Energy
Statement
5.26 pm
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con): My Lords, with the leave of the House, I will now repeat a Statement made earlier in another place by my right honourable friend the Secretary of State for Energy and Climate Change. The Statement is as follows.
“Today I am laying before the House the annual energy statement, alongside the statutory security of supply report. This coalition Government are putting in place the most coherent, sustainable energy policy the United Kingdom has ever had, creating one of the most competitive and attractive electricity investment markets in the world, improving our energy security, boosting home-grown clean energy and providing jobs and economic growth in the process.
This ambitious energy and climate change policy is vital so that Britain can meet our significant challenges. The coalition Government inherited from the previous Administration an energy future with a huge, multibillion pound black hole at its heart, the result of years of underinvestment, dithering and delay, so this Government are having to take the tough decisions others have ducked to make sure Britain’s lights stay on. Everything we are doing has to ensure that we drive investment into the system, not scare it off or freeze it out. But as I will make clear in this Statement, energy security must go hand in hand with affordability.
So let me set out the robust plans we have to deliver affordable energy security. To deal with the problem of tightening electricity margins up to 2018, the Government have been working with the national grid and Ofgem
to develop existing safeguards to have more electricity available for the grid at peak times, including, if needed, the use of power plants currently mothballed. We are introducing to Britain a capacity market to ensure we attract the investment we need in new power stations. The first capacity market auction will take place next year for delivery from the winter of 2018.
In addition to these measures to keep the lights on, Britain now has a long-term strategy encapsulated in the Energy Bill. Over the summer we published draft strike prices for renewable electricity under contracts for difference. Detailed proposals for the implementation of electricity market reform were published this month. The fruits of bringing this greater predictability and certainty to investment are already showing. Latest estimates suggest that at least £35 billion has been invested in new electricity infrastructure since 2010, and much more is in the pipeline. In the past 12 months alone, we have provided consent for seven major energy infrastructure applications worth around £20 billion with the capacity to generate electricity to more than 6 million homes, including, of course, last week’s announcement that we have reached key commercial terms with EDF for the first new nuclear power station in a generation at Hinkley Point C.
And there is more. Through the Energy Bill’s final investment decision-enabling programme, 23 applications for 26 investment contracts are currently being evaluated by the Department of Energy and Climate Change for a broad range of renewable technologies, including offshore wind, onshore wind and biomass projects.
Even though British households pay some of the lowest prices for gas and electricity in Europe, such facts are scant comfort to those who have seen prices rise considerably over the past 10 years. The main driver of these energy price rises has been rising wholesale energy costs, not social and environmental policy. But apportioning blame is also scant comfort to people who are struggling to make ends meet. That is why we have been taking action to help people and businesses struggling with their energy bills.
We have already introduced some help that is immediate. Two million vulnerable households will get £135 off their energy bills this winter, thanks to the Government’s warm home discount. Around 12.5 million pensioners will get the winter fuel payment—£200 for the under-80s and £300 for those over 80. And of course there are cold weather payments if needed, which last year delivered over £146 million to help cut bills for the most vulnerable.
This year we have added to these policies with more direct action. Our new Big Energy Saving Network is training 500 volunteers to go out into communities to help people get better deals from energy suppliers and reduce their energy bills. These volunteers will be fully supported. We know how much people in communities across the country rely on the post office network, so we will be working with the Post Office to raise the profile of the Big Energy Saving Network so that it can make the links with the elderly, the vulnerable and other cost-conscious families trying to make their budgets go further.
We have also brought together in one place all the advice from across government—from DECC and DWP—and from charities such as Age Concern and Citizens Advice. Today, I am writing to all Members of this House with information about this new guide so that they can share it with their constituents to make sure they are getting all the help that they are entitled to.
But while such immediate help for consumers and companies is important, we need more permanent change if we are to keep bills down, not just for 20 months but for 20 years and beyond. The energy company obligation is delivering such permanent change by modernising our housing stock and making it cheaper to heat our homes. Some 230,000 low-income households will be warmer this winter thanks to energy efficiency measures installed through the ECO.
Energy efficiency remains a central part of our strategy both to help the fuel poor and to deliver permanent energy savings, but the permanent energy change we seek also needs more competitive markets. This, however, is not something that the party opposite understands, for the previous Government created the big six, and their irresponsible policies would help only the big six. In contrast, from day one, this coalition Government have been determined, with the stick of competition, to take on the big six for consumers. We have done a lot but, as I will set out, we need to do more.
Already our measures to deregulate have seen a major growth in the number and size of independent energy suppliers. In 2011 there was no independent supplier with a customer base greater than 50,000. Now we have three independents with more than 100,000 customers, and a further eight companies have entered the market since May 2010. We have delivered a doubling of the number of independent energy suppliers offering competition to Labour’s big six, and already hundreds of thousands of people are benefiting, but we are doing more. We are backing Ofgem’s reforms to help consumers get better deals—market reforms to make sure that customers are on the lowest tariffs for them, are moved off poor-value dead tariffs and no longer face the complex web of hundreds of tariffs designed more to confuse than to compete.
Our reforms are making sure that people are given clearer, more personalised information on their energy bills so that they can compare tariffs more easily and switch more easily to save money. We are promoting collective switching, particularly aiming to ensure that the more vulnerable get to benefit from the best deals on the market.
But today I am challenging the industry to deliver faster switching. If you can change your broadband provider with a few clicks of the mouse, why should you not be able to do the same with your gas or electricity? It should not take five weeks for the change to take effect; 24-hour switching is my ambition.
First Utility has been out in front with its target of reaching 24-hour switching. Now, E.ON, SSE, ScottishPower and a number of independent suppliers, including Good Energy, Ovo Energy and Co-operative Energy, have accepted my invitation for urgent talks over the next month on how we can dramatically speed up switching. I want five-week switching to
come down to one-week switching, and then I want to go faster still. Let us be clear that it will not happen overnight. We could announce 24-hour switching and then suppliers would say, “Okay, we will put our prices up to cover the cost”. That cannot and will not happen.
So I want to talk to suppliers who can agree and deliver a plan to speed up switching down to 24 hours, without increasing bills. Any company interested in making things easier for customers to switch, in addition to those that have already agreed, is invited to come and see me. Our preference is to do this jointly with suppliers, building on the good work of Energy UK, which has raised the ambition on this issue across the industry. But we are prepared to take action, if required, to compel those who drag their heels.
I have also written to energy companies about direct debits. I share concerns that they may be holding on to significant credit balances where customers have overpaid through direct debits. I expect all suppliers to make every effort to return money to customers with closed accounts. I accept that sometimes that will not be possible but, when it is not, my strong view is that credits should be directly applied to help the fuel poor and other vulnerable customers. My right honourable friend the Member for Bexhill and Battle will be meeting energy suppliers next week to discuss this question, and the question of the level of credit balances that energy companies are holding on to.
In our debates on energy bills, many have understandably been asking whether competition is working in our energy markets. While this coalition has already done a great deal to promote competition, we are ready to do more. As the Prime Minister announced last week, we now propose to introduce annual reviews of the state of competition in the energy markets. The first of these new competition assessments will be delivered by spring next year. The assessment will be undertaken by Ofgem, working closely with the Office of Fair Trading and the Competition and Markets Authority, when it comes into being.
