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Grand Committee

Thursday, 24 October 2013.

1 pm

The Deputy Chairman of Committees (Lord Bichard) (CB): Welcome to this meeting of the Grand Committee. I remind Members speaking in the first debate that except for the noble Lords, Lord Higgins and Lord Wallace of Saltaire, all speeches are limited to four minutes.

House of Lords: Membership

Question for Short Debate

1 pm

Asked by Lord Higgins

To ask Her Majesty’s Government what assessment they have made of the memorandum by the Clerk of the Parliaments on Membership of the House of Lords, placed in the Library of the House in December 2012.

Lord Higgins (Con): My Lords, I am very glad to have this opportunity to raise this matter. Unlike many of our debates, which are concerned with specific issues, it is more fundamental; it relates to the way in which this House, in carrying out its duties with regard to legislation and holding the Government to account, actually does its work. Therefore, it is a different sort of issue from those that are more often debated.

I will start by putting the memorandum in context. It was produced after the Government had dropped their House of Lords Reform Bill. It was evolved in consultation with a number of groups in the House, including the Campaign for an Effective Second Chamber, and puts forward a number of very important suggestions and analyses them. We do not know what will happen as far as the wider issue is concerned. My own feeling is that it would be very unwise for parties to put the issue of an elected Chamber in their manifesto because I think the House of Commons has realised the dangers that would present to its position at Westminster and the position of individual Members in their constituencies. In any event, it is essential now that we do everything we can to improve the way in which the House works.

I was worried in the immediate aftermath of the other business that there would be resistance by the Government to any progress on this at all. It appears that is not now so. I am glad to see that a Bill embodying what I think we are still calling Steel Mark 2 has been taken up by Mr Dan Byles in the Commons and is apparently being given a favourable wind. I hope that is also true of the proposal made by the noble Baroness, Lady Hayman, who I am very glad to see in her place today.

This memorandum also needs to be put in context in relation to the report made by the noble Lord, Lord Hunt of Wirral, to the Leader of the House on Members leaving the House, and the House of Commons

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Political and Constitutional Reform Committee, which has reported in just the past few days on these very issues.

The danger now is that we will not make sufficient progress. Yet it is absolutely clear that the main danger we are facing is the ever increasing size of the House, which the Hunt committee pointed out very clearly as having the effect of, first, risking the reputation of the House; secondly, the difficulty of conducting business effectively; and thirdly, the effect of the additional Members on the resources of the House and their ability to do their job. Therefore, we need to take urgent action and the proposals in the report by the Clerk give us an opportunity to make real progress.

The surprising thing is that many of the proposals the Clerk makes—indeed, most of them—can be done without legislation. At this stage in a Parliament, the Government would certainly be resistant to anything that involves further legislation. But he points out very clearly that a lot can be done without legislation.

I want to concentrate on two particular points: first, the suggestion by the Clerk that the voluntary retirement scheme should be strengthened, which he does in paragraphs 19 to 21. He suggests that the scheme that exists at the moment could be strengthened, particularly with regard to taking action if people are not really acting as a full Member of the House. This, too, he says, could be done without legislation.

My particular concern is the proposal that he makes in paragraphs 36 to 38 of his report, and in appendix A, for a scheme for voluntary retirement. As has been pointed out time and time again—I think in all the reports that I have mentioned—the trouble with voluntary retirement is that there is no incentive for Members to retire voluntarily. The Hunt report suggested that the Government should look at the possibility of some form of retirement package, which it is hoped would result in a number of people agreeing to retire voluntarily.

I will make one quick point in parenthesis about a view that I believe is held by the Leader of the House. What is proposed would not affect the situation with regard to the Writ of Summons, which is regarded by some in a sort of mystical sense as something that it is important to preserve.

My concern is that of a former Treasury Minister—and once a Treasury Minister, always a Treasury Minister. The Clerk’s memorandum makes it absolutely clear that this proposal will be likely to reduce public expenditure. The key policy of the Government is to reduce public expenditure. Therefore, I am sorry that it is not a Treasury Minister who will reply to the debate this afternoon. I do not suggest that the proposal will result in a massive reduction in the deficit. None the less, it is a move in the right direction, and if we do nothing at all with more and more Members being appointed, there will be an increase in public expenditure, which is clearly incompatible with the fundamental economic policy of the present Government.

The Clerk of the Parliaments has helpfully pointed out, in fairly concrete mathematical terms, what the savings might be. They are not insignificant, and this points the way forward. I hope very much that the Government will, as the Hunt committee recommended,

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take a serious look at the issue. Perhaps, as the Clerk suggests, we should set up a committee to look at all the possibilities.

One particular point needs to be borne in mind. It is the question of party balance. Clearly, if all the volunteers were from one part of the House, that would give a certain amount of concern to the Whips. We will need to take that into account. Therefore, in organising this, the Whips will need to be involved. None the less, we can make significant progress. I do not believe that it is something which is impossible to sell to the public at large. The argument that we will reduce public expenditure is very strong indeed.

I am rapidly running out of time. There are a number of other proposals in the Clerk’s report that are worthy of consideration. All of them, I think, are treated in the Hunt committee report. However, the central issue on which I will focus—although by no means exclusively—is to bring to the attention of the House the possibilities of improving our procedures. All of us are only too well aware of the way in which it is becoming more difficult for the House to work in an effective way as the numbers go on getting bigger and bigger.

1.09 pm

Lord Lea of Crondall (Lab): My Lords, as the noble Lord, Lord Higgins, indicated—and I congratulate him on his timeliness; this is an ingenious way of tabling a debate—the central issue behind the dreadful mess that we are in is the irresponsibility of people increasing the size of the House, on this pretext or that. The connection between that and the memorandum of the Clerk of the Parliaments is palpable. You cannot go through these paragraphs without seeing that this problem would not be so acute or even here at all if we were in a sensible constitutional position. In this country we seem to have been able to make up a constitution through a so-called coalition agreement for Government, but when I lecture on behalf of the Westminster Foundation for Democracy in Mozambique, the one thing I tell them they cannot do is invent constitutions as they go along according to short-term political considerations. That is what we are doing in this country and it is shameful.

To be even-handed, I blame all the three major political parties, but perhaps some more than others. I will just run through the charge sheet because it has a bearing on what we can do about it. The first mea culpa is for the Labour Party, but as my noble friend Lord Hunt of Kings Heath will confirm, in response to an invitation from Tony Blair some six or seven years ago, the Labour Party wrote a memorandum, which I helped to draft, on the future of the House of Lords. It included all the elements that were subsequently picked up by the noble Lord, Lord Norton of Louth, and sold to the noble Lords, Lord Cormack and Lord Steel. It largely became the Steel Bill. There were people in all three political parties with an answer; they were not just whingeing about it.

Now we have this absurdity, and I shall come on to the Liberal Democrats. We stopped kicking the ball in the right direction when there was a change of Prime

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Minister on the Labour side, but the most absurd formula, of course, is the one written as a holy writ in the coalition agreement. It says that the pattern of this House should reflect the voting in the last general election. What an absurdity; what a shameful absurdity in constitutional terms. Yet Mr Clegg and his followers, with a straight face, express the belief that it is fair. We do not need much of a crystal ball to speculate about what might happen after the next election. If, as I hope, Labour gets in with an overall majority and we were to apply that formula, what would the Liberal Democrats be supposed to do? Half of them would commit hari kari. It would be painful to watch, but that is the logical result of their position.

Finally, the Clerk of the Parliaments is someone who can look at this position dispassionately and for the long term. When he wrote the first draft of this memorandum, which a lot of people saw, it had in it a suggestion that the three party leaders ought to get together and agree a formula on this very question, but then he was nobbled. I do not think that the Clerk of the Parliaments should be nobbled by the party leaders, but the first draft had that suggestion in it, and now it is not there. It was the final paragraph, and it has now gone. I think that this is a case of the politicians getting above their station in this matter. We ought to allow the Clerk of the Parliaments to speak for the constitutional requirements that lie behind debates of this kind.

1.13 pm

Lord Steel of Aikwood (LD): My Lords, my noble friend Lord Higgins has done the House a great service in tabling this debate and I thank him warmly for it. I want to limit my remarks directly to the paper which has been tabled by the Clerk, but of course it originated in the report of the Leader’s Group entitled Members Leavingthe House, which was published way back in January 2011. The group was chaired by the other Lord Hunt, my noble friend Lord Hunt of Wirral. Paragraph 47 states:

“We recommend that a reduction in the number of members of the House should result in an overall saving to the taxpayer. We recommend that the possibility of offering a modest pension, or payment on retirement, to those who have played an active part in the work of the House over a number of years, should be investigated in detail, though on condition that this should come from within the existing budget for the House and should incur no additional public expenditure”.

I think we all agree on that, but we do not want to see ourselves pilloried in print for increasing public expenditure. The object of this exercise is to reduce it, as the noble Lord, Lord Higgins, made clear.

The Hunt committee went on to say, in paragraph 67:

“Whilst we cannot recommend that there should be a moratorium on new appointments to the House … we do urge that restraint should be exercised by all concerned in the recommendation of new appointments to the House, until such time as debate over the size of membership is conclusively determined”.

That, of course, has been cheerfully ignored. As we know, not only are the numbers going up but the cost to the public purse is going up. That will continue until we deal with the issue that the Clerk has very kindly put forward in the paper that has been put in the Library.

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A couple of weeks ago, the Bill already passed by this House was taken up by Mr Dan Byles in the Commons. It got its Second Reading, and a pedantic Motion to put the Bill on the Floor of the House was defeated, so it has, properly, gone into Committee. We must hope that we will get that Bill back here. As we have already approved it, it should not be a problem to put it through the House. The important point is that the Bill simply confers the statutory authority that the Hunt committee said that it believed was necessary for the House to decide on what sort of retirement scheme should come into effect. The present so-called retirement scheme is nothing of the kind—it is simply an extended leave of absence. All those who think that they have retired from the House will find that, after the next election, they still get the Writ of Summons, because there is no capacity to create a retirement scheme at the moment. That is why we need the statutory provision and why I hope that the Byles Bill will succeed.

In an appendix to the Clerk’s paper, the finance director estimates that even if a voluntary retirement option was taken up by only 50% of those eligible in year 1, although it would cost £4.7 million, it would save £5.2 million. If the scheme kicked off at age 80, it would cost £3.9 million in year 1 and save £4.4 million. Whichever way you look at it, and however low or high the take-up, there would be a saving to public expenditure. We must, as a group, commend the Clerk’s report to the House as a whole and thank the noble Lord, Lord Higgins, for bringing it to our attention.

1.17 pm

Baroness Hayman (CB): My Lords, I echo the remarks that have already been made about the noble Lord, Lord Higgins, and the value he has provided for today in allowing us to debate this subject. As the noble Lord, Lord Steel, has already reminded noble Lords, the size of the House was already a problem when the Hunt committee reported. Far from seeing a reduction in numbers, as was proposed, we have seen a substantial increase, with all the difficulties that have been referred to today, including the effects on the reputation and, indeed, the workings of the House.

I want to take up the theme of party-political balance in the House. We have no agreement about what the relative strengths of parties in the House should be. However, we do have agreement, I think, that much legislation that comes to this House is badly drafted, inadequately scrutinised or not scrutinised at all, because of timetabling in the other place. Given those circumstances, I ask the Government to think very carefully about increasing by large numbers the proportion of party-political Peers in the House. Second Chambers exist to ask first Chambers to have second thoughts. We need to do our job of pressure-testing legislation, both for policy and for drafting, and to ask the Commons to think again when appropriate. The joy of our present system, and the reason why many of us oppose an elected House of Lords, is because democratic power, accountability and legitimacy lie with the Commons, which always in the end gets its way.

I have been a Minister in this place and I know that it is very disobliging and disrupting to lose votes, but in terms of the quality of the legislation that emerges I

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suggest that it is counterproductive for the Government deliberately to diminish the number of times they are asked to think again in the House of Commons. That can rebound politically, as those who were involved in the poll tax legislation understand very well.

As regards the proposals for not just not increasing the size of the House through new appointments but reducing its size through offering opportunities for retirement and resignation, I echo what has been said about Dan Byles’s Bill because I have always believed that having a statutory basis on which to build in a voluntary manner is tremendously important.

The other development that I think is important is the recently published report of the Political and Constitutional Reform Committee. Many of the proposals in the Clerk of the Parliament’s memorandum are supported in that report and there are specific requests, not just from the Government but from the parties in this House, for the leadership to take those proposals on board and to respond to both the committee and the House as a whole. I hope that the Minister will indicate that the Government are willing to respond to that.

1.21 pm

Lord Cormack (Con): My Lords, it is a great pleasure to follow the noble Baroness, Lady Hayman, and I agree with everything that she said. I, too, thank my noble friend Lord Higgins for initiating this very useful and helpful debate. However, I gently take him to task on one thing: that is, these are not proposals from the Clerk. The Clerk cannot make proposals; he merely set out some alternatives which Members of the House can consider. We ought to put that on the record to defend the total impartiality of the Clerk. In fact, this paper came about as a result of an approach from the Campaign for an Effective Second Chamber, which was formed by my noble friend Lord Norton and I more than 11 years ago. I went to see the Clerk in the wake of the timely defeat of the very ridiculous Clegg Bill and asked him whether he could produce a paper which we could consider. He agreed but on the condition that it must be made available to all Members of the House. Naturally, we readily agreed to that, and that is why it is before us.

This is a debate in which we are rightly limited to a very short speaking time and I want to make just one or two very brief points. The Byles Bill is the filleted version of the large Steel Bill on which my noble friends Lord Steel of Aikwood and Lord Norton of Louth and I worked something like eight years ago. It is a modest proposal but it will help, above all by providing a statutory framework for retirement. However, that is not the end of the matter. Of course, many of these things would have been dealt with had that large section of the Constitutional Reform and Governance Bill, attached as an appendix to this paper, not been dropped in the wash-up prior to the 2010 election. Therefore, we should gently remind the leaders of both parties that they were, indeed, more or less signed up to that three years ago. What they must now do is to exercise restraint. This is crucial for the reputation of the House, which stands high in the public esteem. There was a very good leader in the Times the day after our latest colleagues’ appointments

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were announced way back in late July or August, which said that this was a great institution but was in danger of being overinflated, or words to that effect. It is crucial that we heed that warning. The noble Baroness, Lady Hayman, was so right to say that party balance should not matter here.

The one disappointment I have had since I came to this House—I greatly cherish my membership of it—is that I think on occasion the whipping is too severe. I say that in the presence of at least one Whip.

We should be here to exercise our judgment because, at the end of the day, we cannot overthrow what the elected House has decided upon, but we can, and we should, say, “Think again”. That is the point and purpose of this place. This is not the overriding legislative assembly. Indeed, as my noble friend Lord Norton has argued on many occasions, we are merely contributing to the legislative process.

