2.15 pm

Lord Beecham (Lab): My Lords, I add the thanks of the Opposition Front Bench to the noble Viscount, Lord Tenby, for his many years of distinguished service in this House, to which others have referred. My father did not know Lloyd George, but as it happens he was a constituent of the noble Viscount’s father when he was a Member of Parliament for Newcastle North. The by-election that followed the first Viscount’s elevation to this place remains in my memory as the first by-election that I can recall as a very young supporter of the party of which the noble Viscount’s father was not a member.

I also add my tribute to the noble Lord, Lord Shutt, and the members of the committee, 10 of whom have

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spoken in today’s debate. It is a matter of regret, as he gently hinted, that the report has enjoyed its first birthday before making an appearance in this House for a debate. As I said last week in connection with another long-delayed report, although perhaps with less force in that case, that the House needs to look at how it deals with post-legislative scrutiny, because it becomes extremely post if, once reports are published, they do not reach the Chamber for discussion.

Last week I chanced upon my copy of a book which I last consulted 50 years ago, as I, among others, including the noble Baroness, Lady Deech, who is not in her place today, was preparing for the final examinations for my Oxford law degree. The title of the book was Administrative Law and its author was the eminent legal academic, the Professor of English Law at Oxford, HWR Wade. In those days administrative law could be said to have been in its infancy. Indeed, the Lord Chancellor would be delighted to know that the words “judicial review” do not appear in the index or, indeed, in any other part of the book.

However, there is a chapter on statutory inquiries, which makes instructive reading. Of its 29 pages, 26 are essentially confined to planning inquiries, two to accident inquiries and one to what Professor Wade described as, “a type of public enquiry which from time to time attracts much attention: the special inquiry which Parliament may at any time constitute under the Tribunals of Inquiry (Evidence) Act”. He cited, as examples of the latter, premature disclosures of Budget details by Ministers, allegations that a change in bank rate was prematurely divulged, accusations of brutality by the police and other matters of public importance.

In the first 40 years of the Tribunals of Inquiry (Evidence) Act 1921 only 14 inquiries were established by a vote of both Houses to investigate such matters of urgent public importance, and the following 44 years saw only another 10. It is this Act that was replaced by the 2005 Act, which is the subject of the Select Committee report. Any discussion of inquiries has long since seen matters of urgent public importance overtake planning inquiries and the like as a subject of concern and debate.

Very often, of course, the demands for the establishment of a statutory inquiry arise from questions about the conduct of the Executive in one or other of its various manifestations. It is the role of Ministers in any Government in setting up inquiries, appointing the chair, controlling the disclosure of evidence and publication that not surprisingly provokes scepticism about the process.

It is striking that most of the 2005 Act inquiries arose from deaths in which the role of the police, military or health services came under scrutiny, in addition to the Leveson inquiry and some others. There are others, such as the inquiry into undercover policing, where the inquiry is a 2005 Act inquiry, but as the noble Lord, Lord Shutt, elucidated in a Question last year, the inquiry into the so-called “on the runs” in Northern Ireland is not. That was described as “an administrative review”, despite the issue stemming from a political decision, albeit one that many would say—I would be one of them—was the right one in the circumstances and which contributed

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to the successful outcome of the protracted negotiations that brought peace to Northern Ireland.

The indefatigable noble Lord, Lord Shutt, who Ministers, one senses, might have wished to have lived up to his name, was told in answer to another Question concerning the inquiry into the death of young people in prison—being conducted, I am absolutely confident, in exemplary fashion by my noble friend Lord Harris of Haringey—that the terms of the 2005 Act did not apply. Yet, as I have indicated, deaths in prisons and hospitals were the subject of 2005 Act inquiries. There are, as we have heard, crucial differences between 2005 Act and other inquiries, especially about such matters as the compellability of witnesses, the production of documents, and the public nature of the proceedings being subject to restrictions on grounds specified in the Act. But it is difficult to understand the decision-making processes that lead, for example in the case of the Hillsborough tragedy, to there being one inquest, followed by a major inquiry conducted by the late and much lamented Lord Taylor of Gosforth, and then a second inquest, on the face of it now being properly conducted, as opposed to the first. My noble friend Lord Soley referred to some misgivings, which many would perhaps share, about the way the Litvinenko matter has been handled—first possibly by an inquiry and now by an inquest.

The lack of a consistent approach is surely a matter of concern. It lends force to the Select Committee’s suggestion of central support for inquiries based in Her Majesty’s Courts and Tribunals Service, although in my view there might be other options for its location. However, the principle of having such a unit seems to be very appropriate. The Government’s response, relying on the roles of the Ministry of Justice and, heaven help us, the Cabinet Office, is not very appealing, particularly when it proclaims that the latter,

“offers advice and acts as a conduit for any interaction between the inquiry and Parliament”.

The response goes on to state that:

“In our experience, inquiry chairs and ministers have worked well together in agreeing the details of how an inquiry is to be established”.

It might be thought that the views of the parties to an inquiry, for example, or an independent source would offer more reassurance than this exercise in self-assessment and self-approval. Then there is the equally complacent, if not to say patronising, assertion, which the noble Baroness, Lady Stern, referred to, that:

“Ministers are best placed to understand the full significance of considerations such as national security and international relations and they make decisions accordingly in a way which cannot be expected of the inquiry chair”.

Of course such considerations have to be given due weight, but would it not be possible to involve others in the process, perhaps from the judiciary or Parliament?

It is disappointing that the Government have rejected out of hand recommendation 11 to give interested parties, particularly victims or their families, an opportunity to comment on the terms of reference for an inquiry, although perhaps such a procedure should be qualified by the words “wherever practical”; it may not be practical in all cases. However, there may well be some where it would be.

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The Government have also rejected recommendation 19: that a notice,

“restricting access to an inquiry, should be abrogated”,

leaving that decision to the chair, and recommendation 20, giving,

“only the chair … the power to withhold material from publication”.

Again, if there is some doubt in the Government’s mind, could there not be recourse to some third-party involvement, at the very least on a trial basis?

I also have difficulty with the response to recommendation 23, referred to by the noble and learned Lord, Lord Cullen, that “only the chair” may appoint counsel to the inquiry because—I repeat his quotation:

“Ministers will want to retain control of such issues which affect departmental budgets and the terms of reference of an inquiry”.

Those are legitimate considerations, no doubt, but again is there not at the very least scope for some third-party involvement in the appointment of counsel, perhaps from the judiciary in this instance?

The noble Lord, Lord Shutt, explained the delay in bringing the committee’s report to the House when he asked a Question of the Leader in January saying that the delay was occasioned by the unsatisfactory nature of the response, about which we have heard a good deal in the debate today. Perhaps in replying to the debate the Minister will refer to the attempts made to secure a better response, which do not appear to have been startlingly successful, if I heard the noble Lord correctly. Why have the Government remained, as it would appear, pretty obdurate in respect of some of the recommendations and requests for a further and better response? Perhaps the Minister, not least in the light of the child abuse inquiry fiasco, could indicate whether any thought is being given to an enhanced role for Parliament in this whole area.

