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House of Lords

Wednesday, 30 October 2013.

3 pm

Prayers—read by the Lord Bishop of Lichfield.

Introduction: Lord Holmes of Richmond

3.08 pm

Christopher Holmes, Esquire, MBE, having been created Baron Holmes of Richmond, of Richmond in the London Borough of Richmond upon Thames,was introduced and took the oath, supported by Lord Baker of Dorking and Lord Deighton, and signed an undertakingto abide by the Code of Conduct.

Taxation: Tax Law Enforcement


3.14 pm

Asked by Lord Phillips of Sudbury

To ask Her Majesty’s Government how they will enable those who enforce the tax laws to accomplish their tasks better.

Lord Newby (LD): My Lords, this Government are investing in HMRC, so that it will be collecting £10 billion a year more from its compliance activities by 2015-16 than it was at the start of this Parliament. The number of HMRC staff in compliance roles fell under the previous Government; under this Government there will be around 2,500 more staff tackling tax avoidance and evasion in 2014-15.

Lord Phillips of Sudbury (LD): My Lords, at a time when decent Brits are struggling to pay their full taxes, is it not wholly counterproductive that many of our richest citizens and companies are evading and avoiding tens of billions of pounds in taxation? According to the HMRC calculation, every extra pound spent on enforcement resources yields £10 to £30. Although the statistics are encouraging, surely we should be doing yet more to avoid the citizen disenchantment that is currently brewing.

Lord Newby: My Lords, I absolutely agree with my noble friend. I would remind him that this Government reinvested an additional £917 million in compliance activities in the 2010 spending round. They added another £77 million in last year’s Autumn Statement. Therefore, we have a track record of providing HMRC with additional funding, should it come forward with proposals that result in additional tax yield. It is not inconceivable that HMRC might come forward with such proposals in respect of this year’s Autumn Statement.

Lord Davies of Oldham (Lab): My Lords, should Ministers not be taking some initiative, irrespective of HMRC and its officials? Are Ministers aware of the level of anger in the country, and not just against the multinationals? We all recognise that that is a challenging nut to crack and needs international co-operation. Internal

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British companies—not least the energy companies—are able to locate their senior companies in offshore tax havens in order to avoid paying their legitimate tax. Is the Minister not aware that action is necessary from Ministers and not just from HMRC officials?

Lord Newby: I think the decision taken by Ministers to give an additional £1 billion for compliance activities was pretty clear. Many of the problems that we see with multinationals paying less tax than would appear appropriate are international by nature. That is why we have put a lot of resources into the OECD. We put another £400,000 into the work that it is doing following the G20 summit earlier this year. There is a determination across the international community, to a degree that has not been apparent before, that companies cannot get away with avoiding taxes. This must be dealt with internationally, and that is what we are promoting effectively.

Lord Forsyth of Drumlean (Con): My Lords, does my noble friend agree that what the Treasury should be about is maximising the revenue that is taken in tax, and that the best way to achieve that is by having a lower, flatter, fairer tax system?

Lord Newby: My Lords, one of the things I learnt as a junior Customs and Excise official—

Noble Lords: Oh!

Lord Newby:It was a very long time ago, my Lords. While there are many good theoretical principles on which taxes need to be based, the single most important is the ability to collect the tax in the way you want. That must be a guiding principle. I do not believe that there is an easy answer to generating higher levels of tax revenue just by having a straightforward tax system. If it were as simple as that, it would have been tried by now.

Lord Campbell-Savours (Lab): My Lords, what additional mechanisms, procedures and arrangements are being put in place to maximise the potentially substantial income available from the letting of residential property, particularly in London, by people overseas? At the moment that revenue is often not collected.

Lord Newby: My Lords, as the noble Lord will know, in last year’s Budget and Finance Bill, the stamp duty payable on high-value properties in those circumstances was significantly increased. That has led to a substantial increase in the overall yield of stamp duty on property transactions.

Lord Tebbit (Con): My Lords, is my noble friend aware that a very good precedent has been set on the avoidance of tax by the immediate past Prime Minister, Mr Brown? He does not pay tax on the earnings that spring from the things he does as a former Prime Minister because he gives all those earnings to charity. Is that not an example which might be followed by other former Prime Ministers?

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Lord Newby: My Lords, I think that that is way beyond my pay grade.

Lord Foulkes of Cumnock (Lab): My Lords, I am not going to continue this attack on Sir John Major because it is disgraceful. With respect, the Minister has been giving us the same answer about extra staff for almost the past three years, yet we have illustration after illustration of evasion. First it was Starbucks, then it was Amazon, then it was Philip Green and Irvine Laidlaw; one after the other has been avoiding tax. Has the Minister not yet come to the conclusion that what is needed is legislation to close the tax loopholes?

Lord Newby: My Lords, leaving aside the fact that, sadly, I have not been a Minister for three years, the question of closing tax loopholes and dealing with companies that are international by their nature is an international problem. The level of activity now being undertaken via the OECD is on a scale that we have not seen for a generation. Some 15 work streams are currently under way, looking at different aspects of this problem, with a two-year deadline to resolve them. If it were possible to legislate in one country and deal with all these issues, not only we but the US, Germany, France and other countries that find themselves in the same boat would have done it. You cannot operate against multinationals on a domestic basis alone; it must be done internationally. That is what we are doing, and we are putting huge effort and impetus into that work.

EU: UK Contribution


3.22 pm

Asked by Lord Vinson

To ask Her Majesty’s Government what action they are taking to raise public awareness of the United Kingdom’s net contribution to the European Union’s budget over the last six years exceeding £53 billion, as set out in the HM Treasury Pink Book 2013, and the effect that has on the United Kingdom’s public sector borrowing requirement.

Lord Newby (LD): My Lords, to ensure transparency and increase public awareness, HM Treasury publishes details of UK contributions to the EU in its European Union finances and public expenditure statistical analyses publications. The previous Government gave up a significant portion of our abatement, and consequently our net contributions were always likely to increase. Following the real-terms cut to the 2014 to 2020 payment ceilings negotiated by the Prime Minister in February, they will now be going up by less.

Lord Vinson (Con): My Lords, I thank the Minister for his considered reply. Perhaps I may illustrate my point. Recently, the Chancellor returned from China, pleased that he had raised £13 billion to build the new nuclear power station so desperately needed for our

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energy security. Is it not paradoxical that over the past six years our net contribution to the EU, which is substantially used for infrastructure, has been over £50 billion? That is enough to build at least three nuclear power stations. How is it that we can find the money to build other people’s infrastructure but not our own?

Lord Newby: My Lords, by looking at the net contribution to the EU, the noble Lord is concentrating on only one dimension of our relationship with the Union. He is ignoring the very substantial economic benefits that we enjoy through increased internal trade via the single market, increased external trade via, for example, the recently concluded EU-Canada trade agreement, and increased investment in the UK by companies such as Nissan. He is also ignoring the non-economic benefits of membership in the fields of the environment, justice and external affairs.

Lord Tomlinson (Lab): Will the Minister take urgent steps to gain control of expenditure in the European budget? That can best be done by introducing a system of zero-based budgeting, such as my noble friend Lord Kinnock sought to introduce when he was a Commissioner. The Government have always said yes to this in principle but done nothing in practice.

Lord Newby: My Lords, the first thing that we sought to do on the European budget was to ensure that it was not increasing in real terms. As the noble Lord knows, the agreement made by the Prime Minister at the European Council in February will result in €80 billion less expenditure over the next budgetary period than the Commission proposed. The first step in getting the budget dealt with appropriately was to cap it.

Lord Hannay of Chiswick (CB): Could the Minister say how many nuclear power stations the Government could have built with the rebates that we have received since 1975 under Mrs Thatcher’s arrangements?

Lord Newby: No, I could not.

Lord Pearson of Rannoch (UKIP): Does the Minister agree with two things about the net payment to Brussels of £12.2 billion for the past year alone? First, that it equates to the £30,000 per annum salaries of 1,100 nurses, policemen or any other public servant per day. Secondly, that there is no such thing as EU aid to us, because for every £1 they now send us back we have sent them £2.56.

Lord Newby: My Lords, I am not going to get into a statistical analysis with the noble Lord, but I revert to my earlier point. Our membership of the EU brings with it a whole raft of benefits which do not simply relate to the EU budget. One area of expenditure that we incurred some time ago was dealing with a war in the Balkans, which cost this country more than £1 billion. Since the Balkan wars finished, Croatia has joined the EU and other Balkan states will join. We will not fight other Balkan wars. That does not fit into the noble Lord’s narrow formula.

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Lord Marlesford (Con): My Lords, following the good point made by the noble Lord, Lord Tomlinson, about the need to control the EU budget, does the Minister recognise that in the 1970s, when government spending in Britain got totally out of control, it was brought under control to a considerable extent by the noble Lord, Lord Healey, when he was Chancellor? Helped by Sir Leo Pliatzky, the Second Permanent Secretary to the Treasury, he introduced cash limits. At the moment, the Commission constantly argues that more money is needed to fulfil the obligations of earlier policy undertakings. Cash limits would do it, or help do it. Will the Government try to get the EU to introduce cash limits?

Lord Newby: My Lords, there is a cash limit. There is an overall payment ceiling of €908.4 billion over the next budget period. That is a cash limit.

Lord Ashdown of Norton-sub-Hamdon (LD): Regarding my noble friend’s last answer, I do not know how much the European Union spent on creating a sustainable peace and a functional state in Bosnia-Herzegovina. However, I wonder if my noble friend would accept from me that, however much was spent, the figure amounted to tens of times less than it would have cost everybody, including British taxpayers, if there had been a return to conflict.

Lord Newby: My Lords, I am grateful to the noble Lord. I completely agree with him.

Lord Stoddart of Swindon (Ind Lab): Will the noble Lord confirm that the gross cost to the taxpayer is not £55 million per day but £18 billion every year? If we were not paying that amount in exchanges, would not the Government be able to reduce the deficit on expenditure very much more quickly than they intend to at the present time?

Lord Newby: My Lords, the net payment over the past six years has been about £34.8 billion. This equates to less than 1% of our total public expenditure over that period. It is a very substantial amount, but, as I have now said several times, you have to set against that amount all the economic and other benefits, including those mentioned by my noble friend Lord Ashdown, that the UK derives.

Schools: Curriculum


3.30 pm

Tabled by Baroness Massey of Darwen

To ask Her Majesty’s Government whether free schools and faith schools will be required to deliver a broad and balanced curriculum which addresses the needs of all pupils.

Baroness Hughes of Stretford (Lab): My Lords, I beg leave to ask the Question in the name of my noble friend Lady Massey at her request. She has had an accident and sends her apologies today.

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The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con): My Lords, perhaps the noble Baroness could send a message to the noble Baroness, Lady Massey, that we wish her a speedy recovery.

All mainstream academies and free schools, whether they be faith schools or non-faith schools, must deliver a broad and balanced curriculum. That is a non-negotiable element of their funding agreements. Other state-funded schools, including faith schools, must also deliver the national curriculum and a broad and balanced education for their pupils, as specified in Section 78 of the Education Act 2002.

Baroness Hughes of Stretford: I thank the Minister for that reply and will pass on the good wishes that he has expressed in the House to my noble friend Lady Massey.

Is the Minister aware that, in the light of concerns over many months about the extent of new risks to young people from social media, the internet and grooming, Members across the House and in the other place, schools, children’s organisations and now even Nick Clegg and the Daily Telegraph are calling on the Government to update the guidance to schools on the sex and relationship education curriculum, which was first issued in 2000? Would that not be eminently sensible, and can the Minister tell the House why the Secretary of State has refused to do so?

Lord Nash: My Lords, we looked at that recently during the PSHE review and concluded that the SOE curriculum provides a good foundation on which teachers can build. We trust teachers to deliver the education that pupils need and adjust it for the modern world. Technology is moving very fast, and we do not think that constant changes to the regulations and top-down diktats are the way to deal with this.

Lord Quirk (CB): I wonder why Her Majesty's Government do not insist that those schools should teach the national curriculum, as all maintained schools have to; or, to put it the other way round, what parts of the national curriculum will the Government be happy to see ignored in schools that do not have to teach it?

Lord Nash: Schools must teach English, maths, science and religious education. It is absolutely clear that in order to pass exams in this country, all pupils must have a core body of knowledge as assessed by GCSEs.

Lord Storey (LD): My noble friend is aware that the national curriculum is neither national nor has to be a curriculum for all schools. How do we ensure that those areas of child development and education, about which we have all expressed concern in this Chamber, which are essential to young people and children are taught in all schools—whether academies, faith schools, free schools or what were called county schools?

Lord Nash: All good schools seek to develop their children’s character through a PSHE programme. We do not feel that the programme should be legislated for in its content. Circumstances of the different schools

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and pupils in them vary greatly, and we should leave it for teachers to decide exactly the approach that they take.

Lord Howarth of Newport (Lab): My Lords, given that the charity Mentor said, to cite the Home Affairs Select Committee report, Breaking the Cycle:

“We are spending the vast majority of the money we do spend on drug education on programmes that don’t work”,

and given that his department said it does not monitor the programmes or resources that schools use to support their teaching, is the Minister content with such a casual and laissez-faire approach on the part of the Government in an area where young people are so vulnerable?

Lord Nash: The noble Lord implies that casual equals laissez-faire; we do not accept that. As I said, we accept that most schools should do what all good schools do, which is to have an active programme of promoting their children’s interest, including drugs education, which they must be taught about in science classes anyway. Often, the best way to engage those pupils with those difficult issues, such as forced marriages or gangs, is not for teachers to do that—they often will not open up to their teachers—but for outside agencies and charities with skilled people in those difficult areas to talk to them about that.