I very much hope that following this brief debate the Government will look at the various alternatives proposed in the Clerk’s paper and consider that there is real concern in this House. We welcome our new colleagues and hope that they will be as happy here as we are, but we cannot go on increasing in this way. There has to be provision for reducing over a period the size of the House. We have to look at all sorts of retirement schemes and other things. There is not time to expand now, but I hope there will be in the near future.

1.25 pm

Lord Foulkes of Cumnock (Lab): My Lords, I join in the congratulations to the noble Lord, Lord Higgins, on raising this issue. With respect to the Clerk, who was here earlier, his note is just tinkering with the issue when the reality of what is happening is making a mockery of it. This House is being packed. We now hear that there is going to be a second list. As my noble friend Lord Lea asked, what is the purpose of this? Is it to reflect the vote at the general election or the balance of the House of Commons? Why? This is a revising Chamber. We are supposed to look at and revise the legislation, not rubberstamp what happened down the Corridor, which is what would happen if we reflected the Commons.

What is behind the Government? I can assume only that it is some kind of Marxist or Leninist theory that they want to make us look so ridiculous that the revolution will happen and we will be either directly elected or abolished. That is what they seem to be up to.

I agree that the structure of this House and the way it is constituted needs reform—I do not think there is anyone who disagrees with that—but it needs to be looked at in the long and short terms. In the long term, it needs to be looked at in the context of what else is happening in this country in constitutional terms, particularly with devolution. I favour a federal structure, which the Liberal Democrats have been arguing for. We could be a federal House representing the regions of England, Scotland, Wales and Northern Ireland. That would be a great step forward. That kind of indirect election should be looked at.

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We need to set up some kind of UK constitutional commission to look at that and to come up with a long-term solution. In the mean time, we need to look at something more radical than the tinkering that the Clerk has put forward, some kind of retirement scheme, either through age or participation in the House, so that we can encourage people who are not taking part or who are of a certain age to move towards retirement. We need to get a House that is smaller than the House of Commons, not larger. That is outrageous. We are the second-largest legislative Chamber in the world. The only larger one is China, which has billions of people.

We need to look long term and short term. With no disrespect to the Clerk of the Parliaments, the ideas have to come from us, from our groups, from the political groups and from the Cross-Benchers. I hope I am not giving away a secret—especially with my noble friends Lord Hunt and Lady McIntosh here—but the Labour group is looking at this in the short and long terms, and we will be coming forward with some quite sensible, radical proposals. I hope they will be given serious consideration by the Cross-Benchers and by the other political groups. I hope we can use what I hope the Labour group will propose as the basis for some kind of sensible reform so that we can stop the revolution of abolition or direct election, which seems to be the only way that we are moving with the astonishing direction that the coalition Government are moving at the moment.

1.29 pm

The Earl of Sandwich (CB): My Lords, I have joined the noble Lord, Lord Higgins, in this debate because I am another who believes in the modest reforms in the original Steel Bill, unfilleted. The noble Lord, Lord Hattersley, made a few comments in Dublin last month before the Irish people sensibly threw out the Taoiseach’s proposal to abolish the Senate. He said, quite fairly, that you cannot have a modern democracy in which one House of Parliament is appointed by the Prime Minister. We know that already, and we know the Lords is slowly moving away from Downing Street by means of the Independent Appointment Committee. Most people see that committee as the way out of patronage. We would like it to have statutory powers extending to party-nominated Peers and to have a better control of numbers.

The noble Lord, Lord Hattersley, has kept up our interest in Lords reform. I believe that the coalition is beginning to see the sense of incremental change. Today we are concerned only with housekeeping, with whether we can better organise our numbers and be more effective. The Clerk’s paper makes sensible suggestions, and I would like to discuss the more personal side of retirement.

This House has developed quite a range of services to Members, the sort of things you would expect from any modern corporation or institution. There is one service not offered to Members, although it is given to staff, and that is in human resources. You can talk to your party leader or convenor, you can get comfort in the Clerk of the Parliament’s office or chat to colleagues, but there is no one, apart from these offices, with whom you can discuss your future in the House.

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I have worked in a number of businesses and charities, large and small. I have even been in a multinational. I have come to appreciate the role of human-resources managers in offices. I am not talking of career advice, because it might be impertinent to give career advice to a Peer, although some of the under-50s might appreciate it. Opening a small, comfortable office in an upstairs room would, I am sure, give Members a chance of opening up that they might not have elsewhere.

I tried to persuade the noble Lord, Lord Walton, to join this debate. He is unavailable today, but he knows that I am mentioning him as someone seriously contemplating retirement. He is an obvious candidate for human resources. I have spoken to others in the same situation, in which we will all be at some future date. I therefore propose that serious thought be given to the establishment of a human-resources officer, with an assistant, for Peers—not a department—who can talk to Members at any time of their parliamentary life.

This might be a suitable job for an existing Member of the House, someone of a sympathetic nature, who has been in the House for some time and already knows most of the characters. It could even be job-shared. There should not be a formal retirement age, but, like the noble Lord, Lord Higgins, I have for some time thought that the House should be able to afford a modest incentive out of internal funds. I remain in favour of the equivalent of one or, at the most, two years’ expenses. This would cost nothing because the Peer would remain for that extra year or two, and it might save the expenses of subsequent years. The Treasury does not need convincing of that mathematics. Nor does the Daily Telegraph.

I am not in favour of the enforced-attendance proposals in the Clerk’s paper, echoed in Dan Byles’s latest Bill, because it would dislodge one of the cornerstones of the House to discourage part-time attendance, especially among Cross-Benchers, among whom there are individuals with experience to offer, who can come in only occasionally. I believe part-time attendance also helps to keep down those extra numbers which come from the good concept of working Peers.

I thank the noble Lord, Lord Higgins, for helping the House to go into some of these apparently minor, but important, reforms.

1.33 pm

Lord Norton of Louth (Con): My Lords, I, too, congratulate my noble friend Lord Higgins on raising this important and timely question. For reasons of time, I turn to the memorandum by the Clerk of the Parliament, which provides some innovative suggestions, some more innovative than others. I commend the suggested amendment of Standing Order 22 as a helpful way of addressing the problem of those who do not attend. I will focus on a proposal designed to address the problem of those who do and place a strain on resources.

As we have heard, the Leader’s Group, chaired by my noble friend Lord Hunt of Wirral, raised the prospect of some Members being offered a modest payment upon retirement. The Clerk’s memorandum examines ways in which such a payment may be made, following the comments of the Leader’s Group, as we

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have heard, in a way that is compatible with a saving to the taxpayer. The memorandum is thorough in identifying how this may be achieved.


Since the memorandum was first published, the Leader of the House has stated that the Government, and other parties, do not support the idea. Speaking earlier this year, he said:

“I should make clear, as I have done before, that the Government do not support making taxpayers’ money available to Members of the House to encourage them to retire. That would be wrong, and it would be seen to be wrong. I am glad to hear that my view on this is shared by all groups and all parties.”.—[Official Report, 28/2/13; col. 81.]

I have two questions for the Minister based on this statement. First, if it is wrong for taxpayers’ money to encourage Members of this House to retire, why is it not considered wrong to use taxpayers’ money to encourage Members of the other House to retire? It used to be the case that some MPs sat well beyond retirement age because they could not afford to retire. The Government introduced financial packages that, for all intents and purposes, were designed to enable MPs to retire gracefully. Not only is there now a pension, but for the past 22 years there has also been a resettlement grant. Why is this use of public money deemed right, but something similar for this House is wrong?

Secondly, why do the Government find it wrong to use taxpayers’ money to facilitate Members leaving the House, but have no difficulty using taxpayers’ money to enable new Peers to be created? I have seen estimates of how much it will cost the public purse if the latest tranche of new Peers prove reasonably assiduous in attendance. The scheme embodied in the memorandum of the Clerk of the Parliaments is designed to save money in the long term, and help to reduce the size of the House, whereas the current practice of the Government in creating new Peers achieves precisely the opposite. I look forward to the Minister justifying this state of affairs.

The Government appear to have no qualms about creating more Peers, adding to the burden on the public purse, while making no real effort to address the problem of the size of the House. I see no principled reason for the stance taken by the Leader of the House. The Clerk’s suggested scheme is a valuable contribution to the debate, and if it is not to be pursued, we need a much more considered response from Ministers.

1.36 pm

Lord Hunt of Kings Heath (Lab): I, too, thank the noble Lord, Lord Higgins. It has been an excellent debate. I have to say to my noble friend Lord Lea that I plead guilty as charged, although I hope that the Minister will also plead guilty. I notice that he left the Conservative Party office charge sheet, which rather disappointed me, but perhaps he just felt short of a bit of time.

I thought that the Clerk of the Parliament’s report was excellent, particularly paragraphs 36 and 37 in relation to a strengthened leave of absence scheme, including minimum levels of attendance and enforced leave of absence. Will the Minister state clearly what the Government actually intend to do to progress this?

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As noble Lords have said, the Leader of the House has already indicated that he is not in favour of it, but I think the House and the Committee are entitled to a proper explanation of why this should not be taken forward.

I also ask the Minister about the statement made by the noble Baroness, Lady Northover, at Question Time this morning. She made what seemed to me to be a new statement of government policy in relation to the balance between the parties. I would be grateful if he would expand on what the Minister said in the Chamber.

Thirdly, I come to the point raised by my noble friend Lady Hayman. We have what I think is a ludicrous coalition agreement policy of saying that in one Parliament the membership of the House should reflect the votes cast at the last election; clearly, we have seen lists of new Peers being announced in order to make progress towards that. Our estimate is that the Government will shortly have a political majority in the Chamber of more than 100. What is the point of it? We are a revising Chamber; if the Government cannot be defeated, revisions cannot take place. In my own experience as a Minister, as my noble friend Lady Hayman will know—

Baroness Hayman: The noble Lord is definitely my friend, but in procedural terms in this House he is not my noble friend.

Lord Hunt of Kings Heath: My Lords, I am duly dealt with on that. The noble Baroness was also a health Minister. I would have expected to lose five or six votes on any health Bill that I took through, and I took through rather a lot. This does not happen any more, and I want to ask the Government whether they expect to win every vote. Is this the intention? If it is the intention, frankly, I do not see the point of your Lordships’ House. If the Government are not defeated on a fairly regular basis, we cannot send matters back to the House of Commons and there is no point to us. I am increasingly of the view that in that scenario the only way out is to get rid of the House. I do not think that the Government realise the significance of this. We cannot revise unless the Government are defeated a healthy number of times.

We should look at other reports, as well as the Clerk’s. My noble friend Lord Foulkes has given the game away, in the sense that there is a Labour group looking at some of these issues. The House of Commons Political and Constitutional Reform Committee has produced a very interesting report, with a number of suggestions as to how we might deal with these issues. We may not agree with all of them, but I particularly draw your Lordships’ attention to recommendation 10, on determining the relative numerical strengths of party groups in the House of Lords. In the end, surely we need to have sensible discussions and reach an agreement which will enable us to get a proper balance, allow the House to do its proper job in revising, and keep the numbers at a reasonable level.

1.40 pm

Lord Wallace of Saltaire (LD): My Lords, this debate raises a large number of questions. Let me try to answer as many as I can. I start by saying that the

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Government remain committed to thorough reform and the creation of an elected House. This is part of the reason why we resist proposals to end by-elections of hereditary Peers. I was here when that particular concession was made by the then leader of the Conservative Peers, now the Marquess of Salisbury, on the basis that it would remain until thorough reform took place.

The Government are committed to thorough reform. However, we now have a number of proposals which I have heard described as housekeeping proposals, which are on an interim basis. We recognise that there will not be another attempt at House of Lords reform until well after the next election, when I look forward to seeing a commitment to an elected second Chamber appearing once again in all of the party manifestos. Having said that, we have to recognise that there are some real problems in the House.

The noble Lord, Lord Foulkes, disappointed me enormously in his speech. I looked forward to him saying that we must tackle the question of retirement age, a topic on which I thought he was intervening the other day. I recognise that at the core of much of this are the difficulty of a retirement age or of encouraging retirement, and the balance of the groups within the House.

When I joined the House, now some 17 years ago, I was told that by entering the House of Lords I was raising my life expectancy by a further two years. It is such an interesting place and it keeps us lively and fit. As I sat listening today I reflected that, if I decide that I really ought to take permanent leave of absence when I am 95, I have only 23 more years of service to go. I will then have served in the House for 40 years. We recognise the problem of keeping the House lively and renewing membership.

Incidentally, there is also the problem of different age balances among the different party groups. The Conservatives are the oldest group in terms of appointments, because many of them were appointed in the Thatcher years. Particularly when I talk to some of the older Labour Peers, I am conscious that the reluctance to retire of those on both the Labour and the Conservative Benches is sometimes expressed in terms of, “I would be letting my side down if I retired but some of them didn’t. We would alter the age balance against us”. Anything we talk about in relation to retirements feeds back into the question of party balance. I remind the noble Lord, Lord Hunt, that it is not just the party groups who vote in this House. We have a very active group of Cross- Benchers. I will check on the incidence of votes lost in this Parliament compared to votes lost in the last Parliament. I was not aware that there was a substantial difference in the number of votes lost. In the Bills that I have dealt with, the concessions which one must make in order to avoid votes being lost, and the number of votes lost, are certainly important matters. I give way.

Lord Cormack: My Lords, I am sorry to intervene, but does my noble friend really believe that the House of Lords should have a significant majority on the government Benches?

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Lord Wallace of Saltaire: My Lords, this is for the first time a coalition Government and part of the issue is whether you count the entire coalition of both parties as one or as two. The Government do not have an overall majority in this House because we have a large number of Cross-Benchers. If I may say so, one of the first things I learnt when I entered this House was that if you want to defeat the Government, what you need is a speaker from each of the four main groups, because at that point the Government will recognise that they are about to lose. The noble Lord, Lord Cormack, is occasionally very good at being part of those groups which challenge his own Government. That is the way the House of Lords behaves.

Lord Hunt of Kings Heath: With respect, my Lords, there is one Government and the numbers are clearly added together in your Lordships’ House. I should like to put a question to the Minister. What would happen in 2015 if the Labour Party were to win the general election with a majority? It would be faced with a majority of 100 Conservative and Lib Dem Peers over the Labour group in your Lordships’ House. There would then be a dissolution list, to which I assume both Mr Cameron and Mr Clegg would contribute. What advice would the noble Lord give to a Labour Government about the number of Peers they should appoint?

Lord Wallace of Saltaire: My Lords, we are getting into very difficult constitutional questions here. Again, I have heard discussions about this among some of my noble friends. A Labour Party that wins a majority of seats in the House of Commons on perhaps 35% of the vote and a 60% turnout raises the question of whether that is really a majority or not.

