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Grand Committee

Monday, 17 November 2014.

Employment Rights Act 1996 (Application of Sections 75G and 75H to Adoptions from Overseas) Regulations 2014

Motion to Consider

3.30 pm

Moved by Baroness Neville-Rolfe

That the Grand Committee do consider the Employment Rights Act 1996 (Application of Sections 75G and 75H to Adoptions from Overseas) Regulations 2014.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con): My Lords, with the leave of the Committee, I shall address the six sets of regulations to be considered together.

On 10 November, my noble friend Lord Bourne led the debate on the legal framework that creates a new statutory right to shared parental leave and pay for eligible working parents. This new entitlement will apply to the parents of babies who are due to be born on or after 5 April 2015. It will also apply to parents who adopt on or after that date. To coincide with the introduction of shared parental leave and pay, the Government are changing the statutory adoption regime to give adopters an entitlement to adoption leave and pay that mirrors the arrangements currently enjoyed by birth parents. From 5 April 2015, adoption leave will become a day-one right and the adopter’s pay will be enhanced—that is, increased—in the first six weeks.

We are also making changes that will extend the entitlement to adoption leave and pay to new groups of working parents, including those who are having a baby with the help of a surrogate. This will be achieved through the regulations that we are considering today. So we will have a framework that would give a surrogate parent 90% of their salary in the first six weeks following the birth of their baby, and after that £138.18 a week for the remaining 33 weeks. These changes will give new groups access to the benefits and protections that other parents currently enjoy. This ensures that the law on adoption leave and pay keeps pace with modern family life and the arrangements that would-be parents are already making.

The regulations enable the intended parents in a surrogacy arrangement and those who are adopting a child from outside Great Britain to opt in to the new shared parental leave and pay system if they wish. The entitlement to shared parental leave and pay will arise where the adopter gives up some of their statutory adoption leave and pay to create shared parental leave for them or their partner to take.

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One of the key benefits of a shared parental leave system is that it allows the other person to start taking leave while the adopter is still absent from work on adoption leave. This will enable both parents to be at home together with the child—or children—or to take their leave at different times so that one of them is always at home with the child in the first year following adoption.

There are many benefits to shared parental leave and pay, including stronger links to the labour market for parents who intend to share the caring responsibility for their children. Shared parental leave and pay can be good for business as well, as individual employees who want to return to work—say, after six months—or to do a specific project can do so, allowing their partner to care for the child. They can return to shared parental leave when the project finishes.

Unsurprisingly, the Government are keen to enable as many working parents as possible, and their employers, to benefit from the new system. These regulations do this. They extend entitlement to shared parental leave and pay to parents who are adopting from overseas or who are eligible for and intend to apply for a parental order following a surrogacy arrangement. They also put in place the legal framework that will enable these groups of parents to use shared parental leave and pay in practice. They ensure that those who use the new system are not disadvantaged because they choose to exercise their statutory right to leave and pay. For example, an employer may not refuse a pay award or bonus to an employee, or overlook them for promotion, simply because they are taking shared parental leave.

The regulations provide greater flexibility and extend those protections currently accorded to employees who have had children to intended parents in surrogacy arrangements and to those adopting from overseas. They bring the legal framework up to date with the widening accessibility of advances in medical practice and they adapt to broader societal changes. I therefore commend the regulations to the Committee and beg to move.

Lord Young of Norwood Green (Lab): My Lords, I welcome the Minister’s introduction, but we should remind ourselves that, in government, Labour transformed rights for women and families to help the balance between earning a living and caring for a family. Over 13 years, Labour extended paid maternity leave to nine months and the right to take maternity leave up to 12 months. It gave new entitlements to paternity leave and pay to fathers. Indeed, it was also a Labour Government that introduced the right to request flexible working in 2009, which was extended to parents with children up to the age of 16. We introduced a right to request flexible working for people with caring responsibilities for disabled or elderly relatives and for parents with disabled children up to the age of 18. We ought to remind ourselves that it was David Cameron, now the Prime Minister, and the Conservatives, who voted against the introduction of paternity leave, the extension of maternity leave and the right to request flexible working. I welcome the conversion.

We support today’s regulations, which, as the noble Baroness rightly said, are an extension of what we debated last week. It is absolutely right that we take

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into account the variety of today’s familial arrangements. We support reform of the work-life balance for fairness. Shared parental leave for all families is a step towards levelling the playing field for fathers, which is to be welcomed.

However, we have to recognise that this is a cultural change in a way, both for parents and for employers. I would welcome some comment from the Minister about how we intend to review the introduction of these regulations. I think there was some discussion with the previous regulations about the estimated take-up, which has not been quite as good as we would have wished. Given that this is a cultural change, perhaps that is not surprising, so I would welcome the Minister, in her reply, giving us some indication of how the Government intend to ensure that employers are given advice. As I read through them, my brain started to ache a bit with the complexity of the various arrangements. I am sure that I will not be the only one; a number of employers out there will need to be advised and encouraged to ensure that these arrangements are adopted and have the effect that the Government wish them to have.

Baroness Neville-Rolfe: I thank the noble Lord for his comments. I was very pleased to hear about the record of success in this area, first under the previous Government. He mentioned cultural change, and I feel that there has been an acceleration of the effort to create a family-friendly culture under the coalition Government. As noble Lords can imagine, I am very keen, as a mother of four and the grandparent of a child of a working mother, on having very good family-flexible arrangements. The addition of these regulations relating to the important areas of overseas adoption and surrogacy is a great step forward.

The noble Lord asked about review of the regulations. The Government have committed to review the implementation of the regulations by 2018. We need time to allow them to bed in and for the cultural change that he mentioned to gather momentum.

The regulations that we have debated today give more working parents access to shared parental leave and pay. This is a very good thing, and I am delighted that the noble Lord is able to support them. I commend the statutory instruments to the Committee.