Lord Lexden (Con): My Lords, will my noble friend confirm that the overwhelming majority of free schools have been rated good or outstanding in Ofsted inspections? How does that compare with the performance of schools as a whole?

Lord Nash: Under the recent new inspection framework for Ofsted, which is more rigorous, 64% of non-academies are rated good and outstanding as opposed to 75% of free schools. This is after only two years of them being open.

The Lord Bishop of Lichfield: Does the Minister agree that the use of the phrase “faith schools” can be profoundly unhelpful in the context of this discussion? Schools of a religious character come in many forms. Is it not true that the nearly 4,700 Church of England schools sit very firmly within the mainstream of English education, and that even C of E free schools and academies are linked to diocesan boards to ensure that the education that they provide is broad and balanced, academically challenging, personally inspiring and serving the needs of the whole local community?

Lord Nash: I agree entirely with the right reverend Prelate. Faith schools are a long-established and highly valued part of our educational establishment, and church schools are, too. Church schools consistently outperform maintained schools; they are very popular and often highly oversubscribed. The applications procedures of many of them do not rely heavily on faith; they have a much wider intake.

Baroness McIntosh of Hudnall (Lab): My Lords, will the Minister return to the answer that he gave to the noble Lord, Lord Quirk, who asked him an extremely

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apposite question about which bits of the national curriculum he would be content to see any school ignore? I did not hear him answer that question.

Lord Nash: As I said, they must teach English, maths, science, and religious education, and they must follow a PSHE course. We will have a best eight assessment criteria, whereby schools will have to include other subjects. Then we have destinations, because we want our pupils to be work-ready and for them not to turn out as recently evaluated by the OECD—that is, that after 13 years of the Labour Government we have the most illiterate school leavers in Europe and, according to Alan Milburn, the most socially immobile society in Europe.

Banking: Co-operative Bank


3.37 pm

Asked by Lord Sharkey

To ask Her Majesty’s Government to what extent their aims of producing more diversity in banking and of reforming banking culture will be affected by the change in ownership of the Co-operative Bank.

Lord Newby (LD): My Lords, the Co-op Bank is negotiating a deal on its capital with its creditors. It will cease to be fully mutually owned, but will continue to compete in retail banking markets. The Government’s reforms will make the banking sector safer, more competitive and diverse. We are implementing the recommendations of both the independent and parliamentary banking commissions. These fundamental reforms will be unaffected by the change of ownership for the single bank.

Lord Sharkey (LD): The fact is that the Co-op Bank will now be owned by a couple of vulture funds, which I suppose is diversity of a sort. What advice would the Minister give customers who are looking for ethical values in retail high street banking?

Lord Newby: My Lords, the Co-op is undoubtedly having a significant change in ownership, but one would hope that even vultures will be able to see that the Co-op’s USP is its particular ethical stance. Its strength appears to me, at least, to be very much in that direction. So for the development of the Co-op, one would hope that they would see continuation of those traits being in their own interests, as well as those of anybody else. Of course, there are other mutuals that the discerning customer can put their money with; the Nationwide is very successful, as are other building societies. We must be clear on the difference between “for profit” and “ethical”. I would not want to brand every other high street bank as unethical just because they are also making a profit.

Lord Davies of Oldham (Lab): My Lords, I am grateful to the Minister for his comments on the Co-operative Bank, which after all is one of the few which did not go to the Government and to the taxpayer for support during these difficult times. However, what is the Minister proposing to do about increasing

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bank competition? Some 55% of the British population have never switched their accounts. The degree of switching and of competitive banking is low. Large banks owe their pre-eminence to historical development and being early in the field. Surely the Minister is going to take advantage of the Financial Services (Banking Reform) Bill to enact some of the proposals from the banking commission, chaired by Andrew Tyrie MP, and also amendments being tabled by the Labour Opposition to increase competition in the banking sector, which it sorely needs.

Lord Newby: My Lords, the banking Bill incorporates many of the proposals of the Parliamentary Commission on Banking Standards. On switching, a new seven-day switching service was introduced last month. In its first month, there has been an 11% increase compared with the previous year in the number of people who switched their bank accounts. One would expect that number to increase as the service becomes better known. This year the big change in terms of new entrants to the market is that the regulators have greatly reduced the time that it takes to become a new bank and greatly reduced the amount of money it takes to establish a new bank. Those are key drivers for getting new competitors into the market.

Lord Flight (Con): My Lords, as the noble Lord, Lord Sharkey, has pointed out, it is perhaps somewhat of an irony that the Co-op Bank should being bailed out by hedge funds. The crucial point is that the Government have made clear that the time of taxpayers bailing out banks is over. Bluntly, if a bank cannot organise its own financial affairs, the resolution mechanism is the only alternative.

Lord Newby: My Lords, one of the key purposes of the Financial Services (Banking Reform) Bill is to provide, in ring-fenced retail banks, relatively risk-free places for ordinary customers to put their money. Beyond that, the key thing is that the Bill’s resolution provisions will require banks to put in place mechanisms to be activated if they got into financial difficulties, such that they would not need to come to government in those circumstances.

Lord Tomlinson (Lab): Is the Minister aware that when giving evidence to the House of Commons Select Committee yesterday, the former chief executive of the Co-op Bank said that he was assured by the financial regulator about the safe state of the Britannia Building Society? The Co-op Bank takeover of the Britannia Building Society has given rise to the liquidity problems in the bank. Will he acknowledge that and inquire what the financial regulator was doing in giving that assurance?

Lord Newby: My Lords, I think the merger with the Britannia Building Society was one of the material causes of this problem. I cannot comment on what the regulator may have said. Generally, where banks of all sorts have sought to make large acquisitions and they have then gone wrong, the principal responsibility for due diligence rests with the management of the bank

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involved in the takeover. The role played by the regulator, whatever its scale, does not detract from the fact that responsibility for major corporate decisions of that kind lies primarily with management.

Lord Naseby (Con): Will my noble friend confirm for all of us who believe in mutuality and are sorry that the Co-op Bank has got into its current situation—I believe that mutuality is supported by both sides of the House—that when the new owners have got the bank onto a stable footing and making a profit they will possibly return it to mutuality?

Lord Newby: Well, my Lords, that is possible but, as noble Lords know, the sad truth is that the process has tended to be something of a one-way street with regard to mutuality. When mutuals have ceased to be mutuals, they have tended to cease to be mutuals for good. Still, one can always hope. I should also have mentioned the raft of provisions in the banking reform Bill to bring building society legislation up to date and make it easier for them to compete in the marketplace.

Pensions Bill

First Reading

3.45 pm

The Bill was brought from the Commons, read a first time and ordered to be printed.

Alan Turing (Statutory Pardon) Bill [HL]

Third Reading

3.45 pm


Moved by Lord Sharkey

That the Bill do now pass.

Lord Sharkey (LD): My Lords, I record my gratitude to all those who have helped the Bill’s progress, particularly my noble friend Lord Ahmad of Wimbledon for his words at Second Reading and my noble friend Lady Trumpington for her constant support and enthusiasm.

Lord Tebbit (Con): My Lords, I have no intention of obstructing my noble friend Lord Sharkey’s Bill. As it continues on its journey towards the statute book, though, there is something that should be said. As we know, Mr Turing committed, and was convicted of, an act that would not be a crime today. So have many others, and many other crimes have been committed similarly. I hope that the Bill will not be used as a precedent. Even more, I hope that we will never seek to extend the logic of the Bill to posthumously convict men of crimes for acts that were not criminal when they were committed, but would be if they were committed today. There is a dangerous precedent within this Bill.

Bill passed and sent to the Commons.

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NHS: London


3.47 pm

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con): My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Secretary of State for Health in the other place earlier today on changes to health services in London.

“With permission, Mr Speaker, I would like to make a Statement on the Shaping a Healthier Future programme, a locally led review of NHS services across north-west London.

The NHS is one of the greatest institutions in the world. Ensuring that it is sustainable and that it serves the best interests of patients sometimes means taking tough decisions. The population of north-west London is growing, and will reach approximately 2.15 million by 2018. Around 300,000 people have a long-term condition.

However, there is great variation in the quality of acute care. In 2011 there was a 10% higher mortality rate at weekends for emergency admissions, and the number of hospital readmissions differs considerably across the area. The Independent Reconfiguration Panel expressed concerns that the status quo in north-west London was neither sustainable nor desirable, and might not even be stable.

In order to address these challenges, the NHS in London started the Shaping a Healthier Future programme in 2009. It proposed significant changes to services, including centralising A&E services at five hospitals rather than nine; 24/7 urgent care centres at all nine hospitals; 24/7 consultant cover in all obstetric wards; a brand new trauma hospital at St Mary’s Paddington; brand new custom-built local hospitals at Ealing and Charing Cross; seven-day access to GP surgeries throughout north-west London; over 800 additional posts created to improve out-of-hospital care, including a named accountable clinician for all vulnerable and elderly patients, with fully integrated provision by the health and social care systems; and increased investment in mental health and psychiatric liaison services.

These changes represent the most ambitious plans to transform care put forward by any NHS local area to date. They are forward thinking and address many of the most pressing issues facing the NHS, including seven-day working, improved hospital safety, and proactive out-of-hospital and GP services. The improvements in emergency care alone should save around 130 lives per annum and the transformation in out-of-hospital care should save many more—giving north-west London probably the best out-of-hospital care anywhere in the country.

The plans are supported by all eight clinical commissioning groups, the medical directors of all nine local NHS trusts, and all local councils except for Ealing. It was as a result of a referral to me by Ealing Council on 19 March 2013 that I asked the Independent Reconfiguration Panel to conduct a full review. The panel submitted its comprehensive report to me on

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13 September 2013, which I have considered in detail alongside the referral from Ealing. I am today placing a copy of the panel’s report in the Library, alongside the strong letters of support for the changes I received from all local CCGs and medical directors.

The panel says that Shaping a Healthier Future provides,

“the way forward for the future and that the proposals for change will enable the provision of safe, sustainable and accessible services”.

Today I have accepted the panel’s advice in full, which will be published on the panel’s website.

The panel also says that while the changes to A&E at Central Middlesex and Hammersmith hospitals should be implemented as soon as practicable, further work is required before a final decision is made about the range of services to be provided from the Ealing and Charing Cross hospital sites.

Because the process to date has already taken four years, causing understandable local concern, I have today decided it is time to end the uncertainty. So while I accept the need for further work as the IRP suggests, I have decided that the outcome should be that Ealing and Charing Cross hospitals should continue to offer an A&E service, even if it is a different shape or size to that currently offered. Any changes implemented as part of Shaping a Healthier Future should be implemented by local commissioners following proper public engagement and in line with the emerging principles of the Keogh review of Accident and Emergency services.

I have written today to the chair and vice-chair of the Health and Adult Social Services Standing Scrutiny Panel of the London Borough of Ealing Council, the chair of the IRP—Lord Bernard Ribeiro—the chief executive of NHS England and local MPs, informing them of my decision. These much needed changes will put patients at the centre of their local NHS, with more accessible, 24/7 front-line care at home, at GP surgeries, in hospitals and in the community. More money will be spent on front-line care which focuses on the patient. Less will be wasted on duplication and underperforming services.

Let me be clear that, in the joint words of the medical directors at hospitals affected, there is a,

“very high level of clinical support for this programme across NW London”.

Local services will be designed by clinicians and local residents and be based on the specific needs of the population. None of these changes will take place until NHS England is convinced that the necessary increases in capacity in north-west London’s hospitals and primary and community services have taken place.

I want to put on the record my thanks to the IRP for its thorough advice. As the medical directors of all the local hospitals concerned said in their letter to me, these changes will,

“save many lives each year and significantly improve patients’ care and experience of the NHS”.

When local doctors tell me that is the prize, then I will not duck a difficult decision.

I commend this Statement to the House”.

My Lords, that concludes the Statement.

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3.54 pm

Lord Hunt of Kings Heath (Lab): My Lords, I am grateful to the noble Earl, Lord Howe, for repeating the Statement. I refer noble Lords to my interests, particularly as chair of a foundation trust.

Decisions on hospital reconfiguration should always be made on the basis of the best clinical evidence available. The noble Earl’s announcement today means the closure of a number of accident and emergency departments in London, with the centralisation of A&E services at five, rather than nine, hospitals. That is to happen at the same time as accident and emergency departments are under heavy pressure up and down the country, not least in London. Taking all major A&E units together, London as a whole has missed the Government’s A&E target in 48 out of the past 52 weeks. Is the noble Earl convinced that the system will be able to cope with the reduced number of A&E departments in London?

I note that the chief executives of the three major health regulators have been summoned to meet the Prime Minister to discuss the pressure that services are likely to come under this winter. These meetings are complementary to the weekly meetings that the Secretary of State has with these eminent people. Apparently these discussions are dominated by winter performance planning, particularly relating to accident and emergency departments. What measures are being taken to increase capacity in the community, to enable the flow of patients and their discharge at the right time?

What is being done about the accessibility of general practitioners? We heard much from the Prime Minister about a move to seven-day-a-week access, which the noble Earl will know has provoked a lot of opposition from primary care interests, citing cost at a time when the NHS is cash strapped and when there is a shortage of general practitioners. Does that mean the inevitable merger of smaller GP practices? Can the noble Earl spell out the Government’s intentions? In the Statement, we are told that there is to be seven-day access to GP surgeries throughout north-west London. Can the noble Earl confirm that that means that all surgeries will be open from 8 am to 8 pm, seven days a week? If that is not the case, what happens to patients in practices which are not prepared to open seven days a week?