The exact metrics for the review will be a matter for the regulators but I will be asking them to look in depth and across the energy sector at profits and prices, barriers to entry and consumer engagement. This Government have equipped the regulators with strong powers to deal with unjustified barriers to competition. If abuses are found, they must be addressed.
We also need to make sure that the energy suppliers are open and honest about the profits they are making, so I have also asked Ofgem to deliver—again, by spring next year—a full report on the transparency of the financial accounts of the energy companies and the ways this could be improved, building on the work already completed from accountancy firm BDO. Ofgem will be publishing its consultation on financial transparency this afternoon.
The public need to know that our reforms will have teeth—that companies that play outside the rules will be penalised and fined. With our Energy Bill, Ofgem now has powers to require energy companies to make compensation payments directly to consumers who have lost out. But today I want to go further. That is
why I intend to consult on the introduction of criminal sanctions for anyone found manipulating energy markets and harming the consumer interest.
So, ours is a record of action and delivery. As set out in the annual energy statement, the Government are acting to help those most in need to keep warm this winter and to make sure that everybody will get a better deal from the energy companies. We are acting to deal with Labour’s energy crunch, filling in its energy black hole with more cleaner, home-grown energy, bringing stability and certainty to drive investment. This is our strategy for affordable energy security—a strategy to power the country and protect the planet, and to help keep bills affordable. I commend this Statement to the House”.
5.40 pm
Baroness Worthington (Lab): My Lords, I am grateful to the Minister for repeating the annual energy Statement in this House. I have listened to the content carefully twice now, and I am disappointed to say the least.
There are many important questions about the future direction of our energy sector that this Government are simply failing to clarify. One of the biggest, which was referred to in the debate that we had on Monday, is the degree to which this Government are still committed to decarbonising our electricity sector, yet there was no mention of this in the Statement. The Prime Minister has indicated that he wants to roll back green support mechanisms, without stating which ones. This is bound to decrease investor confidence across the board and increase the cost of borrowing. Just this morning the Leader of the House in the other place wrongly said that it was only Labour that wanted a decarbonisation target and that had we won the vote on Monday, this would have added £125 to consumer bills. Has there been a change of policy? Are the Government no longer committed to setting a decarbonisation target? Are the first few clauses of the Energy Bill now redundant? If so, we need to be told. Will the Minister please confirm that the official estimate of the cost of adding the decarbonisation target is £20, not the £125 which is being repeatedly trotted out by government claims that that is what the target would add to bills.
The other reason why I was disappointed was that the Secretary of State appeared, quite wrongly, to be trying to blame the situation in the energy market today on the previous Labour Government. Let us be clear, under Labour, 26 gigawatts of new capacity was added to the grid—19 gigawatts of non-renewable capacity and seven of renewables. Since then we have seen a hiatus in investment, with reports that renewable energy investment has now halved under this Government. The Statement says that £20 billion-worth of new infrastructure projects have been consented, but does not list what they are. To consent a project is nowhere near the same as having one delivered, built and providing electricity to the grid. We know this because there are many gigawatts of consented gas stations sitting by with absolutely no movement towards bringing them on to the grid. Will the Minister state clearly how much capacity has been added under this Government—not what is proposed or under construction, but what has been added?
We support a few things in the Statement. The most important is the Secretary of State’s statement that the main driver of energy price rises has been wholesale energy costs, not social and environmental policy. We know that they contribute less than 10% of the increase in bills that we have seen in recent years, and that many of them are precisely the measures we need to insulate ourselves against higher prices in the future, and to help the poorest and most vulnerable in making their homes more energy efficient. I am delighted that he made that very clear statement, and I hope that that could be reiterated by government across the board.
Sadly, to return to things that disappointed me, clearly the weakest part of the Statement is the Secretary of State’s claim that he is standing up to the big six. That is very hard to believe. The Government have given everything to the big six that they have asked for. They wanted a rollback in green and social measures, so the Prime Minister says that that will happen. They wanted a review of competition, and the Secretary of State has said today that that is what he will do. We do not need any more reviews; there have been 17 investigations into energy market competition since 2001. What has the regulator been doing all these years? Why do we still not have a competitive market either in generation or retail? We do not need another review. What we need is another approach and another Government; we need to split the big six generation companies from the supply companies to open up that market forcing them to sell their product through an open and transparent market in which everyone can compete fairly; and we need a new regulator. This is what Labour is committed to and what it will deliver.
On security of supply to the UK energy system—of course, there has been another statement today on this issue—the Government are failing to face up to the fact that the greatest uncertainty in security of supply of electricity at the moment is what will happen to our coal-fired power stations. Twelve such stations remain on the system. Built in the 1960s, they are ageing relics and have twice the emissions of gas-fired stations; they are old and they are prone to break down. There is no indication in the Statement that the Government are interested in finding out what these stations intend to do. As long as we do not know what they will do, we cannot move forward with investment in new infrastructure. The longer the coal-fired stations stay on the system, the less there is a clear incentive for investors to bring old gas-fired stations back into the market and to invest in new gas capacity. This is the big question on security of supply but the Government do not have an answer. We need to seek clarity, and soon.
It is welcome that the Secretary of State will be introducing new measures to bring the cost of bills down—we all want to see wholesale prices coming down—but this Government have not got to grips with the scale or the nub of the problem. Labour has a clear plan—we have been crystal clear on what we will do—but the Government simply do not have an answer. They do not even have a consistent message across the department and across government as a whole. The Statement is sadly lacking, but that is not surprising given where the Secretary of State finds himself these days.
5.46 pm
Baroness Verma: My Lords, I have listened carefully to the noble Baroness. Of course, she would say what she has just said; it was the kind of speech that her colleague gave in the House of Commons.
We have laid out quite clearly in the Statement all the measures that we have taken. The noble Baroness has asked me a range of questions, to which I will try to respond in the time I am allowed, but she should be aware that continually saying that Labour will freeze energy prices will raise prices before and after any such action. These wonderful jingoistic statements do not mean very much. They might be populist but, at the end of the day, will they make a difference to the consumer? I doubt it very much.
It would be interesting to know whether the noble Baroness knows where her own leader’s electricity supply comes from because that particular company has already stated that energy freezes will cause hardship for investors and threaten the survival of some of the smaller independent generators. She should bear that in mind when talking about energy price freezes.
The noble Baroness asked whether we were still serious about decarbonisation. As I said in the debate on Monday, the Government are absolutely committed to meeting their decarbonisation targets. Legal requirements are in place in the Climate Change Act 2008 and we have commitments to our European partners. We have always stated that the best time to set a decarbonisation target would be in 2016 with the fifth carbon budget, taking advice from the Climate Change Committee. We must consider the whole economy and not only parts of it because we need to know what condition it will be in at that point. We also need to consider any action against the backdrop of what our partners in Europe and more globally are doing. We do not want to disadvantage ourselves competitively either.
The noble Baroness can rest assured that we are as committed as she is to decarbonising the energy sector, but we need to do so at a time when we know what the whole economy looks like, not in 2014 or earlier, when we will not have that analysis at our fingertips. This will take detailed work, and of course the noble Baroness is aware of that.