Lord Lea of Crondall: I am sorry to press the point, but is that not precisely the doctrine of the coalition agreement—the formula should reflect the results of the last general election—or is it only to suit this particular Government at this particular moment in time?

Lord Wallace of Saltaire: My Lords, it is that in new appointments, one should head in that direction. I speak for a party which received no nominations to this House for several years under Mrs Thatcher’s Conservative Government. Let me say—

Lord Foulkes of Cumnock: You are making up for it.

Lord Wallace of Saltaire: We need some quiet discussions among the parties and I am glad to hear people suggesting that what we need is another committee. I am sure that the noble Lord, Lord Hunt, would love to serve on another committee looking at some aspects of Lords reform; he has a great appetite for it.

Lord Hunt of Kings Heath: My Lords, nothing would give me greater pleasure.

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Lord Wallace of Saltaire: What we are talking about is not just the size of the House; we also have to recognise the issue of attendance at the House. It is the rise in the number of those who expect that appointment means regular attendance, and in some cases we have made a rod for our own back by making appointments, particularly of Cross-Benchers, who are asked whether they will be regular attenders. Our percentage of attenders among the Members has been steadily rising and continues to do so.

Lord Foulkes of Cumnock: I thank the Minister for giving way again. That brings us back to our exchange on the Floor of the House the other day. All of these new Members are going to be working Peers. They will attend regularly. They will receive their attendance allowance and they will need offices and all the other facilities. That, we are told by the Clerk of the Parliaments and others, has to be done within a no-growth budget. How is that possible?

Lord Wallace of Saltaire: My Lords, the question of the overall size of the House brings me to my next point, which is that of retirement.

Lord Foulkes of Cumnock: The noble Lord is not answering my question. How is it possible for this to be done within a no-growth budget? We are getting another 60 extra Peers.

Lord Wallace of Saltaire: My Lords, retirement is essential to this because unless we are going to have a House that grows older gracefully and has very little renewal, we have to have a scheme that encourages retirement. The House has been getting older. After 17 years I have just passed the average age of the House. We need good new Members because we do not entirely want to be a House that represents the wisdom of 25 years ago, and therefore we need to address the question of retirement. I have had one or two conversations with older Peers who have suggested that a more dignified retirement arrangement, in which the House recognises the service of those Members who are retiring, would be of very considerable assistance to them. I am willing to take that back and, indeed, I have already discussed it with the Leader of the House. I think that it is something which we should all attempt to progress as best we can.

On a financial leaving package, let me simply say to the noble Lord, Lord Norton, that we receive allowances in this House; we are not paid. Most of us, the noble Lord, Lord Norton, and me included, have pensions. I think that I can guess what the size of his academic pension will be when he retires. I had a discussion with an older Labour Peer who said that I did not understand how working-class people like him would survive without their allowances. I reminded him sharply that I knew roughly what his academic pension was, and that if he could not survive on a professorial pension there was a real problem.

Lord Norton of Louth: My point had nothing to do with pensions because there is no salary, so it was not premised on that—that was the analogy that I was drawing with House of Commons. The resettlement grant has absolutely nothing to do with pensions.

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Lord Wallace of Saltaire: My Lords, let me simply say, because time is short, that service in this House is a privilege which we should not expect to have to be bought out of. That is the view which I and a number of others hold. The Government remain unconvinced that we should attempt to buy older Peers out. I recognise that there is a substantial problem which older Peers think about in terms of party balance. I think that it is also the recognition issue that we are concerned about and very much want to continue.

The noble Baroness, Lady Hayman, asked whether the Government would respond to the PCRC’s proposals for all-party talks. We will certainly respond to that report.

Lord Norton of Louth: Before my noble friend leaves his previous point, is he saying that service in the House of Commons is not a privilege?

Lord Wallace of Saltaire: My Lords, Members of the House of Commons earn their keep and are much more often in the prime of life. Most of us who come here have earned our salaries elsewhere and have pensions from elsewhere. That is part of the distinction that I am making.

Baroness Hayman: Not the women.

Lord Wallace of Saltaire: My Lords, the noble Earl, Lord Sandwich, asked about human resources. My noble friend Lord Gardiner remarked that that is partly because Cross-Benchers do not have Whips. Whips in this House see themselves not as enforcers but as very much a human resources department for their own party groups.

Noble Lords: Hear, hear!

Lord Wallace of Saltaire: I take that response as a deep vote of confidence in the consultative role and psychological support which Whips provide.

We will of course take back all the points made in this Committee. The Government are willing to give a fair wind to the Dan Byles Bill, which I hope will come to this House in good time and provide for some of the housekeeping measures which noble Lords are calling for. We hope that that will assist. We will take further the question of providing dignified recognition for those who wish to take permanent leave of absence for the service which they have given to this House—and some of them, earlier than that, to the other House. However, I am very sorry that I cannot entirely provide the reassurance that some noble Lords are looking for in terms of a financial retirement scheme.

1.53 pm

Sitting suspended.




Iran

Question for Short Debate

2 pm

Asked by Baroness Afshar

To ask Her Majesty’s Government, in the light of the recent elections in Iran, what steps they are taking to facilitate closer commercial and educational ties with that country.

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Baroness Afshar (CB): My Lords, I am grateful for this opportunity to speak about the country where I was born, and I thank noble Lords who are participating in this debate and speaking. I would like to raise a few points before the negotiations between the countries start again, in the hope that they might be used as relevant points by the negotiators.

Negotiations between Iran and the six powers in Geneva seem to have been very optimistically received. The noble Baroness, Lady Ashton, the EU’s top foreign policy official, has described them as “substantive and forward-looking”. Iran’s top nuclear negotiator, Mohammad Javad Zarif, has spoken of the possibility of achieving a satisfactory outcome in the next six months. I add my voice to those of the educationalists and economists in the UK who have also welcomed this rapprochement. The UK in general, and the education sector in particular, would benefit from the easing of sanctions. This could be a win-win for all concerned, provided that there is understanding and appreciation of the difficulties on the way.

Education is one of the most effective means of building long-term trust among nations and individuals. It is hardly surprising that it is Ayatollah Rouhani, a graduate of Glasgow Caledonian University, who started the negotiations and secured a level of agreement from the spiritual leader of Iran. Students make a significant contribution economically, academically and intellectually, in terms of building understanding across divides that sometimes prove difficult to cross otherwise.

However, there is a real problem in the banking system as it stands and as it has operated in the decades since the imposition of sanctions. It has been a serious impediment. Students who have been offered places—who are more than willing to pay the fees and health taxes that might be imposed in the future and have the money ready—cannot find a bank in the UK willing to open an account for them. I know of students who have lived in Canada for more than 10 years but who, because they are Iranian, cannot even transmit money from Canada to the UK to start discussions. That seems to result in universities saying that their hands are tied because they cannot proceed with the processes. The University of Sheffield, for example, has been working in Iran and has offices there offering scholarships to Iranian students with exceptional academic potential. Many Iranians, particularly women, have such potential aplenty.

The difficulty is not only that the students cannot open accounts; a further problem is when those students who are already in this country and have accounts here go on fieldwork trips and come back, they find that they have to reopen the same accounts and provide the same information all over again. In the case of one of my students, who made two field trips, this had to be done twice.

These kinds of obstacles make students less willing to apply to British universities. The measures are highly counterproductive and the Government should come to the rescue of these students because, as we all know, most if not all British universities are heavily dependent on foreign student fees in order to bridge the gap created by the cuts. Last year, banking restrictions also resulted in Iran abandoning its conversion rate

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for foreign students, which gave favourable rates to students studying abroad, particularly in the UK. Now, it is much more expensive for Iranian students to raise the same fees in Iran.

Banking restrictions have also resulted in very serious medical problems in Iran because pharmaceutical companies cannot import the necessary ingredients for producing medication at affordable prices. This has resulted in the deaths of hundreds of people. Political prisoners have even written an open letter asking for the lifting of sanctions. They point out what I have pointed out in the House before: namely, that sanctions only make the rich richer and the poor poorer. It is not the rich who suffer from the sanctions—they get their medication, they come abroad for treatment—but those who are living in Iran. The situation is dire, which is another reason that Iranians are extremely keen to enter negotiations and for them to be successful.

The prospect of detente has already resulted in the freeing of a number of political prisoners: 11 were freed a month ago. They included Nasrin Sotoudeh, the campaigning human rights lawyer and winner of the European Parliament’s 2012 Sakharov Prize for Freedom of Thought, and the reformist politician Mohsen Aminzadeh. A week later, on the eve of President Rouhani’s visit to the USA, 80 more political prisoners were freed, some of whom had been jailed after the mass protests triggered by the fraud- tainted re-election of former President Ahmadinejad in 2009. Last week, more political prisoners were pardoned. The hope is that this process will continue and accelerate.

A rapprochement would be extremely beneficial to the UK. The Iranian economy has not died during this period. In fact, many projects have been set up, including mining, construction, chemical production, car manufacturing and packaging, and are thriving. But the sanctions have resulted in trade relations moving towards Russia and the East, rather than the West. In 2010 China became Iran’s largest trading partner. In 2011 trade between Dubai and Iran was valued at $13.6 billion. Last year Iran’s largest car maker agreed to send 10,000 cars per annum to Russia.

To circumvent the banking restriction, trading partners use hawala, a system of exchanging money without the money ever leaving the country. It is a system completely dependent on trust, in which the bank uses a country that trades favourably with both trading partners. The current favourite is Japan. The Iranian bank leaves money in a bank in Iran and Japan uses its debts to Iran to provide money in any currency to a trading partner on the other side. So trade has continued; it has not diminished. This could be a profit that the UK is missing.

I shall end by mentioning nuclear power and chemical weapons. I am no expert in these matters, but the facts that the Iranians are offering to keep only two nuclear programmes in Natanz and argue that they have no chemical weapons are worth considering. Iran was attacked with chemical weapons. The havoc that caused means that no Iranian would allow them to be used against anyone, not even their enemy.

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2.10 pm

Lord Lamont of Lerwick (Con): My Lords, I refer to my entry in the Register of Members’ Interests. I am the unpaid chairman of the British Iranian Chamber of Commerce and some years ago I was a director of companies that did business with Iran. I assure the Committee that I have no direct commercial or financial interests in Iran, although I work for a company whose main shareholder has interests in Iran.

For the avoidance of doubt, I will say that I absolutely condemn the abuses of human rights in Iran and recognise the concern over them. Only this week, Dr Shaheed, the UN monitor of human rights in Iran, highlighted and condemned the continued detention of human rights activists, journalists and the leaders of the green movement. However, as the noble Baroness, Lady Afshar said, 500 Iranian intellectuals wrote an open letter. Eighty of them were or had been in prison. They said that the election of President Rouhani had produced a significant change in the climate, that things were changing and that they felt the offer Rouhani had made ought to be responded to by the West. That was the way they put it.

I congratulate the noble Baroness, Lady Afshar, on initiating this debate. I entirely agree with what she said about cultural exchanges. I am also involved in the Iran Heritage Foundation, which exists to do precisely what she described. For example, it was involved in helping set up two major exhibitions in the British Museum and in taking the scroll of Cyrus back to Iran. The Foreign Office advised that it would be stolen by the Iranians, but we went ahead and did it, and it was returned on time and generated a lot of good will.

I believe that the election of President Rouhani was a significant event to which we should pay great attention. In that election, the economic needs of Iran and foreign policy became one issue. People were very dissatisfied with the state of the Iranian economy and wanted relations with the West to improve.

Despite Prime Minister Netanyahu saying that it is the same old thing with a smile, I do not believe for one minute that President Rouhani could have said the sort of things he said with eloquence in the television debates without meaning them and without intending to try to bring change to Iran. His spoke about the use of social media and greater freedom for individuals, and just 48 hours ago made a speech about freedom in universities. Above all in his comments, he spoke about transparency in the nuclear programme.

There are some people who say that sanctions have brought this about, and therefore that we should continue with them, not relax them. That would be a huge error. People wanted change, but polls show that there is considerable public support for the nuclear programme and that people blame the absence of medicines—something that was highlighted by the UN human rights monitor at the UN this week—on sanctions and foreign powers.

Israel has made it quite clear that it does not want an agreement between the West and Iran. I suspect that it would prefer a country which is beyond the pale. It does not want a large country in the Middle

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East that has normal or near-normal relations with the United States. Other Gulf states have voiced their anxiety, and although they are our good friends—they invest here, they lend us money—I hope that people will realise that they, too, have their own domestic political reasons for promoting the image of Iran as a threat to them, and that religious prejudice is not always in one direction only. I do not believe that Iran has any territorial designs on any country; I do believe that it has its own security concerns.

People often try to read the mind of Mr Khamenei. I think you need to know only one thing about Mr Khamenei. Before he became the Supreme Leader he was President for two terms. During that entire time he was a president at war—a war in which 500,000 people either lost their lives or were seriously wounded. People do not recognise that Iran is, militarily, a very weak country. I think it was General Petraeus who pointed out the other day that the entire air force of Iran could probably be wiped out in 24 hours by that of the UAE, although we continue to sell arms to the UAE for reasons I sometimes find difficult to understand.

Is a deal possible? There are a number of points that need to be considered. First, obviously, we need the maximum transparency and rigorous inspection. The additional protocol has to be signed by Iran, meaning that inspectors can request to go anywhere in the country. Then there is the big issue of the timescale. The Iranians want a quick deal. They talk of six months. Of course, they want quick relief from sanctions. However, quick relief from sanctions does not mean that there could not be an extended period, perhaps lasting five years or so, in which the suspension of sanctions was conditional or dependent on Iran continuing to honour the undertakings that it made with regard to its nuclear programme.

Then you have the issue of the size of Iran’s enrichment programme. The Israelis say that it should be dismantled completely. I think it is clear that that is unacceptable to the Iranians. I do not pretend to have any nuclear expertise but I have spent quite a bit of time talking to people who have. I believe that by taking measures to deal with capacity, output and the type of centrifuges involved, it would be possible to define the breakout period. The breakout period is what concerns Israel: that is, the time it would take to break out from a civilian programme to manufacture a weapon. That period has to be long enough so that the West can identify and respond to it. I believe that that could be identified.

I do not believe that Iran will accept that there should be an end to all enrichment in that country. That would be very difficult for it to accept politically, and very difficult for it to justify after all the suffering from sanctions and all the billions that have been spent on it. However, its programme should be related to what its need for nuclear electricity is likely to be. We threw away opportunities in the past: in 2003 and 2005. Even the Israeli Defence Minister said yesterday that he believed Iran was genuine in wanting a deal. Israel may be opposed to it, but he said that Iran was genuine in that belief and aspiration. I hope that we will not repeat the mistakes we made when President Khatami was in power.