Another issue has been raised with me by the eminent QC, Stephen Hockman: namely, the responsibility for writing the report to be published by the inquiry. This is not covered by the rules or the committee report. I understand that Lord Leveson delegated the drafting of much of his landmark report to counsel to the inquiry, now Sir Robert Jay, whereas the noble and learned Lord, Lord Saville, wrote the entire report on Bloody Sunday himself after a prolonged 12-year inquiry. Another approach was apparently adopted by the noble and learned Lord, Phillips of Worth Matravers, who in the course of conducting the BSE inquiry published online a section of his report after each week of evidence. That is an interesting technique, and I am not saying for a moment that it would apply to all cases, but perhaps it is worth considering.

Is there not a case for providing inquiries with professional assistance in report drafting and a framework within which a draft report can be submitted for comment by interested parties on a more systematic basis than appears to be present at this time? After all, we are dealing with matters of great public interest in which it is vital to sustain public confidence in the independence of the process and its capacity to discover the truth, uncomfortable though that will sometimes be. Governments must go further if the public are to be reassured of the integrity and capacity of the

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system to meet these objectives, and they should recognise the role of Parliament as an indispensable element in the system.

Finally, I will conclude, if I may, by saying a word or two about the Minister. He and I have had the pleasure of confronting each other across the Dispatch Box for the last 15 months. I have always found him to be an extremely courteous and effective debater, and somebody who has done a valiant job in defending the Government—pursuing my ancestral career of making bricks without straw—but doing so with great charm and to great effect. Who knows what the forthcoming election will bring about in terms of our respective positions on the Front Benches or elsewhere in the Chamber, but I would like to put on the record something which I believe many members of the committee would share: our gratitude to the noble Lord for the way he responds to debates both in the Chamber and outside. I wish him well, whatever the outcome of the election and wherever that leads or leaves him.

Noble Lords: Hear, hear!

2.27 pm

The Minister of State, Ministry of Justice (Lord Faulks) (Con): My Lords, I thank my noble friend Lord Shutt for initiating this debate to discuss the Select Committee’s report on the Inquiries Act 2005, and in particular the Government’s much criticised response to its recommendations. I also thank all other noble Lords who have contributed to this debate. If it is to be my last appearance at the Dispatch Box—I am most grateful to the noble Lord, Lord Beecham, for his remarks in that respect—it is a great privilege not only to be involved in a debate of this quality with so many participants of enormous experience, but also to be present on the occasion of the valedictory speech of the noble Viscount, Lord Tenby. I have not had the privilege of knowing him well; I wish I had known him better. I do know, however, that he was the assistant to no fewer than five Convenors of the Cross Benches. Perhaps I could dare this observation: I suspect that that might well have been quite a challenging occupation on some occasions.

Before finally turning to the debate itself, perhaps I may reciprocate the comments of the noble Lord, Lord Beecham. He has been a formidable opponent—not to say a thorn in my side—during the time that I have been standing at the Dispatch Box. He has held the Government to account with tremendous ferocity accompanied at the same time by great wit. I pay tribute to him for that.

The report of the noble Lord, Lord Shutt, received a response from the Government. The noble Lord, Lord Soley, suggested that in the welcome expressed by my ministerial colleague, Simon Hughes, there was a subtext that the Government did not in fact welcome the report. I am here to disabuse him on that particular matter: the Government do indeed welcome the report and know that the committee invested a considerable amount of time and effort in understanding the operation of inquiries both under the Act and otherwise. The committee’s work has undoubtedly prompted a lively and constructive debate today.

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I am grateful to all those who have given evidence to the inquiry—both written evidence and in person—including former chairs, panel members, inquiry legal and administrative teams, and others with involvement in inquiries, who provided invaluable knowledge, experience and insight into how inquiry processes and procedures might be improved.

I assure the noble Lord, Lord Shutt, and his committee that their report was well received across government and that careful consideration was given to the recommendations. It is worth making clear to the House that the response submitted by my right honourable friend Simon Hughes, the Minister of State for Justice and Civil Liberties, who has responsibility for this policy area at the Ministry of Justice, reflected opinion across the whole of Whitehall, not just that of our department. As my noble friend Lord King pointed out, the possible need for these inquiries can confront Ministers in different departments with different levels of experience. It is important that there should be—this is very much the burden of one of the recommendations—a degree of sharing of knowledge and experience to enable a proper response to be given by Ministers in different departments to the call, as there often is, for a public inquiry.

For the benefit of those who are not familiar with this aspect of government, the Ministry of Justice works closely with the Cabinet Office in the operation of inquiries. My department has responsibility for the Inquiries Act 2005 and the Inquiry Rules 2006, which underpin the Act. It provides advice on the application of the Act and the rules. The Cabinet Office has responsibility within government for providing guidance on how to establish and conduct inquiries, and provides the main liaison between lead departments and the centre of government.

Regardless of how they are constituted—whether they are statutory or not—and as a number of noble Lords quite rightly said, public inquiries perform an important role in today’s society of holding public bodies to account, as well as bringing to light, and providing answers to, issues and events that cause public concern. Setting up a major public inquiry is a process that of course the Government take extremely seriously. There is a clear requirement in the Ministerial Code reflecting the importance that is attached to major inquiries of this nature. It states that:

“The Prime Minister must be consulted in good time about any proposal to set up … Major public inquiries under the Inquiries Act 2005”.

I know that the noble Lord, Lord Shutt, and his committee colleagues may feel that the Government took a long time to respond to their recommendations. However, as I have alluded to already, the Ministry of Justice consulted widely to make sure that the response was as comprehensive as possible. Some government departments had little experience of running an inquiry while others had much to offer. As it was, and simply for the sake of the record, the committee’s report was published on 11 March and the Government’s response was published on 30 June.

The noble Lord, Lord Shutt, referred, by way of comparison, to the report of the noble and learned Lord, Lord Hardie—another essay in post-legislative

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consideration—on the Mental Capacity Act. I was the Minister who responded to that debate. Lest it be thought that the Government are serial offenders in late responses, I should correct one slight misunderstanding that my noble friend may have in that respect. We did in fact respond to that report well within time. The letter that I wrote, and which was referred to in the debate, was a response to the noble Lord, Lord Beecham, simply to update the House as to what had been done to implement the various recommendations—I am glad to see the noble Lord nodding to affirm this. It enabled the debate to be much shorter because the House was made aware of the up to date position. The point that my noble friend makes is a valuable one, but it is not an appropriate criticism of the Government in that respect.

Here, the Select Committee’s report reflected a number of concerns about the use and operation of the 2005 Act and contained 33 recommendations. There were three broad areas of concern that my noble friend Lord Shutt focused on. First, the Committee believed that, when considering what form an inquiry should take, it should be Ministers’ practice to start from a presumption that the 2005 Act should be used—a point made forcefully in the course of our debate by the noble Lord, Lord Richard, who referred to the evidence given by my ministerial colleague Shailesh Vara.

The word “presumption” does not appear in the Act. It is an expression familiar to lawyers and it may be that, on many occasions, Ministers would be well advised to look at the 2005 Act first. However, it would be wrong to superimpose some rule of law, from whatever origin, that there is a presumption that the 2005 Act should be used. Whether it is wise, of course, is a matter of opinion, and this particular Act does not contain any mandatory obligation on the part of a Minister to employ the Act.