Lord Young of Norwood Green: What arrangements have we made for encouraging and advising employers and parents about the extent of the new arrangements?

Baroness Neville-Rolfe: I know that there is information available on GOV.UK, which is to be publicised through our communications campaign. We are engaging with stakeholders to promote and raise awareness of the new system. We are making material available to those stakeholders for them to use in appropriate formats with their existing customers and clients. From reading the Hansard report of the debate that the noble Lord had with my noble friend Lord Bourne, I notice that there were also comments about trying to engage some of the business bodies, such as the CBI. I have

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found, having tried to use some of the online material available on family-friendly rights of various kinds, that the websites do a very good job, and that does help. I hope that that meets the point that the noble Lord addressed.

Motion agreed.

Shared Parental Leave and Paternity and Adoption Leave (Adoptions from Overseas) Regulations 2014

Motion to Consider

3.41 pm

Moved by Baroness Neville-Rolfe

That the Grand Committee do consider the Shared Parental Leave and Paternity and Adoption Leave (Adoptions from Overseas) Regulations 2014.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments

Motion agreed.

Statutory Shared Parental Pay (Adoption from Overseas) Regulations 2014

Motion to Consider

3.41 pm

Moved by Baroness Neville-Rolfe

That the Grand Committee do consider the Statutory Shared Parental Pay (Adoption from Overseas) Regulations 2014.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments

Motion agreed.

Employment Rights Act 1996 (Application of Sections 75A, 75B, 75G, 75H, 80A and 80B to Parental Order Cases) Regulations 2014

Motion to Consider

3.42 pm

Moved by Baroness Neville-Rolfe

That the Grand Committee do consider the Employment Rights Act 1996 (Application of Sections 75A, 75B, 75G, 75H, 80A and 80B to Parental Order Cases) Regulations 2014.

Relevant Document: 9th Report from the Joint Committee on Statutory Instruments

Motion agreed.

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Paternity, Adoption and Shared Parental Leave (Parental Order Cases) Regulations 2014

Motion to Consider

3.42 pm

Moved by Baroness Neville-Rolfe

That the Grand Committee do consider the Paternity, Adoption and Shared Parental Leave (Parental Order Cases) Regulations 2014.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments

Motion agreed.

Statutory Shared Parental Pay (Parental Order Cases) Regulations 2014

Motion to Consider

3.43 pm

Moved by Baroness Neville-Rolfe

That the Grand Committee do consider the Statutory Shared Parental Pay (Parental Order Cases) Regulations 2014.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments

Motion agreed.

Social Security (Contributions) (Amendment No. 5) Regulations 2014

Motion to Consider

3.44 pm

Moved by Lord Newby

That the Grand Committee do consider the Social Security (Contributions) (Amendment No. 5) Regulations 2014.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments

Lord Newby (LD): My Lords, as both sets of regulations deal with national insurance contributions and arise from the changes made to the taxation and charging of national insurance consequent to changes made to the treatment of partnerships in the Finance Act 2014 and the National Insurance Contributions Act 2014, it seems sensible to debate them together. The Joint Committee on Statutory Instruments considered these regulations and has not raised any issues relating to them, and I can confirm that they are compatible with the European Convention on Human Rights.

I turn first to the Social Security (Contributions) (Amendment No. 5) Regulations. Section 13 of the National Insurance Act 2014 provides a power to make regulations to modify the way in which the liabilities of members of certain partnerships to class 4

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national insurance contributions are determined. That section addressed an issue arising under existing partnership rules whereby the immediate entitlement to partnership profit is restricted by the alternative investment fund managers directive. Under existing partnership rules, tax and national insurance contributions are charged on profits as they are earned rather than when they are received. An unfunded NICs charge can therefore arise on profits that are allocated to an individual partner of an alternative investment fund management partnership and which are then deferred in line with the regulatory requirements of the AIFMD. This is because the partner cannot access the profits in the year they arise. Following discussions with fund sector representatives and the Financial Conduct Authority, the Government have put in place a statutory mechanism to address this issue. These regulations remove the charge to class 4 NICs when the profits are allocated to an individual but access is restricted under AIFMD, and reinstate the charge when those profits are eventually vested in the individual. As a result, the individual will be liable to pay class 4 NICs only when they have unfettered access to the profit. To ensure consistent treatment between NICs and tax, these regulations mirror income tax legislation.

Turning now to the Social Security Contributions (Limited Liability Partnership) Regulations, Section 14 of the National Insurance Act 2014 provides an express power to regulate to treat some members of a limited liability partnership who meet certain conditions as employed earners for NICs. Similar provisions treating these members as employees for income tax purposes can be found in the Finance Act 2014. Previously, all members of an LLP were treated for tax and national insurance contributions as self-employed. They benefited from the tax and NICs rules for the self-employed and the LLP did not have to pay employer’s NICs.

The treatment of members of LLPs as being self-employed for tax and NICs was designed to replicate the position of traditional partnerships. However, LLPs have increasingly been used to disguise employment relationships and to avoid accounting for employment taxes and NICs. The new measures in these regulations and the Finance Act ensure that the original intent—that of treating members of a LLP the same as traditional partnerships—is not used to create a tax and NICs advantage. They create a level playing field for those who have not sought to misuse the rules for a tax and NICs advantage and those who have.

When certain conditions are met, a member of an LLP will be treated instead as an employee for the purposes of NICs. Broadly, that means that they will have employee NICs deducted from payments to them and the LLP will have to account for employer NICs and assume the other responsibilities arising from being the secondary contributor. The conditions were introduced by the Finance Act 2014, and are that the individual member of the LLP has little or no real economic interest or risk in the LLP, no significant influence over its affairs, and is largely rewarded by a fixed salary. During the course of the consultation in 2013 and 2014, HMRC became aware of proposals to create structures with corporate members to avoid the impact of the proposed changes. The proposals involved the individual establishing a personal service company

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or other intermediary and that intermediary becoming a member of the LLP in place of the individual. These regulations contain measures to counteract the artificial interposition of a company or other intermediary to avoid the impact of the legislation.