I now turn to the noble Earl’s announcement about Charing Cross and Ealing hospitals. Very simply: is this a permanent reprieve? The report of the Independent Reconfiguration Panel says that the future of the proposed local hospitals at Ealing and Charing Cross, and the final decision about what might best be provided from each location must be the subject of a specific programme of work which should address the needs for in-patient services for the vulnerable and frail elderly, and that its outcome would determine whether there is a need for further consultation. In his Statement, the noble Earl has said that, whatever the outcome of that further work, Ministers have decided that Ealing and Charing Cross hospitals should continue to offer an A&E service, even if it is a “different shape or size” to that currently offered. Can the noble Earl spell out what, exactly is meant by that? Can he guarantee that both Charing Cross and Ealing hospitals will continue to run full, 24-hour A&E services in the long term?

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The Statement is about hospitals in London. I was surprised that the noble Earl made no mention of Lewisham Hospital. The victory won by the people of Lewisham in the Court of Appeal yesterday will give hope to patients everywhere. Back in the summer, the Opposition explicitly warned the Secretary of State to accept the first court ruling. Instead, he ploughed on with a hopeless case, wasting taxpayers’ money in a cavalier fashion. Will the noble Earl confirm that there will be no further appeal to the Supreme Court? Will he give the people of Lewisham and the staff who work in Lewisham Hospital a commitment that their accident and emergency and maternity units will be protected in the long term? Given that the Lewisham clinical commissioning group opposed those changes, what does it say about the assurances that he gave during the passage of the Health and Social Care Act 2012 that the whole purpose of those misguided changes was actually to let local clinicians decide? What happened to that in Lewisham?

The noble Earl tabled an amendment to the Care Bill only a few days ago, which he described as making a small change, so he will of course know that the Government have sought, very rapidly and very quietly, to change the law so that what happened in Lewisham cannot happen again. My interpretation of that amendment is that in the future there is a risk of services being shut down without the agreement of local people, without extensive consultation and without agreement from local commissioners. We, on this side of the House, support reconfiguration of health services when supported by the clinical evidence, but it must be on the basis of a requirement to go through a properly defined and structured reconfiguration process with extensive consultation with the local community.

From all we have learnt, we know that successful reconfigurations need to take the form of open and honest leadership, a patient process of engagement and consultation and proper consideration of the wider impact. The changes that the Government seek to make in legislation will ensure that that does not happen in the future. I hope that the noble Earl will be able to say that, in the light of yesterday’s ruling, the Government are giving second thoughts to their intentions in this regard.

4.01 pm

Earl Howe: My Lords, I am grateful to the noble Lord, Lord Hunt of Kings Heath, for his questions. I preface my answers by saying that this is the first significant set of local reform proposals under the Government’s NHS reforms and it is a set of proposals that has been led clinically by the CCGs. There is an unprecedented level of clinical support for the changes that I outlined. The chairs of all the local CCGs wrote to the Secretary of State personally expressing absolute support; the medical directors of all the local hospitals affected wrote to him expressing absolute support; and the Independent Reconfiguration Panel report is crystal clear that the principles of this scheme are right and will benefit patients.

The noble Lord asked me about A&E services, in particular, at a time when we know that A&E departments are under pressure—a fact which I do, of course,

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readily acknowledge. The key to these recommendations is twofold. First, the way investment will be deployed will mean that we shall have centres of excellence in emergency care which will copy, in some respects, the way that stroke and trauma care has been centralised across London. This was controversial at the time but is now acclaimed by clinicians and, I think, politicians alike as proving to save hundreds of lives every year. There will be more critical care consultants on duty 24/7; more obstetric consultants on duty 24/7 on labour wards; consultants in other specialities, such as paediatrics, on duty between 12 and 16 hours a day, seven days a week; more trained and experienced emergency doctors on site 24/7 in A&E departments; and more investment in mental health, so that psychiatric liaison services can better co-ordinate care for vulnerable mentally ill people. In general, we will have all nine of the hospitals concerned across north-west London with urgent care centres open 24/7.

That is one half of the equation; the other half is investment in the community. I mentioned that there will be access to GP surgeries seven days a week across north-west London. That is not to specify which surgeries —the key is access to GP services. It will be for the local commissioners and NHS England to work out which surgeries they should be. Eight hundred additional posts will be created to improve out-of-hospital care and some £190 million will be spent recurrently every year on GP and other local services by 2017-18. Therefore the preventive aspect of these proposals should mean that fewer people land up in A&E in the first place.

The noble Lord asked me about the proposals for Ealing and Charing Cross. The IRP’s advice is clear that the current problems and future challenges faced by the NHS in north-west London require large-scale change in the way that services are designed and delivered. I concur with that entirely. However, it also says that while the changes to A&E at Central Middlesex and Hammersmith Hospitals should be implemented as soon as practicable, further work is required before a final decision is made about the range of services to be provided from the Ealing and Charing Cross Hospital sites. As the process to date has already taken four years, as I mentioned, my right honourable friend has decided that it is time to end the uncertainty. Therefore, while he accepts the need for further work, as the IRP suggests, he has decided that the outcome should be that Ealing and Charing Cross Hospitals should continue to offer an A&E service, even if in the end that is of a different shape or size from that currently offered. What does that mean?

In the first instance, we are clear that a 24/7 urgent care service should be run from both those sites, involving senior consultant cover and the ability to admit patients 24/7. Any changes implemented as part of the Shaping a Healthier Future proposals should be done by local commissioners following proper public engagement and in line with the emerging principles of the Keogh review, as I mentioned. However, none of the changes to these critical services will take place until NHS England is assured that all the necessary increases in capacity in north-west London’s hospitals and primary and community services have been satisfactorily developed.

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The noble Lord asked me about Lewisham. I will not disguise the Government’s disappointment at the result of the court judgment yesterday. However, we respect that judgment. Our priority now is to end the uncertainty for patients in south London. It is time for the new Lewisham and Greenwich NHS Trust to move on and work with its commissioners and the community to develop a local solution that is clinically and financially sustainable. The proposals that we came forward with earlier in the year cannot be proceeded with in their entirety. In our view that is a pity, because we now have a local health economy with an annual financial shortfall, which has to be addressed in some way. In so far as we can assist local commissioners to find a way through that problem, we will be happy to do so. However, it is largely up for local determination.

As regards the appeal, we felt that that was the right and responsible thing to do. This is the first time that the trust special administration provisions have been used and it was important that the law should be tested to be absolutely clear what it meant. We make no apology for the fact that our interpretation of the law as Ministers was different from that of the judge. However, as I said, the judge has made his ruling, and we need to respect it.

I hope that I have answered most of the noble Lord’s queries. However, he ended his remarks by observing that, as he perceives it, the Government have created a situation where service configuration can take place in the future without local clinical support or consultation. I would just like to assure him that that is not so. Indeed, the importance of having local clinical support could not be stronger. We see it here in the example of north-west London, and even in the rare case where trust special administration is required, the consultation involved is clearly set out in legislation. Local people will not be left out of the dialogue. I hope that that is of some reassurance to the noble Lord.

4.10 pm

Baroness Hanham (Con): My Lords, may I say how glad I am to hear that the proposals have support from all the clinicians and the CCGs? The noble Lord will know that I was chairman at St Mary’s Hospital when the Imperial College Healthcare NHS Trust was formed —and it was formed on the basis of full support from clinicians and the local community. The local community is not always at one with change, so I shall ask the noble Lord a couple of questions. First, this is not a short programme. These proposals will not take five minutes to implement. Most of the changes in the health service over recent years have taken an enormous amount of time, and it would be fair to say that the Imperial Trust, which includes Charing Cross, has probably only just completed its previous reorganisation, and now it is being reorganised again. The first question is: what is the proposed timescale?

Secondly, the noble Lord mentioned consultation, and may I say that it is absolutely vital that the local community be brought along with this? Otherwise, it will take even longer. Thirdly, there is an expectation that there will be a lot of new consultant and other medical posts. I am aware that A&E is not flush with clinicians taking up the specialty, so may I ask what encouragement is being given, by the colleges in particular,

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to ensure that there will be enough staff available to deal with the new services? Finally, may I say how glad I am that St Mary’s has figured again in trauma services?

Earl Howe: My noble friend, with her experience, asks some very pertinent questions. On the question of timescale, we believe that it will take between three and five years for the proposals to be actioned to their fullest extent. It will be necessary to take that kind of time. Some elements can happen relatively quickly, but my noble friend is absolutely right that there are important workforce issues to be taken into account. Indeed, one of the IRP recommendations was that the NHS should review its workforce programme and ensure that it has the means in place to deliver what is required. I am sure that in working through the proposals, local commissioners, as well as NHS England, will need to satisfy themselves on that point—not least with regard to the new posts to be created in the community, but also in terms of accident and emergency consultants in the A&E departments of the relevant trusts. On local communities, again I agree with my noble friend. As the Shaping a Healthier Future proposals are developed by the clinical commissioners, it will be vital that any further proposals are consulted on locally, and that there is real buy-in from patient groups and the public generally.

Lord Winston (Lab): I declare an interest as a member of Imperial College London and a practitioner who has been a consultant in north London for a long time. It is right that the financial shortfall means that there has to be considerable reconfiguration. In this case that is a move in the right direction. However, it raises a number of questions to which I would be very grateful if the Minister would respond. One is that if you close casualty you affect the training of surgical trainees. Do the Government have a view on that issue?

The Minister also referred to obstetrics in west London. As he will almost certainly know, the neonatal paediatrics department at one of the best obstetric hospitals in the country—Queen Charlotte’s, based at Hammersmith Hospital—has always been somewhat threatened. Is that secure, given that one of the issues in north-west London is undoubtedly that of duplication in many hospitals, which is expensive? Does the Minister feel that this is the only reconfiguration that will be required, given the amount of duplication that there is?

Earl Howe: To answer the last point, it is clear from the IRP report that its authors believe that this is a comprehensive set of proposals which will stand the test of time in north-west London. It is a very thorough set of proposals which takes into account every aspect of healthcare provision. On maternity and paediatrics, I can tell the noble Lord that under these proposals there will be more obstetric consultants on duty 24/7 in labour wards. As he will know better than anyone, that, of course, is designed to reduce the number of complications during birth and to ensure one-to-one midwifery care for women during labour. Consultants in other specialties such as paediatrics will be on duty, as I mentioned, for 12 to 16 hours a day, seven days a week, providing much better cover than at present.

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It was very striking in the IRP report that the first point made by the noble Lord, Lord Winston, did not elude the panel. The panel concluded that the pragmatic and explicit approach used by the NHS reflected the clarity of the aim to improve quality outcomes by implementing life-saving standards through the establishment of major hospitals. The report referred to the economic realities of the NHS and the urgency of making progress in the light of known risks to the sustainability of emergency services such as the abilities of staff, A&E and emergency surgery rotas, and the desire to minimise the negative impact on access of concentrating services. That was shorthand—as the noble Lord will see if he reads the rest of the report—for saying that the desirability of concentrating expertise in centres of excellence is a clear imperative for the quality of care that patients receive. As regards surgical experience, I think that if my noble friend Lord Ribeiro were here, he would confirm that that is absolutely the direction of travel, but that we must ensure that surgical expertise is built on a sufficient number of hours and cases for the quality of care to be maintained. That is exactly what underlies this whole set of proposals.

Lord Walton of Detchant (CB): My Lords, since the relevant professional bodies, not least the British Medical Association, have decided that they wish to support a move towards the provision of all acute and relevant services in the NHS for a full seven-day period, it is inevitable that there will be major reconfiguration of services not just in north-west London but in many other parts of the country. This will involve the concentration of specialist services in fewer hospitals and could even result in the closure of some smaller hospitals. However, that is not immediately relevant. The point I will make is that it is good to know that the clinical commissioning groups and the local hospital trusts have all supported this proposed reconfiguration.

However, I must ask the Minister a couple of questions. First, is he satisfied that the five A&E departments into which all accident and emergency services are to be concentrated, with four others closing, have the capacity to provide facilities for all the relevant staff and to deal with the increased number of patients who will go through those five hospitals? That is point number one, which is crucial.

Secondly, is the Minister satisfied that this concentration of services, with the new 800 posts in the community to which he referred, can be carried out within the existing financial constraints? Have these changes been costed? As the Minister knows, under the so-called Nicholson challenge, the NHS is required to make substantial savings across the country over the next year or so, and it is crucial that he can reassure the House that the necessary money will be available to provide this reconfiguration, which is clearly in the best interests of patients and their communities.

Earl Howe: My Lords, the noble Lord raises the important question of capacity. The key point is that none of these changes will be implemented until such time as commissioners and the relevant providers are satisfied that the necessary capacity exists. That is a key point. Secondly, on the costing and the financial aspects of the proposals, the way in which we will be

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able to spend more money on front-line care and better-quality facilities is by spending less on duplicated facilities, underperforming services, and badly designed and out-of-date buildings, which cost a lot to maintain. Therefore, as part of this package, there will be new custom-built hospitals at Ealing and Charing Cross, costing about £80 million each, designed to deliver the specific services needed in those respective communities. That will be part of the way in which the money released will be invested for the betterment of patients in the area over future years.

Baroness Barker (LD): My Lords, the most important part of this Statement is the part stating that none of these changes will come into effect until NHS England is convinced that the necessary primary and community services are in place. How will that be determined by NHS England? Secondly, who will be responsible for the integrated commissioning of community and primary services to bring about the necessary preventive services on which this reconfiguration is based?