The noble Baroness asked about the rollback of our support for the green agenda. That is absolutely not the case. It is an important agenda for us all. We believe that we need a much cleaner, greener energy sector, so of course we are signed up to it. Within that, however, we have to recognise that a sensible Government can see what is working well, how it is working and how it is impacting on consumers, and are able to take stock of where the measures are.
The noble Baroness asked about investment. Since 2010, we have seen £35 billion-worth of investment, £20 billion of which has been made in the renewables sector. We have not put people off investing in Great Britain. It is wonderful to realise that people are very confident about coming to this great nation to invest, and we need to talk that up. I hope that the noble Baroness will join me in making sure that people go on wanting to come here and invest. This is a great place for investment and I would hate the conversation to lead to anything other than that.
The noble Baroness went on to point out that 17 investigations have been conducted since 2001. I would just like to remind the noble Baroness that her party was in government until 2010. If her party thinks that Ofgem is the toothless regulator it is making it out to be, why did it do not do something about it then? Why are the Opposition now planning on putting more costs on to the consumer by trying to develop a new regulator? What we want to do is ensure that the regulator we have in place, under new leadership, has the powers and the means to do the job it needs to do. That job is to go out there and make sure that the energy market is performing to the best of its ability for the consumer.
5.52 pm
Lord Jenkin of Roding (Con): My Lords, I thank my noble friend for what she has said, but might I press her a little further on the point with which she ended her reply to the noble Baroness, Lady Worthington? I refer to the question of the competition reviews. The Statement says that although much has already been done, the Government are ready to do more, and then goes into detail about annual reviews of the state of competition in the sector. If, as seems entirely possible, one of the results of a review is that the regulator, Ofgem, for example—I agree with my noble friend that we need to build on what is already in place and not try to create something entirely new—needs strengthened powers to make competition more effective, how might Ministers expect to deal with that? As the Secretary of State said in his Statement:
“If abuses are found, they must be addressed”.
Would it not be wise to take powers now in order to avoid having to introduce fresh primary legislation? Interestingly, EDF has come out in only the past few minutes to say that it would welcome a review, because that will help to restore trust in the system. If that is indeed likely to be the result, would it not be a good idea to act fairly quickly?
Baroness Verma: My noble friend is absolutely right. The purpose of the review is to enable the regulators, led by Ofgem, to see what needs to happen in order to strengthen competition. They should be able to look carefully at whether there is transparency or not and accountability or not. What we need to do is wait for the competition review to take place, conduct a consultation on the review, feed into the review and then comment on it. It would be wrong for the Government to comment at this moment in time. It is right to get the competition review under way by having all three regulators look at the position carefully. They have the expertise and they know what they are looking for. If they need extra powers, it is for the Government to ensure that we support them by ensuring that those extra powers are put in place.
Lord Teverson (LD): My Lords, with this kind of Statement, we get rather infected with the way of doing things and the mood of the House of Commons. I welcome the fact that the Statement concentrates on competition. We have to keep it absolutely focused there. Is there an easy answer to this and is anybody offering one? No, there is not, but we need to keep working at it. I have a particular question for the
Minister on that point, which I will ask in a minute, but first let me say that I welcome the security of supply report that came with this Statement. It is one of the clearest and most interesting documents that has come out of DECC for some time and includes things such as the electricity diversity diagram and report. I particularly welcome the move to make switching much easier and quicker; that is clearly important both for consumer power and for competition. I also particularly welcome the market manipulation pledges that have come from my right honourable friend the Secretary of State. We certainly expect that when it comes to other types of asset and other financial instruments, which is effectively what energy is nowadays, and we should have it now in this case.
My question was about the proportion of the wholesale supply that the Government intend should go through a market and be auctioned. Where is the government thinking on that? My own wish is that we start to expand the proportion of the market that has to go out there and is traded between the supply side and distribution to customers. One issue that came out in our consideration of the Energy Bill was the transparency of those actions. I know that that is a priority for the Government and would like to understand how that is moving forward.
My last point is about energy prices. We are told time and again that electricity prices very much rely on and follow wholesale gas prices, but we are questioning how much wholesale prices have gone up in reality over the past year. We are now engaged in greater questioning of the big six. Given that electricity generation is now dominated by much cheaper coal, can the Minister tell me where that extra margin from the cheaper fuel input has gone? It has certainly not gone to consumers. That is an area that the Minister would do well to pursue.
Baroness Verma: My noble friend is of course absolutely right. All the questions that he asks are poignant, as are the remarks that he made around switching and making sure that we have the security of supply that we require. As my noble friend is aware, in the short term we have measures in place. However, in the longer term we have to look at a range of measures and mechanisms. I know that my noble friend is very keen on demand-side reduction, which of course is part of that and another measure that we are seriously looking at piloting through the Energy Bill.
My noble friend also raised the issue of manipulation. The Secretary of State has said that we need to look at stronger measures. If we do not see action on greater transparency and accountability, we may have to look beyond just financial penalties at criminal sanctions. We are undertaking a range of measures. My noble friend is absolutely right that we are of course debating many of the questions that he has asked today in relation to the Energy Bill. There are further debates to be had and I hope that my noble friend will be reassured that we are undertaking very much the sort of action that he expects us to as a responsible Government.
Lord Horam (Con): I have a further question about the security of supply. Along with the noble Lord, Lord Teverson, I very much welcome the strength of
the Statement when it comes to security of supply. It is a very important issue, which people are concerned about. If there is any possibility of—to use the rather dramatic phrase—the lights being turned off, do I understand the Minister to be saying that mothballed capacity will be available and brought into action should that eventuality arise?
Baroness Verma: I reassure my noble friend that, yes, we have measures in place that will ensure that we have enough capacity to keep the lights on.
Lord Grade of Yarmouth (Con): I, too, thank my noble friend for repeating the Statement. It was comprehensive, intellectually rigorous and resistant of soundbites, which is to be welcomed. My question relates to the regulator. The question of consumers switching between utilities is not a new concept. In the telecoms sector, Ofcom was quick to address the question of switching from one mobile phone provider to another. Was it a failure of the regulator or of the statutory powers and remit of the regulator that meant that this question was not addressed earlier?
Baroness Verma: My Lords, it is a failure of energy companies ensuring that consumers have easy-to-understand information. That has been a big part of the problem, as well as the fact that we have not pushed enough to get energy companies to be more transparent and accountable. First Utility has been one of the first companies to come forward, with E.ON, Scottish Power and SSE, to say that it will be leading the charge to try to make switching quicker and easier. We are inviting more energy companies to come forward to join us. The Secretary of State has made it very clear: we want to talk with all energy companies and we are keen to see their consumers’ bills go down. It will become apparent that those energy companies that do not want to do this will end up losing customers to those suppliers that are at the front of the game.
High Speed Rail (Preparation) Bill
First Reading
6.02 pm
The Bill was brought from the Commons, endorsed as a money Bill, and read a first time.
Overseas Territories
Question for Short Debate
6.02 pm
To ask Her Majesty’s Government what plans they have to support economic diversification in the Overseas Territories.
Baroness Hooper (Con): My Lords, since our last debate on the theme of the overseas territories in 2011, there have been a number of significant developments, not least the Government’s White Paper, The Overseas Territories: Security, Success and Sustainability, on which wide consultations have taken place. This was
followed by the communiqué of the Overseas Territories Joint Ministerial Council meeting, issued in December last year, which committed the political leaders and representatives of the UK and overseas territories to,
“a modern relationship based on partnership and shared values”,
“the principle and right of self-determination”.