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Lord Ahmad of Wimbledon (Con): Just before the noble Baroness gets to her feet, I would like to remind all speakers that this is a time-limited debate. When the Clock shows seven minutes, remarks should be concluded.

2.19 pm

Baroness Williams of Crosby (LD): My Lords, I very much agree with what has already been said by the noble Baroness, Lady Afshar, and I congratulate her on calling this timely debate. I also strongly support what was said by my noble friend Lord Lamont, who was absolutely right in suggesting that it is perfectly possible to now open negotiations with Iran on a serious basis. I add only one thing to what he said about that, which is that Iran has already suggested that it could move away from the 20% refinement figure across the front, where it started moving in that direction, and back to the 5% which is compatible with civilian uses of nuclear power. That should be carefully tested, investigated and discussed so that we can find out how much credence there is in what has already been said.

The only other point that I will make is that it is difficult to look at a country like Iran and not recognise that it has profound reasons to be frightened of being attacked. We tend to forget in this country that the Iran-Iraq war brought, as my noble friend said, 500,000 casualties. That is a rather modest figure; my understanding is that it was probably more like 800,000, of which the larger proportion was Iranian casualties. Why? Because only Iraq used chemical weapons; Iran never resorted to them. Iraq used both sarin and mustard gas, which are long-standing and extremely agonising forms of chemical weaponry. It can fairly be said that there is not a single country in the world, not even Syria, which has suffered as much from the use of chemical weapons as Iran. Despite that, Iran has never attempted to build up chemical weapons. Compared to the huge reserves of 10,000 tonnes that we know Syria has, the core of the matter is that Iran has never moved in that direction. It has repeatedly said that it regards chemical weapons as totally unacceptable.

On a more general note, I understand that up until now, the United Nations has not sent an invitation to Iran to take part in the Geneva II negotiations which are likely to happen later this year or, at the very latest, early next spring. I find that puzzling given that Iran is the second-greatest regional power in the whole area, and also given that it is seen as an ally by Syria. Assad has not said himself that he will go to any Geneva II negotiations, but there is surely reason to believe that if his closest ally, Iran, is there, he is much more likely to go than if it is not there. Perhaps my noble friend Lady Warsi will tell us something about the prospects for Geneva II including Iran as one of the countries sitting round the table. It is vital because, like it or not, Iran is seen by the whole of the Shia group of Muslims throughout the world as being the lead country. Therefore, its non-presence would almost certainly undermine the value of those negotiations.

I will say two other things before turning to one or two practical ideas that could be used to create a much closer and mutually constructive relationship with Iran.

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I fully share what has already been said by the noble Baroness, Lady Afshar, and the noble Lord, Lord Lamont, on the subject of issues that can be taken up and used in this respect. The first thing I will say is that there is a colossal misunderstanding about Iran in the West. I will take just one example, as a woman Member of the House of Lords. It is widely believed in large parts of the United States that Iran is rather like Saudi Arabia: that women walk around fully veiled, are not allowed to drive cars, have no education and are deeply and profoundly suppressed. Not so. Some 55% of undergraduates in Iran at the present time are women, and there are large numbers of women at the very top of both the legal and medical professions.

I completely share what was said by both previous speakers about human rights. We absolutely need to insist that Iran lives up to the highest standards of human rights and that it releases more—indeed, ultimately all—its prisoners who have not been tried. It is vital that we better understand that this great civilisation is not the same as some of the excesses that one sees in other countries. Incidentally, the widely held belief that Iran is Arab is also completely misleading. The fact that it is multifaceted in religious terms is an important point to make. There are still active members of the Zoroastrian community in Iran, which is an ancient civilisation.

Practically, what can we do? I suggest that there are three areas where we could create much better relations with Iran without damaging in any way the serious considerations that have to be brought to bear on such things as nuclear weapons and so forth. First, the noble Baroness, Lady Afshar, mentioned the possibility of much closer relations with universities. My noble friend Lord Phillips of Sudbury recently went to the University of Isfahan, which is a very famous and ancient university, and also to the University of Tehran. In both cases he was told very strongly that they would welcome a much closer relationship with a matching United Kingdom university. They did not specify which ones, but they made it clear that they would be wide open to such proposals.

There is another serious issue which involves the universities. That is, as some noble Lords in the Room already know, that there is a very serious incidence of drug-related tuberculosis in Zahedan, in the south-eastern part of Iran. I will spell it for Hansard. I am not sure I have pronounced it right. The important point is that drug-related TB is not a respecter of borders. It crosses them very happily. We know from our own experience of drug-related tuberculosis among some migrants to Britain how crucial it is to try to deal with this at the source. Iran comes second only to India in the incidence of drug-related TB. We have in Britain university departments that are highly instructed about and knowledgeable about drug-related TB. This is, again, an obvious win-win example of what can be done.

Secondly—and I now look firmly at the right reverend Prelate the Bishop of Ripon and Leeds, who will be surprised that I address him—I strongly believe that a group of religious leaders from Britain would be very welcome in Iran and would do a great deal to bridge the gap between us and this strange country, which is rather like the Holy Roman Empire, in that it is at

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once both a religious and a political entity. I have always been puzzled why the great advantage that the Church of England has in this respect, as a state-based religion, could not be used to create much closer relations with Iran.

My final point is very important. We have in this Room—I invited him as a guest—Professor Lightfoot, who is the leader of the co-ordinating organisation of international research into disease surveillance. He has set up, all over the world, networks of people looking at surveillance of a disease and how it moves across the world. He has just been approached by Iran, Armenia, Georgia, and other countries with a view to setting up a regional network. I can think of nothing better—less objectionable, politically speaking—than to set up such a—

Lord Ahmad of Wimbledon: I must ask my noble friend to conclude.

Baroness Williams of Crosby: I will be finished in a moment. There could be nothing better than to set up an international network of this kind and to support Iran’s being part of it. I commend the idea to the Minister.

2.27 pm

The Lord Bishop of Ripon and Leeds: My Lords, I am very grateful to the noble Baroness, Lady Afshar, for initiating this debate and for introducing it so comprehensively. I am aware, through contacts, of Iranian students in Leeds and of some of the difficulties of which noble Lords have been speaking in terms of their education and the way that that has developed, and of the struggle to keep them at Leeds University.

Like others, I have been heartened by the change of political rhetoric following the elections in Iran, and share the high expectations that a more pragmatic stance from Tehran will see progress made on a range of issues, not least the nuclear issues. In view of the speed of recent diplomatic developments and the ambitious timetable set at this month’s talks in Geneva—the six to nine months to which a number of noble Lords have already referred—it would be helpful to have some idea from the Minister as to what she understands to be the end game. What would a normalisation of relations look like? What might be the trade-offs that each party might be required to make? That seems to be at the heart of the question that the noble Baroness has put before us today.

I will take up the references that have been made to issues of human rights in Iran. I want to see progress on the nuclear issue, but I am conscious that in any trade-off we could see a weakening of the Government’s commitment to secure progress on other fronts, particularly that of human rights. Iran appears to be preparing a receptive response to inquiries from international oil and gas companies, in the expectation of the lifting of EU sanctions. That may well be right, and it may well be the direction in which we ought to go. However, it seems premature until we have more in the way of assurances and evidence that human rights will be more respected in Iran than they have been.

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I am not yet convinced that a change in Iran’s human rights agenda will come with the Rouhani presidency, because critical decisions continue to be made by the Supreme National Security Council. This remains populated by a cohort of people who spent much of their careers in the military and security services. I listened hard to the arguments, both in this debate and earlier, that Iran has no regional ambitions, and about its place in the funding of rejectionist Palestinian entities. I am not yet convinced by these arguments. For me, there needs to be much clearer evidence of a new Iranian policy in the whole area, as well as new developments at home.

Has the Minister seen any change in the vulnerability experienced by religious and ethnic minorities in Iran, whether by Kurds in Iranian Kurdistan and in Iran, or by people of minority religions? From my own contacts with Iranians in Leeds, particularly those who have fled from Iran, I know that they certainly remain highly on edge as to exactly what the future will hold, for their families back in Iran as well as for themselves.

I am also concerned about the continued fate of the members of the Iranian resistance at Camp Ashraf and the misnamed Camp Liberty in Iraq. What evidence is there of any concern from the Iranian Government for those refugees? Whatever we make of responsibility for last month’s massacre at Camp Ashraf, what are the Government doing to provide for the safety and security of the women, men and children in those camps, whether by means of UN forces or otherwise?

I was grateful to the noble Baroness, Lady Williams, for her challenge on the relationships between the Christian churches here—perhaps the Church of England in particular—and Iranian religious leaders. I will take that back and see how we can develop some of those relationships. I absolutely agree with her that it is in discussions, and in deepening religious as well as academic and educational links, that we shall come to understand one another better. We would then be able to move in the sorts of directions that we have been talking about this afternoon.

I hope that the Government will give us a clearer idea of their strategy for balancing the range of competing concerns, so that we can make progress on the nuclear issue without losing sight of the wider picture. I look forward to developments as the discussions go on, especially in our concern for the upholding of human rights.

2.34 pm

Lord Hylton (CB): My Lords, I join in the thanks already expressed to the noble Baroness, Lady Afshar, for this debate. I start from the fact that the United States has had no diplomatic relations with Iran since 1979. This has moved me to argue for political détente. I will continue to do so, and I welcome of course the first small steps that Her Majesty’s Government have taken in this direction; for example, by exchanging non-resident chargés d’affaires and by the conversation between our Foreign Secretary and his Iranian counterpart in New York.

I hope that relations will continue to be improved step by step. There are two rather obvious reasons for doing so, the first being external and the other internal.

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Iran is in a position to be extremely helpful in other countries, particularly Syria, Lebanon, Iraq and Afghanistan. That is why, and as other speakers have mentioned, I would like to see Iran taking part at whatever level can be agreed in the second Geneva conference on Syria. I agree strongly with the noble Baroness, Lady Williams of Crosby, on that.

The internal reason is that Iran is a diverse country, by no means monolithic. It contains Azeris, Kurds, Arabs and Balochis—to name only a few of the subgroups. Politically, there are hardline and more moderate clerics, just as there are Revolutionary Guards and pretty extreme politicians. The new president and his Government are somewhat different from the previous Administration. It is therefore important to give as much encouragement as possible to those who hold reasonable views and who care for the common good of the whole population. This has, we know, been much damaged by sanctions, a depreciating currency and rising prices. It is in our interest that the present Government should not be marginalised by their opponents.

Iran has some 75 million people and is therefore of a similar size to Egypt, recognised as the largest Arab country. The noble Baroness, Lady Afshar, is therefore quite right to ask for closer education links. My late mother’s cousin, Nancy Lambton, was for many years professor of Persian at London University. She and others created links which should be developed.

On commerce and trade, Iran could become an important market for our goods, services and expertise. Iranians whom I met just a few years ago in Isfahan were keen supporters of our football teams. We therefore have some goodwill on which to build. I acknowledge of course that major trade links may have to wait until progress has been made on the nuclear issue. I look forward to the Government’s thoughts on the possible means for achieving improved relations and greater détente—some of which, again, were outlined by the noble Baroness, Lady Williams.

2.38 pm

Lord Triesman (Lab): My Lords, this debate is happening at an important moment. I share President Obama’s assessment, echoed by my noble friend Lady Ashton on behalf of the EU, that President Hassan Rouhani is indeed reaching out. The recent exchanges on the nuclear programme, the exchanges of letters and the interface with our own Foreign Secretary are hopeful signs, but so far they are only signs. I therefore join others in thanking the noble Baroness, Lady Afshar, for hitting such a helpful moment to have this debate.

Anyone who knows the Iranian people or who has visited the country will be impressed by the energy and intellectual curiosity, particularly of young Iranians. Anyone who has ever taught Iranian students, as I have had the good fortune to do, will know exactly what I mean, and the noble Baroness, Lady Williams, made key points about the role of women in higher education which I wholly endorse. Iranians are inquiring, modern and hungry to engage with others; they are protective of their country, although that does not mean that they embrace theocratic rule or want to live

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in a social order resembling a caliphate—that is not true about them. Some are very brave. They faced repression, even if there are now limited changes.

It makes great sense to look at the two outward-facing windows that this debate suggests we look at which offer perhaps the best opportunities to build, for ordinary people, on the process of reaching out. Commercial links have understandably been impacted by economic sanctions. Sanctions were and, in my view, are essential until there is compliance with all United Nations decisions. They have had an impact and have had a much better effect than the alternative forms of intervention which some have advocated. It is easy to understand that the Iranians want them eased. The country is struggling under the current sanctions, not least because of the two-thirds decline in its oil exports, which account for some 50% of government expenditure.

The noble Lord, Lord Lamont, put the case about the economy very strongly, and I can only echo him. In exchange for diplomatic concessions, there is already promising talk about easing sanctions imposed by the UN and the West. Starting from such a low point, almost any commercial link is bound to be an improvement. On 19 October, the United States released $12 billion-worth of sanctions and the EU released $35 billion-worth of sanctions. These are good steps. I know of business opportunities, including some for Iranian state pension providers, many of whose beneficiaries are British. Opportunity is there, so there will be progress, but only if there is progress in the other areas that concern us, not least uranium enrichment and security for the missions of countries, including ours, that have suffered in the recent past. We do not yet know with certainty that this progress is sustainable, and I will return to the strategic judgment we have to make. It should be the core issue of this debate that we look at this issue, and ask the same fundamental questions as the right reverend Prelate the Bishop of Ripon and Leeds. I share his call for clarity.

Education links are invaluable for the future. They reach a new generation of Iranians whom we need to reach. UNESCO tells us that almost 99% of Iranians aged between 15 and 24 are literate and, as a percentage, as many people go to tertiary education as in this country. Support for educational and cultural exchanges between our two countries will form stronger bonds and more mutual comprehension. We have promoted this through the British Council and Chevening scholarships.

Other countries have also recognised the problems in this arena. UNESCO reported interventions—I will not go though all the kinds of courses because of the time—from Germany, France, the Czech Republic, Malaysia, Korea and the United States, and I am sure there are a great many others. Aside from the Chevening scholarships, I am aware of initiatives taken by a number of British universities. There are scholarships at Cambridge, East Anglia, Westminster and Nottingham, and the noble Lord, Lord Hylton, kindly reminded us of a longer and deeper historic link with the universities as well.

All this is positive, but it does not address the key strategic issue. I know how hard negotiating with Iran can be as I conducted the negotiations for the release

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of our sailors and marines who were seized in the Persian Gulf by the Revolutionary Guard. Everyone is entitled to look for signs of hope—we would feel hopeless if we did not do that—but we will all weigh the changes in top personnel, even if we do not yet know much about them, and the positive words, which are to be welcomed and given weight, while we recognise that the intention of diplomats who utter them is that they should be given weight. The art is to be optimistic, but not to put unsustainable weight on pronouncements or on preliminary stages of a dialogue. These are processes where cautious advance is critical, working out with consummate care what is to be given in exchange for real changes, and for nothing less.