Earl Howe: Largely, the judgment by NHS England will be made by local area teams—but not in isolation. It has to be a collaborative exercise, which is my overall answer to my noble friend’s second question. The successful integration of services must depend on close collaboration between the different constituent parts of the NHS but also with adult social care and local authorities. It is striking that already we are seeing this happening in north-west London, as we are in many other parts of the country. For the system to work as we want it to, all the constituent parts need to be effective and efficient. The integration of services, which is one example of how the NHS can become more productive in the future, as well as more clinically effective for patients, is an essential way of ensuring that we have a sustainable NHS in the future.

Lord Kennedy of Southwark (Lab): Will the noble Earl confirm, first, that there will be no further appeal in respect of Lewisham hospital after the decisions of two courts; and, secondly, that there will be no attempt to change the law in respect of Lewisham hospital? What lessons have been learnt by the noble Earl and his ministerial team that they can apply to what is going on in north-west London? We are all aware that the Minister has never visited Lewisham hospital; the last ministerial visit was in May 2010. Will he tell the House—if not from the Dispatch Box, then by writing and placing a copy in the Library—when Ministers last visited the hospitals in north-west London that have been mentioned?

Earl Howe: I can certainly find out the answer to that last question. As regards the appeal, we have only just received the judgment, as the noble Lord will know. But that is only the outline judgment. We have not received the full text. It is important that we read that and inwardly digest it before we finally decide on the way forward. The lessons of Lewisham are very clear. I confirm that we shall not be legislating around Lewisham and the recent provisions in the Care Bill were not retrospective, as the noble Lord is aware. I have not personally visited Lewisham, which is clearly an omission that I should at some point rectify, but it

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is important for me to put on the record that the concerns expressed by the people of Lewisham are, and have always been, entirely understandable. Ministers greatly respect the wish of local residents to see their hospital thriving, as it always has in the past. Nevertheless, as I said earlier, Lewisham and Greenwich now have a challenge. There is a financial issue that needs to be addressed and I hope that commissioners and providers, acting together, can do that successfully over the months ahead.

Baroness Masham of Ilton (CB): My Lords, can the Minister say whether, if A&E departments are shut, hospitals will be downgraded? Will the resources of the ambulance service be increased to transport ill patients around, as the ones with A&E departments may not have enough capacity to treat them?

Earl Howe: I do not think that it is appropriate to talk about downgrading in this case. However, it is appropriate to talk about changing the way in which services are delivered to the local population. In the case of two hospitals, we are seeing fully fledged A&E departments becoming 24/7 urgent care centres. That means that the most serious A&E cases, such as trauma and cardiovascular emergencies, will be taken to centres of excellence where patients will have a much higher chance of survival. That is a pattern that we are seeing throughout the NHS and one that has been proved to be successful and in the interests of patients. On ambulances services, we are already seeing in London, for example with stroke care, ambulances taking patients to centres of excellence for stroke care. Eight of these centres now exist compared to 32 some years ago. That means longer journeys in an ambulance but also much higher survival rates for the patients. I do not think that we should look on the kind of reconfiguration that I have described in a negative way. On the contrary, the whole thrust of these proposals is to improve the quality of care for patients.

Lord Rea (Lab): The noble Earl said that, as part of this reconfiguration, there will an increase in the services available in the community. Can he say whether this will be done in co-operation with the royal colleges and the British Medical Association rather than being imposed from above? The latter solution is unlikely to work.

Earl Howe: The noble Lord is absolutely right. These solutions should not be imposed from above. Indeed, the Shaping a Healthier Future proposals were designed by local clinicians in consultation with their patients. It was not a prescription dreamt up in Whitehall. We are very clear that the local NHS should continue to feel local ownership of these ideas as it takes them forward. I have no doubt that, if it feels it necessary, it will turn to the royal colleges for particular kinds of advice. It is free to do that as it wishes.

Lord Tomlinson (Lab): Is the noble Earl aware that on this side of the House he is very highly regarded as a model of clarity? However, in the second part of his answer to the noble Lord, Lord Hunt, today, he was somewhat equivocal in relation to the future of Lewisham Hospital. I hope that he will accept an invitation to

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visit Lewisham Hospital. I declare an interest as somebody who lives in that area and has opposed the closure. Does he also realise that such is the strength of feeling in Lewisham, he had better have read the whole judgment carefully and cleared all his lines before he goes there? The threatened closure created such community anger as I have never seen before and he would be most unwelcome unless he were able to give a clear and unequivocal response about its future.

Earl Howe: My Lords, I certainly understand the noble Lord’s strength of feeling on this. It is certainly my intention to read the judgment when we receive it in full. Nothing is closing in Lewisham. The service remains as it has been. There is nothing that Ministers intend to do to change that situation. However, as I mentioned earlier, there is an issue to be addressed in Lewisham and indeed in Greenwich. It is a pressing financial issue that commissioners as well as the hospitals themselves have to face. I have no doubt that a visit to Lewisham would benefit me enormously and I shall await an invitation to that effect.

Media Convergence: Communications Committee Report

Motion to Take Note

4.31 pm

Moved by Lord Inglewood

That this House takes note of the Report of the Select Committee on Communications on Media Convergence (2nd Report, Session 2012–13, HL Paper 154).

Lord Inglewood (Con): My Lords, we speak at a moment of high drama in the politico-media world. Lord Justice Richards, sitting with Mr Justice Sales, earlier today dismissed PressBoF’s application for a judicial review of the Privy Council’s decision to reject its charter on press self-regulation, and will dismiss its application for an injunction on the Privy Council’s sealing of the alternative all-party charter later today.

Barring any attempts by PressBoF to challenge this decision at the Court of Appeal, I believe that, as things stand, the Privy Council is still due to meet to seal the royal charter on the self-regulation of the press later this afternoon. I dare say that historians of the media will one day find it ironic that at the same time this House met to debate media convergence, a phenomenon which raises the question: for how much longer will the press truly require its own discrete self-regulatory arrangements at all as distinct from those which may yet come to be established in the future, which will have a wider focus and include forms of news media available online, in text, audio or indeed audio-visual form, with which the activities of what we now know as newspapers may have seamlessly merged? It is a coincidence of events that must generate at least a little Schadenfreude.

Of course, until recently, separate media industries were actually distinct. They were easily distinguishable by the way in which they delivered their content; for example, newspaper businesses were newspaper businesses to a great extent because their content reached us on

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large sheets of thin paper rather than over the spectrum or through the flickering light of a projector at the cinema. Media convergence, however, has changed all this. Alongside their individual traditional delivery mechanisms, content providers increasingly digitise their material and distribute it through the use of internet protocol, known as IP. Conveyed by IP, content, which has been reduced down to packets of data, can be assembled as text, image, video, sound or however else technology permits. This occurs on a growing range of devices, both fixed and mobile.

In turn, this has stimulated media providers of all kinds into a search for new ways of delivering their content, many of which have been straightforwardly borrowed from industries they each used to consider neighbours. This has blurred the boundaries between them. These experiments, in turn, have given audiences all kinds of ways to consume virtually any content, at any time, anywhere and on any device. In some instances, the impact of this revolution is far-reaching and often entirely positive, not just for the regulation of content standards, but also for content creation and competition. Barriers of all kinds are dissolving.

The impact of all this may not be fully felt at once, or even for some time, across the whole population. A recurring theme of our deliberations in this inquiry was the need, therefore, for haste rather than panic. As they say, we were looking for an evolutionary, rather than a revolutionary response. However, equally clear was that some thinking, some preparation and, to some extent, action, is required now to ensure that the evolutionary path is smooth and that we do not allow the regulatory architecture for the media as a whole to become entirely mismatched with the technological and commercial landscape which it oversees. I hope that our report and my remarks will make it clear why.

In our report, we submitted recommendations under three main headings. First, content standards; secondly, content creation and thirdly, competition. I should like to take each briefly in turn.

On content standards, which occupied us the most, it is worth saying that this country’s content standards framework has to date proven remarkably resilient. However, we found that the confidence and trust which the public have grown to enjoy in it will come under increasing pressure in two areas in particular. First, there is news content. Newspapers are not just printed, but are online and they carry video packages with the look and feel of traditional television. Broadcasters publish websites, including text-based articles, similar to online and print. The scheduled news programmes are still broadcast, but are also available on demand, both on digital channels and on a variety of websites. It is tremendously exciting, but potentially rather confusing because the regulatory framework has been left behind.

Broadcast news is required to adhere to the broadcasting code, with its full range of protections relating to accuracy and fairness, as well as an obligation to uphold due impartiality. While the emerging press regulator, with oversight of participating newspapers and websites, may well include some of these protections in its code, it will certainly not include an obligation to uphold due impartiality. It bears saying that this is a

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good thing. The abiding difference between the balanced, impartial news provided by the broadcasters, and the vigorous, partisan news provided by the press, has helped to create a beneficial tension and a valuable mixed ecology. Nevertheless, the impact of convergence means that the providers of the one will become increasingly difficult to distinguish from the other. The binary distinction between impartial and partisan news will no longer be mirrored in the difference between the news which UK audiences happen to watch and the news which they happen to read. In order to ensure that UK citizens continue to be able to identify and have confidence in the provision of impartial news coverage, and that they can identify and bring accurate expectations to partisan content, these blurred lines should be tidied up.

The second area that will come under increasing pressure is what we might call non-news, audio-visual content—sometimes known as TV and TV-like content. Perhaps the sharpest example of this pressure point can be seen in the content now available to the public through internet-connected televisions. On these, regulated and unregulated content, licensed and unlicensed services, sit side by side on one device. Increasingly, the public will be able to switch seamlessly between them. As the European Commission says in its Green Paper, Preparing for a Fully Converged Audiovisual World: Growth, Creation and Values, from the consumer’s point of view, the difference between linear and non-linear services might blur. Providers under no obligation to observe the watershed, for example, are increasingly only one press of the button away from those that do. The clues which the public might have used to sense that they are entering a different environment, in which different standards are to be expected and to be found, are disappearing. With that comes the risk that regulators will no longer be able to be sure that the public can confidently make sensible decisions about what is suitable for them and their families.

I turn now to our recommendations on content standards and want briefly to make one preliminary point. During the inquiry, we received a number of thoughtful proposals for a complete overhaul of the regulatory framework. These aimed for a new, logically coherent system. While some of the thinking that had gone into the proposals was impressive, we felt that they did not account for one or two important points. For example, the pace of media convergence is contested, and it was put to us repeatedly during the course of the inquiry that traditional services such as linear broadcast television remain hugely popular and resilient. What is more, there are very marked generational differences in the ways that younger groups are using media compared with their older peers. This meant, we felt, that it would not be right, in considering reforms of the content standards framework, to try to set a course for the promised land. Rather, we should look more simply for a framework that enables audiences to make good decisions in the circumstances of the time about the content which suits them and their families. The framework will almost certainly need updating from time to time to the extent that it fails to achieve this, and fails by extension to earn or deserve their trust. To that end, we made two recommendations

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which could and should be adopted in the short term, and we postulated on a basis, one that is entirely up for debate, around which further change might occur in the medium to longer term.

First, in the shorter term, broadcast licences should be amended to ensure that standards similar to those set out in the Ofcom broadcasting code, amended for the relevant environment, would apply to any service using the same channel name or brand as a licensed broadcast service. It is at present an anomaly that the BBC, to give an example, is required to uphold the broadcasting code when it broadcasts, but not when it makes content available through the iPlayer, and especially in light of the director-general’s recent announcements about online commissions, we feel that this is an important step. Secondly, there is a case for positively encouraging other non-broadcast providers to join the framework in return for some form of public recognition or kitemark. Were such an opportunity to be provided, I suspect that some of them would seize it, not least for their own commercial advantage but equally so that the UK public could build accurate expectations of the standards and character of their products.

We also made a number of recommendations as regards the content standards framework that focus on the medium to long term, but I do not propose to rehearse the detail of these. In a nutshell, we recommend a slight reconfiguration of the regulatory framework involving the establishment of four different approaches to content standards across four clearly defined types of content. The first one is public service broadcasters, the second one would be non-public-service broadcast news providers, the third would be non-news television and television-like content, and the fourth would be the open internet. Some of the impact of this reconfiguration might seem to be a bit striking at first blush. For example, no longer would broadcasters other than public service broadcasters be required to uphold an obligation to due impartiality. In place of the watershed, a standard system of age-based classification would be adopted for TV and TV-like services, providing the public with useful information to take into account in making their own decisions about what they and their family should look at. Ofcom would be given a new proactive role with regard to the content available to UK citizens over the open internet, with a duty to consult on and publish UK citizens’ expectations of the responsibilities of digital intermediaries, and to monitor performance against those expectations.

While we believe that these recommendations point in the right direction, they are entirely up for debate, one that we would welcome and thoroughly encourage. The Government’s response to our report was, as I said at the time, disappointingly thin—albeit that that is probably better than being thick. They deferred the substance of any response to our report to what was at the time a forthcoming policy paper called, Connectivity, Content and Consumers: Britain’s Digital Platform for Growth. However, the Government appear to have avoided the major questions, saying that they will look to industry and regulators to provide clarity on the right approach to content standards and regulation in the digital world. But because we believe that what is required is a reconfiguration of the framework around the media as a whole, there is an important and

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necessary role for the Government in setting out a view and leading debates that can be orchestrated sensibly only from that particular podium. For example, there are matters of principle: should we, generally speaking, adopt a more libertarian approach in which the public are expected to make their own choices about which media and content to use, informed by appropriate information, or should there be a more paternalistic approach in which regulators impose certain standards and help make those choices on behalf of the public? As our recommendations show, our report tends to lean towards the former over the latter. However, where the line is drawn is an important matter for genuine and legitimate debate.