The regulations apply where the new tax provisions apply and an individual salaried member of an LLP is treated for income tax purposes as an employee of the LLP under a contract of service. For the purposes of NICs, the salaried member is treated as an employee and their income is treated as earnings, and the benefits in kind regime applies to them. As the salaried members are treated as employees for the purposes of employee NICs, the LLP is treated as an employer for NICs purposes and must account for employer NICs. The employer as secondary contributor is also responsible for statutory sick pay, statutory maternity pay, statutory paternity pay and statutory adoption pay. These regulations provide that the LLP will be responsible for these statutory payments in respect of salaried members.

As I have mentioned, HMRC became aware of schemes to avoid the impact of the Government’s partnership proposals. The tax legislation to prevent such avoidance provides that where an individual provides services to the LLP through an arrangement involving a member of the LLP who is not an individual—generally a personal service company—the individual providing the services is then treated as a salaried member. So an individual cannot sidestep the impact of these measures by interposing a company or other intermediary between themselves and the LLP. These regulations ensure that where the tax anti-avoidance measure is in play, the like NICs consequences will follow.

To avoid a double charge arising where the anti-avoidance measure applies and the intermediaries legislation, commonly known as IR35, also applies, the regulations in respect of IR35 are modified so that only one charge under these regulations can occur. To ensure consistent treatment for NICs and income tax, these regulations mirror the tax legislation, relying on mirroring definitions. These provisions are part of a package of tax and NICs measures that will yield £3.2 billion over the period to April 2019. The regulations contain mirror provisions applying to Great Britain and to Northern Ireland.

I commend the statutory instruments to the Committee.

Lord McKenzie of Luton (Lab): My Lords, I thank the Minister for introducing these regulations. I am reverting to dealing with Treasury matters today because my noble friend Lord Tunnicliffe is in the Chamber.

As the Minister explained, these regulations spring from a review of the taxation liabilities of partnerships, and elements of avoidance related to the conversion of employment income into self-employment income, particularly regarding mixed partnerships, with individuals and corporates, and the allocation of profits and gains on a favourable basis. I should make it clear that we support the tackling of such avoidance; it is absolutely right that we do so.

The Explanatory Memorandum to the second set of regulations made reference to estimated,

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“tax and NICs revenue of £3.27 billion over the forecast period to 2018-19”.

In the light of tax receipts to date, will the Minister comment on how robust that figure is and whether there is a revision on the cards? Unless he can respond, we may have to wait for the OBR report in a few weeks’ time.

As I said, we support the principle of those with disguised self-employment income being treated as employees for both income tax and national insurance purposes. Can the Minister say a little more to clarify the precise circumstances under which these provisions will apply? I looked at the summary of responses in HMRC’s document, Partnerships: A Review of Two Aspects of the Tax Rules. Pages 11 and 12 set out the Government’s proposals for when the rules would apply, and state:

“Where all of new conditions A to C (as set out below) are met, then with effect from 6 April 2014”—

I note that these measures are retrospective, and we support that—

“an individual member of an LLP will be treated as an employee of the LLP for tax and NICs purposes”.

Condition A then states that,

“the member is to perform the services for the LLP in his or her capacity as a member, and is expected to be wholly or substantially wholly rewarded through a ‘disguised salary’ that is fixed or, if varied, varied without reference to the profits or losses of the LLP”.

That is one of the three tests, and I understand that all three must be satisfied. If that is one of the planks that the Government are moving forward on, it would not be too difficult to circumvent and seems somewhat flimsy.

Condition B in the Government’s response is that,

“the member does not have significant influence over the affairs of the partnership”.

I wonder about the extent to which that condition reflects what happens in lots of partnerships at the moment. I remember being, in a former life, a partner in Price Waterhouse, but as a new equity partner, with another 120 partners at the same time, frankly one’s influence over the business was quite small. A lot of these partnerships have grown much broader in the intervening years. I would have thought it quite likely that someone who is a genuine equity partner does not have significant influence over the affairs of the partnership. Collectively, equity partners do, but individually they do not. Perhaps the Minister will help us with that.

Will he also say something about the territorial aspects? The regulations refer to partnerships that are constituted under UK law and, clearly, that are operational in the UK. What happens to partnerships that are constituted under the rules of a territory outside the UK?

Do any other consequences flow from treating income as employment income? The Minister referred to statutory payments, but there are issues around employment rights and health and safety. For example, there are some changes in legislation that are looking to exempt a huge swathe of the self-employed from the Health

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and Safety at Work etc. Act. Would that continue to apply to people who purport to be self-employed, notwithstanding that they are being treated as employed for the purposes of tax and national insurance contributions?

I move briefly to the regulations that relate to the AIFM arrangements. As the Minister explained, these apply to class 4 self-employed contributions. What is the situation of somebody who is treated as an employed person under the other regulations? How does this work for such people? That is very unclear. The regulations seem to focus just on class 4, which presumably applies only to those who have deferred income arising and are accepted as being genuinely self-employed, and not to this other category, which we are seeking to address in the other regulations. I must say, I am a little confused about how that works.

Paragraph 4.4 of the Explanatory Memorandum refers to class 4 contributions applying when profits,

“vest in the individual partner, if that partner is carrying on the AIFM trade at the time of the vesting”.

What if the individual is not carrying on the trade at the point of vesting? I am not sure technically how that would work, but clearly the Explanatory Memorandum recognises that it is a possibility. When does class 4 bite in those circumstances?

I should be grateful for the Minister’s help on those points, in follow-up if not here today. Clearly, we have no problem with these regulations and we support the thrust of the anti-avoidance provisions that they seek to address.