I welcome this approach and look forward to the outcome of this year’s joint ministerial council meeting, which is due, I believe, next month and which I understand will continue the dialogue on constitutional issues, the commitment to growth and jobs, the environment and the relationship of the overseas territories with other international organisations, especially the Commonwealth, among other things.
Today’s debate is intended to concentrate on economic developments but it cannot pass without a reference to the increasingly politically charged atmosphere affecting Gibraltar and the Falkland Islands. I was fortunate in being able to join colleagues from both Houses of Parliament and many Chief Ministers and representatives of the overseas territories—including one from the Pitcairn Islands, which, as your Lordships know, has a population of 52 people—for the celebration of Gibraltar’s National Day in September. It was the tercentenary of the signing of the Treaty of Utrecht and there had been increased tension and disruption from the Spanish authorities at the border all through the long, hot summer. But the National Day celebrations went with a swing and there was no doubting the will and determination of the people as well as the politicians of Gibraltar to remain British.
Gibraltar also hosted the pre-joint ministerial council meeting, hence the presence of the representatives of other overseas territories. Those meetings were well attended and fruitful.
The economy of Gibraltar as a financial centre is clearly booming, and tourism flourishes in spite of the border difficulties; sadly, the situation continues to deteriorate in that regard. I was particularly saddened to learn that only yesterday there was a serious incident when a Guardia Civil patrol boat had a slight collision with a royal naval supply ship in British territorial waters and guns were pointed at each other. Can my noble friend the Minister inform us of any steps that the Government may have taken about this incident? Could he also give us, in relation to Gibraltar, any information on the eagerly awaited report from the European Union inspectors who have looked at the border situation?
I turn to the Falkland Islands, where there is sadly no abatement in difficulties being raised by Argentina, exacerbated last year on the 30th anniversary of the Falklands War. Again, this does not appear to have affected the economic development of the islands, which flourishes. It is the Falkland Islands Government, almost exclusively, who, like the Gibraltar Government, devise their economic diversification strategy and implements it. Her Majesty’s Government are involved in certain areas, notably in negotiations with the European Union development aid budget on behalf of the overseas territories. The Falkland Islands will receive some £3.5 million over the next three years from that source. Can my noble friend give us any
further information about this and on the building of a new port facility in Stanley?
I believe that we can approach the general issue of economic development under three broad headings: diversification, tourism and financial services. On diversification, which is a common goal throughout the territories, a robust, long-term economic strategy needs to be worked out on a territory by territory basis. Some will need more help than others; each is a unique and different place. To give an example, Tristan da Cunha—which is heavily reliant on its one leading export, gourmet-quality lobster—needs to take advantage of new technology and upgrade its techniques, for example for buying and selling products online. Tristan is also looking to develop its tourism in line with its globally significant biodiversity and produce more high-quality, tourist-related products. Will the UK Government support this?
Another example that I can quote is that of Anguilla, where the economy is heavily reliant on tourism, which is currently suffering in the present economic climate. They have a small financial services sector, which is under challenge, and are seeking support for diversification in developing a fishing strategy, for example, to clear the waters to the north of the island of third-country, mainly Asian, trawlers, to enable local fishermen to fish and put a conservation policy in place. It must be said that Anguilla has particular constitutional issues that affect the relationship between the governor and the elected Government, which they claim is too complex and commercially based and not sufficiently clear to encourage sorely needed investment.
Both those examples, and the many others that I do not have time to quote, underline the need for a proactive rather than a reactive partnership plan between the United Kingdom and the relevant overseas territories. They also emphasise the importance of links in the field of education, training and skills, particularly at tertiary level, between UK institutions and the overseas territories. It is clearly important, not to say vital, for overseas territories to have well diversified economies, not only to enable them to become sustainable but to allow them to flourish with continually growing resilient economies and increasingly affluent societies. I look forward to my noble friend’s comments on this. In this respect, too, I welcome the fact that the Foreign Office will host a business forum for overseas territories during the week of the next joint ministerial conference specifically to introduce UK businesses to opportunities in the overseas territories.
To varying degrees, tourism affects all overseas territories. I have already made reference to some of them. The unique and isolated locations of many territories, treasure trove of biodiversity and improving communications all go to make tourism a high value source of income for those territories. Even Bermuda, now the largest of the overseas territories, acknowledges that tourism is its second-largest industry, providing 6% of its GDP. Perhaps the most exciting development, after years of campaigning, is the building of the airport on St Helena. This will have a huge impact, with journey times to the island reduced from five days at sea to five hours by plane. The UK Government’s involvement in the airport, as well as some ongoing DfID funding to infrastructure and capacity-building
initiatives to support the airport investment, is to be welcomed. I hope the Minister will be able to tell us that the UK Government intend to follow on from and build upon the large upfront investment they have made in the airport.
My third theme is financial services. I shall try to speak briefly on this as I know that others will major on the overseas territories active in this area. First, it is important to recognise that, for example in a territory such as Bermuda—which provides a global service centre in the insurance remittance, private equity and asset management fields, with the knock-on effect of 100,000 jobs in the UK—we are talking about activities with an important added value of expertise. However, the eyes of the world, especially through the prism of the OECD, are focusing very much on money-laundering and tax-washing—I think that is the expression now. It seems that blacklists can be issued on a unilateral basis, which can have an unfair impact. Nevertheless, the OECD estimated that developing countries lose three times as much money to tax havens as they receive annually in aid. It is therefore essential that our Government do all they can to ensure openness, transparency and high standards of probity. Can my noble friend comment on the signing up by overseas territories to the multilateral Convention on Mutual Administrative Assistance in Tax Matters? Could he also tell us whether the Prime Minister’s announcement this morning of the Government’s decision to create a new public register of the ownership of some 2.5 million companies applies equally to companies registered in the overseas territories?
In conclusion, in the nearly 30 years that I have been a Member of your Lordships’ House, I have had the privilege and pleasure of introducing a number of debates on issues affecting the 14 overseas territories and their dependencies. Today’s debate is the least well attended. I feel sure that it is a case of quality rather than quantity and I am most grateful to those who are participating in the debate. I have received apologies from some who know and take a great interest in various overseas territories but are not able to be here. It is a sad reflection on the present composition of your Lordships’ House that, although people complain that we now have too many Members and nowhere to sit, so few take an interest in the fascinating, diverse and tiny overseas territories.
6.14 pm
Lord Boateng (Lab): My Lords, this House and the overseas territories themselves owe the noble Baroness, Lady Hooper, a debt of gratitude for the fortitude and determination that she has displayed over the years in pursuit of their interests in this House and more widely.
I well recall as Chief Secretary being asked to reflect on the airport in St Helena. The noble Baroness’s name came up then, all that time ago. It is to this Government’s credit that they have gone ahead with that long overdue project. That addresses the central issue which we are asked to look at tonight about the diversification of the economies of our overseas territories. The need to diversify those economies to achieve the Government’s stated objective of successful and resilient economies in the overseas territories is clear. Without
diversification, there is no way that those small economies will withstand the shocks that they are bound to experience from time to time because of events in the global economy. At the moment, they are experiencing those shocks in tourism and the financial services industry.