I ask noble Lords not to misunderstand my point. I want hope and positive advance no less than anybody else. I do not want to miss any window of opportunity, but I know that no sophisticated nation or alliance builds a credible foreign policy on the basis of hope alone. It is built in calibrated steps by all parties. It is circumspect and usually involves turning around a huge tanker that is loaded with history, poor experiences and disappointments. To do so as fast as the evidence suggests is, of course, right, but it has to be as fast as the evidence suggests.

I hope that when we hear in a few moments from the noble Baroness, Lady Warsi, what the Government’s current assessment is, the lessons to take away will be that we must move in a timely way; that we should not be star-struck with hope without proof of good intention; and that we should have carefully designed milestones by which to measure proposals. That is the approach I would advocate, and I do not believe that it moves an inch against the direction of doing so with a hopeful spirit.

2.45 pm

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con): My Lords, I start by thanking the noble Baroness, Lady Afshar, for calling this incredibly timely debate. It is particularly timely because nuclear talks with Iran resumed last week in Geneva, and for the first time in a decade we are seeing serious exchanges between the E3+3 and Iran on the nuclear issue. On the bilateral side, we have agreed with Iran that we will both appoint non-resident chargé d’affaires, which marks a first step towards improving diplomatic relations. As my right honourable friend the Foreign Secretary said on 8 October:

“It is clear that the new President and Ministers in Iran are presenting themselves and their country in a more positive way”.—[Official Report, Commons, 8/10/13; col. 27.]

That is, of course, welcome. However, the noble Lord, Lord Triesman, is right to say that we must advance cautiously. So far, the contact has been thus. On 5 August 2013 the Prime Minister wrote to President Rouhani, and on 23 September the Foreign Secretary met the Iranian Foreign Minister, Mohammad Zarif, in the margins of the UN General Assembly in New York. He spoke to him again on 7 October. The FCO’s political director met the Iranian deputy foreign Minister on 25 September, and again in Geneva on 16 October. However, we remain concerned about a number of

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Iran’s policies, including regional activity, particularly in Syria, and human rights. We want to see a change in actions, not just a change in words, from Iran.

Iran’s nuclear programme remains our overarching priority. Iran has thus far failed to reassure the international community that its nuclear programme is for purely peaceful purposes and it is therefore right at this stage that the UN and the EU have imposed sanctions on Iran. Given the current sanctions regime, the British Government do not encourage trade with Iran and do not support companies who wish to export to Iran or have a presence within the country. However, trade does continue in humanitarian goods such as medicine and foodstuffs, which are exempt from sanctions.

Lord Lamont of Lerwick: Has the noble Baroness noticed the report of the UN monitor of human rights who specifically said that the relief from sanctions for medicines and humanitarian purposes for poorer people in Iran is ineffective because the banking sanctions remain?

Baroness Warsi: I take the point made by my noble friend. So far as the UK is concerned, we have tried to issue export licenses for these products as a priority, but I understand the challenges that are presented by the banking sanctions. I shall certainly take back the comments that have been made in the debate today, including those referring to CORDS, the organisation that is in attendance here. It is the ambition of the UK Government to resolve the impasse in the nuclear issue peacefully. We therefore hope that President Rouhani’s Government will engage constructively and reach a negotiated settlement with the international community.

I can assure noble Lords, and specifically in response to the comments made by my noble friend Lord Lamont, that we have been open with Iran. We have said clearly that reaching a comprehensive agreement on the nuclear issue would mean the normalisation of political and economic relations with the international community and the end of all nuclear sanctions. Iran’s nuclear programme would be treated in the same manner as that of any other non-nuclear weapon state party to the non-proliferation treaty. A solution to the nuclear problem would mean that normal commercial ties with Iran could resume. It is therefore in all our interests for this matter to be resolved and for us to proceed to the next stage. The E3+3 accepts and respects Iran’s right to use nuclear energy for peaceful purposes. But this remains impossible if Iran continues to expand its nuclear programme in violation of UN Security Council resolutions and multiple resolutions of the IAEA Board of Governors.

Iran’s recent activities go far beyond what is required for a civil nuclear programme. Iran needs to take concrete steps to address international concerns and comply with international resolutions. We therefore welcome the more positive approach taken by the Iranian Government in nuclear talks between Iran and the E3+3 in Geneva last week. Foreign Minister Zarif presented a basis for negotiations and for the first time diplomats have begun more substantive

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discussions with Iran on issues of concern. We hope that negotiations will lead soon to some tangible results. There is a great deal of hard work ahead and further talks will take place on 7 and 8 November in Geneva. It is important that we maintain the positive momentum of the negotiations while at all times keeping a clear focus on Iran’s continuing efforts to develop its nuclear programme.

The noble Lord, Lord Hylton, and other noble Lords raised the issue of educational ties. We deeply regret that one implication of the lack of progress on the nuclear issue and a consequence of the closure of our embassy in Tehran has been to make it harder for Iranians to apply for visas to travel here as students, and for other visas. While there has been a noticeable drop in the number of students applying for visas, the UK remains committed to fostering educational links and has issued nearly 1,500 student visas via our diplomatic missions in Istanbul and Abu Dhabi. We also continue to run the Chevening Scholarships programme for Iranian students. This scheme is part-funded by the Foreign Office and will enable six outstanding scholars from Iran to study a one-year postgraduate course at a university in the UK.

The British Council suspended operations in Iran in 2009 but, noting President Rouhani’s positive comments regarding engagement with the international community, is now looking again at strengthening cultural and educational links between the UK and Iran. In the mean time, the British Council has supported English language teacher training through the development of digital resources and face-to-face training events outside Iran.

Baroness Williams of Crosby: I apologise for interrupting the Minister and thank her for giving way. Just before we move away from the visa issue, will she consider looking at visas specifically for scientific and medical purposes? I mentioned drug-resistant TB. There is a great deal of expertise in this country and in Iran. That is the kind of area where perhaps a more generous approach can be made.

Baroness Warsi: I will certainly look at that specific issue, and will continue to press for the overall normalisation of relations, which will impact positively on all visa applications.

In May this year, the British Council also hosted a meeting across the Persian Gulf in Dubai, which brought together senior non-governmental stakeholders from the Iranian education sector to discuss language and education in Iran. Such dialogues are continuing; for instance, with a round-table discussion next month, which will explore the role of cultural relations in developing UK-Iran engagement.

The noble Baroness, Lady Afshar, and my noble friend Lord Lamont spoke about banking restrictions. It is regrettable that a number of banks have taken the position that they have. It is not the intention of sanctions for that to have happened. The impact of sanctions on student bank accounts has been as a result of some banks imposing their own restrictions in addition to the sanctions. The FCO has held some initial discussions with the Treasury on how to resolve this issue, and these discussions are currently ongoing.

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As my right honourable friend the Foreign Secretary has said, progress in our bilateral relationship with Iran must be on a step-by-step and reciprocal basis. We are open to more direct contact and further improvements in our relationship. It is with this in mind that we are appointing the chargés d’affaires, who will be tasked with rebuilding our relations and dialogue on many issues.

My noble friend Lady Williams is right: one issue where Iran can, and must, play a constructive role is Syria. The new Iranian Government have said that they want to see a peaceful solution to the Syrian conflict. No decision has been made on Iran’s participation in Geneva II. We call on President Rouhani’s Government to match their words with actions and publicly endorse the G8-backed Geneva communiqué, which calls for a negotiation between the Assad regime and the Opposition on a new transitional authority for Syria. Iran has so far failed to endorse that communiqué. Iran’s actions must not prolong the conflict and must not contravene UN Security Council Resolution 1747. However, by supporting the Syrian regime with weapons and financial assistance, unfortunately Iran’s actions continue to do that at this stage.

Finally, as this Committee is well aware, the human rights situation in Iran continues to be a matter of serious concern. We regularly receive reports of serious violations by the Iranian regime against its own citizens and have condemned these. While I accept the comments of my noble friend Lady Williams, Iran does differ in many positive ways on the issue of human rights, women’s rights in particular, but there are still challenges. Women continue to suffer discrimination under Iranian law with a draft Islamic penal code continuing to legitimise disparity between the sexes. We saw a further erosion of women’s rights in Iran in August 2012—

Lord Lamont of Lerwick: I entirely accept what my noble friend is saying, but does she make the same representations equally unequivocally to Saudi Arabia?

Baroness Warsi: I am not the Minister with responsibility for Saudi Arabia, but I can assure my noble friend that when I last met with the Saudi Justice Minister I was incredibly forthright and frank in the discussions on the issue of women’s rights in Saudi Arabia.

We have made many public statements about women’s rights in Iran, too. The death penalty remains to be used excessively, and Iran has one of the world’s highest per capita execution rates. Discrimination and persecution of religious and ethnic minorities continues, as does torture and intimidation. I would be supportive of anything that the right reverend Prelate the Bishop of Ripon and Leeds could encourage the Church of England to do to help foster understanding.

The noble Baroness, Lady Afshar, noted some positive moves, including the release of Nasrin Sotoudeh. This is, of course, a welcome step, but more needs to be done to ensure all Iranians enjoy the rights and freedoms to which they are entitled. I can assure the right reverend Prelate that the issue of human rights concerns is as important to us as nuclear concerns. We have designated more than 80 Iranians responsible for human

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rights violations under EU sanctions and have helped to establish a UN special rapporteur on Iran human rights. We supported Iran-focused human rights resolutions at this year’s UN General Assembly. In relation to Mujahideen-e Khalq and Camp Ashraf, we have called for a timely Iraqi investigation and for those responsible for these terrible attacks to be held to account. I have answered questions on these matters on many occasions before the House.

In conclusion, we sincerely hope that the marked change in Iran’s public statements is accompanied by concrete actions on issues of concern, not least the adoption of a viable approach to nuclear negotiations. If it is, the UK stands ready to work with Iran. We do not underestimate the difficulties ahead, but must take full advantage of any opportunities. If Iran matches its words with genuine steps to address the concerns that have been outlined in today’s debate, the Government believe that there is a rare and significant opportunity for progress to be made, and for our commercial and educational links to be strengthened as a result. This can only be to the benefit of Iran, Britain and the rest of the international community.

2.57 pm

Sitting suspended.

Housebuilding

Question for Short Debate

3 pm

Asked by Lord Stoneham of Droxford

To ask Her Majesty’s Government what progress they expect to make in increasing housebuilding by May 2015.

Lord Stoneham of Droxford (LD): My Lords, I start by declaring my interest in the register as chair of Housing 21, a housing association. I thank my noble friends Lord Borwick and Lord Oakeshott for taking part in this debate and also the noble Lord, Lord McKenzie, and my noble friend Lady Stowell. I hope what we lack in quantity we will make up in the quality of the debate. I also congratulate my noble friend Lady Stowell on her appointment as Parliamentary Under-Secretary of State for Communities and Local Government and apologise for putting her on the spot so soon after that appointment.

I tabled this debate six months ago. My main motivation was to assess the progress on housebuilding in this Parliament and to monitor the progress on the government strategy as outlined in Laying the Foundations: A Housing Strategy for England. The document was hailed by the Prime Minister and Deputy Prime Minister as a perfect example of the approach of the coalition, which took decisions that were right for the long term and not for the headlines. In the foreword, they committed that the Government,

“will unlock the housing market, get Britain building again, and give many more people the satisfaction and security that comes from stepping over their own threshold. These plans are ambitious—but we are determined to deliver on them”.

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It is nearly two years since that housing strategy document was published, and it has to be said that the first year, in terms of the number of houses built, was disappointing. In 2012-13, only 108,000 houses were completed. We have to face the fact that, after the 2008 economic meltdown, which had an overheated speculative housing boom and bust at its epicentre, restoring confidence and getting finance flowing again was never going to be a quick fix. There was also the adjustment of a new social housing programme, which has taken time to bed in and get under way.

However, there are signs of life now in the housing market. The number of new homes completed in the last quarter was up 25%, housing starts were up by a third and stamp duty revenues were up. That is clearly a change from a year ago. Housing was then very much seen, certainly by those who thought we should give greater priority to it, as the best possible kick-start to the economy. Now, with signs of recovery, our main concern must be that demand does not outstrip supply. We have to refocus on the shortfall between the number of houses built and the formation of new households, which requires houses to be built at double the rate we are building them at the moment. I hope the Minister will be able to tell us what the Government’s latest forecast is for new homes this year and whether they are confident that they can build the projected 170,000 affordable homes by 2015 that they set out in their housing strategy. That will represent significant progress on the number built in the last five years of the previous Government.

With signs of recovery, and some initial concerns about house prices rising in the south-east and London, housing strategy requires a long-term focus. We must avoid the quick fix that ends in another burst housing bubble and which will only compromise the chances of more people owning their own home or renting one at an affordable rent. We must not forget the many lessons of past housing cycles, which have occurred under Governments of all persuasions, but particularly under the previous one in the so-called good times between 1999 and 2007. The number of new houses built annually during that period rose by something like 30%, from 120,000 a year to 160,000 at the peak. But prices rose by 173% and mortgage loans increased by 182%. The central problem is that housing is a cyclical industry where price inflation has been the driver of profitability in the short term and land asset appreciation has been endemic to a business model that eventually hits the buffers.

Each boom and bust has not only shaken financial confidence but has sapped capacity in the sector. Each cycle has made the inelasticities of the supply chain even less subtle. Housebuilders are rightly going to be cautious following the experience of the bust times. They are initially going to be motivated to make marginal additions on their most profitable sites. They will even have some interest in allowing prices to rise rather than in providing volume to counter the higher prices. There has been a huge reduction in capacity in the sector, and skilled workers and developers have left the scene. Already there are signs that building costs are moving up with the initial recovery.

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I suggest three guidelines for the Government. First, given the very dysfunctional housing market, they will need to intervene more than they want to. Particularly as recovery takes hold, they will have to work on opening up land supply and making sure that our technical colleges provide the new skills that are going to be needed to fill the capacity shortages. They will have to monitor competition in the market with the smaller number of developers in play.

Secondly, they will have to watch like a hawk their demand-led initiatives, such as Help to Buy, to make sure that they do not simply lead to price inflation. Thirdly, although 75% of new build is in the private sector by developers, they need to balance their attention with initiatives for social and council houses and for self-build to develop the full potential of new capacity and affordable housing. Doubling building capacity must be our objective, and it will probably take another full Parliament to get there.