Lord Newby: I am most grateful to the noble Lord for his support for these SIs and for his questions. On his first question about the revenue of £3.2 billion, the formal answer is, of course, that as this has just started and is looking at the period to 2018-19, it is far too early to tell. To the extent that there has been any weakness in income tax receipts, it is due to shortfalls in income from people at the lower end of the income spectrum. These people are definitely not there. Given that the sector we are talking about is doing pretty well at the minute, there is certainly no reason to think that that figure is unlikely to be met.

The noble Lord asked about the territoriality of the measure. My understanding is that it applies to UK-constituted partnerships only. He asked about the conditions, of which there are three. Condition A is that reward is largely fixed. The use of “largely” simply allows for small variations to take place but for an individual still to fall within that condition. As regards exactly what is meant by the second condition, HMRC has issued detailed guidance, which was written following extensive consultation and discussion with the sector.

I am sure that I have not responded to one or two points and I am very grateful to the noble Lord for being willing to accept a letter dealing with those remaining points. With those responses to the noble Lord’s comments, I commend the regulations to the Committee.

Motion agreed.

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Social Security Contributions (Limited Liability Partnership) Regulations 2014

Motion to Consider

4.01 pm

Moved by Lord Newby

That the Grand Committee do consider the Social Security Contributions (Limited Liability Partnership) Regulations 2014.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments

Motion agreed.

Broadcasting (Independent Productions) (Amendment) Order 2014

Motion to Consider

4.02 pm

Moved by Lord Gardiner of Kimble

That the Grand Committee do consider the Broadcasting (Independent Productions) (Amendment) Order 2014.

Relevant document: 8th Report from the Joint Committee on Statutory Instruments

Lord Gardiner of Kimble (Con): My Lords, the order aims to ensure that the definition of independent producer for the purposes of commissioning television programmes excludes only those production companies that are UK-broadcaster owned from being considered “independent”. The order does not extend the definition of qualified independent producers to producers owned by UK broadcasters that do not qualify at present. The order merely seeks to reaffirm what has been the agreed policy over the last 10 years, which is that a producer which is owned by a non-UK broadcaster, or is part of the same group of companies as a non-UK broadcaster, should not be prevented from being classified as an independent producer if they meet the qualifying criteria.

The Communications Act 2003 requires the public service broadcasters—the BBC, the Channel 3 companies, Channel 4, Channel 5 and S4C—to ensure that in each year not less than 25% of the total amount of time they allocate to the broadcasting of qualifying programmes is allocated to the broadcasting of a range and diversity of independent productions. The Communications Act 2003 also applies a similar “10% independent productions” requirement to all digital service broadcasters that are not public service broadcasters. The aim of the independent productions quota is threefold: to promote cultural diversity and to open up the production system to new energies and voices; to stimulate the growth of small and medium-sized enterprises, promoting creativity and fostering new talent; and to tackle vertical integration within the UK programme supply market. It is widely considered that the independent productions quota has been working

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well over a number of years, providing competition and a stimulus to originality that has benefited programme supply in the UK.

However, a few issues with the legislation as currently drafted have been identified and the amendments made through this order are designed to deal with them. Perhaps I may explain a little more. The Communications Act requires that the terms “independent productions” and “qualifying programmes” are defined by order. Article 3(4) of the Broadcasting (Independent Productions) Order 1991 defines an independent producer as a producer who is not employed by a broadcaster, who does not have a shareholding greater than 25% in a broadcaster, and in which any one UK broadcaster has a shareholding greater than 25% or any two or more UK broadcasters have an aggregate shareholding greater than 50%. This definition must also be read in accordance with Article 3(5) of the order, which stipulates that “any person connected” to a producer—that is, in the same ownership chain—must also not be employed by a broadcaster, own more than 25% of a broadcaster, or be more than 25%-owned by one UK broadcaster for the producer to be considered as independent. The meaning of the terms was first specified in the 1991 order, which was subsequently amended in 1995 and in 2003. It is the last of those amendments, to the 2003 order, which failed to reflect fully the policy in relation to ownership of a UK production company that Parliament agreed to. That policy was, in essence, to allow a producer to be treated as an independent producer even if it was owned by a foreign broadcaster so long as the foreign broadcaster’s services did not target the UK.

So, while the 2003 amendment amended certain elements of the definition of independent producers, including introducing the qualification that ownership of the producer by a UK broadcaster was a disqualification, it did not amend Article 3(5) in relation to “any person connected” to that broadcaster or producer. This means that if a person connected to the producer fails any of the tests in Article 3(4) which define “independent producers”, the producer cannot be considered “independent”. That connected person could be, for example, part of a group of companies which include not only a UK broadcaster but any broadcaster anywhere in the world. The net result is that the current definition still excludes some producers that the Government and, crucially, the industry itself believed were within the definition. Ofcom has told us that these production companies include such high-profile ones as Zodiak Media, the maker of programmes such as “Wallander” and “Being Human” for the BBC, and FremantleMedia, which produces the likes of “Take Me Out” and “Through the Keyhole” for ITV. Both companies are owned by broadcasters that predominately operate in other parts of the world. So although a public service broadcaster could commission programmes from these producers according to the strict letter of the legislation as it currently stands, that public service broadcaster could not count those programmes towards its 25% independent productions quota.

It is essential that we clarify this anomaly for broadcasters and producers, as well as for Ofcom, whose regulatory role is to ensure that broadcasters

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comply with the independent production quota set out in their licences. This order rectifies the situation by redefining the term “broadcaster” to ensure that it refers only to UK broadcasters or broadcasters whose transmissions are primarily aimed at the UK consistently in Article 3. The amendments preserve independent status for producers who are connected to a person who owns or is owned by a broadcaster that does not aim its services primarily at the UK. The order does this by removing the references to “producer” in Article 3(5) so that only the producer has to meet the tests—not the producer and any person connected with the producer. Any producer owned by a UK broadcaster will still be excluded from the definition of an independent producer, continuing to prevent vertical integration in the UK supply market. Whoever holds the licence for a public service broadcaster, whether it is a British or foreign company, has to comply with the public service obligation set out in the broadcasting licence. These obligations are enshrined in legislation and include quotas for UK-originated content and content made in the regions and nations of the UK.