Secondly, there are matters of process. How can we bring about evolutionary change to a system of regulation which is cemented in statute, and which in recent years has been subject to a slow cycle of change—10-yearly or thereabouts—imposed by the parliamentary timetable as much as anything else? In our report we propose a new approach, including the use of the super-affirmative procedure. We believe that this would avoid the “stop/go” approach, and provide the legislative mechanism to ensure smoother evolutionary change in an era when time for primary legislation is allocated elsewhere. In summary, I urge the Government and the industry to read carefully the thinking behind our recommendations on content standards, and to engage properly with this important set of debates.

I now turn briefly to the two remaining aspects of our report, which address content creation and competition. On content creation, convergence has made it possible for new investors to reach audiences outside the traditional broadcast environment. Your Lordships will be aware that my noble friend Lord Dobbs recently had a great hit on Netflix, entirely funded by that enterprise. Our congratulations go to him. However, investment in content from these new entrants remains dwarfed by the investment from the five public service broadcasters and their spin-off channels, which still represent something like 90% of UK spend on first-run, originated output. This seems very likely to remain the case for some time to come. In that light, it is important to recognise that the ability of the public service broadcasters to continue investing in content depends on their ability to reach large audiences in this country.

We therefore recommend that the Government consider the implications of changes in the way that public service content will be discovered and accessed by viewers on new connected TVs and other converged devices and, specifically, what interventions on prominence and “must carry online” obligations may be appropriate and possible in non-linear environments. In our view, as far as possible the on-demand services offered by public service broadcasters should achieve due prominence on any relevant home screen or guide which directs users to content.

Having said that, the way that the public access content is almost inevitably going to change, and the range of brands they choose to consume is likely to widen. Against that background, convergence can be seen to raise some very important general questions about public investment in content creation. As audiences

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continue to fragment and models for funding content creation adapt, exactly how public service broadcasting is provided, by whom, and the contestable process of allocating public money to pay for it, are all matters which deserve debate. The issue again is that these questions must be considered from a higher vantage point, and in a manner which is more holistic—to use a word I dislike—than is currently the case.

To date, decisions about each type of public service broadcaster—the BBC, Channel 3, Channel 4 and Channel 5—have largely been made independently of each other. In future, given the paramount importance of sustainable and sensible funding in order to safeguard public service broadcasting, we think that it is crucial for its future to be considered in the round by the Government. However the detail may be configured, a stable and sustainable future is required for the system as a whole, not just for each player within that system.

We believe that the Government would be well advised to get ahead of the curve, rather than waiting for difficulties to arise. Therefore we recommend that as preparation for, and in advance of, the next BBC charter review, the Government consider fundamental strategic questions surrounding the public service broadcasting system as an interconnected whole, and the potential impact on it of convergence. For example, what is the right scale and scope of PSB? What purposes should it serve? How can it best be sustained in a converged world?

On matters relating to competition, it is equally clear that convergence has sharpened long-standing debates over Ofcom’s ability to promote competition across media markets. While we did not have the time to carry out a comprehensive review of broadcasting competition powers, it was clear from the evidence we received that clarification is required of Ofcom’s existing ex ante competition powers for the audio-visual sector. The aim of such clarification should be to enable Ofcom to take effective action where necessary, but also to ensure a high hurdle before any ex ante approach can be adopted. It is important for there to be clarity for all those who might be affected.

In my conclusion, I thank the noble Lords, Lord Bragg and Lord Gordon, both widely knowledgeable and constructively hard-working members of the Communications Committee at the time of this inquiry, who have since left it. Their contributions to our final report were significant. I know that they are both sorely missed at our regular Tuesday afternoon meetings.

Finally, I also thank our specialist adviser, Robin Foster, for his expertise and enthusiasm throughout the inquiry. On a subject of often thorny complexity, Robin’s advice was always forensic, clear and logical, and his easy and droll manner equally helped to make the committee’s whole experience of this inquiry a pleasure.

I look forward to the debate and to the Minister’s response. I beg to move.

4.50 pm

Lord Gordon of Strathblane (Lab): My Lords, it is a great pleasure immediately to follow the noble Lord, Lord Inglewood, and thus be the first to have an opportunity to congratulate him not only on securing

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this debate but on his skilful chairmanship, navigating us through the undergrowth of a very difficult subject, which could easily have led us off in tangential directions. Instead, we managed to focus on some main issues, which he adumbrated this afternoon.

I am one of those who believe that the invention of the internet may well turn out to be more important in human history than the invention of printing. One known unknown is that we cannot predict the nature of the change that is coming about, any more than people could have forecast that one of the prime uses of mobile phones would be text messaging. One known, however, is that it will all happen very fast. The noble Lord, Lord Inglewood, was right to draw attention to the importance of flexibility in the Government’s response. For that reason, the super-affirmative procedure is probably the best way forward from a legislative point of view. I add a further suggestion: it would be useful if the next communications Act did not try to go into too much detail. After all, we have got by in public service broadcasting for a very long time with the simple words, “inform, educate and entertain”. If we left legislation giving us general objectives and then left it to regulatory authorities to use common sense in applying those in the circumstances of the time, the legislation would stand the test of time rather better.

The Communications Act 2003, to which reference has already been made, did not contain much in the way of references to the internet, although I seconded a successful amendment, tabled by the Earl of Northesk, making it an obligation of Ofcom to ensure widespread access to high-speed data transfer, which is the same thing as broadband. The internet was felt then to be different from broadcasting, in that it was a pull-down rather than a push-out medium. Therefore, both libertarians and others united in thinking that we did not need to regulate the internet. My sense is that that is not the public feeling today; we most certainly do need to regulate it. At a minimum, we all agree that we should not allow child pornography on the internet, or incitement and aid to terrorism. However, if we are able to do it for those two subjects, we could do it for a whole range of others, so the decision is about whether we want to regulate, not whether we are inhibited by the technology from doing so at all.

I would like to concentrate mainly on the main theme of the report, content standards. We would all concede that the main argument for public service broadcasting has lost two of its main pillars of support; scarcity of frequencies does not now apply. But as Professor Tommaso Valletti told the committee during the inquiry, the economic argument has gone, but the BBC is the envy of the world—“Why break it?”. That is very much my feeling. It could also be said that PVRs have reduced the power of programme scheduling to create high-quality programmes and get a large audience for them. Some 45 years ago, I presented a political programme on television which secured a somewhat larger audience than would normally be expected for political programmes. I would like to think that it was the intrinsic quality of the programme; realistically, I think that it had a lot more to do with the fact that it was sandwiched between “News at

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Ten” and “New York Police Department”, and remote controls had not yet been invented, so people could not be bothered to get out of their armchairs to switch me off.

Public service broadcasting is worth preserving and, indeed, encouraging outwith the traditional sector. How can we do that? One way is charging for spectrum. The report is ambivalent on whether we should do this but draws attention to its difficulty. It would remove more funds from public service broadcasters which could otherwise be concentrated on programming. I firmly think that there should be no charge for spectrum for public service broadcasters. That would provide an incentive for more people to provide public service programming.

The noble Lord, Lord Inglewood, referred to EPG prominence, which is also important. I suggest that getting some payment from the platform provider could be addressed. If the trade-off is that there should no longer be a “must carry” obligation on the part of the platform provider, it would enable us to find out what the real market rate for a programme was. After all, the bulk of viewing on Sky is still of traditional PSB broadcasters. It would not want to do without the BBC. Why should it get a payment from the BBC for broadcasting programmes that are one of its main attractions? It is interesting and somewhat ironic that, in the United States, Fox Television is leading the charge for precisely that—payment from cable providers over there.

We also face new forms of broadcasting, to use that omnibus word, and we will need regulation to ensure prominence in non-linear broadcasting television sets. During a visit to the BBC’s Blue Room, the committee was somewhat taken aback to find what we would regard as a traditional television set on which programmes came fairly well down the line. First, you are exposed to various products of the television manufacturer, gaming, online games and everything else and then, finally, you get through to an EPG programme guide. I think that we have all assumed that television sets are passive; they are not now. We must ensure that broadcasting—public service broadcasting in particular—gets due prominence. That was alluded to by Mr Simon Pitts of ITV, whose remarks were reported in paragraph 163 of the report. That will clearly be an issue.

The noble Lord, Lord Inglewood, also referred to what he called TV-like content: things that are received on the same television set side-by-side with traditional public service broadcasting programmes. I think that most of us would shy away from the idea that they should all be regulated as public service broadcasters, but I think that there was a general sense that it would be a good idea if they aspired to produce good programming. Perhaps the kitemark idea is the best way forward. After all, people have a vested interest in being respected. The advertising industry supports the Advertising Standards Authority. Ofcom ensures that it operates, but the industry does it itself because it is in its self-interest. I do not want to go to a chemist who is unregulated; I do not want to go on holiday with an unregulated travel company. Regulation is in the self-interest of the provider.

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The British Board of Film Classification has established age categorisation that has stood the test of time and, I think, could be expanded into other spheres of programming. People will make substantial edits to their film to secure a better classification that will ensure a wider audience. That is a good example of enlightened self-interest.

Moving on to what has been referred to in the report as the wild west of the internet, it might be made a little less unruly if the internet providers—four big companies control 85% of the market—could be persuaded that it was, again, in their self-interest to ensure that the more undesirable aspects of programming were simply not broadcast. Name and shame them if they do not do it and they will come round to the idea. We could make a lot of progress in this way.

Finally, the BBC represents a major market intervention —in general, overwhelmingly for the public good. However, during our visit to the Telegraph Media Group, our attention was drawn to the danger of the BBC crowding out other providers by its expansion on to the web. If the BBC is providing a good free online service, it is increasingly difficult for newspaper publishers to erect paywalls and thus to secure payment for content that is often expensive to provide.

The collection of the licence fee has been greatly aided by a requirement to notify of a purchase of a television set. A licence fee request will then follow. However, television can now be watched on smartphones, laptops and other devices. Requiring anyone who buys a smartphone to buy a television licence would, I think, be unsupportable and could well lead to the loss of the licence fee altogether. The alternative is to find another way of funding the BBC. On that gloomy note, I renew my thanks to the noble Lord, Lord Inglewood.

5.02 pm

Lord Clement-Jones (LD): My Lords, I follow the noble Lord, Lord Gordon, in congratulating my noble friend Lord Inglewood on his lucid introduction and on his excellent chairmanship of our committee. This was an extremely timely report. Even since it was written, digital media in the UK have developed further. Only yesterday, we heard in committee about the growing success of digital regional media.

The tablet that I am holding represents convergence. There are newspapers in digital form delivered over the internet with news clips embedded. There are news and sports apps with clips and text commentary. There are programmes made for television delivered on demand through non-broadcast apps. There are broadcasters’ catch-up services. These are subject to wholly different regulatory regimes: contrast the Ofcom regime over commercial and public service broadcasters with that over newspapers. Incidentally, I welcome today’s judgment on the alternative royal charter.

My noble friend Lord Inglewood is right.The Government’s response was disappointing. It was effectively a holding response. It did however anticipate last July’s White Paper, Connectivity, Content and Consumers: Britains Digital Platform for Growth. Much of the focus of both the response and the White Paper was on child safety on the internet and connected television. That is a clearly defined area where action

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is required. It is a matter of current concern and I commend the Prime Minister and the Secretary of State for their proactive stance and the subsequent actions of ISPs and mobile phone service providers. I commend the Government, too, for the new tax break for animation and high-end television production.

However, the Government’s response to our report promised a holistic strategy for the communications sector. There is little sense in the White Paper of such a strategy in the area of content, despite talk in the White Paper of getting ahead of the curve and despite a long gestation period of more than two years in setting out a strategy. The imperative in an age of converging media—which is common ground between the committee and the Government—is to maintain public trust in the regulatory regime applied to different types of content on the internet, despite the blurring of boundaries. We proposed,

“a new content standards framework”.

The questions are: what content falls into what regulatory regime, and into what regime, if any, should content fall? The Government in their proposals assert that,

“people still expect different standards from their TV, radio, newspapers and social media”.

The committee’s paper examines that proposition extensively. One size certainly does not fit all, and the committee recommended a “graduated approach to regulation”. However, we strongly recommended that research be carried out into public expectations of standards for various media content. Do the Government themselves have plans to do this?

The Government use the phrase “flexible, industry led approach”. I would prefer the initial leadership to be provided by the Government, but either means being clear about what kind of new elements need to be built into a new Bill, even if they need to remain flexible.

The Government promised to outline:

“Targeted updates to our legislative framework”.

However, they do not set out what they believe should be done by primary legislation in a new Bill and what can be done by voluntary action. Indeed, there is clearly some doubt about whether there will be a new communications Bill in the first place. What are the Government’s intentions? Will there be a Bill in the remaining months of this Parliament? I certainly hope that there will be.

There was some discussion of Ofcom’s ex ante competition powers in the White Paper. We are promised a consultation on this, but surely it will be an important part of any Bill. Competition must be able to flourish, and great content to flourish on a plurality of platforms. We need a debate and some certainty about Ofcom’s future role in this area. The committee itself was not convinced that we need to go further than ensuring clarification, rather than extending some powers.