What is needed with these guidelines? It is all there in the housing strategy document, but the strategy now has to concentrate on easing the supply constraints in the sector. Let us look first at the private sector. Planning flexibilities have to show through to release more land to be used. We have to make sure that the new homes bonus for local authorities provides an incentive to release development land. New players have got to be encouraged into the market. The Government were right to give more support to encourage self-build, which has been a weak component of the private sector after the destructive impact of stop-go cycles. Price stability has to be an important objective for living standards. Energy bills pall into insignificance compared with the cost of housing.

We have been very lucky to have low interest rates, but we do not want people fooled into thinking that they can continue. The greatest concern is that Help to Buy will stoke up prices in the south-east, although it will probably still have a role to play in other parts of the country. Will the Government consider reverting to a regionally focused Help to Buy scheme if house prices get out of hand in London and the south-east? Will the Minister update us on the progress the Government have been making with build now, pay later, the Growing Places fund and initiatives to stimulate self-build? Is the announcement on the much needed larger developments for the new generation of garden cities now imminent?

In the social housing sector, there is still uncertainty about future funding. If it delivers the Government’s target of 170,000 affordable homes, it would demonstrate its capacity potential. The Government’s proposal to develop a guaranteed bond scheme linked to potential institutional investment has the potential to fund a further 60,000 homes. What impact on extra housing supply can now be expected from the guaranteed loans for social and private rented landlords provided in the Government’s strategy?

In the council housing sector, now that councils have control of their housing revenue accounts, is the improving economic situation not a good time to review whether council investment in housing should be included in the public borrowing limit? We need to put councils on an equal footing with housing associations.

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No other European country has as strict accountancy arrangements as we do. Frankly, if we want to tackle some of the problems of our own council estates, they need development, regeneration and investment. Is this not a good time for the Government to review the anomaly that exists between councils and housing associations with regard to the treatment of their investment in the public accounts? If they did, it could be a source of new funding.

Finally, with so much to do and deliver, we must question whether the Department for Communities and Local Government has the resources and leadership to do all this. The Labour Government had nine Ministers for Housing. The coalition is now on its third. Yet the position of Minister of State for housing has disappeared. Can the Minister tell us how, in the face of the many challenges and the need for the housing sector to be galvanised to increase housebuilding, we can manage without a Heseltine or a Macmillan figure to meet the strategic housing needs of the country?

Housing is not just key to improving the social fabric of the nation; it has often been at the heart of the health and the crises of the economy. Never has there been such a requirement for a strong strategic focus aimed at long-term stability. The Government have made a start but they need to prove their grasp in the next 18 months, and we need to show that we take decisions that are right for the long term and not for the headlines.

3.12 pm

Lord Borwick (Con): My Lords, first, I declare my interests as shown in the register, particularly the directorships and shareholdings in two housing development companies—one developing up to 2,500 new houses in Bicester and another with plans for 10,000 houses in Sussex—and ownership of a farm in Scotland that may eventually be developed for houses and rail-related warehouses.

The history of our site in Bicester may be helpful in understanding the problems that beset our planning system. Planning for this non-controversial site, supported by the local authority, took only seven years from preparation of the first application to the grant of conditions and to the ability to start on site. This planning process cost us about £4 million. If the scheme was unusual, even revolutionary, it would probably have taken longer. It certainly suggests that any ambition to build on wholly new sites before May 2015 is impossible, and pretty doubtful before 2020.

In its report dated this month, An Analysis of Unimplemented Planning Permissions for Residential Dwellings 2013, the LGA suggests that the number of unimplemented planning permissions is about 400,000. However, I believe that there are serious flaws in the analysis. At present, our site in Bicester has permission for 1,585 houses, of which roughly 200 are built and occupied. Under the LGA analysis, I understand that the site is counted correctly as unfinished, but also as totally unimplemented, when the truth is that it is partly implemented.

The LGA figure of 400,000 unimplemented planning permissions is indeed scandalous—if true, which I doubt—but it is scandalously low, not high. The NPPF requires that councils should identify five years of

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housing land supply, of which at least the next three should be deliverable. Five years’ supply at the normal rate of housing production would imply a figure of 1 million houses, not 400,000.

My noble friend Lord Taylor of Goss Moor has been working hard, with tremendous success, to reduce 7,000 pages of planning guidance by 90%. But the problem is that the system does not really want to change. Any shortcut or acceleration of an ancient process is a risk without a reward. The risk is that a mistake will be taken to expensive appeal or judicial review, while the reward cannot be seen. There seems to be no advantage to a town or a council in becoming bigger. The established view is that new residents produce new problems and new costs. Property taxes that would galvanise an American town to growth are seen as irrelevant in the UK.

We all know that the costs of running the Government will require growth in the economy if we are to afford them. Furthermore, there is a shortage of cheap houses for the next generation, and our whole economy is distorted by the high value of houses in the south-east.

The admirable concept of localism has been taken by many as the right to do what they want—that is, nothing—rather than to influence what is really needed. What can be done about it? Perhaps I can make a few suggestions to the Minister. If we are to achieve growth in the production of social houses—and growth in commercial house numbers, too—councils must feel that there is an advantage to their organisation and their community in passing planning permissions.

The new homes bonus is a good scheme but perhaps too small to work. It seems from the figures that the number of planning approvals has gone up, but I am always worried about whether the same definitions are being used. I suggest that the best figures are for houses built and occupied, as there is no advantage to the country in having permissions granted but not used. What would happen if the new homes bonus was trebled, but for one-third of the time of the original scheme—that is, for two years rather than six—and the bonus paid only for new homes built and occupied? Moreover, it should be free to be used by the council, not top-sliced to pay for LEPs.

Will the Minister consider urging her colleagues in the Treasury to do something about stamp duty? Many noble Lords and the Government have been urging the country to build new homes, which is great. Well, how can a tax on new homes, such as stamp duty, help that process? A possible way to slow down something is to tax it. Can we please try the reverse? A route to be studied would be to ensure that stamp duty on residential houses was paid to the local planning authority rather than to the Treasury. That would further incentivise the authority to get houses built and sold. When the Treasury became used to not receiving the income from stamp duty, perhaps after three years, then the tax could be abolished entirely. Would that not be a marvellous development?

3.18 pm

Lord Oakeshott of Seagrove Bay (LD): My Lords, it is a pleasure to follow the noble Lord, Lord Borwick, and to welcome him to this House. He has a distinguished

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business career in manufacturing but clearly speaks with great knowledge and expertise about the housing market. Abolishing stamp duty is a nice idea, but I do not know where the money is coming from. Perhaps I can say to him that the best way to raise a significant amount of money without stopping housing supply is to have the Liberal Democrat mansion tax, which goes on existing property and so does not affect supply.

I should declare my interests in the register, as did the noble Lord, particularly the fact that I am chairman of OLIM Property Ltd, which is a commercial property investment management company. I have bought about £100 million-worth of property during the past year all over the country, from Belfast to Ipswich, Preston to Leeds and Peterhead to Exeter. Although I am not operating in the housing market, I am obviously pretty close to what is happening in the local economies in those areas.

There is a simple and very serious problem that house prices are horribly and unaffordably high in this country. I go beyond the people who argue for stability, and say that prices are too high and need to come down. There are two simple reasons for this. We have built far too few houses for many years and we have also, in terms of affordability, sold off so much of the social housing stock. Two million houses were sold since Mrs Thatcher introduced the policy in 1979, of which three-quarters of a million—no less—were sold under Blair and Brown.

Under both Governments we had a failure to build, and a failure even to use what houses we have to best advantage. We are therefore left today with £23 billion of housing benefit being poured down the drain. Much of it is actually spent on the same council houses which were sold off, but the rent now goes to private landlords.

The result of this long-term lack of supply can be seen today in the ratios of earnings to house prices, which is the key measure of affordability. You do not, if you are wise, take a mortgage on the basis of this week’s special mortgage offer. Mortgage rates go up and down, but obviously what matters long-term is how your earnings compare to what you pay for the house. If I were to advise someone to rush out and buy a house on very low mortgage rates today, to be honest I would be guilty of mortgage mis-selling.

Going back to 1997, when Labour came to power, English house prices were three and a half times median annual earnings. Ten years later mortgage lending had trebled but there had been no net increase at all in house building, with the same number being built. The cost of housing index had doubled to a ratio of 7.2 at the peak of the 2007 boom. On the latest official figures, which are for April 2012, 18 months ago, it had only slipped back to 6.7 times annual earnings.

It is very likely that, with house prices rising five times faster than average earnings, that ratio is right back up past the 2007 peak. As a very good map in the Guardian last Saturday showed, the ratio is already above that peak in very many local authorities. These are mainly, although not entirely, in the southern half of the country, all the way from Somerset to Suffolk,

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in Devon and even one or two in Lancashire. It is not just in the centre of London. For example, housing in Welwyn Hatfield, the constituency of former housing Minister Grant Shapps, is now unaffordable. There houses cost eight times local earnings, even higher than at the peak of the boom.

I have also done some work on auction results and the housing auction market. This is a real market where real volumes change hands. The numbers are quite large, about 5,000 houses a quarter. In the last quarter, July to September 2013, the average price of a house sold at auction across the country rose by 14%. It rose by 16% in London, but still actually by 10% in other parts of the country. That statistic is more up to date than the Government’s Land Registry figures, which are on completions, and it goes further back. House prices are rising fast, and I am afraid that that is accelerating.

My noble friend Lord Stoneham asked for a long-term focus on housing. I do not know if 40 years back is long enough, but I remember buying my first home in 1972. That was in rather similar conditions to today, during the Barber boom. There had been a great relaxation of credit, and house prices had already gone up 40% or so over the previous year. I had quite a struggle to buy a house priced at £8,500 with a £7,500 mortgage. Two years later I had to come to London to be a special adviser in the 1974 Government, and mortgage rates had then gone up to 14%. Having saved up on my own to be a first-time buyer, I then had to be a second stepper with the bank of mum and dad behind me to have any chance at all.

We have had many, many experiences in this country of wild fluctuations in interest rates. Rates may be a little more stable today, but there is clearly a great deal of concern about the way they are going. That is being expressed by commentators from all sorts of backgrounds. I have here the HSBC chief UK economist’s research from last week, which argues that house price inflation will not help the UK rebalance and points out the problems of supply.

To return to what the noble Lord, Lord Borwick, was talking about regarding resistance to development, I am not personally against a bit of nimbyism, “not in my back yard”. After all, that is local democracy and people are able to argue that. What we must fight against is the attitude there often seems to be of BANANAism. I do not know if your Lordships’ know about BANANAism, but it means “build absolutely nothing anywhere near anyone”. I am afraid that that is the attitude of some people.

For a variety of reasons, we have had a serious shortage of housebuilding for many, many years. Lately, as my noble friend Lord Stoneham has said, it has been creeping up to 110,000 or 120,000 a year. It was down a couple of years ago to the lowest level in peacetime, since 1923, so, though it is picking up, supply is still far, far below what is needed even to keep house prices stable, given the growth in population, given the growth in household formation. The best estimates are that we need something like 250,000 completions every year just to keep up with increasing demand. To make any impact on the problem and

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keep house prices down or even make them a bit more affordable, we would clearly need to be up at 300,000 a year.

I very much hope and believe that the Liberal Democrat manifesto at the next election will have a commitment to that. However, a commitment is one thing—getting on with progress towards it now is quite another. There has been quite a bit of talk about Help to Buy and whether that—as I believe it is—is quite dangerous, given the way it has come in, with a limit of 25 times national average earnings, £600,000 a year. Like my noble friend Lord Stoneham, I think it should be limited to areas where the housing market is not so overheated as the south-east of England. It certainly does not need to be at anything like that high a level when you consider that across a lot of the country house prices, certainly for first-time buyers, are much more like £100,000 or £150,000.

We have another problem. There are two reasons house prices did not fall as much as one would have expected during the crash, and why they have gone up faster than they otherwise would have done. One is, of course, quantitative easing—£370 billion of credit pumped into the economy—which was necessary to avoid the economic patient dying of a heart attack at the time but has a lot of serious after-effects. The other is the Funding for Lending scheme. Just in passing, again, if you think this is wild left-wingery from me, the chief executive of Legal & General, no less, was describing quantitative easing as a policy devised by the rich for the rich. There is no doubt that it has helped push up prices of all sorts of assets, including housing.

The Funding for Lending scheme of the Bank of England has significantly failed to do what it is meant to do, which is to get cash to small businesses. Instead, it has led to a flood of cheap credit in the mortgage market, which is not its point. The Bank of England and the Treasury, I believe, must refocus Funding for Lending on its proper task, which is to rebuild desperately needed business job growth, not to get the house price merry-go-round going again.

When Grant Shapps was Housing Minister, he did make a sustained—and, I thought, quite logical—case for stable house prices, even though I would like to see them lower. I am afraid now that he is party chairman, he seems to be almost in denial. The Government, I am afraid—Conservative Ministers, anyway—seem to be washing their hands of the high-house-price crisis, because that is what it is, in a way reminiscent of Pontius Pilate. We cannot pump up house prices unless we are much more radical about supply. I am afraid Help to Buy without far more active help to build is a potty policy.

3.28 pm

Lord McKenzie of Luton (Lab): My Lords, I thank the noble Lord, Lord Stoneham, for initiating this short debate. When he introduced it he referred to the noble Baroness, Lady Stowell, and welcomed her to the Front Bench. She is now a veteran of housing debates. This must be the third in a couple of weeks, with one to come next week. I enjoyed the contribution of the noble Lord, Lord Borwick, although I did not agree with much of it. I have enjoyed the contribution

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of the noble Lord, Lord Oakeshott, whom I found myself closer to. I am interested that he bought his first house in 1972 with a mortgage of £7,500. So did we. I think we were both at that time members of the Labour Party, so our histories have diverged a bit.

We know that housing is moving up the political agenda, and for good reason. We have a growing housing crisis because we are building less than half the number of homes we need to keep up with demand. The truth, as others have said, is that we have not been producing enough homes under successive Governments for some time. In the past three years the number of homes built has reached its lowest level in peacetime, since the 1920s.

The recent upturn in activity is to be welcomed, but there is a long way to go. Homelessness and rough-sleeping are increasing, and the number of families in temporary accommodation is rising. People are struggling to get mortgages to get on the housing ladder and there is a rapidly growing private rented sector where too many lack security, have to pay ever increasing rates and suffer poor quality accommodation. There are nearly 5 million people on local authority waiting lists and this housing shortage is central to the cost of living crisis. It now takes the average family more than 20 years to save for a deposit, and house prices are, I think, eight times the average wage. It is no wonder that home ownership has fallen for the first time in a century, and that there are now some 8.5 million people in private rented accommodation, spending an average of 41% of their income on rent.