These changes are being made with the support of the industry. The DCMS wrote to all broadcasters last summer to notify them of our intention to correct the legislation. We received no comments opposing the move and, just prior to laying the order before your Lordships’ House, we gave broadcasters the opportunity to comment on the draft. I can confirm that all were supportive of the changes being made. We also worked with Ofcom and PACT, the member body for the UK independent production sector, on this order to ensure that it is fit for purpose. To date, the industry has been applying the definition set out in the policy rather than what is contained in the legislation. These amendments will ensure the policy intent and the legislation are fully aligned.

This is an important clarification for the industry—the public service broadcasters and all other commercial digital channel operators in the UK that rely on the definition to identify whom they commission from to fulfil their quotas for independent production—and will enable Ofcom to undertake its regulatory duties more effectively. This legislation is therefore needed and proportionate, and I commend the order to the Committee.

Lord Clement-Jones (LD): My Lords, I thank the Minister for a very clear exposition. I very much agree that the connected person issue needed to be addressed, and has been very adequately addressed in the order.

However, this is an opportunity to make a slight diversion in terms of independent production. I noticed that the Minister went back to the original 1990 Broadcasting Act and talked about the three limbs and the reasons for the independent production quotas that were set out in that Act: promoting cultural diversity; stimulating the growth of small and medium-sized enterprises; and tackling vertical integration. It is worth while reminding ourselves of those. I noticed that when the committee met in the Commons, everybody vied to talk about their favourite programme and which independent production companies made “The Great British Bake Off”, “Sherlock”, “Rev.” and the like.

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However, the fact is that independent does not necessarily mean small—some of these independent companies are very large and it is a very contestable market out there between some of the independent production companies. In that context, it is very interesting that the noble Lord, Lord Hall, in a speech in July, talked about opening up the BBC further to independent production. That then leads on to the BBC charter review and the review by Ofcom of PSB, which I think will be complete next year. PACT has some very interesting ideas about how the BBC might, in its words, become much more of a “publisher broadcaster” over time. All these are very interesting ideas that do not flow directly from this order but certainly form part of a general thinking—a rethinking, if you like—about the role of independent producers.

Since 1990, we have had a particular regime. Is it time, now we have such a robust independent production sector, to move further? Should we be encouraging the BBC—not only with the actions of the noble Lord, Lord Hall, but through the charter review—to engage more in independent commissioning? I notice that the noble Lord, Lord Hall, has plans effectively to make the BBC’s in-house production part of a market in which it will be competing, in a sense, against the independent producers. Again, that is a very interesting idea, and it is very forward-thinking of him. I assume it is to make sure that that production is seen as being as efficient as it can be and is not characterised as bloated or whatever, as it has been in the past by certain commentators. That sounds a very defensible action. It will be interesting to hear the Minister’s comments on whether DCMS was thinking in that direction and on what thoughts it had on the subject generally. I support the order.

4.15 pm

Lord Stevenson of Balmacara (Lab): My Lords, I, too, support the order which at its heart is simply a correction of an earlier infelicitous piece of drafting. Although it has taken a very long time to come through, it is an important step in the right way. Having said that, I slightly wonder why, given that we have been waiting for this, in some senses, since 1990, the Minister feels that it is necessary for it to come into force on the day on which it is made, which I presume will be tomorrow, rather than on one of the common commencement dates, 1 October or 6 April, for the good reason that that would give the industry time to plan and to think through the issues. The Minister will be aware that I have spoken about this in respect of other draft orders laid before Parliament. It is important that if the Government are going to depart from common commencement dates, they should have a very good reason for doing so. Advice to officials is quite clear on that. Certain steps have to be taken, certain requirements have to be met and approvals have to be sought from a central committee, and I do not think that that has happened in this case.

Like the noble Lord, Lord Clement-Jones, I was struck by the way in which the Explanatory Memorandum and the Minister’s introduction to the order—which he did very well—centre around the original three limbs of cultural diversity, the growth of small and

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medium-sized businesses and tackling vertical integration. It is interesting that the argument used throughout the Explanatory Memorandum veers towards the last of those, rather than the first two, in trying to come up with answers for why this regulation is in place at all, let alone why it needs to be corrected. My point on this is slightly different from that of the noble Lord, Lord Clement-Jones. It is that although they are admirable in every way as aspirations for a system, they are, as he said, possibly a bit otiose in terms of what we now see when we look out to that area, not that we should not be constantly on our guard to make sure that there is a vibrant independent production sector. Will the Minister tell us when it is intended to have a look at them? Are they still the main drivers for these regulatory structures? If they are, and the Government are happy with them, when were they last reviewed? If it was not reasonably recently, when might they be reviewed? I say this in particular because the Government announced in the Secretary of State’s speech to the RTS conference in September 2014 that they were going to redo this order, although information had been circulating for some time about the need for it, particularly Ofcom’s letter of the previous December. In stressing that the Government have been clear that the order before us today does not reflect an intention to amend the rationale for the intervention that has been made, nor to amend the qualification criteria—in other words, the three limbs we were talking about earlier—the Secretary of State left an impression that some form of review was taking place on this. He went on to say that the Government will consider these issues,

“once Ofcom has published its PSB review next summer”.

What will be included in that review announced by the Secretary of State? It is just the three limbs, as previously talked about, or it is some other variation on this matter? I would be grateful for any clarification the Minister can give on that.