There are other areas where primary legislation may be relevant, on which Ofcom itself gave a useful detailed response in June. These include some of the committee’s recommendations on, as my noble friend Lord Inglewood mentioned, giving the Secretary of State power to vary Ofcom’s powers by super-affirmative resolution so that where appropriate it could introduce a common co-regulatory framework for TV and TV-like

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content; the guidance that should be given to Ofcom on the establishment of any co-regulation system, and imposing a duty on Ofcom to advise the Secretary of State on the timing of any such order; the whole question of the removal of the duty of impartiality for non-PSB news services; a more proactive role for Ofcom regarding the internet, as the noble Lord, Lord Gordon, has stated; and perhaps the issue of EPG prominence, especially in the light of the kinds of television that we saw, as the noble Lord also mentioned, in the BBC’s Blue Room.

The need for flexibility in legislation is common ground. The landscape is changing rapidly. As the Government rightly point out in the White Paper, YouTube did not exist back in 2003 when the Communications Act was passed. There are, of course, areas where voluntary action may be more appropriate. Clearly, linear viewing will remain strong, certainly in older generations, but, as viewing habits begin to markedly differ, have the Government taken a view on the idea of a common system of age rating classification for on-demand material, which could be by the BBFC, as the noble Lord, Lord Gordon, said?

There are other areas where we need more public debate. Is it not essential, as the committee recommends, that we assess the role of public service broadcasting in the age of convergence? It faces risks and threats but also great opportunities. As we have heard, there are major issues about retransmission for public service broadcasters and the carrying terms for PSB channels. The Government say that they want to see zero net charges—that is, fees cancelling each other out. However, some of the commercial PSBs claim that their investment is being put at risk by an,

“outdated system, which tilts the channel and platform relationship in favour of pay-TV platforms such as Sky and Virgin Media”.

They say that,

“these arrangements require PSB channels to subsidise pay-TV platforms by providing their main PSB channels to pay-TV platforms for no payment, or in the case of Sky to actually pay them to carry them to carry those channels”.

As a result, there is concern that none of the revenue that pay-TV platforms make from these business models reaches the PSBs that make the original investment, or the talent who make our programmes possible. PSBs are the cornerstone of our current broadcasting ecology. Their role is changing rapidly but, rather than welcoming the fact that these reviews by Ofcom take place, the Secretary of State has proposed that Ofcom’s duty to review PSBs every five years should be phased out.

I sense in all this no really coherent strategic intent, and perhaps no real intent at this stage to amend the Communications Act 2003. I look forward to the Minister’s reply but if we are not careful we will bumble along until well after the next general election, and that would be a mistake, as I think the committee’s report clearly shows.

5.10 pm

Lord St John of Bletso (CB): My Lords, I am grateful to the noble Lord, Lord Inglewood, for his able chairmanship of this very topical, broad-ranging and fascinating inquiry. The speed of the technology revolution of the past decade has been nothing less than remarkable and, as the report said:

“Converged devices have become a mass market reality”,

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with audiences expecting everything any time and anywhere. The possibilities for multifaceted smart devices with ever-greater interactivity seem limitless. In a very short time we have moved from an analogue to a digital, to an on-demand and now to an interconnected age. The emergence of common standards has meant that we are more connected than ever.

There is no denying that the younger generation are at the vanguard of media convergence. I have to admit that, as the father of four young teenagers, I rather pine for the days when my children were not constantly on their iPads, iPhones and BlackBerrys. The digital evolution with media convergence has presented huge opportunities but, as this report aptly puts it, with a number of major challenges. While the UK market for on-demand services is one of the most advanced in the world, it is reassuring that linear broadcast TV still remains largely popular and resilient with most of the population getting their news from television. I noted in the recent Ofcom report that UK households currently spend less than 10% of their TV viewing time watching on-demand content.

A key observation of this report is that new technologies and behaviours are evolving more quickly than regulatory protections. The Government’s forthcoming White Paper on communications will certainly need to address some of the regulatory challenges on content, content creation and competition. Statute is a blunt instrument and should be used only when totally necessary, but a regulatory framework needs to keep pace with this ever-changing world in an evolutionary manner.

Clearly the competition regime for media markets should seek to promote choice, innovation and competitive pricing. The new platforms to distribute content over the internet and via satellite have allowed UK viewers increasingly to take advantage of international content and businesses to globalise. While this provides opportunities for wider economic growth, it raises the thorny issue of jurisdiction over the content of some of these programmes. This should and could affect a number of areas of regulation and enforcement, particularly as Ofcom has the ability only to regulate services that originate in the United Kingdom. The impact of globalisation on national regulation of media content raises a major challenge.

The noble Lord, Lord Inglewood, gave us an excellent overview of the key findings and recommendations in this report. Without repeating his points, I will touch briefly on the safer internet, which was briefly raised by the noble Lord, Lord Clement-Jones. It was summarised in recommendations 220 to 222. It is essential that adequate protections are put in place to ensure that children’s use of the internet is controlled in a safe manner. I know that the Government are working closely with the UK Council for Child Internet Safety to pursue a self-regulatory approach to keeping children safe online. However, I do not believe that simply installing filters on IP smart devices, including mobile phones, iPads and computers, is sufficient. Parents need to be better educated as to their responsibilities to ensure parental controls on these devices. It is also essential that ISPs, mobile phone operators, device manufacturers and retailers as well as software developers all work together to ensure adequate protections.

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One area of the Internet of major concern to me is the “deep web”, sometimes referred to as the “invisible web”, which is accessed through an anonymous network called Tor. This was originally developed by the US Navy, but is currently being used as a hub for illicit activity, including the notorious website Silk Road, which was fortunately shut down by the FBI recently. Sadly, similar websites are cropping up as we speak. The deep web has also been used as a source of child pornography.

Normally, file-sharing and internet browsing can be tracked by law enforcement through each user’s unique IP address, which can be tracked back to individual computers or iPads. The Tor network on the deep web effectively hides the IP address, opening the internet to unsavoury elements. A lot more focus needs to be placed on trying to control this content which is not part of the surface web.

I briefly draw reference to paragraph 155 of the report, where we pointed out that one of the risks of convergence is the fragmentation of audiences and revenues, which could impact adversely on investment in high-production-value content. As ITV pointed out in a recent briefing note, the sustainability of their investment in content depends on their ability to make a viable financial return on their investment and also, obviously, to reach large audiences. I entirely agree with ITV that in a digital age, an effective intellectual property regime is vital. It is essential that any exceptions from intellectual property protection are as narrowly and well defined as possible. Advertising revenues are no longer sufficient to ensure continued investment in world-class drama programmes. I call on the Government to give assurances that a strong intellectual property framework will be incorporated into the forthcoming communications White Paper.

I noted that, in the Government’s response to our report that, while the process of convergence poses a challenge for how we continue to ensure public expectations about content standards, the time is not yet right for convergence of linear and non-linear regulation. There should be no movement to reduce the amazing opportunities that are presented by convergence and the internet more broadly. Regulation should not stand in the way of innovation but, equally, more needs to be done to address the challenges facing media convergence. I agree with the noble Lord, Lord Gordon, that there is a need for some form of regulation of the internet.

In conclusion, there needs to be an evolutionary approach to the regulatory framework to keep pace with this rapidly changing world. I wholeheartedly support the recommendations in this report and hope that many of them will be incorporated into the forthcoming communications White Paper.

5.18 pm

Lord Stevenson of Balmacara (Lab): My Lords, I thank the committee for its excellent report. I probably should say “latest in a range of excellent reports” because in recent years the committee has been doing exemplary work, stalking around the areas to do with communications and the audio-visual sector more generally and bringing forward a range of proposals and ideas which are fantastically useful to those who

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are interested in this area. Indeed, it confirms the rightness of your Lordships’ House in deciding that the committee should continue; long may it do so. I also thank those who have contributed to the debate today. We are small in number but high in quality. We have certainly given most of the main recommendations in the report a good whirl.

The report starts in relatively easy mode. It takes as its typical reader someone—not unlike myself, I suspect—who does not really understand what exactly they are talking about, and tries to explain what media convergence is. I was okay for the first three or four lines. In fact, I think I could answer a certain number of questions on the first three or four paragraphs. I liked the bit that said that it was a technological phenomenon where the various platforms come together, but that does not really help us get into the question of how, when and on what basis regulatory and other measures might be needed to deal with this brave new world.

I was happy to read the quote from Lara Fielden, who explains in essence what we are talking about:

“Newspapers are not just printed but online and carry video packages with the look and feel of traditional TV; broadcasters publish websites including text-based articles similar to online print offerings; scheduled programmes are broadcast but also available on-demand, on digital channels and a variety of websites; user-generated material vies for online audiences alongside professionally produced content; professional and amateur bloggers share the same debates”.

As the noble Lord, Lord St John of Bletso, said, our kids consume all of this, and more, all the time. I often come home to discover them lounging on a settee watching television, plugged in to an iPod, listening to other music that is playing loudly and also texting and doing other things. How do they do it? Indeed, it occurs to me that the need for regulation is probably in inverse proportion to the number of platforms a person consumes on average. Think about it.

The value of this sector to the UK economy is some £53 billion. The sector is growing, providing jobs and new business opportunities, creating exports and boosting inward investment, generating benefit for the UK. All the signs are that this will continue. As the report recognises, intellectual property is a crucial element in this mix and while the report acknowledges it, it is a pity that the committee has not, so far, dealt with it. I hope that it will return to this topic. That aside, it seems to be generally accepted that convergence has the potential to increase the value that this sector generates even further, allowing new business models to emerge and offer people exciting and innovative new products and services which will bring about great benefits for consumers and businesses alike.

However, I have some sympathy with those who warn that, while technology and consumer behaviours are changing, it is important to remember that the process of convergence is taking place unevenly. Different media are becoming more converged in different ways and at different speeds and we find that audience expectations have not changed as fast as the technology or the markets. It is interesting that audiences have continued to distinguish between content on the basis of where they find it and on what service it is provided. Indeed, in that respect they may be ahead of both this report and the Government.

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If I have one concern about the report, it is that it implicitly gives the impression that, other things being equal, more convergence will require more regulation. I can see the arguments for that, but I am not sure that the evidence is there yet. It may be that smarter, different regulation is what is required, but, at least in the interim, I hope that we can all agree that there should be no movement to reduce the amazing opportunities that are presented by convergence and the internet more broadly. I agree with the committee’s assessment that a flexible, industry-led approach will be key to addressing the challenges and making the most of the opportunities of convergence.

The Government say that they have been undertaking a wide-scale review of the sector over the past two years—it seems like a lot longer than that—and it has been good to read that, shortly, they will be publishing their strategy and vision for the sector. Will the Minister enlighten us on the timetable for legislation? Are we to see more publications along the lines of the ones that have already been produced, perhaps even the long-promised White Paper, first referred to in this House in about 2010, but which seems no nearer publication?

We have had a good discussion about the detail and I shall pick up on two points. The committee points out that the process of convergence poses a challenge in ensuring that public expectations about content standards are met. I note that the Government do not believe that the time is yet right for convergence of linear and non-linear regulation. I should be very grateful if the Minister could say more about that because we do need clarity here—indeed it came up as a Question in the House only yesterday. The committee makes good points about news and its imaginative proposals for non-linear news provision have some merit. I hope that its suggestion of legislating early on the principles but holding back on the detail will catch the eye of the Government. It may be that the age-rating system that was referred to during the debate could work, although I have to say that I have my doubts, particularly if the British Board of Film Classification system was to be expanded wholesale.

There are some recommendations for content standards in the section on “A safer internet”. That area has many challenges. Clearly, we need to make sure that children experience the internet in as safe a way as possible. However, their parents have major responsibilities in this area, and it is also important that the internet is open and transparent, in line with the aspirations of its founding parents. At this stage a self-regulatory approach is surely the right one for non-broadcast material. As has been said, securing the engagement of industry and organisations across the whole value chain, from internet service providers, mobile phone operators and device manufacturers, to retailers, software developers and parents, should deliver results. It would be good if the Minister could outline his Government’s expectations on this issue.

The quality and diversity of our content is something for which the UK is admired internationally and UK-originated content is a successful export. Research commissioned by PACT and UKTI shows that the revenue generated from international sales of UK television programming and associated activities grew

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by 9% between 2010 and 2011. We all want to ensure the continued health of the industry as a whole and continued investment in UK content both by public sector broadcasters and non-public sector broadcasters. That suggests a need for stability and certainty in the sector to avoid any potentially chilling effect on such investment in the longer term.

As my noble friend Lord Gordon noted, the report rightly raises the importance of ensuring that terrestrial television has sufficient spectrum to enable it to compete effectively with other platforms. The report covers the worries that exist in the industry about the long-term future of DTT and makes points about the possible impact of Ofcom’s administered incentive pricing scheme. Again, it would be useful if the Minister could share the emerging thinking on this point.

Finally, before my voice finally deserts me, the committee should be congratulated on an excellent report, and on being so far ahead of the game—so far ahead that it has produced a very limp response from the Government so far. As the noble Lord, Lord Clement-Jones, says, what is the strategy here? I should be grateful if the Minister could enlighten us.

At the start of his remarks the noble Lord, Lord Inglewood, drew attention to the royal charter sealing which was scheduled for about now. He may not know it, but we have been able to find out—by skilful use of devices on a multi-platform basis—that an appeal has now been lodged in the Royal Courts, and so the sealing may be delayed. Nevertheless, that means that we are thoroughly up to date. We are catching up with the committee, which is far ahead of us at all times, but it has left us with a very good report that we hope will stimulate the long-needed debate in this area.