If home ownership is to be a realistic aspiration for working people and rents are to be affordable, we need a step change in the scale of house building in this country. This will not, of course, be achieved overnight, and on present policy certainly not by 2015. We have seen a plethora of initiatives by this Government, but they have not delivered anywhere near what is required. On home ownership we have seen First Buy, launched in 2011 and closed in March of this year, followed by Help to Buy equity loans, followed by the NewBuy Guarantee Scheme and now Help to Buy brought forward from January 2014.

However, there are real concerns about the latest Help to Buy scheme. If the Government simply increase housing demand but do not act to increase housing supply, all that will happen is that house prices will be pushed up and up. The end result is that the very people that the policy should be helping—first-time buyers—will find it even harder to get on the housing ladder. How in touch are this Government who introduce a scheme allowing taxpayer-backed mortgages for homes worth up to £600,000 when the average house price in the UK is £245,000 and the average price paid by a first-time buyer if less than £200,000?

We are not the only ones voicing concerns; the Treasury Select Committee has done so, and the IMF has warned about its impact on rising prices. These issues have particular resonance in London and we have heard from the Business Secretary, Vince Cable, about soaring house prices being dangerous and unsustainable. The new homes bonus was designed to incentivise local authorities to approve new housing developments, but has yet failed to deliver.

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In its report in March this year, the NAO concluded that there is,

“little evidence that the Bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply”.

On coming to office, the Government cut the budget for new affordable housing by 60% and put the strain on increased rent levels to fund such provision. Even then its claim to deliver 170,000 new homes by 2015 includes those commissioned by the previous Administration. However, the programme has got off to a slow start, and anyway, some half of the programme is back-end loaded and is due to be delivered only in the final year.

We will doubtless hear from the Minister about the reduction in the number of affordable homes under the Labour Government; in fact, the figure usually quoted is a reduction in the number of homes rented from local authorities and housing associations over the period, and does not take account of the wider stock of affordable housing. The reduction is a direct consequence of the Right to Buy programme, touched upon by the noble Lord, Lord Oakeshott, which is a policy that this Government are seeking to make more generous. In fact, under the previous Labour Government, nearly 2 million more homes were built in England, including half a million affordable homes, with 256,000 in the last five years.

It is not difficult to conclude in all of this that the patchwork of current initiatives will simply not produce the step change in housing provision which is required. We have a job as the Opposition to criticise, challenge and support where necessary the Government of the day. However, we are now doing more so that in May 2015, given the chance, we will be in a position to start seriously to close the gap between the homes that are currently being built and the homes that we need.

Ed Miliband and Hilary Benn have asked Sir Michael Lyons, supported by a panel of experts, to lead a new housing commission whose task will be to set out a road map for how an incoming Government can help secure a big change in the number of homes being built. Some of the policy solutions to a step change must include tackling land banking and speculation by looking at giving local authorities proper compulsory purchase powers so that they can buy, assemble and grant planning permission on land that is being hoarded and is holding back development and giving councils the power to charge people escalating fees for sitting on land with planning permission.

There must be planning to establish new towns and garden cities. The UK has never delivered a large uplift in housebuilding without large-scale development such as the post-war new towns. This will entail the creation of new town development corporations as public/private bodies with the power to raise finance, undertake building and provide infrastructure. It would also necessitate financial incentives and freedoms for local authorities within the scheme and a fast-track planning process under the nationally significant infrastructure planning regime.

We know that at present some areas want to grow to meet local housing demand but do not have land within their local authority boundary to do so. Neighbouring authorities block the building of badly

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needed homes and the duty to co-operate has yet to prove effective. We want to establish a “right to grow” status with bids from local authorities assessed by the planning inspectorate. We also consider that there is scope to reform the housing revenue account system and we are not unsympathetic to the proposition to remove the cap. We want to give local authorities greater flexibility so that they can build more social homes. A number of local authorities are already beginning to build again within the constraints they have but we want the commission to look at the obstacles to overcome and the incentives needed to get councils and housing associations back into the business of building again. Despite various attempts to do that through Section 106, the community infrastructure levy and the new homes bonus, we consider that there remains a significant mismatch between the national and regional need for further housebuilding and the incentives which local communities have to accept new developments, especially developments such as new towns.

We need to find ways of ensuring that a larger share of windfall gains from planning permission goes to local communities. One thing is certain: if we carry on as we are, by 2020 there will be 2 million few homes in Britain. Our aspiration is to see 200,000 new homes delivered each year by the end of the next Parliament. That would be a significant improvement but there needs to be a long-term national effort to turn this around.

3.38 pm

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Stowell of Beeston) (Con): My Lords, I am grateful to the noble Lord, Lord Stoneham, for introducing this debate. As the noble Lord, Lord McKenzie, has just said, far from putting me on the spot, this is my third housing debate in the past two weeks. However, I am far from expert in this area and I recognise and acknowledge the great expertise of noble Lords who have spoken today. I also welcome my noble friend Lord Borwick. I have not had the pleasure of participating in a debate with him until today.

Before getting to the substance and specifics of the points raised by noble Lords, of which there are quite a lot, I shall start by speaking in general terms and move on in due course. The most important point to make at the outset is that the Government are committed to delivering long-term economic stability and economic growth. Our purpose and objective in that area have not changed. Whereas the previous Administration oversaw a housing boom and bust, we have done extensive work since coming into office to pick up the pieces. We have introduced a series of initiatives to boost housing supply, increase the provision of affordable housing and support a healthy private rented sector, and by tackling the deficit we are helping to keep down both interest rates and the number of repossessions. However, we are only at the start of a return to recovery. The housing market has turned a corner, but mortgage lending and loan-to-value ratios on new mortgage lending remain below their historic averages, while, relative to earnings, median house prices across England are at around the same level as they were in 2005.

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I was pleased to hear the noble Lord, Lord McKenzie, acknowledge in his contribution that his Government did not build enough homes when they were in power. The housing supply today is at its highest since the end of the housing boom in 2008, with 334,000 new homes built in the past three years. It is worth noting that the Chartered Institute of Purchasing and Supply has said that activity in housing construction has been increasing at its fastest pace for almost a decade, and, as my noble friend Lord Stoneham has already acknowledged, starts are up by a third on last year. Indeed, the Royal Institute of Chartered Surveyors reported this week that housebuilding was picking up across the country, which is an important point since it indicates that recovery is not confined to one particular area.

We believe that we are making progress because of the policies that we have introduced and the investment that we have been able to make, and that that investment has been able to attract private sector investment as well. In the current spending round, we have invested £11 billion in housing, which has leveraged a further £15 billion from the private sector in affordable housing. In the next spending round, government and private sector investment will be in excess of £23 billion in new affordable homes, which will be supported by government guarantees of £12 billion to support homebuyers.

In response to many of the points that have been raised in the debate, if housebuilders are to build, they need to know that people will buy. Since the launch of the Help to Buy equity loan scheme in April this year, more than 15,000 reservations have been made for new-build homes. In total, we have helped nearly 30,000 people to buy or reserve a new-build property through a range of government-backed home ownership schemes, including the most recent initiative that was launched earlier this month—the Help to Buy mortgage scheme. This is aimed at people who, unlike the noble Lord, Lord Oakeshott, do not have a bank of mum and dad to rely on but still have every right to aspire to get on to the housing ladder.

The noble Lord, Lord Oakeshott, and others asked whether some of these initiatives were having the effect of creating a housing bubble. In the course of his contribution, the noble Lord referred to different economists and other experts. He will not be surprised to learn that I am about to quote from others who offer a different view. There are plenty of people who very much endorse what the Government are doing in this area. For instance, Huw van Steenis and Charles Goodhart from Morgan Stanley said recently that Help to Buy could help to stimulate far more housebuilding than many believe, while Ernst & Young stated earlier this month:

“The Government’s well-timed initiatives to revive mortgage lending have borne fruit, with prices and transactions recovering from their recent very low levels, in turn supporting the wider economy. The housing revival has given rise to concerns that the government’s interventions—including bringing forward the Mortgage Guarantee Scheme—risk stoking up a housing bubble, especially in London. In our view these worries are overdone”.

I will not repeat some of the national figures that have already been covered in noble Lords’ contributions, but many areas outside London are seeing much lower average prices today than before the housing boom in 2008. For instance, in my home town of Nottingham,

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in August 2007 average house prices were £103,000; they are now £86,000, which is 17% lower. In the Isle of Wight, which I know the noble Lord, Lord Oakeshott, is familiar with, the average price is 16% lower than previously. Certainly, transactions around the UK as a whole are way below what they were before the crash.

While I am on Help to Buy, I will respond to the point made by the noble Lord, Lord Stoneham, about reverting to a regionally focused Help to Buy scheme if house prices get out of hand in London and the south-east. It is far too early for me to give any response to that but I emphasise that, as the noble Lord knows, we have a proper regime with the Bank of England to monitor these schemes and ensure that they do not have a perverse outcome.

I think we all agree that owning your own house is an important part of our culture. It is a symbol of security and success, which people understandably aspire to. But increasingly, some people are opting for different choices. There is evidence that renting as a long-term option is something that people want, so we have also been improving the private rented sector so that it offers a real, positive alternative. As has already been mentioned, we are kick-starting the building of more private rented homes through our £10 billion housing guarantee programme and the £1 billion Build to Rent Fund, which means that blocks of flats or new estates will be built with the sole purpose of being for rent. Under the Build to Rent Fund, 44 projects have been shortlisted and the first scheme has been agreed at Southampton Quay. The noble Lord, Lord Stoneham, asked about targets for this scheme. It is important to emphasise that this is a demand-led scheme, not one that we would start off with a target for. We want to see how demand for it develops.

Moving from the private rented sector back to affordable housing, the noble Lord, Lord Stoneham, was right to emphasise the importance of supplying social housing alongside new private sector homes. We are building more affordable housing. As the noble Lord, Lord McKenzie, predicted, I will remind your Lordships that the previous Administration saw a reduction in the stock of social rented homes of 420,000. I am glad not to have disappointed him. He questioned whether our Right to Buy scheme, which supports those in social housing who want to go on to purchase housing, is the right measure. I think that it is, because of the reasons I have just given about the importance to people of owning a home.

It is important that we continue to build new houses. In this spending review period alone, with £19.5 billion of public and private funding, our affordable homes programme is on track to deliver 170,000 new affordable homes between 2011 and 2015. The noble Lord, Lord Stoneham, asked for an update: half way through, 84,000 households have already moved into new affordable homes. In the next spending period, we are looking to build a further 165,000 such homes. So there is real effort and impetus in that area. We are also making a great effort to release public sector land so that it is available for new build.

Noble Lords raised questions about garden cities. Our approach is about supporting local areas to develop large-scale schemes while making sure that they are

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driven by local areas. We have a fund to support that and there is some evidence of action in that area, which I do not have time to offer in detail.

Noble Lords covered various matters to which I have not responded. However, there are points I would like to make because there is quite a lot of action that is worth sharing more widely. I will write to noble Lords and put a copy of that letter in the Library.

My noble friend Lord Borwick had two innovative ideas, including one of trebling the new homes bonus for a third of the scheme, which I will take back to colleagues at the department. As to his suggestions on stamp duty, I know I was promoted a couple of weeks ago but I did not get as far as becoming Chancellor of the Exchequer, so I hope he will forgive me if I do not comment on that proposal. However, I will of course make sure that my right honourable friend the Chancellor is aware of what he said today, and will follow up any further questions in writing.

3.51 pm

Sitting suspended.

Natural Capital Committee

Question for Short Debate

4 pm

Asked by Baroness Miller of Chilthorne Domer

To ask Her Majesty’s Government what changes they will make in resource allocation in the light of the assessments of the Natural Capital Committee.

Baroness Miller of Chilthorne Domer (LD): My Lords, the Natural Capital Committee is clearly a bit like a bus. There has been no mention of it in either House for ages, and then suddenly this week two debates come along at once. I am delighted about that. We are privileged in this House to have the Defra Minister responsible for it, my noble friend Lord De Mauley, to respond to us.

Although the Natural Capital Committee deals with many Defra matters, it was commissioned by the Treasury and reports to the Economic Affairs Committee of the Cabinet, which is chaired by the Chancellor of the Exchequer. The NCC’s job is to advise the Government on the state of English natural capital. The establishment of the NCC is one of the rather quiet but very significant things that the coalition has done. It is part of a package. In 2011, the Government also introduced the natural environment White Paper The Natural Choice and the UK national ecosystem assessment which shockingly found that one-third of the UK’s ecosystem services was declining severely. If the UK’s ecosystems were protected and enhanced, they could add at least an extra £30 billion annually to the UK economy. By contrast, neglect and loss of ecosystem services can cost us as much as £20 billion a year.

The Government made these moves as part of a plan. Previously, successive Governments and the public have really thought about natural capital only in response

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to a crisis, some sort of wake-up call, whether floods, droughts or food prices. The coalition Government were certainly reminded early on of just how much the public value natural capital when they announced their plan to sell off UK forests. The coalition Government learnt that the public value natural capital, even if they do not consider all parts of it.

I was moved to bring this debate as a result of a conference on soils. Soils are perhaps the most vivid illustration of our natural capital. The development of soil takes between 500 years and perhaps 10,000 years. Even a centimetre of topsoil takes at least 200 years to develop. Soil is the basis of our food production, but it is much more than that. It is important for carbon storage, water absorption and water filtering, and is crucial as the first layer in the food chain. How have we treated this virtually irreplaceable resource? We have allowed it to be eroded, polluted, washed away and built over. People may own the land, but the timescale that soil takes to form puts it into the category of a real commons for the nation—or natural capital.

Let us take another part of our natural capital that has been the subject of debate in our Chamber recently: bees. Pollinators are—to mix my metaphor—perhaps the canary in the coal mine. We do not know why bee colonies have collapsed; there seem to be several possible contributory factors. Only recently have people begun to appreciate that, beyond the luxury of honey, the pollinator services of bees and their many pollinating relatives are critical to food production. The collapse of bee populations is mirrored by those of frogs and other amphibians. Could it be that the use of substances such as neonicotinoids is having a much wider effect, or is it the cocktail of pesticides that needs further examination? It has always seemed bizarre to me that a product is tested alone when in reality a cocktail is being used out there.

That brings me to the first question for my noble friend. The NCC rightly sees developing a research agenda on natural capital as a priority. The research agenda on the constituents of natural capital is badly in need of some major help and overhaul. I have seen plenty of evidence which suggests that attempts to ensure the future health of our natural capital might be undermined unless research priorities are better aligned to overall needs and move away from the quick buck producing areas. The determinants of innovation and factors that influence research choices, such as science policies, public-private partnerships and the career paths available, all combine to favour technological regimes that tend to suit very focused, reductionist approaches rather than the holistic ecological approach that is needed to address ecosystems and the sort of complex interactions that we get between, for example, soil and water. Can my noble friend confirm that the Government will ensure a move to a more appropriate balance of research?