Finally, the wording we are faced with in this order, although absolutely correct in terms of the original drafting in 1990 and 2003, speaks to a form of distribution of television that is changing rather fast. While we probably still have independent producers and, to some extent, broadcasters, the consumption patterns of programmes no longer fit the standard definitions that were once the very bedrock on which these regulatory structures were put up. If, as my children do, people consume television entirely through an internet connection on iPads and even iPods and do not subscribe to the idea of having a regulated channel system, whereby broadcasters take programmes and send them round to people to receive through aerials and satellite dishes into their homes, what will it mean in terms of these definitions? I understand that the point here is to catch up with how the industry has defined itself over the past 10 years—that is a good thing—but I wonder whether the order is future-proofed in any way. Perhaps the Minister could reflect on that because, although there is no immediate need for a change here, I signal the fact that this set of definitions will not survive for very much longer.

Lord Gardiner of Kimble: My Lords, I thank your Lordships for their comments. As my noble friend Lord Clement-Jones has said, we are going through a

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time when the general landscape is being considered and reviewed. Obviously, the comments of PACT and the recent observations by the noble Lord, Lord Hall of Birkenhead, also mean that this whole area is under considerable scrutiny and consideration. My own view is that this is about the quality and the ability of the productions.

The noble Lord, Lord Stevenson, referred to the three limbs. Looking at them again, I think that they are still as relevant, and some of these principles may remain relevant for a very long period of time, because the promotion of small and medium-sized enterprises, diversity and a whole range of issues are important. Certainly, the whole reason why we all wish to review, now or in the future, is because we wish to ensure that we have a vibrant sector. In British television, compared with many other parts of the world, we have not only a vibrant but in many respects high-quality sector.

I will look at Hansard and, if there are some points of timing on which I can help the noble Lord, Lord Stevenson, I shall write further. As for the changes in the market and terms of trade between indies and broadcasters, that is clearly an issue that has provoked much recent debate among public service broadcasters. The terms of trade have been a key reason why the UK independent sector is such a success story both here and abroad. Of course, this Government want to see that sector grow from strength to strength. The time to consider whether any policy changes are required to ensure that that success can continue and be built on further is after Ofcom has published its PSB review next summer, given that the independent production sector is a key theme of the review.

On the question asked by the noble Lord, Lord Stevenson, about why we cannot have a common commencement date, if any apologies are due, I of course give them. However, I understand that Ofcom set guidance for this year’s quota of reporting requirements in October, and the legislation had to be updated to confirm that guidance as soon as possible. As I say, if any further apology is due, I give it now.

It has been very helpful to discuss these points, and I shall want to reflect and speak to colleagues about timings of any further work. In the mean time, I commend the order to your Lordships.

Motion agreed.

Legislative Reform (Entertainment Licensing) Order 2014

Motion to Consider

4.24 pm

Moved by Lord Gardiner of Kimble

That the Grand Committee do consider the Legislative Reform (Entertainment Licensing) Order 2014.

Relevant document: 6th Report from the Regulatory Reform Committee

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Lord Gardiner of Kimble (Con): My Lords, in 2011 the Government launched a consultation that examined the regulatory regime for entertainment licensing under the Licensing Act 2003 with the aim of removing any regulation which unnecessarily restricts creativity, community expression and economic growth. This has been and is being taken forward in three phases.

On 3 June last year, your Lordships considered and approved the first of three phases of reform of regulated entertainment. That phase related to performances of plays, dance and indoor sporting events. The second phase is a clause in the Deregulation Bill before your Lordships’ House and seeks to deregulate the exhibition of film in community premises, about which the noble Lord, Lord Stevenson of Balmacara, and I had an interesting exchange last week.

The order today is the third element of the reform package. The Government launched a consultation on the details of individual measures on 22 October last year. The intention of the order is to reduce the burden of licensing on entertainment organisers through the introduction of a range of targeted licensing exemptions for lower risk entertainment activities that are subject to the satisfaction of important conditions. These exemptions take into account the four licensing objectives: the prevention of crime and disorder; the prevention of public nuisance; public safety; and the protection of children from harm.

The order removes the need for licences between 8 am and 11 pm for many public entertainment performances in lower risk circumstances. The order brings common sense to the licensing framework. Where an entertainment activity is organised by a local authority on its own premises, that local authority will no longer have to grant a licence to itself. The order will make it less bureaucratic for parent-teacher associations to stage entertainment in support of schools. A healthcare provider can organise entertainment on its own hospital premises without needing prior authorisation. The order will enable greater numbers of businesses and performers to benefit from the conditional deregulation of live music entertainment in alcohol-licensed premises and workplaces. It will do this by increasing the audience size limit to 500 people. The order will remove the licensing burden on music entertainment in village halls and other community premises that are not licensed for the supply of alcohol on the premises. The order will also put travelling circus entertainment on a clearer statutory footing, assisting both licensing authorities and circus operators.

As long as an activity meets the criteria for an exemption, organisers will no longer have to incur the administrative, and sometimes financial, cost of acquiring a licence authorisation. For instance, PTA UK estimates that this order will probably save £0.25 million a year, which can be ploughed back into activities and support schools. Overall, this order will probably save organisers about £1 million a year, which is a useful financial advantage and, more particularly, will be of great assistance in reducing administrative burdens. Where the criteria for an activity are not met, for example where live music is performed until the early hours of the morning, a licence will still be required.

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The order also extends the licence review mechanism to include recorded music in alcohol-licensed pubs and clubs. That is an important safeguard for local residents. Anyone with legitimate grounds can ask their licensing authority to review the alcohol licence on the grounds of noise from performances of live or recorded music. Conditions can then be imposed or reimposed on the music performances where necessary to protect the licensing objectives.