Secondly, the Committee felt that it would be useful to have a standing central inquiries unit to give practical support to the chair and secretary of inquiries. Thirdly, the committee made a number of recommendations to increase the accountability of government Ministers and limit their powers to act without the consent of the inquiry chair.

I am sorry that the committee did not feel that the Government’s response addressed these points to their satisfaction. The Government accepted over half of its recommendations—19, in fact, although I understand there is slight carping over the mathematics—and we believe that these included the most important recommendations, as I will explain in a moment.

As noted in the Government’s response, the Select Committee’s report was very much welcomed. My department had carried out post-legislative scrutiny of the Act in 2010, in line with the then new regime of departments scrutinising their legislation between three and five years after implementation. The 2010 scrutiny concluded that the Act was working well but that the 2006 rules presented a number of concerns. The work of the committee was therefore timely. When it reported in March last year, four years had elapsed since that post-legislative scrutiny. At that point, 17 inquiries, under the Act or otherwise, had reported since the implementation. Since the scrutiny, three further inquiries

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have either been set up under the 2005 Act or been converted to run under the Act. This includes the most recent independent inquiry into child sex abuse, to be chaired by Justice Lowell Goddard.

At the end of October, as he told the House, my noble friend Lord Shutt and members of the committee met my colleague the Minister of State for Justice and Civil Liberties. I understand that many of the committee’s concerns were addressed. There were, however, a few points on which the Government committed to respond—around the role of the Cabinet Office, as I understand it. Perhaps I may take this opportunity to apologise to the noble Lord and his colleagues for the delay in responding to those points. In response to the committee’s report, and to further helpful discussion with committee members, we have looked again at the guidance available and the role that the Cabinet Office can play in supporting departments. I will say a little more about that in due course.

As to the question of whether to establish an inquiry under the 2005 Act, the government response looked in some detail at how Ministers decide what kind of inquiry to establish. At the October meeting, my ministerial colleague addressed the committee’s concerns about the consideration given by government departments to establishing inquiries under the Act. However, for the benefit of the House, I will explain that Ministers will in fact always consider the suitability of the 2005 Act when deciding to establish a public inquiry—it will always be the starting point.

Ministers will, however, also want to consider whether another vehicle would be more appropriate and effective, bearing in mind time and cost. This could be a non-statutory inquiry—I note that the noble and learned Lord, Lord Morris, drew on his experience of non-statutory inquiries and said that they could be useful; an independent review; a parliamentary inquiry; an inquiry of privy counsellors; an investigation with a public hearings element overseen by a judge or QC; an independent review with a public hearings element; or, in a very limited number of cases, an inquiry established under other legislation, such as the Financial Services Act 2012 or the Merchant Shipping Act 1995.

Across government there was consensus that Ministers must retain the option of deciding whether or not to use the Act. It is essential to adopt what is the right approach under all circumstances. It should also be noted—some noble Lords might already be aware of this—that Section 1(1) of the Act gives Ministers discretion to decide whether or not to use the Act. This clearly indicates that Parliament was mindful of the potential of other, non-statutory, approaches.

The House should not lose sight, either, of the fact that there is always the option to convert an inquest or other form of inquiry, investigation or review, into a 2005 Act inquiry in the event that powers under the Act—such as those to compel witnesses—are felt to be required. Very often, witnesses do not need compelling, but recently this has been the case in the investigation into the death of Alexander Litvinenko. On 22 July 2014, the Home Secretary announced that the inquest would be converted into an inquiry—the noble Lord,

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Lord Soley, referred to this—under the 2005 Act to give the chair the power he needs to consider sensitive material.

On the point about a central inquiries unit and guidance—an important part of the report—I fully understand the concerns behind the committee’s recommendation that a central inquiries unit should be established within central government. Government departments considering establishing an inquiry—as well as potential inquiry chairs and teams, both administrative and legal—will want to be assured that there is resource and experience available to them, rather than having to reinvent the wheel, to use the terminology employed by the committee, with every new inquiry. However, as the Government’s response sets out, we do not accept the need to create a new standing team. The MoJ and Cabinet Office already work closely with departments to provide guidance and assistance at various stages of inquiries, from the point at which Ministers consider whether an inquiry is required, through set-up and on to the final publication of reports, to closing down inquiries and learning lessons.

We absolutely accept that more can be done to improve this service, and to ensure that we learn lessons from inquiries. However, it is essential that any central resource provided for inquiries work is proportionate to the number of inquiries and reflects the need from departments. In this vein, and since the Government’s response last June, the Cabinet Office revisited its approach in this area and identified dedicated resource to build the nature and profile of support available. The Cabinet Office also revisited the draft guidance to departments on establishing an inquiry, taking account of the views of the committee and feedback from departments. This will be a more streamlined document, providing the necessary signposts for those involved in inquiries and ensuring that there is complete clarity around additional sources of information and support.

The guidance will take account of the recommendations made by the noble Lord and his committee, of what has been said in today’s debate and also of the recently published guidance by the Centre for Effective Dispute Resolution—with which I know the noble and learned Lord, Lord Woolf, has been involved—on setting up and running a public inquiry. It will also take account of lessons learnt from inquiries that have completed or are underway, including the recent data loss from the Robert Hamill and Azelle Rodney inquiries. The Cabinet Office official responsible for this area of work instructed me to say that she would be very willing to meet my noble friend Lord Shutt to discuss this ongoing work before it is finalised.

Alongside this, the Cabinet Office is engaging with key officials across Whitehall to ensure that the cross-Whitehall officials group on inquiries operates as effectively as possible. In addition, we are establishing a network of former inquiry secretaries to provide a further repository of expertise and experience. We absolutely accept the committee’s concerns regarding the completion of lessons learnt exercises, and the Cabinet Office will ensure that these are completed with greater consistency

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than they have been to date, and that the lessons arising are cascaded appropriately and are used to continue to inform guidance to departments.

Like my department’s post-legislative review in 2010, the committee concluded that, generally speaking—and notwithstanding its various recommendations—the 2005 Act continues to work pretty well. However, the committee also agreed that there is a need to improve the rules. The committee recommended four amendments to the rules, of which the Government accepted three. Unfortunately, we have been unable to make these amendments in the current parliamentary Session. However, work is in hand to progress these changes at the earliest opportunity under the new Parliament. The changes are in no way controversial.

I now come to what is much more controversial: the question why Her Majesty’s Government rejected the committee’s recommendation that Rules 13 to 15 on warning letters should be revoked and substituted with a rule giving chairs greater discretion. Of course, on warning letters, a 2005 Act inquiry cannot apportion civil or criminal liability—although I note the observation of the noble and learned Lord, Lord Woolf, that more use might be made of the findings of inquiries in civil proceedings. The warning letter provides a mechanism to inform someone of the fact that they have been or may be criticised during the course of the inquiry. Rule 13 contains a discretion to send warning letters. The warning letter also provides that individual or body with the opportunity to respond to the inquiry chairman and provide any additional information. To that extent, warning letters can—as acknowledged in the debate—assist in the effectiveness of inquiries by encouraging engagement and allowing the inquiry to consider any response from that individual before reporting.