5.27 pm

Lord Gardiner of Kimble (Con): My Lords, I in turn thank my noble friend Lord Inglewood and all members of the committee for their report. The Government very much welcome this second report into media convergence. Noble Lords have asked a number of questions, some of them a shade too technical for me. I hope that they will forgive me if some of the answers come in written form; perhaps they will then get a better response. Like the noble Lord, Lord Stevenson of Balmacara, I congratulate your Lordships on setting out in the report an excellent description of what convergence in the world of media content means. I must say that it was extremely helpful to me.

Each of us enjoys content, be it news or entertainment, and modern technology offers a plethora of ways of accessing that news and entertainment. Only last week I read that viewing of BBC TV programmes on mobiles and tablets accounted for 41% of the 176 million requests for the iPlayer in September of this year. The noble Lord, Lord Gordon of Strathblane, raised the issue of this new technology for so many that is proving so popular. That is why convergence is an exciting prospect and a daunting challenge.

The Government have recently completed a review of the legislative framework that governs the media and telecommunications sectors to ensure that it remains appropriate for the digital age. That culminated in the publication in July this year of our strategy paper,

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Connectivity, Content and Consumers: Britain’s Digital Platform for Growth

. Our discussions with industry, regulators and consumer groups demonstrated that the present framework is broadly working well, is generally working for the consumer, and is supporting economic growth and innovation. I was particularly taken by what a number of your Lordships said about the need for evolutionary rather than revolutionary change. That has been borne out in the discussions that have taken place.

The internet and the growing technology to access it both create advantages. There is the advantage, to which my noble friend Lord Inglewood referred, of being able to move seamlessly from television channels regulated by the broadcasting code to channels streamed directly from the internet. There are also the disadvantages for users confronted with unregulated content that they might not have wanted. I understand that point.

The committee’s valuable report presents a comprehensive overview of the converging media landscape and the opportunities and challenges that it creates. We must look at how best to address those challenges. We know that some issues will need to be discussed on a European or even a global level in the future. However, we are not yet living in a fully converged world, so the Government seek to address issues that can be tackled on a national level to achieve the best outcome for our country. We also seek a safer internet environment by working closely with member states as part of the EU Commission’sSafer Internet programme.

The value of the media sector to the UK and the economy is not to be underestimated. Over the past decade it has gone from strength to strength. It is also crucial to us all as consumers, allowing us to communicate as never before and giving us access to ever more sources of information and content. However, sometimes having more information does not necessarily mean that we receive better information, so we should look at ways in which we can be sure of the reliability of that information.

Convergence has the potential to increase the value that this sector generates even further, allowing new business models to emerge that offer people exciting and innovative new products and services, and bring about great benefits for consumers and business alike. We therefore fully agree with the committee’s view that there should be no movement to reduce the exceptional opportunities presented by convergence and by the internet more broadly.

We have also taken into consideration wider international discussions that will impact on the audiovisual sector—for example, about issues such as copyright—and which are briefly mentioned in the report. I shall take this issue a little further to draw attention to the UK’s support for a comprehensive multilateral treaty that protects the same rights in different technologies, and covers traditional wireless broadcasting, as well as internet broadcasting and rebroadcasting.

As your Lordships’ report states,

“the fluidity of change is uncontested; dramatic developments in media industries and audience behaviour will continue to run on in the wake of convergence”.

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While technology and consumer behaviours are changing, it is important to remember that, as noble Lords have already mentioned, different media are converging in different ways and at different speeds. Indeed, people still expect that their television, radio, newspapers and social media will encompass and embrace different opinions, different values and, indeed, different levels of partiality. My noble friend Lord Inglewood also referred to this. What is important is that we should identify the source of the news or content we are accessing, so that we can feel comfortable in applying those expectations.

The Government believe that our basic approach to regulation in this area, through Ofcom and the Authority for Television on Demand, strikes the right balance between the freedom of the internet and the tighter regulation of live broadcast material. It is impossible to predict with any certainty how convergence will continue to develop and at what pace. All noble Lords who have spoken referred to this. We do not want to make the mistake of attempting to predict the course of developments and of inadvertently stifling growth. The noble Lord, Lord Stevenson of Balmacara, hit the nail on the head: we must be careful that we do not choke off desirable advances by seeking to regulate. That is an important feature that we need to study carefully. In many respects convergence has not yet significantly affected consumer behaviour, but predictions for future developments regarding technical development and consumer behaviour are uncertain. That continues to bear out our approach.

The Government therefore favour greater partnership working and collaboration with industry across the media market. Your Lordships’ report reflected comprehensively on the issue of common media standards. We agree that non-broadcast content providers should be positively encouraged to ensure that there is a common framework for media standards in preparation for a more converged future. However, we want industry and regulators to work together on a voluntary basis to achieve this.

The recommendations in the committee’s report for content standards refer to content standards on TV and TV-like services. We agree with the committee’s characterisation of the emerging environment for content standards with the convergence of live and on-demand TV-like content, and the increasing role of the internet in providing content. We are also in agreement with your Lordships’ report that the process of convergence poses a challenge to how we continue to ensure public expectations about content standards are met. However, we believe that the time is not yet right for convergence of broadcast television and television-like content regulation, because, since the process is incomplete, we can only speculate at this moment on how best to manage it.

The noble Lords, Lord St John of Bletso and Lord Stevenson of Balmacara, spoke powerfully about the recommendations on content standards in Chapter 4, headed “A safer internet”. We agree with the committee’s findings about the challenges and opportunities of the internet, and what UK citizens expect in relation to this. The Government have been working through the UK Council for Child Internet Safety and with industry to drive action that will help ensure that parents can keep their children safe while online. My noble friend

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Lord Clement-Jones rightly referred to the major speech that the Prime Minister made on 22 July, in which he set out a range of measures that he has asked internet service providers, mobile network operators, public wi-fi providers and Ofcom to deliver to ensure the UK stays at the forefront, internationally, of delivering a safer internet.

Much online activity takes place in the home. Providing parents and guardians with easy-to-use and effective tools to help limit the content that children can access is a key aspect of the overall package of measures that should be available. The Government recognise that some parents may be less comfortable using the internet and may feel unsure about how to go about keeping their children safe. That is why we have charged the internet service providers with making the parental control tools they are developing as simple as possible. The noble Lord, Lord St John of Bletso, raised the question of awareness. Internet service providers will run an awareness campaign early next year with advice to help parents become more confident in setting up parental controls tools.

In addition, as part of the Government’s reforms to the national curriculum, we have strengthened the requirements to teach e-safety as part of the changes to the new computing programmes of study. From September next year, e-safety will be taught to pupils at all key stages.

The Government have been working with industry to secure the commitment that, by the end of this year, the four largest internet service providers will provide, free of charge, family-friendly network-level filtering for new customers. This means that, when someone sets up a new broadband account, the settings to install family-friendly filters will be automatically selected and will cover all devices in the home connected to that service.

Internet service providers have also committed to contacting existing customers during next year and providing them with an unavoidable choice on whether to set up filters. The Government believe that working with and through industry is the most effective way in which to increase the safety of children online through securing the engagement of industry and organisations across the whole sector. This is an essentially international situation. I know that the Secretary of State visited America precisely to have discussions on this issue.

Ofcom has been asked to report, by the end of this year, on a number of areas in relation to child internet safety, predominantly around parental awareness of—I hope that that will be endorsed by the noble Lord, Lord St John of Bletso—and confidence in using, the available internet safety tools.

The recommendations on content set out a clear picture of how public service broadcasters—PSBs—have an important and continued role within the wider context of content creation and commissioning in the UK. I listened very carefully to what the noble Lord, Lord Gordon of Strathblane, said. Indeed, the Government are about to update existing regulation on PSB prominence. The quality and diversity of our content is something for which the UK is admired

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internationally, and the PSBs are central to this success. I applaud all the channels that work so hard and are so much part of our creative industries. They invested £2.8 billion last year in UK content. Non-PSBs have also increased the amount they invest in UK content. In addition, UK-originated content is a successful export. Research commissioned by the Producers Alliance for Cinema and Television and UKTI shows that the revenue generated from international sales of UK television programming and associated activities grew by 9% between 2010 and 2011 to a figure of £1.475 billion.

We want to ensure the continued health of the industry as a whole, and continued investment in UK content both by PSBs and by non-PSBs. Further, we are mindful of the need for stability and certainty in the sector, to avoid any potentially chilling effect on such investment in the medium to longer term. Again, the noble Lord, Lord Stevenson of Balmacara, referred to that. We need sometimes to be cautious. That is why we have set out the outcomes that we want to see, and the action that we will be taking in working in partnership with the industry.

All noble Lords asked about legislation and consultation. The Government will consult on a range of issues. There will be a consultation on broadcasting competition, to which my noble friend Lord Clement-Jones referred, and if necessary, legislation may follow. We will also consult on electronic programme guides and the level of payments. We intend to legislate on nuisance calls, spectrum, switching the bundles, R18 video on demand content and premium-rate services. The Government believe that the right way forward is to legislate on the key areas of concern and not have—I think the committee’s report endorses this—new and radical root and branch new legislation that would be unhelpful to the sector.

A dynamic and competitive broadcasting industry is essential to boost growth, encourage creativity and innovation and improve consumer choice. We recognise that the current competition regime is not perfect, particularly in a converged world. This reflects the thrust of the committee’s report in this area. We are looking at how we can improve it for the benefit of consumers and industry. We committed to consult on broadcasting competition, as I have said, in our paper, Connectivity, Content and Consumers. We will keep the legislative framework under review, but we do not consider that wholesale changes, either at national or EU level, are necessary or appropriate. It is important that EU regulation in this area could be a negative if it were to stifle growth. We need, again, to be careful and cautious on that.

In considering how best to address the challenges and, indeed the issues of regulation, I believe that there is no single bullet. Technology is constantly changing, as the noble Lord, Lord Gordon of Strathblane, said. I agree entirely with him that legislation should be less complex and more understandable, but there are occasions when the draftsmen defeat us all. I believe that we should avoid legislation with a short shelf life, particularly in a changing environment. We must, however, have a framework in which the industry can grow and in which consumers—most important of all—are protected. Various strands of ongoing

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work are in place that aim to address many issues set out in the committee’s report, and there are still further developments to consider all the time as convergence evolves.

The noble Lord, Lord Stevenson of Balmacara, challenged me on what might be called the strategic priorities for the Government. That is why the paper was produced. The Government wish to establish world-class connectivity throughout the UK, to support the production of world-beating, innovative content and services that originate in this country, and to ensure consumer safety in an increasingly online world. We also wish to keep the cost of living down by ensuring that consumers have choice.

I assure noble Lords that we have discussed both the committee’s report and the paper, Connectivity, Content and Consumers with colleagues and officials. The Select Committee’s report has given great insight into many issues with which we are all having to wrestle during this continuing process. I assure your Lordships that we think that much of what the committee proposes should be developed further. I renew my thanks to all who have worked on this report and acknowledge it as a valuable resource that has indeed helped enormously in addressing the challenges that undoubtedly lie ahead.

5.46 pm

Lord Inglewood: My Lords, I thank all those who have taken part in this debate. I hoped that we might have been slightly more numerous, but I know that the particular circumstances today have meant that a number of noble Lords who would have liked to take part have been unable to do so. I begin by thanking all those, in addition to the Minister, who took part. They endorsed and underscored the approach of the committee, pointing out, as I said, that the issue is complicated and not straightforward. Wider implications are involved and nothing is clear.

I turn specifically to the Minister. It is true that, in my opening remarks, I commented on the physiognomy of the initial response. Rest assured, we did not write the report in order that we might get a clap on the back from the Government. We wrote it, and believe it is important, because the kind of things that I and other Members of your Lordships’ House described are going to happen. That has huge implications for the country, and we need to respond to the changes, working with the Government to bring about the best for the country.

I will make one point in response to something that the noble Lord, Lord Stevenson, said. There is a difference between regulation and the regulatory framework surrounding this sector. We are not necessarily keen on seeing more regulation; we believe that the regulatory framework within which this sector operates will have to adapt. If we have made a positive contribution —as I believe we have, from what the Minister said—towards trying to bring about an evolving policy that is sensible, realistic, workable and effective, we will feel that we have done a constructive job. I beg to move.

Motion agreed.

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Tackling Corporate Tax Avoidance: EAC Report

Motion to Take Note

5.48 pm

Moved by Lord MacGregor of Pulham Market

That this House takes note of the Report of the Economic Affairs Committee on Tackling corporate tax avoidance in a global economy: is a new approach needed? (1st Report, HL Paper 48).

Lord MacGregor of Pulham Market (Con): My Lords, I am pleased to introduce the report of the Economic Affairs Committee entitled Tackling Corporate Tax Avoidance in a Global Economy: Is a New Approach Needed? I declare my interests, although I think they are pretty remote for this inquiry, as chairman of the British Energy Pension Fund Trustees and of the Eggborough Power Ltd Pension Fund Trustees.

I begin by paying tribute to the Leader of the House and the business managers for giving us an early opportunity—and in prime time in the Chamber—to debate this Select Committee report. This is a welcome and swift response to criticisms by Select Committees that they have often had to wait a long time to get a debate and response from the Government, and then get one only in the Grand Committee Room.

I am grateful to all the witnesses who contributed oral and written evidence to the inquiry and to our specialist adviser Professor Michael Devereux, director of the Oxford University Centre for Business Taxation and associate dean of research at the Said Business School. Professor Devereux’s knowledge, expertise and advice made an essential contribution to our report. I am also very grateful to our committee clerk, Bill Sinton, and his staff for their first-class assistance.