4.30 pm

Organisers of entertainment events will also continue to be subject to health and safety, environmental protection and fire safety legislation that provide safeguards for the public without imposing unnecessary double regulation through the licensing regime for lower-risk entertainment. Indeed, given the new arrangements, work is already in hand with stakeholders, such as PTA UK, to formulate guidance to assist organisers. As I said, this order deregulates in lower risk circumstances. I emphasise that it does not remove licensing from the sale and supply of alcohol, nor does it deregulate sexual entertainment or mixed martial arts.

The Government believe that the order strikes an appropriate balance between encouraging entertainment in local communities and promoting the licensing objectives. As I said, it will remove some of the costs and bureaucracy that can sap the will of volunteers and soak up often scarce financial resources. In response to the consultation, 75% of respondents were either supportive or offered qualified support for the proposals. This included a wide range of performers, entertainment industry members and local authorities. The Voluntary Arts Network said of the measures:

“The … burden of entertainment licensing … has in recent years been a major obstacle to voluntary arts groups putting on small local events and performances”.

And the Musicians’ Union said:

“We agree that these proposals would lead to more performances of live music, particularly in small venues. Over the past few years our members have been telling us that the number of gigs available to young musicians who are still perfecting their craft has gone down”.

This is sensible deregulation of activities which we believe should not be caught by the Licensing Act. The Government’s view is that existing safeguards put in place under alcohol controls, fire, health and safety and anti-social behaviour legislation mean that it is sensible to remove these lower risk activities from regulation. The removal of this cost and bureaucracy will help sustain community entertainment, such as live music, which I think we all believe is part of the cultural heritage of England and Wales. For those reasons, I commend the order to the Committee.

Lord Clement-Jones (LD): My Lords, I thank the Minister for that exposition, which brings back happy memories of my Second Reading Speech on the Live Music Bill back in 2011. I wholly support the rationale for the deregulation of live music. It may have taken some time, and I must be a collector of consultations in one way or another since 2011, but it has been a very careful and stately progress towards building on the Live Music Act exemption for venues with an audience capacity of 200, which will be extended to

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500 if this order goes through. It is as if, between 2012 and now, Christmas has arrived after many years of waiting under the previous Government. I remember first raising the deregulation of live music performances in 2007. I kept being told that reviews would take place. I think that a consultation paper was issued in early 2010 and thereafter, of course, a new Government took office, so I am extremely pleased to see this on foot. I thought that the original 5,000 figure was rather extravagant. I do not know whether it was aversion therapy or whatever, but certainly I expect that local authorities made their views known about the idea of deregulating an audience of up to 5,000 for live music.

There are still areas of live music which could be improved, but I was very pleased to see stated in the LRO consultation of July 2014:

“The coming into force of the Live Music Act 2012 has not negatively impacted the licensing objectives and the Government considers that having an audience limit of not more than 500 people for music entertainment in relevant premises strikes the right balance between those who welcome it, and those who have concerns about noise nuisance”.

That is a very fair and balanced approach.

I am often critical of the Government’s impact assessments, but the impact assessment that assesses the administrative savings from the reduced need to apply for licences and TENs for business and third-sector organisations states the figures at £5.9 million and £3.8 million. Over the appraisal period, that may sound slightly spuriously precise, but I am sure that there will be considerable administrative savings as a result of this order.

Again, I welcome the order, but there are further steps that we should take to free up live music. We had some sensible proposals on how leafleting for live events and small social and cultural events is going to be treated, on which DCLG is consulting at the moment, and I welcome them. I have spoken on busking, and I promoted an amendment to the Deregulation Bill, but had somebody else speak to it. The way in which the planning law operates is still a problem for some small venues, as many people know, and there are petitions on changing the law, which I hope will make progress.

My only question for the Minister at this stage is about the guidance. Chapter 15 of the current guidance deals with regulated entertainment. Of course, it took a little bit of time to consult over exactly how the guidance needed to be changed last time around. Does the Minister consider that it will take an equivalent time this time or can the process be speeded up? I hope that it will come into effect as quickly as possible.

Lord Stevenson of Balmacara (Lab): My Lords, I, too, welcome the order. I have no particular objection to it as it stands, and I agree with many points made by the noble Lord, Lord Clement-Jones, in his current mainstream form, although I have welcomed him in surrogate packaging form on a couple of other recent occasions.

First, I want to say how nice it is that this order will come into force on 6 April 2015, which is one of the common commencement dates, and that the department has been able to find a way in which to make that

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happen this time. However, I do not quite follow the argument that I heard the Minister make about how the four principal objectives of public licensing come through in the specifics of some of the issues raised by this order. The one on which I want to concentrate particularly is children. I understand that crime, public safety and public nuisance issues are well dealt with because there are other ways in which they can be addressed. The choice of low-risk venues and the experience over a reasonable period with deregulated live music gives us all confidence that there are ways in which this will come through. However, I put one caveat on that, in that I worry slightly about the size of some of these venues.

In preparing for the debate that we had last week on the deregulation of community cinema, we were told by a number of expert witnesses that the size specified of 500 people was very large in proportion to existing community premises, which tend to be much smaller, and to the licensed exhibition of films. Sadly, these days there are very few cinemas; there used to be cinemas that could hold up to 2,000, particularly in London, whereas most cinemas now hold something of the order of between 300 and 500 people. So we talking about deregulating what is admittedly a low-risk environment—venues that are probably not in existence and are unlikely to be built. I wonder slightly about that, but it is not my main concern, which is that in crime, public safety and public nuisance we have reasonable experience of what has happened in the deregulatory phases of the past two years, and we understand how the regulations will apply.

Let me just take two issues. It may be a good thing to ensure that the licensing treatment for peripatetic circuses is evened up across the country. Removing regulations is a novel way of doing this—although I understand the reasoning—since it avoids the possibility of different approaches in different areas. However, circuses are aimed at children and in my experience, although I have not been to a circus for many years, most of the performances include bringing children on stage, or certainly engaging them through the clowns and various other aspects. There must a priori be an interest in ensuring that the child protection aspects of that are well considered. Will the Minister point out where that appears in the order, as I could not see it in relation to circuses? As I read the order, there is nothing specific addressing children. There is a lacuna there that we might wish to reflect on.