Of course, success is a relative term. The financial services industries in the overseas territories have been, on one measure, a real success. They have, in some instances, developed interesting and significant markets—for instance in reinsurance and hedge funds. However, that success has come at a cost. I fear that the cost has all too often been paid by economies that are themselves struggling to develop.
It is not without significance, I submit, that the Africa Progress Panel—which is supported by the Department for International Development, our Government, as well as by the Governments of many emerging market economies in Africa—stated:
“The governance vacuum surrounding companies operating from offshore centres is undermining reform in Africa itself”,
“African governments and citizens … have no recourse to information about the operations of these companies”.
That is true, and why it is so important that the Government answer the Question asked by the noble Baroness, Lady Hooper, about their position on urging the overseas territories to sign up fully at the Joint Ministerial Council to the multilateral convention on mutual assistance for the administration of tax matters. No one wants the financial services sector to go down in the overseas territories. Without it, in a number of instances, they would be in serious difficulty, but that should not be at the expense of other developing economies and markets elsewhere in the world, particularly in developing markets and economies where the poorest of the poor can least afford the consequences of the failure to promote transparency, accountability and good governance in the financial services sectors. We await the Answer to that Question with interest.
Tourism, too, has suffered as a result of the recent global downturn. It is to one particular economy in one of our overseas territories, that of Anguilla, that I ask the Minister to address his mind and the activity of the Government. Anguilla is a small island whose dependence on tourism has come at a very high cost. According to the ECCB figures of September this year, there was negative growth in Anguilla for 2012—minus 2.61%—and, for 2013, growth is projected at 0.93%. Frankly, the margin of error there is such that the economy has effectively stalled.
The consequences of that in terms of unemployment and poverty on the island are real. It is now seeing growing levels of poverty, an increasing reliance on food banks, and one in 10 homes are without electricity. There is real human suffering in Anguilla and we have a responsibility to address it. The Government have said that where there is need, the overseas territories will have first call on DfID’s budget. We have not yet seen that materialise in fact, and we need to hear from the Minister what plans DfID has to step in to support Anguilla at this difficult time.
This is not one of those occasions when it will be open to DfID to say, “They do not meet our eligibility criteria”, because the fact of the matter is that they do. If we look at the criteria for overseas development assistance or at the OECD’s development assistance co-operation list, which defines the poorest countries in the world, Anguilla is among them. We need to hear what the Government propose to do to give some reality to the aspirations contained in the highly laudable White Paper of 2012.
There is a concern that Montserrat and Anguilla have somehow fallen into the twilight zone of policy that affects the Caribbean, so far as the operations of Her Majesty’s Government are concerned. Despite its middle-income status in some instances, the Caribbean generally has within it real instances of poverty. They are driving a situation in which there are fragile states exposed to the dangers and vagaries of international and domestic gangsterism, and in which women are forced to become mules for drug runners because of their own dire poverty. Yet because these pockets exist within “middle-income countries”, DfID is unable or unwilling to do anything. We need to revisit policy in relation to the Caribbean generally, but our focus this evening is on our overseas territories—those territories for which we are responsible. Surely, Montserrat and Anguilla are entitled to the benefit of DfID’s active engagement.
I know that DfID is supposed to be working in Montserrat in ways that promote private-public partnership responses to the needs of that island, which is all very interesting. There is a real opportunity to develop the volcano that was responsible for so much of the damage and harm done to Montserrat as a highly effective energy source. Yet despite DfID’s best endeavours, and despite what I am told is the express willingness of a number of private sector operators to become involved, there does not seem to have been any particular progress in attracting private sector engagement for Montserrat. We really need to see some action in this area.
Perhaps what we need to see is a greater degree of engagement on the part of Her Majesty’s Government with the ACP in Brussels, which has a brief in this area and which also has resources paid for by the British taxpayer. We should see what it can do to promote diversification across the piece, throughout our overseas territories. These territories are a responsibility that we have inherited. We should not see them as some sort of embarrassment or vestige of a colonial past that we no longer want to talk about. They are part and parcel of our history. We owe them a debt of gratitude for the role that they played strategically over many years in our island story. We owe them, too, a moral responsibility to deliver to them at this time of real need in so many of these territories.
6.25 pm
Lord Blencathra (Con): My Lords, I am pleased to declare an interest. I am the representative of the Cayman Islands Government in the United Kingdom, a remunerated post. I have never spoken or asked a question on behalf of Cayman in this House, and do not intend to do so today. Rather, I shall talk about all the British Overseas Territories.
I congratulate my noble friend on her speech. She has a notable track record of support for the territories and is a stalwart defender of them, as has been said by the noble Lord, Lord Boateng. However, that is my first point: why should we have to defend the territories? They are an incredible success story—and a great British success story, as the noble Lord, Lord Boateng, has just said.
Like your Lordships’ House, we would not invent them if we were starting from scratch today, but over hundreds of years they have worked and they still work today—even more so, I submit. They work because they are democracies with parliamentary assemblies based on the Westminster Parliament; because they have the rule of law and the security provided by the Crown; because they have the right to self-determination but have always voted to stay British; and because they are innovative and make the best of scarce resources. They are good for Britain because they, and the Crown dependencies closer by, put a lot more in than they take out.
Recently, I think I heard the Premier of Montserrat, which was completely devastated by the volcano in 1995, say, “If you’re served a lemon then you may as well make lemonade. And please tell the noble Lord, Lord Boateng, that we’ve drilled down the side of a volcano, got geothermal energy and are selling off some of the rich volcanic rock and ash that covered our capital to a depth of 12 metres”. That is innovation and diversification in action and, with the additional help that the noble Lord called for, they could do so much more.
This debate is about economic diversification, and the word “diverse” certainly applies to the overseas territories. Every single one is different. From Pitcairn—I can tell the House today that 4% of its population are visiting Parliament; that is, two of them—to the Falkland Islands, Anguilla, Bermuda and Tristan da Cunha, they are all small islands, except Gibraltar, which is almost an island, and, as has been said, each requires different solutions for economic growth.
Before I move on from the word “diverse”, I want to mention biodiversity. Some 90% of the biodiversity of the United Kingdom is not in the United Kingdom at all; it is in the British Overseas Territories. What native species do we have left in the UK that have not been lost? Soon we might have no red squirrels left, and even hedgehogs are becoming an endangered species. However, the overseas territories are packed with wildlife on land, in the air and in the sea. In the overseas territories we have some of the best marine parks in the world, and most of our coral reefs are still intact. Of course they are under pressure and too many species are on the red list, but at least we still have them and we have to ensure that we never lose any more.
Could the Minister please press his colleagues in the Foreign Office to look favourably on the Pitcairn bid to create the largest marine reserve in the world around the islands—836,000 square kilometres of pristine ocean? I understand that there is a concern that if we declare it we cannot enforce it, but they have suggestions for that in the excellent booklet that they have produced on the bid. We often cannot fully enforce our own
fishing grounds but that does not stop us declaring that they are our waters. We should do the same for Pitcairn.
It does not require mega-investment to diversify the economy of many of these territories. Ecotourism is a natural area for economic diversification, and that could work in nearly all the territories. Tristan da Cunha has made a breakthrough with its gourmet lobster and exports 40 tonnes per annum to the EU, having fought for years for the right to do so with that mere 40 tonnes. It is also hoping to go upmarket with its island-produced knitwear, and if it improved its harbour then a lot of diversification would automatically follow.