The next paragraph I will share with the House reflects the letter to my noble friend Lady Buscombe but contains a further comment. Her Majesty’s Government consider that Rule 13 strikes the right balance, affording individuals the opportunity to take legal advice and, if necessary, to respond to criticism. A departure from the current approach could lead to a loss of that opportunity with a corresponding impact on the involvement of witnesses.

During the course of this very helpful debate, there have been useful observations from the noble and learned Lords, Lord Woolf, Lord Cullen and Lord Morris, and the noble Lord, Lord Pannick. In the helpful comments of the noble and learned Lord, Lord Brown of Eaton-under-Heywood, he provided the useful quotation from Sir Richard Scott—as he then was—stressing the need for flexibility and how so often this process has got out of hand. I can tell the House, notwithstanding the official response, that the Government—although considering, on the face of it, that there should be sufficient discretion for chairmen to avoid some of the undesirable features of the Salmonisation or Maxwellisation process so helpfully identified in this debate—are none the less much impressed by the strength of the argument today and consider that it may well be necessary to reconsider these particular rules to give greater clarity to chairmen so as to avoid some of those undesirable features. The House will

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realise that I cannot go further than that but I hope that that will provide some comfort to those who participated in the debate.

I assure the noble Lord, Lord Shutt, and his colleagues that, since the Government published their response, the Ministry of Justice and the Cabinet Office have worked closely together, and will continue to do so, to make sure that the committee’s recommendations are implemented. As I said, work has progressed on the support provided to those considering establishing an inquiry. The Cabinet Office is currently working with departments to ensure that this guidance reflects their needs, and will of course take account of all that has been said.

I was asked to deal specifically with a number of matters. I will do so very briefly given the time that has already elapsed in my response—although I was asked by my noble friend Lord King to give a full response, and I am endeavouring to do so.

The noble Lord, Lord Trefgarne, was concerned about the need for representation. Of course, he will be aware that it is provided for by Section 40 of the Act that the chair can award reasonable costs, but he was right to draw attention to the fact that he departed somewhat from the rest of the committee given his particular experience, having been before the Scott inquiry.

The noble and learned Lord, Lord Cullen, referred to the appointment of counsel. He will be aware that the cost of legal teams is one of the biggest cost drivers in inquiries, so it is right, in the Government’s view, that—important though the role of counsel is, for the reasons that he gave——Ministers should protect the power to be involved in the appointment of counsel. In the Government’s view, that should not be for the chairman alone, although one imagines that the chairman often has considerable influence in the identification of appropriate counsel.

My noble friend Lord Trimble referred to the question of inquests—whether there were inquests rather than inquiries, in a reference to Article 2 of the European convention. There is a slight difference. Of course, there has to be an inquest as a matter of law in certain circumstances but there is always discretion whether to call an inquiry. As he will know, all inquests have to comply with Article 2. I understand that the inquest system in Northern Ireland is somewhat different, and inquests there have been held by the ECHR not to comply with Article 2 of the European convention. He also referred to the on-the-runs inquiry. He said that that was a private inquiry. I am instructed that in fact it was not private, but was an independent review under the chairmanship of Lady Justice Hallett. No public evidence sessions were held, given the nature of the issues—of which my noble friend will be well aware—but a full report was published on 17 July 2014.

In conclusion, I hope that the House will be assured from my remarks today that the committee’s recommendations were well received and that work is progressing—perhaps not at the pace that the committee would like but at a pace that is realistic given the many other pressures, especially now as we approach the end of the Parliament.

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The noble Lords, Lord Soley and Lord Richard, and the noble Baroness, Lady Stern, all rightly emphasised the importance that public inquiries exercise in the public mind as a reassurance when, sometimes, confidence in politicians is not quite what it might be. The noble Baronesses, Lady Stern and Lady O’Loan, emphasised the absolute need for the paramountcy of independence where inquiries are concerned. I entirely agree.

I think that the noble Lord, Lord Shutt, and his committee colleagues have accepted that given the nature of public inquiries there needs to be a degree of flexibility. One size plainly will not fit all. As we know, every time that an issue arises, there is a call for an inquiry. Consideration must be given to the most suitable approach that will deliver the answers and limit the possibility of the event happening again, but in a cost-efficient and timely manner.

The report, and this debate, have been an extremely valuable contribution to what is and will remain a very important topic. I thank all who have taken part very much.

Lord Shutt of Greetland: My Lords, before the noble Lord sits down, can he confirm whether we are to cull from Hansard some of the important things that he has had to say, or whether there will be what we might call a supplementary government response to the report?

Lord Faulks: I will not to commit to a supplementary government response, but I will look through Hansard to see whether there are any particular matters that I did not deal with in the course of the debate.

2.54 pm

Lord Shutt of Greetland: My Lords, I thank the noble Lord, Lord Faulks, for his response. He said that the Government had welcomed our report, and perhaps they have, although it did not seem like it at the time. I am delighted that he said today that in looking at inquiries under the Act, the Act will always be considered: it is on the agenda of the Minister bringing in an inquiry. Secondly, whether it is a central inquiries unit or a discrete department of the Cabinet Office, it sounds to me as though we are going down the right track. That is also helpful.

We will see what happens. There will be a Ministry of Justice Bill at some point in a subsequent Parliament. Amendments may well arise in connection with such a Bill. I thank the Minister for his work during this period in government.

I also thank everyone who has taken part in this debate and I am grateful for the very kind remarks that have been made. It is quite splendid that 10 of the 12 members of the committee have spoken today. That says to me that there has been a real weight of support for what we did and the recommendations that we made. We will read Hansard to take in the debate further, and there may be supplementary information, but as for the inquiry rules in connection with warning letters, not only did the committee hear witnesses and take a view, that has been enhanced by the debate today. It has been further embraced by serious, solid, senior lawyers—amazingly to me—that there can be a real saving in time and money. I should have thought

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that that was something to be grabbed by government. I hope that what the Minister said will be embraced in a supplementary report or is dealt with later. I thank everyone for taking part today.

Motion agreed.

European Public Prosecutor’s Office (EUC Report)

Motion to Take Note

2.57 pm

Moved by Baroness Corston

That this House takes note of the report of the European Union Committee on the impact of the European Public Prosecutor’s Office on the United Kingdom (4th Report, HL Paper 53).

Baroness Corston (Lab): My Lords, it was my pleasure to serve as both a member and the chair of the Sub-Committee on Justice, Institutions and Consumer Protection. At the outset I thank my colleagues who served as members of that committee, who all brought extraordinary expertise and diligence to their work, and pay tribute to our staff. We were very fortunate in the clerks who served when I was on the committee and in our legal advisers, who were second to none. Having served for 13 years as a Member of another place, I think I can say without contradiction that the scrutiny role of the House of Lords in its European work is second to none and is recognised as such throughout the European Union.