Secondly, there is the addition, for reasons that I do not quite understand and would like an explanation about, of Greco-Roman and freestyle wrestling. I am not a wrestling aficionado and am certainly not an expert, but I do not quite get why they have been picked out in preference to many other styles of wrestling. I do not really understand how it can be said that they are by some definition freer from concerns about public order issues than might apparently apply to Cumbrian wrestling or indeed, if we were talking about Scotland, which sadly we are not, Scottish wrestling, which is, as far as I understand it, certainly not public nuisance-free. It seems to take place in Scottish highland games, at which there are very large amounts of alcohol copiously available. Apparently for Greco-Roman and

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freestyle wrestling you have to be not only an aficionado but under the auspices of British Wrestling, an organisation I am not familiar with, but which is apparently the one specified. By some miraculous arrangement—perhaps the Greco-Roman gods are looking over this—there is no alcohol present because that just does not happen. That may be true, but it seems rather odd to have picked out Greco-Roman and freestyle wrestling for this, particularly as the order makes provision for this to take place in venues for up to 1,000. Not 200, not 500, but 1,000 people can gather together for an alcohol-free festival of Greco-Roman and freestyle wrestling. That is good news. Again, I worry a bit about that, but I worry also about the child protection aspects. This is an area where, presumably, young people are being brought to encourage them. It is very physical and very direct exercise—it was pretty good in the Olympic Games, and it was interesting that in the audience, there were quite a lot of children watching. My concerns are therefore obvious and I will be grateful if the Minister will respond to them.

Other than that, we think that the order is well presented. Like the noble Lord, I thought the Explanatory Memorandum was very good. I enjoyed reading it and felt it answered many of the questions I had.

Lord Gardiner of Kimble: My Lords, I thank my noble friend Lord Clement-Jones and the noble Lord, Lord Stevenson, for their overarching welcome for the thrust of what we are seeking to achieve. I understand my noble friend Lord Clement-Jones’s reference to stately progress. It is sometimes important to get it right, but I understand the frustrations when things take rather longer than one would wish. My noble friend used the words “the right balance”. The Government have sought to find the right balance. The whole purpose of this is to ensure that the activities that we seek to deregulate are at the lower risk end. This is not about in any way changing the main thrust of what is required if there were problems.

On audience limits for live music, we believe—and this is something that has been felt across the piece generally—that 500 achieves a fair balance between promoting creativity and ensuring the sustainability of live music and entertainment yet at the same time protecting local communities from unwanted noise nuisance. In the end, where people run these events, they will be part of the local community, and where you have live music, very often it will affect people in the community who might well go to the pub or to various events. We have this safety mechanism in that when someone has an alcohol licence and the music is causing a problem, there are ways in which the licensing authority can trigger reimposition of sanctions. We have been seeking to achieve the right balance here.

4.45 pm

I will deal with the other points in no particular order. I am very much at one with the noble Lord, Lord Stevenson of Balmacara, in not being an expert on Greco-Roman or indeed freestyle wrestling. These types of wrestling are ancient combat sports where a competitor seeks to gain control over his or her opponent

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through the use of throws, locks and clinching techniques. In the Greco-Roman discipline, competitors may not attack their opponent’s legs or use their own legs to trip, lift or execute other moves. It has to take place in a controlled environment and usually takes place in seated indoor arenas. For those reasons, it was considered that spectator safety can be safeguarded for those particular types of wrestling.

The noble Lord mentioned other types of wrestling, including Scottish wrestling, but there is also Cornish and Cumbrian wrestling. These very often take place outdoors as part of festivals, and therefore on balance they are not considered to be as low in risk with reference to the licensing objective for public safety.

Lord Stevenson of Balmacara: I am grateful to the Minister for explaining that. However, my other point was that it seemed odd to choose those particular styles of wrestling. The reason as he explained it may well be sufficient, but the bulk of the interest as I understand it is in martial arts, particularly kick-boxing and the like. I am a bit surprised that that is not the way the mind is moving; audiences would certainly be more active in those sort of events, which take place in sports halls and other recreation centres.

Lord Gardiner of Kimble: I am obviously not in a position to say that we might be thinking of extending this beyond these two activities, but as I say, those two—the Greco-Roman and the freestyle—are the only Olympic wrestling events. It may also have something to do with a view that, on balance, they are at the lower-risk end. We will see, but I think that is sensible.

Quite rightly, none of us would wish to do anything in terms of deregulation if for one moment it was to put any child in jeopardy. As for children going into

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circuses, they provide family-oriented entertainment and are not typically licensed for alcohol purposes. The protection of children from harm is about sexual entertainment and alcohol harm, not about regulating circus performance, which it would arguably be disproportionate to do. I know the noble Lord did not mention this, but in terms for instance of the protection of children who are part of circuses, there are separate child performance regulations covering how many hours a child may perform, which are administered by local authorities. My guess is that most children would go to a circus either with their parents, in a school group, or whatever. I take the point very seriously, but there is no lacuna because these regulations are about ensuring that the key points of the licensing objectives are retained.

Going back somewhat to the size of venues, if someone is organising an event, there may be a limit of 500. However, if you were thinking of getting 500 in a very small pub, that would not necessarily pass the test in terms of all the key factors that a publican or an organiser has to ensure such as fire safety, health and safety, and all the existing legislation and regulations. We are not removing those—we are deregulating for music in this instance.

Again, I will look at Hansard and see whether there are any outstanding reassurance that may be needed, but I think this sets the right balance and is an appropriate form of our deregulation task. I very much commend the order to your Lordships.

Motion agreed.

Committee adjourned at 4.50 pm.