Now that the airport is under construction in St Helena, I am certain that, with the drive and ingenuity of the St Helenians, we will see diversification there, too, and a huge boost to sustainable tourism.
Of course, tourism would be boosted in most of the territories if they were not discriminated against in air passenger duty. It cannot be right that it is cheaper to fly to San Francisco than to Turks and Caicos or the British Virgin Islands. The territories are not asking for APD to be scrapped but for it to be rebanded simply to remove the grossly unfair advantage given to most of the United States, which is 2,000 miles further away.
As my noble friend said, the Government are to be congratulated on their robust defence of the Falkland Islands and Gibraltar. Oil companies continue to explore in the Falklands because they have the assurance that the UK will support the right of the islanders to self-determination. I welcome the similar support offered to Gibraltar. Of course, Gibraltar diversified into online gaming, but the Treasury did not like it. We live in a global online world, and if the Treasury stamps out online gaming in Gibraltar because it fears loss of revenue, it will pop up in another less well regulated and non-British jurisdiction, and the Treasury will still have lost the revenue.
We all know that one size does not fit all in policies for diversification in the overseas territories. However, at very little cost the British Government can assist, and I, too, congratulate the Foreign Office on the initiatives it is taking in encouraging the territories to collaborate with other government departments and county councils to learn best practice. The business event it is organising for the JMC is totally focused on economic diversification. It is a first, and even if it is only half successful, it will be far better than nothing and better than what went before.
The territories have their own laws in place on human rights, equality and diversity and proper procurement procedures et cetera, but I worry at times that the UK Government may foist too many regulatory burdens on them which may make them uncompetitive. I think Bermuda has the largest population with 65,000 people, Pitcairn has just 48 or 52 people—it is about there—and the average is about 23,000 people. We cannot keep territories of that size competitive if we overburden them with all the quangos and authorities that we have in a country of 55 million people.
It is on competitiveness that I wish to close my remarks. Some of the territories and Crown dependencies are top financial centres and are rated alongside the
Londons, Hong Kongs and New Yorks of this world. They contribute billions to the UK economy. The Michael Foot review, set up under the previous Government, showed conclusively that they did not cause the economic crisis of 2008. In July, Jersey published a report,
Jersey’s Value to Britain
, which showed that £1 in every £20 of money invested by foreign individuals and companies in assets located in Britain reaches the UK via Jersey, and each year Jersey banks send around £120 billion of their deposits to parent operations in the UK. The same goes for most of the other overseas territory and Crown dependency financial centres. A recent World Bank report—I think it was in April—showed that massive investment routed through the financial centres of the world is pouring into the eight African countries that have economies growing at more than 10%. British financial centres are putting money into developing infrastructure projects in the UK and emerging nations, not taking it out. Two days ago the Premier of Bermuda spoke at the Islamic finance conference and said that Bermuda would seek to diversify into Islamic banking. That is diversification of a kind, but still within the umbrella of international finance.
These financial centres cannot diversify into something totally different, and nor should they. I deplore the neo-colonial attitude of some activists who say that they should be closed down and get overseas aid instead. These territories are a source for good in the world, and I thank the Prime Minister for his robust declaration that they are no longer tax havens and that we should look at much larger nations which are not as well regulated as the territories. He is absolutely right. Professor Sharman’s report showed how easy it is to set up a shell company in some states of the USA, with no checks whatever. If the NSA is looking for sources of terrorist financing, it should spend less time looking into Angela Merkel’s and the Pope’s phone messages 5,000 miles away and look 50 miles down the road at 1209 Orange Street, Delaware, where a little two-storey block has more than 200,000 companies registered. No questions are asked and nobody knows who owns them.
The overseas territories are well regulated, as the Prime Minister has now acknowledged. We all support the principle of a global level playing field and therefore welcome the action being taken to secure this through the development of new international standards for automatic exchange of information that will have global application. Business is global and regulation must also be global and apply to all. If all territories and countries are treated equally under international regulation, as they must be, I am absolutely certain that the British Overseas Territories will still be the world-class jurisdictions of choice, and places of which we can all remain proud.
6.35 pm
Baroness Howells of St Davids (Lab): My Lords, I am grateful for the opportunity of speaking in the gap. I add my thanks to the noble Baroness, Lady Hooper, for initiating the debate. I have decided to concentrate on Anguilla, although it has been mentioned by every previous speaker.
Anguilla previously experienced strong growth during the period 2004-07. Its GDP stood at 12%. Now recession and the dreaded APD tax have hit the country. It relies heavily on its tourism sector. This has created a very worrying time for the island, with high unemployment, home foreclosures, and growing levels of poverty and business failures.
While it is accepted that there is the need to diversify—agriculture, fisheries, finance services and ICT are cited as possibilities—it takes a lot of time to diversify on tiny islands. Consequently, there is a need to invest in the facilities and infrastructure, which will improve access to Anguilla and enable the island to benefit more from tourism while diversification takes place.
We know that Anguilla is ready for overseas development assistance, according to the OECD’s co-operation list which defines the poorest countries in the world. However, DfID has not provided any development assistance to Anguilla for many years. In the 2012 White Paper, the coalition Government set out a vision to support all the overseas territories in order to make them flourish and be free from financial dependence. Overseas territories also have “the first call” on DfID’s budget.
Despite these facts, DfID does not provide any direct funding to Anguilla and does not have the machinery to re-evaluate the economic status of a territory once it decides that the territory should not get any support. This means that, despite six successive years of economic decline, DfID has been unwilling to entertain any conversations about re-evaluating Anguilla’s status for DfID support, despite the fact that Anguilla remains very much in need of help by official development assistance. The UK Government are committed to contributing 0.7% of their national income in aid, but it appears to be without regard for the overseas territories.
The Government of Anguilla are keen to diversify its economic base, but to do so at this time requires effective long-term thinking. While the economy remains in a negative state, it is difficult for the Government to focus human resources on this task. DfID has yet to offer effective assistance to facilitate that process. I ask the Minister to address these concerns and to give a reassurance as to what assistance will be afforded this small island, which is profoundly loyal to the British Government.
6.39 pm
Lord Brooke of Sutton Mandeville (Con): My Lords, with the leave of the House—I have also spoken to the spokesman for the Opposition—I have a very brief and indeed personal point to make in the gap, which relates to a single territory.
The island of St Helena is now awaiting the arrival of its airport and is hoping for tourists. Tourists like to see sights. St Helena has Georgian architecture; not always in the best of shape, but Georgian. Conservation is therefore important. For personal reasons I am interested in making a charitable financial contribution.
My personal reasons are that one of my forebears was governor, and a good one, between 1787 and 1801. Perhaps nepotistically, he brought out his nephew to be his secretary. The latter remained on the island in this capacity until 1834, publishing a book on the
island’s history in 1808. A second edition was published in 1822, which added two chapters—we Brookes are of few words—to cover the residence of Napoleon Bonaparte.