On 17 July 2013, the European Commission published its long-awaited proposal for a European public prosecutor’s office. It is subject to the UK’s opt-in protocol, but the coalition agreement had already ruled out participation by the United Kingdom. I interject a personal note here. It seems to me to be quite a discourtesy in parliamentary terms to start a consultation process on 17 July in any year as Parliament has either risen for the Summer Recess or is about to do so. In order for us to do our scrutiny work properly, not only did it involve holiday time for staff, it meant that the committee had to come back when the House was not sitting to be able to fulfil its role. I hope that the European Commission will not persist with that kind of timetable in future.

Under the Commission’s proposal, the prosecutor would be made,

“responsible for investigating, prosecuting and bringing to judgment … the perpetrators of … offences against the Union’s financial interest”,

and would be empowered to,

“exercise the functions of prosecutor in the competent courts of the Member States”.

This organisation was going to be responsible for all fraud in the European Union. At its meeting on 11 September 2013, the Sub-Committee on Justice, Institutions and Consumer Protection, which at the time I chaired, considered the Commission’s proposal for the first time and decided to issue a reasoned opinion, challenging it on the grounds of subsidiarity. In October of the same year, this House approved the

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sub-committee’s proposed reasoned opinion and because the number of reasoned opinions submitted by the national parliaments reached the “yellow card” threshold, the Commission was obliged to review the proposal. It is important to point out that this was only the second time that sufficient national parliaments had ever forced the Commission to undertake such a review.

We were consequently very disappointed when shortly thereafter, in November, following its review, the Commission produced a communication in which it decided to maintain its proposed European prosecutor as originally brought forward. There was not much in the way of a reasoned argument. Following this news, in January 2014, the sub-committee agreed to launch an inquiry into the ramifications of the proposed European public prosecutor’s office for non-participating states such as the United Kingdom—but of course, the United Kingdom is not the only one. While we had our doubts about the proposal, we were also very concerned about the impact it would have on the non-participating member states, of which the UK is one, and on the ongoing relationship with the European Union’s current anti-fraud body, OLAF, and Eurojust.

We began taking evidence in March 2014. We heard from leading academics in the field, representatives of the legal profession, the current president of Eurojust and one former holder of that position, and the current director-general of OLAF. The sessions concluded with evidence from the Home Secretary. We are grateful to all those who submitted evidence to our inquiry. Unfortunately, the committee’s planned timetable was somewhat frustrated in that while the evidence sessions were well under way, following the member states’ initial discussion of the Commission’s proposal, the then Greek presidency of the Council brought forward an alternative prosecutor’s proposal, addressing some of the member states’ key concerns. The Government submitted an Explanatory Memorandum on this alternative text in June 2014.

We took the decision to postpone publication to allow all those who gave evidence to the inquiry an opportunity to consider the rival text. The committee’s subsequent report was published on 3 November 2014. My committee found a number of very significant problems with the Commission’s proposal. We were worried about the principle that the prosecutor would be responsible for investigating and prosecuting all EU fraud crimes, to the exclusion of the national bodies responsible—what is referred to in the jargon as exclusive competence. This in turn would run the risk of the prosecutor being overwhelmed from birth by an excessive workload. We also expressed doubts about the proposed centralised structure.

Unfortunately, we did not see the presidency’s text as a panacea. The committee found that the rival text raised more questions than answers. There was a lack of clarity about sharing competence for these crimes between the member states and the relevant national authorities. We also thought that the attempt to mimic Eurojust’s collegiate structure was overly complicated. As for the position of the non-participating member states, neither of the texts considered during the inquiry addressed their position at all. However, the report warned that the proposed European prosecutor could

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seriously undermine the UK’s relationship with the European Union’s current anti-fraud body, OLAF, and with Eurojust.

Unsurprisingly, given their long-standing opposition to the European public prosecutor’s office, the Government shared many of the committee’s concerns. There is a great deal of common ground between the committee and the Government and, as we know, that is not always the case.

Lord Spicer (Con): I do not quite see why the committee was so surprised that it was all or nothing. As it is all going to be conducted under a different form of law from ours, it has to be, in the interests of fairness, all or nothing, does it not?

Baroness Corston: The main problem, as we saw it, was not only that the prosecutor would be completely overwhelmed but that no consideration at all was given to countries that, from the outset, would not play any part. I think that formed the basis of both our concern and the concern of the Government.

Given that there was a great deal of common ground between the Government and the committee, the Government agreed with nearly all our conclusions and recommendations. The only point of disagreement relates to the Home Secretary’s suggestion during her evidence that the United Kingdom might not be legally obliged to respond to requests for assistance from the European public prosecutor’s office. Given her doubts, the committee called for an urgent consultation by the Home Office on this matter. Sadly, our call was rejected by the Government. They cited as a reason the current lack of clarity over the prosecutor’s potential role. I accept, of course, that a lack of clarity pervades any discussion of the proposed public prosecutor’s office—indeed, this theme runs throughout the report—but I would suggest that the issue of co-operation between the European public prosecutor in whatever form and the relevant UK authorities—for example, in relation to European arrest warrants—is not going to go away.

Witnesses to the inquiry were quite clear that any weakness or failure by the UK authorities to co-operate with the European public prosecutor in this regard risked the UK being seen as a safe-haven for those suspected of committing offences against the European Union’s financial interests and for illegally obtained EU funds. The members of my former committee would not want to see the UK become, as one witness warned, the Costa del Sol of the 1980s for those who perpetrate criminal frauds against the European Union’s finances.

I again thank those who contributed to the inquiry and my former colleagues on the sub-committee, whose company I very much appreciated. No doubt we all agree that it is essential that the European Union and the UK consider the full implications of the establishment of the European public prosecutor, not only for those states that will not participate but for bringing to justice those people who commit fraud against the interests of the European Union. I beg to move.

3.08 pm

Lord Hope of Craighead (CB): My Lords, I congratulate the noble Baroness, Lady Corston, and her Committee on the work they have done and on their very timely

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report on this rather troublesome issue. For the most part, I welcome the response by the Home Office to the report. I particularly welcome the Government’s decision not to opt in to the Commission’s proposal to establish a European public prosecutor’s office. I am delighted that the committee has taken the opportunity in paragraph 6 of its report to endorse that proposal.

I last worked on Sub-Committee E about 15 years ago. At that time, the splendidly named OLAF had only just been born and Eurojust was still in the course of being conceived. It was being talked about, but had not yet come into existence. Now that they have grown up, as it were, it is a real pleasure for me to cast an eye over them to see how they are getting on. As it happened, last October I attended a seminar in Florence, at which one of the delegates was from Eurojust. We enjoyed a conversation over dinner, at which she spoke with real enthusiasm about the contacts which she had in the course of her work with prosecutors in the United Kingdom. As I spent some time when I was at the Bar as a prosecutor in Scotland, I was particularly interested in what she had to say about her contacts with the Lord Advocate’s department. Here, too, she was enthusiastic about her contacts with that department and the practical value which she saw in those contacts.