We decided to undertake this inquiry because of the rising public, media and parliamentary concern that multinational companies are not paying their fair share of UK tax. We also decided to make it a relatively short one, over the spring and early summer, because, given the topicality and urgency, we did not think that we should carry on the hearings after the Summer Recess and into the winter. The Public Accounts Committee in the other place was concurrently holding its hearings and we had the benefit of having the chairman of the PAC as one of our witnesses.

Before and as we launched our inquiry, there was a steady stream of stories in the media about multinational companies that in practice pay little or no UK corporation tax, even when they are doing very good business here. Examples included Google, Amazon and Starbucks, as well as the British-based Vodafone, Thames Water and Cadbury before its takeover by Kraft. This practice undermines public trust in the fairness of the system, calls into question corporate sector responsibility, raises doubts over the effectiveness of HMRC in ensuring compliance with corporation tax, reduces the tax revenue to HMG that should legitimately be coming here, and can place UK-based firms at a competitive disadvantage if they operate mainly or solely in this country and pay their full taxes here. This can in particular affect small to medium-sized businesses that are attempting to compete and grow.

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In some cases, UK corporation tax seems to a considerable extent to be a voluntary tax for multinationals. Starbucks’ volunteering of extra payments in the UK after bad publicity suggests that it recognises that. As the PAC noted, Google generated $16 billion revenue from the UK between 2006 and 2011 but paid just $16 million of UK corporation taxes in the same period. Even after accounting for all its expenditure, it is still a huge gap.

There is a serious issue of avoidance of corporation tax to be tackled. Part of the problem is the complexity of the UK’s tax system but the main scope for corporate avoidance arises from the international tax system, which allows multinational companies to shift profits between countries to lower-tax regimes and reduce their tax liabilities in the UK, even when they are doing good and substantial business here.

Our report, based on the evidence, fully recognised that the Government are giving priority to tackling these issues but, recognising the challenges and concerns, also made some further recommendations. I have to say that I find the Government’s response somewhat disappointing, defensive and perhaps slightly complacent. That may not have been the intention but the impression is given that it can be summarised as, “Of course there is a problem but we are doing all that is required to tackle it”, and they are dismissive of any other recommendations.

Two key points underlie our analysis. First, international companies, like all others, are entitled to frame their tax policies with a view to minimising tax within the rules, although multinational companies are diverting huge resources to exploiting to the maximum what the rules enable them to do. I will have something to say later about whether HMRC is sufficiently resourced to ensure that companies are paying their proper share. Secondly, we recognise that fundamentally this issue can be fully and properly tackled only at the international level because it is so often the difference between the tax regimes that makes the exploitation and ability to minimise the tax possible.

I will turn briefly to the areas in which we are in agreement with the Government’s response and where we actually said so very firmly in our report. We acknowledge that changes are being carried out throughout the corporate tax road map and steps are being taken to simplify the tax system and make UK corporation tax one of the most competitive in the world. We acknowledge all the efforts to tackle tax avoidance, in GAAR, DOTAS and so on. We acknowledge and support the increased resources and manpower for HMRC to tackle tax avoidance and evasion, and the successes it has achieved. Above all, we acknowledge the key importance of international action and the Government’s leading role in the OECD multilateral project on base erosion and profit-shifting. All this is agreed and supported by our committee.

However, three of our recommendations were not accepted. The first is our proposal for an urgent review, to be undertaken by the Treasury, of the UK corporation tax regime, which should report back with proposed changes to be made at home and pursued internationally. Our report lists six issues for this review,

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of varying importance. The one I would single out is a review of alternative tax structures, such as a destination-based cash-flow tax, which we analyse in some detail.

I will explain the reasoning for that recommendation. There is general agreement that the various individual countries’ tax regimes do not reflect the changing business models, the domination of multinational corporations and the challenges of the digital economy. This is well recognised in the G20 Leaders’ Declaration of September 2013. Their solution is the OECD’s action plan on base erosion and profit-shifting, to be completed in two years.

One attraction for doing the work into alternative tax structures that we are recommending is that there is no certainty, to put it mildly, of a successful outcome of the OECD’s BEPS—as it is known—action plan within two years. One needs to look only at the OECD’s plan of action, published in July, to see what a truly formidable range of work has to be undertaken, let alone agreed among so many Governments. There is a serious risk at international level that we are putting all our eggs in one basket and that three or four years on we would be no better off. The advantage of the destination-based cash-flow tax is that it could be introduced unilaterally.

Secondly, I note that the Government have by implication rejected our recommendation that HMRC should be better resourced, by outlining all that has already been done. I acknowledge that the evidence so far is that extra resource has been more than self-financing in the revenue it has produced. I have looked at this quite a few times in the past and our recommendation for more resources was designed to help and support HMRC in the good work that it has been doing. That is why I am disappointed that the Government have dismissed our recommendation. As a former Chief Secretary, I have to say that it is the kind of extra resource I would encourage. It is difficult to judge how much extra resource is needed but the evidence is that it would well justify itself.

Thirdly, I regret that our recommendation of a joint parliamentary committee, along the lines of the Intelligence and Security Committee, to oversee HMRC has been rejected on grounds of taxpayer confidentiality. The same argument about confidentiality could be used against the existing intelligence committee on grounds of national security, but there has never been a breach or leak. Meanwhile, Parliament has to take it on trust—relying on the National Audit Office, another body of officials—that all is well in HMRC with the resources that it has. I hope that this recommendation will be looked at again.

Finally, I have three specific questions for the Minister when he comes to wind up. Can he update us on progress since publication in July of the OECD Action Plan on Base Erosion and Profit Shifting? Is the way ahead any clearer? Can the Minister also update the House on progress on some of the Government’s other anti-avoidance initiatives, such as giving HMRC the ability to name high-risk promoters of tax avoidance schemes? I understand that consultation on this ended on 4 October. Can the Minister brief us on the current status of the Government’s proposals to exclude companies whose tax affairs are not in good standing

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from bidding for public procurement contracts? How would such measures be consistent with that respect for taxpayer confidentiality which the Government invoked against the idea of naming and shaming users of aggressive tax avoidance schemes, as well as their advisers?

I shall leave it to other noble Lords, who have practical experience of corporate issues, to focus on some of the matters I have not had time to deal with, such as debt equity finance. I look forward particularly to the maiden speech of my noble friend Lord Leigh of Hurley.

I conclude by saying that our committee is composed of many with great experience and knowledge in business, finance, tax and academia, and they have brought that business experience and wider knowledge to bear on this report. I am indebted to them all; it is a privilege to chair such a committee. I beg to move.

6.01 pm

Lord McFall of Alcluith (Lab): My Lords, it is a pleasure to participate in this debate and to have been a member of the Economic Affairs Committee under the wise chairmanship of the noble Lord, Lord MacGregor. As he said, this is a short report which will advance matters a small amount, but it contains the opportunity for the Government and others to act on issues and to take them forward.

Our report asks whether a new approach is needed. The answer is an unequivocal yes. At the heart of the report is the statement that the UK has serious problems with the avoidance of corporation tax. As the noble Lord mentioned, that is partly due to the complexity of our domestic tax regime, but principally it is because of an international tax system which gives multinational companies the ability to shift profits between countries in ways which minimise their tax liabilities in the UK. The effect of that is to damage the economy and undermine trust in the taxation system. It has both social and economic consequences. We are witnessing democratic failure here and the electorate have caught on. They are unconvinced that the political class will solve these big issues, and there are no issues as big as this to solve. The electorate are of that opinion because they see the social contract as broken—the social contract which was founded on the premise that everyone got a slice of the pie. Over the years, some got a bigger slice, but now we find that, while some are still getting a big slice, others are getting nothing.

The noble Lord, Lord King, the former Governor of the Bank of England, made the point recently that wages and standards of living in 2017 will be the same as they were in 2007. Professor Joseph Stiglitz, who is a professor at Columbia University and a former chief economist at the World Bank, stated, in his book, The Price of Inequality, that the global economy is sick, has been sick for a long time, and that that is infecting our politics. He cited figures to show that, in the US since 1979, output per hour has gone up by 40%, but pay has barely increased. Meanwhile, the top 1% in the US takes home more than 20% of national income. He asked whether the great recession has made things worse. It has made things worse for 99% of people, but 95% of the gains between 2009 and 2012 went to the top 1% of society.

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We can see the same trends in our own country. The electorate feel that their views are less important than those of the banks and financial institutions, the energy companies and the multinationals like Google and Starbucks. Our report backs that up when it says that multinational companies are unique in that their corporation tax payments are largely a voluntary activity. That is endorsed by Sir Martin Sorrell of WPP, among others. However, it is not a voluntary activity for the rest of society. The message from HMRC at the end of the year will be that people better get their self-assessment tax returns in by 31 January otherwise they are liable to a £100 fine per day. Rightly so, we should say. But, if we are to have a level playing field, and the chance to restore both economics and politics to health, then we must urgently look at this situation.

Earlier this month, HMRC estimated that there was a £35 billion tax gap which it was failing to collect. The noble Lord, Lord MacGregor, made the point that our proposal for HMRC to have extra resources had been rejected. If it had those resources, as it has done in the past with positive results, then some of that £35 billion could be clawed back. If the Chancellor had that £35 billion in his hands, he could reduce the basic rate of tax from 20p in the pound to 12p. There is a big pot to get hold of, but we need the resources to do so, and it is disappointing that the Government have rejected that proposal. Tax evasion is relevant to the everyday lives and struggles of us all, particularly at this present time of austerity.

Is the UK a soft touch here? It does seem so. The recent examples of Starbucks and others who shifted their profits elsewhere illustrate that point. Since their naming and shaming, the voluntary payment of £20 million by Starbucks is welcome, but it is not the answer. We need to change the structure. The use of outlandish gimmicks to shelter profits in other countries must cease. Google is claiming, absurd though it is, that its intellectual capital resides in Bermuda. That would be okay if it was not for the fact that it was approved by the US Internal Revenue Service. That illustrates just how difficult the situation is and how we need to tackle it globally. In my capacity as a member of the Parliamentary Commission on Banking Standards, we saw how our own domestic banks—HSBC, UBS, Standard Chartered, Barclays and others—were fined almost $4 billion by the American authorities for engaging in money laundering activities. The HSBC evidence to the Parliamentary Commission on Banking Standards was very clear. It admitted that, on day one of assuming control of a Mexican bank in 2002, there was an e-mail from the head of compliance which made it clear that there was no recognised compliance or money laundering function in the company. Yet it allowed that to fester for years.

Why do I mention that in the context of a global financial situation? It is not a victimless crime. During the period of HSBC’s ownership of that Mexican bank, 35,000 individuals in Mexico died at the hands of local drug gangs. So there is a moral as well as an economic case to be looked at. We need international co-operation. We cannot do this alone. The G8 took place in Lough Erne, where warm words and a forced solidarity of leaders gave some reassurance. However, the mild language in our report where we say that we

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are not yet clear how effective the proposed solutions can be or whether they are achievable within the timescale puts a question mark against the purpose of the G8 in ensuring that this issue is tackled.

I want to put forward a few proposals for what we need to do. First, we need to tackle the opacity of the international structures. They are giving companies an easy advantage in using differences in tax rates between jurisdictions to avoid paying tax legally. The International Financial Reporting Standards, which are overseen by the International Accounting Standards Board, need to be urgently reviewed. Presently the International Accounting Standards Board is an independent, non-governmental body comprised of representatives from the accountancy and tax professions, but it is not overseen or regulated by government. Given the state we are in, there has to be a role for government oversight of this issue. We have to look at how tax structuring is based in the IFRS and elsewhere. The Government need oversight of these accounting standards.

Secondly, we need also to ensure that we remove the lack of transparency of, lack of control over and lack of accountability in the basic tax system that we are now witnessing. Thirdly, in promoting transparency and more democratic accountability, we need a stronger culture. A public beneficial ownership registry is an important aspect of that. Both the Government and the EU have carried out cost-benefit analyses on it. The Government’s cost-benefit analysis produced a figure showing a saving of £30 million in police time alone, while the European Commission has said that the United Kingdom could save €420 million if this register was created. It would be the correct thing to do to have such a register so that we know who owns the companies and what benefits they bring. Apart from revealing savings and costs and being able to tackle money laundering and fraud, one of the key aspects of such a register would be transparency.

For example, in the recent horsemeat scandal, the key companies were set up by the same Cypriot professionals who helped the infamous arms dealer, Viktor Bout, to create his web of secretive companies. If such a register was established, it would provide business with important information about partners, suppliers, investors and customers, and it would ensure that the law enforcement and tax authorities, including those outwith the UK, would have quick and guaranteed access to information. That would be helpful to us all. At the G8 summit the Prime Minister promised,

“to push for more transparency on who owns companies”.

We need this public register. I know that this Thursday and Friday the Open Governance Partnership will hold its summit meeting, and I would like to think that the Government will take up this recommendation and ensure the establishment of a register.

I turn now to transfer pricing and the many ways companies find to shift profits between countries. As the noble Lord, Lord MacGregor, said, the Government’s response on this issue is inadequate. Stepping up the fight, as they say, misses the point. Our report shows that currently there are legal ways to avoid paying UK taxes that are owed because of the very many existing loopholes. We need to identify and close those loopholes.

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If I was asked to choose between name and shame or ensure transparency, I would ensure transparency on the basis that if we name and shame the “bad” acts, we will see that many of those acts are perfectly legal at this time. Transparency is the key here.