The years 1787 to 1834 spanned many Georgian years. Every time I have an opportunity, like a regular meeting of the St Helena All-Party Group, or an ad hoc one, when someone germane is either going to St Helena or returning, I ask for details of the way to help the conservation programme. Every time I am promised the details, but answer comes there none. The CPA even put me on a CPA visit to St Helena one summer which was then cancelled, but with a written promise to send me on a substitute visit in the new year. The new year came, the visit went, with no word to me, and a substitute sent in my place, but not from my party.
I intend it as a compliment to my noble friend who will shortly be at the Dispatch Box to ask him to absorb what seems a reasonably simple request and get someone to send me in writing the details I seek, preferably with a letterhead or e-mail address to which I can respond if necessary. If there are other territories beside St Helena which have the same needs, I shall be happy to support them too, perhaps with others following suit.
6.42 pm
Lord Bach (Lab): My Lords, I hope that the Minister listened carefully to what the noble Lord, Lord Brooke, has just argued. In many ways, of all the questions that he will be asked this evening, that is one that he must answer tonight.
I will also start by congratulating the noble Baroness, Lady Hooper, on securing this debate. It is an important and timely debate, with the forthcoming 2013 Joint Ministerial Council about to start. I agree with her that it is a shame that there are not more speakers. Perhaps one of the reasons is that this debate has commenced after 6 pm on a Thursday evening in the autumn/winter, on, of all nights, Halloween. I wonder whether that has been a factor in keeping noble Lords away.
I have had the pleasure of working very closely with the noble Baroness in a number of fields over a number of years, perhaps most significantly as joint officers of the British Council All-Party Group. If I need to, I declare an interest as chairman. The whole House admires and has long admired the noble Baroness’s unrivalled knowledge and expertise in the field of foreign affairs generally, as well as the overseas territories, and her practical skill in getting things done. She does not just talk, but acts as well.
I am delighted that the noble Lord, Lord Ahmad of Wimbledon, is to answer this debate. Many of us on these Benches—can I let him into this secret?—admire his performances at the Dispatch Box. I have certainly enjoyed our jousts on the subject of legal aid. However, I have to tell him that there will be little jousting between the Front Benches tonight. To use the words of the noble Baroness, Lady Hooper, in the previous debate that she instigated on the territories:
“This debate is not … political. Indeed, I think that it is probably the least contentious … of government policy”.—[Official Report, 10/3/11; col. 1797.]
I agree but that is not to say that the Opposition do not have questions they would like answered. We agree with the comment of the noble Lord, Lord Howell of Guildford, in that debate, namely:
“This is a complex and wide-ranging portfolio”.—[Official Report, 10/3/2011; col. 1796.]
We are united in our commitment to the principle of self-determination whether it concerns Gibraltar, the Falkland Islands or any of the other overseas territories. It is for the peoples of the territories to decide their own future.
The Government’s White Paper, published in June 2012, builds on work done by the previous Government. Noble Lords should not simply take that from me; that generous comment was made by the Minister, Mark Simmonds, who used that phrase in a debate in another place on 11 December 2012. The Labour Government’s 1999 White Paper strongly influenced their policy during their time in office and, I venture to suggest, influenced the present Government when they produced their own White Paper last year.
Mr Simmonds also said in another place:
“I see the focus of the UK Government in the year ahead as assisting the territories with their priorities, rather than what we think their priorities should be”.—[Official Report, Commons, 11/12/2012; col. 15WH.]
We agree with that sentiment, as we do with the words of the communiqué that was issued following last year’s Joint Ministerial Council. Part of that communiqué was read out by the noble Baroness, Lady Hooper, a few minutes ago. It states:
“We are committed to a modern relationship based on partnership and shared values. We share a commitment to the principle and right of self-determination. The people of each Territory have the right to choose whether or not their Territory should remain a British Overseas Territory. Any decision to sever the constitutional link between the UK and a Territory should be on the basis of the clear and constitutionally expressed wish of the people of the Territory”.
It has been obvious for a long time that some of the overseas territories are poorer than others. Not only are they situated around the world but their natural resources, histories and the forces that have moulded them are very different. The economic typhoon that has gone round the planet has affected the overseas territories, particularly those which are less well off. In our view the British Government have a duty to assist those territories that are feeling the effects of that economic typhoon most severely. I hope that the Minister agrees.
The subject of tonight’s debate—economic diversification in the overseas territories—may be key to gaining or recovering financial health. Many of the overseas territories are situated in beautiful and environmentally compelling parts of the world, and thus have built up and sustained a tourist industry that can be particularly vulnerable to downturns and recessions in larger, more industrialised, countries from where the tourists come. Sometimes tourism has taken the place of indigenous industries such as fishing or farming. When income from tourism falls, trouble may loom unless alternatives are found. Some of those alternatives have been mentioned in tonight’s excellent debate. Given that background, what is Her Majesty’s Government’s policy in terms of giving aid and assistance
to overseas territories that may require them? I believe that the answer to that question is at the heart of this debate.
Much has been said about Anguilla and I am not going to repeat it, but I ask the Minister to answer those questions about the role of the Department for International Development and say whether some help can be given to that country, which clearly needs it. Many of us have received representations over the past 24 hours and it is important that the Government come up with answers.
Air passenger duty was mentioned in particular by the noble Lord, Lord Blencathra, in his excellent speech. Will the Minister answer the question posed by the noble Lord? It is a crucial question and it looks on the face of it as if the operation of the system is unfair.
The issue of financial transparency is obviously important—one that the Government should take seriously, and I have no reason to believe that they do not. I ask the same question that my noble friend Lord Boateng asked: ahead of the Overseas Territories Joint Ministerial Council in London on 26 November. Will the Government ensure that as part of efforts towards economic diversification overseas territories take steps to ensure greater financial transparency? Specifically, will all overseas territories sign up to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters? That is an important question to which many outside this House would like an answer.
In conclusion, this has been an excellent debate. I very much welcome the fact that it has taken place and we all look forward to hearing what the Minister has to say.
6.51 pm
Lord Ahmad of Wimbledon (Con): My Lords, I join other noble Lords in congratulating and paying tribute to my noble friend Lady Hooper, who has—as I recently found out, I confess—done incredible work in this area. She continues to represent the case for the overseas territories with great passion and vigour. I pay tribute to her efforts in this regard. The noble Lord, Lord Bach, was kind in his opening remarks and perhaps I may reiterate the sentiment he expressed about quality over quantity in terms of participation.
Economic diversification in the overseas territories is an important area. I will take the opportunity also to comment on what the Government are doing to improve trade and investment opportunities, about which all noble Lords asked. Mention was made of when my noble friend Lord Howell of Guildford responded to a previous debate on this subject. I share his sentiments and comments. Certainly from the Dispatch Box he, too, demonstrated Her Majesty’s Government’s commitment to the overseas territories.
The Government set out our vision for the overseas territories in last year’s White Paper. My noble friend Lady Hooper referred to it in her introduction. The Prime Minister described them as,
“an integral part of Britain’s life and history”,
“We want to see our communities flourish in partnership, with strong and sustainable local economies”.
As the noble Lord, Lord Bach, said, as we progress on this issue, there is no difference in the sentiment, emotion and determination to protect and defend the territories’ sovereign integrity that we share across the Chamber and the political divide.