Your Lordships would get much the same message if they were to read the written evidence which the committee received in March last year from Frank Mulholland QC, the Lord Advocate, to which brief reference is made in paragraph 37 of the report. He tells us that the serious and organised crime division in his department, which has an international co-operation unit, participates fully in the work of Eurojust and OLAF. That unit liaises regularly with colleagues abroad in relation to investigations and prosecutions in Scotland, as well as providing assistance to colleagues from other jurisdictions in their own investigations. He tells us that it has successfully used the assistance of Eurojust in a number of serious and high-profile cases, especially those, as in the case of VAT fraud, which are especially complicated.

The Lord Advocate describes the work that Eurojust does in the co-ordination of investigations of the different member states when dealing with cross-border crime as “extremely valuable”. He says that his department also has experience of working with OLAF and that it too carries out much valuable work, although it is fair to say that he adds that difficulties have sometimes arisen because OLAF was not engaged at a sufficiently early stage of an investigation to meet the procedural requirements of Scots law.

If I have any criticism of the report, it is the tiny point that it did not make a little more use of the Lord Advocate’s criticism. As I have said, it gets only one very brief mention in two sentences in paragraph 37. The essence of that evidence is accurately summarised in these two sentences, but it might have been helpful if some more references had been given to his evidence in the later passages dealing particularly with OLAF and Eurojust. Of course, it is possible to trace the evidence online with the assistance of the reference in footnote 98. I am particularly grateful to our Librarian for being able to do this for me. I encourage the Minister and his team to do just that, and to read what

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the Lord Advocate has to say. That is because one does get from it some valuable insight from someone who as a prosecutor is really in touch with what is going on on the ground.

May I mention briefly some of the points the Lord Advocate makes because I think that they add force to the points made in conclusions and recommendations 6, 7, 8 and 9, with all of which I respectfully agree? The first point is that his department does not see the need for the creation of the EPPO. It is perhaps a bit late in the day to make that point, but it does underline the good sense of the decision not to opt in to the proposal, and the reasons why he makes it are worth stressing. He says:

“There are many challenges to overcome where criminal jurisdiction is potentially viable in different Member States and the diverse rules of evidence within Europe bring their own barriers. Whilst it is recognised that organised crime is not necessarily related to a specific Member State and that the fight against crime needs to be addressed Europe wide, without an evidence based assessment relating to why existing measures and national procedures and practices are not sufficient it is difficult to come to the conclusion that a European Public Prosecutor’s Office would be able to prosecute cases more effectively than individual Member States”.

It is worth stressing the different evidential rules which arise from state to state. The complications for a central office trying to deal with that are fairly obvious. He also makes the point that,

“there is scope for further improvements to be made in the investigation and prosecution of frauds against EU interests through better use of Eurojust and OLAF and by improving working practices between Member States and those organisations”.

He believes, and one can see the force of this, that:

“It is logical that Member States use the current structures available to their full extent before consideration is given to establishing a new body with such far reaching powers”.

As for the impact that the creation of an EPPO would have on a non-participant member state, the Lord Advocate makes the point several times that there is a lack of sufficiently robust evidence to demonstrate that such an office is required. This reinforces the point made in conclusion 6 that the Commission has failed to address the EPPO’s impact on OLAF and the knock-on effect for non-participating member states. As the Lord Advocate sees it, there is a lack of information which makes these effects difficult to assess. He sees real difficulties, whichever model is adopted, whether it is exclusive competence to the EPPO in matters affecting the EU’s budget or a competence that is shared with member states. Either way, conflicts of competence or jurisdiction will arise, which would be a recipe for confusion and delay and would play into the hands of offenders and their defence teams. As the Lord Advocate puts it, a system that gives exclusive competence in some cases and a shared competence in others would result in confusion as to who is dealing with which offence, which would be highly undesirable.

As for the effect on Eurojust and OLAF, here too there is a lack of sufficient information. That is why the assurances referred to in recommendations 6 to 9 are so necessary. There is real cause for concern. This would not be so if the functions of Eurojust were to remain as they are, as Scottish prosecutors would still

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have the access they enjoy at present, but that is not what seems likely to happen if the proposal goes ahead.

I warmly support what the report says in these recommendations. It is important that the Government take an active role in the development of the proposal. I hope that they will draw strength and guidance from the points made by the Lord Advocate, to which I have referred. I stress that they are not motivated in the least by any kind of Euroscepticism on his part. On the contrary, he is all in favour of inter-state co-operation. He has seen on the ground the benefits that that can bring in combating fraud conducted across borders. The points are essentially practical ones made by someone who really does know what he is talking about,

3.16 pm

Baroness O'Loan (CB): My Lords, I speak in this debate as a member of European Union Sub-Committee E, which was so ably chaired by the noble Baroness, Lady Corston. This report deals with a subject which has much exercised the committee over the past years as the heart of it goes to how the European Union and the member states thereof seek to control crime, and particularly fraud affecting the EU.

There can be little doubt that co-operation between member states and European institutions and agencies in the fields of justice and home affairs has resulted in significant achievements in the battle against crime. Eurojust, Europol and OLAF—the European anti-fraud office—have all played their role in fighting crime. While there are deficiencies which have been identified, there can be no doubt that co-operation in the processes of investigation et cetera has facilitated effective action. The sub-committee was aware that there is a problem of hitherto unquantified fraud on the EU’s finances and it published a report on this matter.

European Union law obliges both the European Commission and member states to combat fraud on the EU’s finances, but the onus to protect the EU’s financial interests falls mainly on individual member states because they are currently responsible for administering 80% of EU funds. We found that the EU’s anti-fraud system has a number of weaknesses. The Commission cites a figure of fraud worth €404 million per annum, but we felt it offered only a glimpse of the level of fraud perpetrated against the EU’s budget. Based on the evidence we received, we felt that the actual figure is around £5 billion but may be even more. There clearly is a problem and the proposal for the EPPO is one of the initiatives intended to address this issue, but it does not really address the problem. Rather, we found that it had the capacity to create major problems both within participating member states—as the noble Baroness, Lady Corston, said, the UK would not be one at present because we would exercise our right not to participate—but also in other member states because of the capacity of the proposals to interfere with the working of the two institutions which have been really useful in the fight against crime against the EU’s financial interests: Eurojust and OLAF.

An EU body to investigate and prosecute crimes against the EU’s financial interests was provided for in Article 86 of the treaty on the functioning of the EU,

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which says that any EPPO would be responsible for investigating and prosecuting and bringing to judgment the perpetrators against the EU’s financial interests and that it would be empowered to exercise the functions of prosecutor in competent courts of the member states. The noble Baroness, Lady Corston, has articulated what happened when that proposal came before the sub-committee. We published a report in October 2013 which suggested that the House challenge the EPPO proposal on the very considerable grounds of subsidiarity. The House approved that opinion, and 14 other legislatures reached similar views, causing the EU Commission to review its proposal. However, it was a cursory review, and in December 2013 the Commission indicated that it would proceed with its proposal. We therefore undertook the second stage of the inquiry.