I have referred to a few other elements of natural capital such as water, minerals, stone, gravel and energy sources, whether oil or gas. They are all part of the natural capital that is fundamental to our manmade economy and society. We could not have a manmade economy if it was not underpinned by all those elements.

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Our failure to adequately protect our natural capital could well be a fatal step towards an economy that diminishes severely over time.

One of the problems is that efforts to protect our natural capital have too often been made on the basis of the intrinsic or aesthetic value of, say, woodlands, uplands, clean streams or bird populations. I accept that we may succeed in better protection if we explicitly demonstrate the value that society places on our natural assets, thereby protecting and maybe even enhancing them for future generations. The Natural Capital Committee is part of that effort. The first annual report of the NCC earlier this year contained a number of important recommendations, and I wonder if my noble friend would be able to comment on one of them. The NCC stated that,

“the Government’s efforts to reform the Common Agricultural Policy be intensified, with a long-term view to phasing out Pillar one support and moving subsides towards Pillar two and the provision of public goods”,

and thereby,

“securing as much flexibility as possible in how funding can be allocated for the period 2014-2020”.

If my noble friend could tell us how that work is going, I would be grateful. Will he also encourage the NCC to consider who should be the innovators of these approaches? Clearly, there will need to be some pilot areas; the national parks are one obvious example, but what about the Crown Estate? It is also responsible to the Treasury, and there it is with swathes of our natural capital under its management. Surely it should be a cradle of innovation.

I have a few comments to make on the NCC itself. It held a useful open event at the Royal Society and its first annual report is quite readable. However, the minutes of the NCC are dry to the point of desiccation. This is important because it needs to be outward facing if it is to succeed in integrating the thinking that is being developed into the mainstream and make it the discussion of the day in boardrooms. It will also need to develop some work with institutions such as Cranfield because it is disappointing to read that the Committee concluded,

“that it is not currently possible to identify with any certainty precisely which natural capital assets are being used unsustainably, especially given the available data and knowledge about limits and thresholds”.

That seems to be under-ambitious, although the Committee does go on to say that the rate at which natural assets are being consumed is “unprecedented”.

In conclusion, I must say that there are plenty of cynics out there who think that the NCC is just a way to suggest that the Government are after some green credentials. Whether that is the case or not will be proven in whether policies start to shift in decision-making across all departments, and by the Treasury itself in the way it allocates resources. We need some startling, if welcome, decisions and some much more radical policies.

The next debate, which my noble friend is also going to answer, is on the Thames Tideway Tunnel. That is a good example of what I am talking about. Faced with the same sort of problem as London, the city of Philadelphia chose a radically different solution, avoided many costs, enhanced its environment amazingly

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and brought solutions down to a neighbourhood scale. The NCC is perhaps looking at such worldwide examples of practice that could help its deliberations, and I hope that the noble Lord, Lord Berkeley, may go into the Philadelphia example. The NCC is subject to review in 2014, and I certainly hope there will be no question but that it should continue. We really need its work.

4.10 pm

The Earl of Courtown (Con): My Lords, I thank my noble friend Lady Miller of Chilthorne Domer for initiating this debate. Her speech was very educational, and told me much about natural capital that I did not already know. I read the debate in the Commons earlier this week, and so far today I have learnt a little bit more about it. I look forward to hearing what the noble Lord, Lord Grantchester, and my noble friend the Minister have to say.

In the debate in the Commons on Monday, my right honourable friend the former Secretary of State at Defra, Mrs Spelman, made a very telling and—as expected—well informed speech which emphasised the importance of this subject. She stated:

“We had the lofty ambition … of being the first generation to leave the natural environment in a better state than we inherited”.— [Official Report, Commons, 21/10/13; col. 101.]

This sets the bar very high indeed, but so long as we work towards this aim it must be better for our environment and for the people who come after us.

The United Nations Environment Programme calculated that although overall wealth in the United Kingdom increased up to 2008, during the same period natural capital decreased by 30%. These are similar figures to those already quoted. Much work is required here. It will be interesting to hear my noble friend the Minister’s response to any foreseeable changes in policies relating to natural capital and its future.

As my noble friend said, the White Paper published some years ago also introduced the national ecosystem assessment. This was developed with the help of scientists as a measure of natural capital, which is not an easy job in itself. We must not forget that environmental legislation has done much good. For example, it has transformed watercourses, many of which were very badly polluted but which have now improved in many places throughout the country.

I give another example of how important infrastructure is to natural capital. I had some experience of this in an area of which my noble friend the Minister might be aware, in Priory Vale, north Swindon. There was an extensive development programme there, involving some of the biggest housebuilders in the United Kingdom. I was involved in the planting of native trees, shrubs and hedges, using the old hedge lines and retaining the old hedges and ancient oaks. There are green corridors throughout this development which are so important for the environment, and make it a much more pleasant place to live. There is a lot of benefit from that, which people have been trying to measure as well.

It is welcome to hear that the Natural Capital Committee may be chaired by Professor Dieter Helm. It is relevant to both the Treasury and Defra. The Natural Capital Committee information pack refers

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to its work programme and in particular to its annual report. It works with Defra, the Office for National Statistics, landowners, academics and the research councils.

I would be grateful if my noble friend the Minister could inform the Grand Committee how the NCC works with other departments. Perhaps he could draw to our attention—I refer to my example of Priory Vale—how the NCC works with planning regulations to ensure that where development does take place the land used is replaced as much as possible with other green areas.

My noble friend reminded me earlier, before we started this debate, about the previous time we were both speaking in this Room, when we were discussing a possible Severn barrage. It is absolutely frightening to think of the debit on the natural capital balance sheet if that project had gone ahead. I look forward to what the noble Lord, Lord Grantchester, and the Minister have to say.

4.15 pm

Lord Grantchester (Lab): I thank the noble Baroness, Lady Miller of Chilthorne Domer, for tabling this debate this afternoon. It gives the Committee the opportunity to debate the first report of the Natural Capital Committee, issued in April this year, following its establishment in May 2012. There has always been a debate around the relative merits of the environment when set against economic development and around how to translate this into public policy priorities. The debate initially focused on sustainability, with the thought that competing claims had to be balanced between two polarities. When English Nature was set up some 10 years ago, sustainability was likened to a stool with three legs: the first leg being the economy, the second the environment and the third, in equal balance, being communities or society. At that time, debates contested whether it was possible to balance these competing aims and whether economic benefit would take precedence or the environment should be given an overriding veto.

The difficulties in settling this debate can be readily appreciated when there is no clear and independent assessment of value. When the environment, or elements in it, can be described, in the classical sense, as a free good, how can it be assigned a value? Meanwhile, the degradation of our environment here in the UK and internationally could not be denied. The effects of waste and pollution in one country are often visited on its neighbours. Nature and the environment cannot simply be seen as isolated elements or units in a biodiversity action plan, such as one to increase songbirds. Instead, the natural environment needs to be assessed and valued as an ecosystem. No longer can this be seen as an either/or debate; instead it must now be recognised that nature and the environment represent a complicated, interrelated system. A properly functioning natural environment is the foundation of sustained economic growth and prospering communities. It bears repeating that we need to create a green economy, where economic growth and the integrity of natural resources sustain each other and the consequences of actions and decisions better reflect the importance of the environment.

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Although some may find it reprehensible to try to assign value to natural capital, nevertheless the widening recognition of other assets, such as intellectual property and brand values, perhaps points to natural capital accounting as the best way forward, especially across continents, cultures and national governance divergences. In advising the Government on the state of natural capital in England, the Natural Capital Committee set out to do three main things: first, provide advice on when, where and how natural assets may be being used unsustainably; secondly, advise the Government on how they should prioritise action to protect and improve natural capital and the environment through its methodology; and, thirdly, advise on research priorities to improve future advice and decisions on enhancing natural resources and natural capital.

In reporting directly to the Cabinet’s Economic Affairs Committee, it must work across government and have an interdepartmental profile. It will not be lost on many that this is where it is most needed—under the nose of the Chancellor of the Exchequer. The committee could be seen to have already had an effect on resource allocation and decision-making through its advice on accounting for forest assets in response to the recommendations of the Independent Panel on Forestry, which was set up following the disastrous disregard for woodland assets in the early days of the coalition.

The committee has produced an interesting and thought-provoking first report. The Woodland Trust urged the Government to adopt the committee’s recommendations, stating that the extent to which the NCC informs policy will be a key test of the natural environment White Paper and its ability to achieve a paradigm shift in how nature is valued. With the disastrous lack of border controls and risk analysis of tree diseases in the UK, better protection of our natural assets means, to the Woodland Trust, stronger and better enforced planning protection and robust action on tree diseases. The UK’s woodlands are vulnerable to the effect of historical fragmentation and a continual drift towards decreasing diversity.

The report made reference to trends in UK fisheries but made no reference in its recommendations to the marine environment. This is perhaps a glaring omission that the committee should correct as soon as possible. In the four years since the Marine and Coastal Access Act 2009 was passed, the designation of the first tranche of up to 31 marine conservation zones is still awaited. These sites represent less than a quarter of the sites proposed to achieve an ecologically coherent network, known as an ECN in the jargon. The designation of a network of marine conservation zones is vital to stemming the degradation of the marine environment. Does the noble Lord agree that this is perhaps one of the most pressing issues that his department should be tackling? Will he put the marine environment at the heart of the debate on the EU fisheries policy? Will he ask the Natural Capital Committee to undertake some work on this for inclusion in any report it might produce in 2014?

The committee made 13 recommendations in its report. Will the Government be making a more comprehensive reply beyond the succinct, one-and-a-half-page letter dated 22 May 2013? I believe that the

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committee deserves better. It is interesting that the committee wishes to develop a framework to define and measure natural capital by drawing on data across departments. If it follows the UN’s global standard known as the System of Environmental-Economic Accounting, will that fall foul of the UK’s data protection laws? It will be interesting to hear the accountancy profession’s assessment of this, as well as of the Prince of Wales’s Accounting for Sustainability project.

The accounting profession will be very familiar with the notion of a risk register as set out in the second recommendation made by the committee. The risk register will identify a range of risks and make assessments against the size of the impact and against the likelihood of occurrences. Will the Minister comment on whether the Government see this as a useful tool to inform practical applications in policy and decision-making? While some may find it difficult to identify the practical usefulness of natural capital accounts, risk registers throughout government applicable to ecosystems and regions could develop into a useful policy assessment tool. Are the Government actively considering this recommendation?

In the thesis undertaken by Mr Christopher Baldock of Imperial College London, Opportunities for Development, he states that the main reasons given for the lack of use and integration of natural capital accounts in decision-making were identified as the lack of a recognised framework of evaluation methodologies, too many ad hoc initiatives hampering development and the lack of recognised uses and application of accounts. Have the Government considered how this could be tackled and improved? How will they identify and embed best practice in the uptake of methodologies across the public estate?

The report identifies the United Nations Statistical Commission of the System for Environmental-Economic Accounts as a major step forward and, importantly, that this system uses the same accounting conventions as the UN system of natural accounts. The report sees UK environmental accounts as limited to a number of physical flows and natural resource assets accounts that include only partial aspects of natural capital. They are not currently aligned with ecosystem accounting and do not provide a fully integrated account of the stocks, flows and changes over time. Can the Minister update us on whether his department has asked the Office for National Statistics to prioritise activity on this?

Will the Government press for an international natural capital accounts body to co-ordinate efforts and collaboration between states and between corporate and international bodies? There is a need to link up and demonstrate the importance and usefulness of accounts if natural capital accountancy is not to fade slowly away from being central to the green economy.

Much debate could be had on each of the other recommendations of the report, not least its comments on agriculture and the natural capital of the countryside in relation to bees and other pollinators, a subject that I know is most dear to the Minister. It must be borne in mind that agriculture exists in a food chain, and that the actions of all in that chain, not least of food retailers in setting the price of food that the consumer

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pays, have a bearing on agriculture’s ability to respond. These are important matters in the redesigning of the common agricultural policy. The five lines on this in recommendation 13 are incredibly flippant and risk alienating one of the most important communities whose good will is vital in maintaining the nation’s natural capital—the farming community.

I end with one or two remarks on offsetting. The report has merely one sentence on this, which states:

“Offsetting and other forms of compensation are explored after a clear set of principles and a policy framework have been developed”.

Quite simply, offsetting means that if a developer is going to build something that will damage or destroy a habitat of conservation value, it must buy a biocredit to compensate for that loss elsewhere. I find this incredibly dangerous because it sends the mixed message that it is somehow all right to denigrate our natural assets in exchange for making a payment to a good cause. It is the equivalent of having an environmental swear box. Disconcertingly, this was picked up and referred to in the Secretary of State’s page-and-a-half letter to the committee, which stated that the Treasury was particularly engaged in exploring this potential. While the Government may warmly welcome the committee’s ongoing input, I urge them to dismiss this as a very retrograde and dangerous activity to promote.

That said, the committee’s first report is very provocative. The state of natural capital in the UK is at a critical point. Recognition of the committee’s work from the Government who set it up must amount to more than lip service. With the debates over decarbonisation targets and climate change at the forefront of public policy, the Minister’s department should respond more constructively to the committee’s recommendations. I look forward to the review of the Natural Capital Committee in 2014.

4.27 pm

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con): I start by thanking my noble friend Lady Miller of Chilthorne Domer for raising this important issue today. I welcome the chance to discuss the vital topic of England’s natural capital. As my noble friend set out, our natural capital provides a range of essential services to society. We all rely on the benefits of natural capital for our clean air, water, food, energy and well-being.

The contents of my noble friend’s speech and, indeed, that of the noble Lord, Lord Grantchester, draw me to make a couple of declarations of interest. I have a farm with a river running through it and some trees growing on it, so I hope noble Lords will appreciate that I come to this with an interest in, and a limited amount of knowledge of, some of the issues.

Lord Grantchester: The Minister’s comments remind me that I omitted to declare my interests in the farming field.

Lord De Mauley: My Lords, natural capital therefore underpins two of the Government’s key priorities: encouraging economic growth and enhancing the natural

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environment. These two agendas are not mutually exclusive. In fact, the sensible use of our natural assets is an essential precondition of our prosperity.

In its first report, The State of Natural Capital, published in April this year, the Natural Capital Committee made just this compelling argument: that long-term economic growth will be undermined if we continue to erode our natural capital. The Government agree: long-term prosperity is possible only if we preserve the foundations on which our economy and well-being are based.

It is therefore crucial that we measure, value and protect our stocks of natural capital. Indeed, this is why the Government set up the independent Natural Capital Committee in 2012, the first of its kind in the world. The committee has been asked to provide expert, independent advice to government on the state of England’s natural capital assets. In the past, the benefits that flow from our natural capital have too often been taken for granted, and as a result our assets have become eroded.