The territories are constitutionally separate from the United Kingdom and have their own Governments and laws. The elected Governments of the territories are responsible for developing their economies but, as we said in the White Paper last year, the UK Government will continue to work with the territories to help them in this area. We have made significant strides but recognise that there is more to do. As several noble Lords outlined, the territories have particular challenges, such as their geographical isolation, small communities—only 52 in one case, as we heard—and the fact that at times they face hostility from their nearest neighbours. They have a narrow economic base and limited natural resources, and few have a manufacturing industry.
Many territory economies are based on the twin pillars of financial services and tourism, both of which are vulnerable to shifts in the global economy. Territory leaders recognise the need for diversification, but their scope to do so is limited. The Falkland Islands, for example, are actively developing their natural resources for their economic benefit. Anguilla, which was mentioned by the noble Baroness, Lady Howells, and others, is looking to develop a sustainable fishing industry, which is to be welcomed.
Renewable energy—another source of diversification —is another area that some Caribbean territories, such as Montserrat, are taking forward. They have an abundance of natural energy sources that can reduce reliance on imported fuels, help create jobs and of course improve balance sheets.
I will set out for noble Lords the work that we have been doing across government to support the territories in order to help them to diversify their economies. At last year’s Overseas Territories Joint Ministerial Council, the Government and territory leaders agreed to work together to promote trade and investment between the territories and the United Kingdom; to support territories in overcoming obstacles to trading with third countries; to support the development of entrepreneurship and the growth of small business in the territories; and to organise a business forum in 2013 involving the territories.
In July this year, we gave instructions to our overseas missions to assist bona fide territory companies and territory government/business delegations in accessing overseas markets. FCO and UKTI staff will also give a range of assistance across three fronts: first, assisting territory delegations visiting their markets; secondly, assisting territory companies experiencing market access difficulties; and, thirdly, assisting territory Governments and trade promotion agencies wanting to establish a presence in a market. We have also introduced a light-touch buddy system so that territories can call on expert UKTI advice in their respective regions.
We work in different ways across the territories, but I will highlight some specific examples where they have received assistance from the Government. Last year, the FCO launched the jubilee fund to help develop the capacity of the public services across all the territories. The fund, which this financial year is worth approximately £500,000, has been used to support secondments of
territory officials to UK counterpart departments and agencies, as well as visits to territories by UK experts. This work assists the territories to reach high standards in governance, financial management and economic planning. Such standards allow the territories to present themselves as trustworthy and transparent partners in business, and excellent places in which to invest.
As several noble Lords have acknowledged, in 2011 the UK Government agreed to provide funding of more than £246 million to design, build and operate an airport on St Helena. I note the comments made by the noble Lord, Lord Boateng, and my noble friend Lady Hooper in this regard. I assure my noble friend Lord Brooke that I shall ask for a written response to him, enclosing both a name and an e-mail address to which he will be able to respond accordingly.
Earlier this year, the British Virgin Islands established an office in Hong Kong to help promote their financial services and tourism industry. They did so with the full support of the British consulate-general, who provided logistical help and identified the key players to ensure that the launch of the office was a success.
The Government support Montserrat in implementing its plan for sustainable economic development of the island. This includes exploiting geothermal power, improving telecommunications and upgrading transport links. We are also helping the Government of Montserrat implement reforms aimed at improving the environment for business. As the noble Lord, Lord Boateng, mentioned, diversification is an important part of the economy, and the Government are seeking to play their part.
Growth and jobs will be the focus of our discussions at this year’s Overseas Territories Joint Ministerial Council. Territory leaders will have the opportunity to discuss the issues with a number of high-level speakers from across government and industry. When it comes to issues of governance, Her Majesty’s Government are encouraging full participation, not just by the Foreign Office or DfID but by departments across the board.
In addition, we are facilitating a business event in the same week as the Joint Ministerial Council, which my noble friend Lady Hooper mentioned in her opening remarks. This will go further than a round-table discussion. We are working closely with the territories to ensure that they gain maximum benefit from it. We want them to showcase what they have to offer and to scope out the possibilities for the UK—territory, trade and investment.
I shall now turn to some of the questions asked, and if I am unable to answer all of them because of pressure of time, I will write to noble Lords. Gibraltar is close to my heart. The name Gibraltar in Arabic is Gibral Tariq, and means the mountain of Tariq, so I suppose I have a personal territorial claim. Gibraltar is the only overseas territory in the EU and European law applies to Gibraltar, with some exceptions. Our team in Brussels works closely with and on behalf of the Government of Gibraltar, alerting them to forthcoming EU measures, negotiating on their behalf, and ensuring that they are able to benefit from access to EU markets. I thank all noble Lords who raised the issue of sovereignty in both the Falklands and Gibraltar. Let me make Her Majesty’s position absolutely clear.
On the Falklands, the UK has no doubt about its sovereignty over the islands. The principle of self-determination underlines this. There can be no negotiation on sovereignty unless and until the islanders so wish. Our position on sovereignty in Gibraltar is also clear. The UK will never enter into arrangements under which the people of Gibraltar would pass under the sovereignty of another state. I assure my noble friend Lady Hooper that this will never happen against their freely and democratically expressed wishes. The relationship with the EU is also important for the other territories, and I am pleased to inform the House that only last week we reached the successful conclusion of the negotiations on the new overseas association decision.
I shall now turn to some of the questions asked, particularly in the area of financial services, which were raised by my noble friend Lady Hooper and the noble Lord, Lord Boateng. The noble Lord, Lord Bach, also raised several questions in this regard. The territories continue to meet their international standards. They have responded speedily to our G8 tax and transparency agenda, and the Prime Minister has commended the progress made by all overseas territories, as my noble friend Lord Blencathra acknowledged in his comments. Most have now had the multilateral convention on mutual administrative assistance on tax matters extended. They have all published action plans on beneficial ownership and agreed to play an active part in the new pilot initiative on multilateral automatic tax information exchange.
Turning to the incident which my noble friend mentioned in her opening remarks on Gibraltar, I will write to her in this respect with the full facts and, of course, place a copy in the Library.
As to the register of company beneficial ownership, we are strongly encouraging all territories to ensure that their consultations or assessment also include the question of whether the register of company beneficial ownership should be made public.
Some questions on taxation and Anguilla were raised by the noble Baroness, Lady Howell, and the noble Lord, Lord Boateng. I can assure them that I note and recognise the challenges that have been outlined. I, too, received a briefing from the Anguilla Government. I shall certainly be passing those comments back to my colleagues at the Foreign and Commonwealth Office. We are looking to support Anguilla through the promotion of public and private partnerships but I appreciate and fully understand the challenges it has gone through recently.
Turning to the comments of my noble friend Lord Blencathra on air passenger duty, for now I can say that no change is intended. However, again, his comments have been noted and I am sure will be shared. He also raised the issue of the gaming industry in Gibraltar. We believe that the Government’s reforms to the gambling tax will provide a fairer basis for competition between remote gambling supplied from the UK and that from overseas.
In conclusion, our relationship with the overseas territories is very strong. I am encouraged by, and welcome the warmth and support for, the Government’s position across the Chamber. We all recognise that the overseas territories are an important part of what
constitutes our relationship with them and our valued partners. As I have already said, all government departments are committed to supporting the territories in their area of expertise. Despite all the challenges that we have, we are encouraging them and we regard
them as partners; we are not there to interfere in areas of responsibility devolved to them. Our aim is simple: through the work that I have described, it is ultimately for them to be able to help themselves.