We found many problems with the current proposal for the EPPO, and many potential difficulties for the United Kingdom in the proposed arrangements and the possible UK response to them. First, the potential workload of the EPPO would be absolutely overwhelming, given the range of crimes against the EU’s financial interests. Witness after witness gave evidence to that effect, and even the Home Secretary was clear that it was impossible for anybody to give the correct figure for such crime—a view shared by the British former president of Eurojust, Mike Kennedy. The UK could not legally respond to EPPO requests for assistance, giving rise to the risk that the UK would—as the noble Baroness, Lady Corston, said—become a safe haven for illegally obtained EU funds; there would be problems for non-participating states in that the proposal might affect the capacity of Eurojust to support all member states; the proposals for shared competence between the EPPO and the member states are unclear to the extent that they may be unworkable; robust and capable monitoring of investigations and supporting fast and efficient decision-making would not be possible; and there is no clarity as to the impact of the existence of the EPPO on OLAF.

At a time when the activities and costs of the EU are under significant scrutiny, when organised crime is becoming even more effective despite the massive resources poured into the attempts to control it, and when there is deep scepticism in some quarters about the benefits of EU membership—scepticism which I do not share—the committee has called on the Government to take effective action to ensure that the UK’s interests and indeed the interests of its colleagues of the European Union are not compromised, that very clear steps are taken both here and in the Union to ensure that before any EPPO is established there are very clear rules about how its shared competence will operate, and to provide for the situation in which we do not participate but must be protected against the adverse consequences which may result. In addition, the need to protect OLAF and the assistance currently received by the UK from OLAF and Eurojust is vital.

I therefore commend the recommendations of this report to Government for implementation. I welcome their response to the report, but urge them to accept all the recommendations, notwithstanding the lack of clarity about the proposal for the EPPO’s role and operation.

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3.23 pm

Lord Pearson of Rannoch (UKIP): My Lords, I cannot resist speaking briefly in the gap, because I think this is the first time in 25 years that I am able to congratulate an EU Select Committee on one of its reports, and indeed the Government on their reply.

I also take the opportunity to apologise for scratching last Wednesday 11 March from our debate on the competences review, or balance of power between Brussels and our Government. A long-standing family engagement meant that I could not have stayed to the end—not that I would have asked the Minister, the noble Lord, Lord Wallace, any questions. I would just have explained why the whole exercise is pretty much a waste of time that will do little to curb the appetite of the corrupt octopus in Brussels.

I will, however, take this opportunity to say that I am disappointed that the Minister, the noble Lord, Lord Wallace, took the opportunity—at col.748—to criticise me and my views on the European Union in my absence. The richest bit of this criticism was perhaps that the noble Lord opined that Euroscepticism in this country is a belief, a faith, a prejudice. Yet it is surely our Europhiles who demonstrate a disease-like blind faith in the project of European integration, which is failing before our eyes, causing great misery across the continent, and which will continue to do so until it eventually collapses.

This report and the Government are rightly critical of the Commission’s stubbornness in continuing with its plans for a European public prosecutor. I therefore thought that it might be helpful if I put the powers of the unelected Commission on the record, perhaps for the first time, so that people can see what our powerless national Government are up against.

First, the Commission enjoys the monopoly to propose in secret all EU legislation, and thus a large proportion of our national law.

Secondly, its proposals go for still-secret discussion in COREPER—the Committee of Permanent Representatives, sometimes described as EU ambassadors—where the bureaucrats from the member states negotiate their national interest, the members of the Commission having sworn allegiance to the EU and not to support any partial national interest. I have never understood how our privy counsellors square their oath of allegiance to Her Majesty with that one. That is their problem, I suppose.

Thirdly, when the proposals emerge from COREPER as pretty much a done deal, they go for ratification to the Council of Ministers from the member states, in still largely clandestine discussion, and to the European Parliament, with its powers of co-decision.

Fourthly, our Parliament can scrutinise the emerging legislation but cannot change it. Indeed, it has never done so, as we see with this proposed public prosecutor.

Fifthly, the Commission then becomes the sole enforcer of all EU law and can impose massive fines for transgression, subject only to the Europhile Luxembourg court.

Sixthly, the Commission manages the EU budget so badly that the EU’s accounts have not been signed off by its internal auditors—there being no external auditor—

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for the last 19 years. If a public company was in a similar position, its directors would have been in jail many years ago.

Seventhly, the Commission negotiates all our foreign trade arrangements, again badly. Singapore has had free trade agreements with India, China, Japan and the United States for 10 years, but we have none because the Commission is in charge on behalf of all the member states.

I cannot help feeling that if the British people understood the full extent of the unelected Commission’s powers, which I have set out above, and how powerless their Parliament has become in this and other matters, their dislike of our EU membership would increase even further.

I have only one question for the Minister: what happens if the Commission decides to plough on with this proposal?

3.27 pm

Baroness Smith of Basildon (Lab): My Lords, to return to the committee report, I thank my noble friend Lady Corston and her committee. I was also grateful for her introduction to the debate. She was extremely helpful in her narrative about the twists and turns, and the ongoing debate on this issue. It was of benefit to the House to hear about the frustrations that her committee had in dealing with some of these issues.

Other noble Lords who took part in our previous debate on this issue on 28 October 2013 will recall that the report that we then discussed and the scrutiny that the committee had provided were invaluable in the understanding and analysis of what a European public prosecutor’s office could do and was intended to do. That position remains the same. I thank my noble friend and her colleagues on the committee, including the noble Baroness, Lady O’Loan, for providing what for me, having not considered this in great detail before, is a clear and detailed report.

There are important issues, but although the premise may be very straightforward, there are complexities and differences of opinion on how they can best be tackled, which cannot be lightly dismissed or ignored because they are genuine and justified concerns. As my noble friend Lady Corston pointed out, it is not a new proposal. The idea had been discussed even before the Commission’s proposals in the 2001 Green Paper, particularly in discussions on the Nice treaty. At that time, an outline proposal was debated but then abandoned though lack of support. Concerns were expressed and discussed then. They are still being discussed and concerns remain, which have not been addressed, about the relationship between an EPPO, Eurojust and OLAF, the European Anti-Fraud Office. The European Scrutiny Committee in the other place reported that a body such as the EPPO was,

“unnecessary, particularly given the existence of Eurojust”.

Our committee took evidence from experts of exactly the same view.

It is not the first time that this has been raised and it is not the first time that it has been debated in your Lordships’ House; it is the second report of the EU

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Committee. However, despite the criticisms of the proposed mechanism, the issues that the proposal seeks to address are very serious. That is why the deficiencies in the proposals are so disappointing and so serious. This is not an issue that has been plucked out of thin air; it seeks to address a very genuine and serious problem. The level of fraud against the EU budget must be taken extremely seriously and action has to be taken to address it. When we last discussed the issue, the Commission estimated the level of fraud at around €5 million in each of the previous five years. That is money taken from British taxpayers. Not only do we need to take action against those responsible and bring them to justice, it is very clear that far more preventive work and action must be undertaken.

The ongoing debate is not on whether we should tackle fraud, or assess whether we are tackling it or how best to tackle it, but on whether the proposal that has been put forward for the European Public Prosecutor’s Office is the best way to deal with the problem and to bring those responsible to justice. As this report highlights and analyses, there is also the question of whether the Commission recognises the concerns that have been raised and why they were not addressed in the revised proposals. As we said, the proposals previously presented clearly breached the subsidiarity principle, and the national level approach supported by existing EU mechanisms was far more appropriate.

It was therefore unfortunate and unhelpful that, as the report makes clear, despite the response of a number of national parliaments expressing their concerns and despite the Commission being forced to review the proposals in December 2013, the Commission decided not to make any amendments but to continue with the proposal as originally intended. The noble Baroness, Lady O’Loan, referred to it as a cursory review; I think that that is a correct assessment. As a result, 14 reasoned opinions were issued by national parliaments, which clearly makes the case that there are widespread concerns across the EU—we are not the only country with such concerns and reservations. Then we had the position where, seeking compromise, the Greek presidency issued an alternative text—but that is not supported by the Commission.

So where are we now? The conclusions and recommendations of the EU Committee are not based, as we have seen so often with debates on EU legislation, on whether the committee is pro-European Union or anti-European Union. I mention that because it sometimes characterises debates. We heard earlier from the noble Lord, Lord Pearson—and whether someone is pro-EU or anti-EU can colour their judgment on anything brought forward. When we had that farce of the opt out, opt in again debates on policing and criminal justice measures, it was very clear that the Government’s position was highly political, rather than a pragmatic, principled position in the interests of tackling crime across the European Union.

I have to return to this—I know that the Minister will groan with frustration as I do—but I have never, ever had an answer from the Government to my question about the practical impact or the operational value of those EU crime and policing measures that the Government have opted out of. I suspect that their

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answer is that there is very little: surely no Government want to get rid of EU-wide measures that are effective in tackling crime? Either the measures that the UK has opted out of had a practical and operational effect, or it was just a political stunt. I suspect that it was the latter.

That is where the committee’s report is so useful, both for your Lordships’ consideration in this debate and for wider consideration. I hope that the Minister recognises that it is also helpful to the Government. I saw the Government’s response rather late in the day in an undated letter to the noble Lord, Lord Boswell. I do not know when the letter was sent; I was able to get a copy only today. I certainly would have appreciated a copy of that letter much sooner for today’s debate than collecting it from the Printed Paper Office earlier.

I come back to the central point about this report: it is factual, well informed and principled. I think that the frustration of the committee in looking at these issues comes across very loud and clear. On this occasion, it is frustration—I have to say—not with the UK Government but with what appears to be, and I put it politely, some intransigence on the part of the Commission. All of us need to understand how serious the issue of EU fraud and financial crime is. Being critical of the proposals put forward in no way detracts from our wish to tackle these issues or from our understanding of how serious it is. The proposals and recommendations of the committee seek, first, to address some of the problems that have arisen from the Commission’s proposals, and, secondly, to suggest how the UK could take a lead and play a key role in seeking to ensure that those issues are addressed.

It should also be recognised that the political landscape has changed—as my noble friend Lady Corston observed—in the way that these matters are considered. Any new proposal such as this would now be subject to a referendum and legislation if its adoption by the UK were to be recommended—although that is not currently the case and it seems unlikely that it will be so. What is so disappointing is that the Commission’s position does not appear to have changed and it does not appear to be designed to try to gain as much support as possible for an EU-wide body or EU-wide co-operation around the core principles and actions of tackling crime. Had the Commission wanted to garner greater support, and if it was serious about ensuring that this was workable and that other nations would sign up to it, it would have amended the proposals and had more discussions. That frustration comes through in the report. There is no doubt that tackling any cross-border crime, including—or perhaps especially—EU fraud, benefits from EU-wide co-operation.

The objections outlined in this report cannot be lightly dismissed and I was pleased to read the Government’s response. The objections deserve far greater consideration by the Commission. On the issues that were highlighted—exclusive competence and workload—evidence was given to the committee that a new body such as the EPPO would collapse under the weight of the work it was provided with. The impact on Eurojust and OLAF is important, not just in principle, but in pragmatic, operational terms: how a new body such as the EPPO could possibly be

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effective in practice. It seems that all those who gave evidence for the report said that the complications of such a body would make it even more difficult to prosecute than it would be without the body: first, because it would collapse under the weight of the work, and, secondly, because of its relationship with the other bodies.

It is worrying—as the report and the Home Secretary’s evidence highlighted—that the lack of attention to the impact on non-participating member states creates an unacceptable level of risk that has to be addressed. When this proposal was first discussed, it was on the basis that all member states would sign up to it; that is clearly not the case, so the issue about those member states that do not sign up to it has to be properly considered. We had a similar debate on the National Crime Agency not applying to Northern Ireland, and we see it in this debate on a far wider scale; it is clear that they have not properly looked at this issue. My noble friend Lady Corston warned that the UK could be placed at risk by being, in effect, a safe haven for illegally obtained EU funds. That is why this issue has to be considered.

I do not want to repeat the detail of the report. It is an excellent report, and it does this House a great service to be able to consider such reports. The committee’s recommendations are useful and seek to find some way forward. The Government’s response—in the time that I have had to look at it—is positive, but this is a debate that will continue for weeks, months and, I suspect, possibly for years. We often say that a committee’s report is a valuable contribution to a debate, but in this case it goes far wider than that. This report is essential reading for any Government who have to deal with this matter. I look forward to the Minister’s response.

3.39 pm

The Parliamentary Under-Secretary of State, Home Office (Lord Bates) (Con): My Lords, I join others in paying tribute to the work of the wider EU committees under the chairmanship of the noble Lord, Lord Boswell, and, specifically in this context, to the work of the Sub-Committee on Justice, Institutions and Consumer Protection under the chairmanship of the noble Baroness, Lady Corston.

The report is very thorough and comprehensive, and the body of evidence that it drew upon in arriving at its conclusions was substantial. Anyone who has had anything to do with EU institutions will recognise the high regard that is held throughout the European Union member states for the work of this House in carrying out scrutiny of proposals. It is therefore doubly disappointing that the concerns, which were clearly expressed in the reasoned opinion, were not taken more seriously. The yellow card system could perhaps have worked a little better in that regard. However, the Government have very much welcomed the report. The Home Secretary gave evidence to it, and we have responded to the committee and to its specific recommendations. I now want to cover some of the principal points raised during the debate.

The Government have consistently made it clear that we will not participate in an EPPO, and we have assurances from the Commission and all member

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states that our non-participation will be respected. We continue to take an active role in negotiations to ensure that it is, and those negotiations are ongoing. I was amazed to see that the idea of an EPPO had its genesis back in 2000 or 2001, so it has been going on for some 14 years. I do not understand why, in the words of the noble and learned Lord, Lord Hope, people are not looking at the existing structure and making what we have work better rather than seeking to develop something that is new, untried and untested. That logic escapes the Government, as it has escaped the committee.

The negotiations are contentious and extremely fluid. The focus to date has been on Chapters I to V of the proposal. Participating member states regard these as internal business matters that concern only them. In their view, it is too early to have discussions about impacts on non-participating member states. The Latvian presidency is aiming to reach a partial general approach at the June Justice and Home Affairs Council, which it hopes will firm up the basic structure of the EPPO. Yet member states still have divergent positions on many of these issues.

There are other factors in play, many of which have been mentioned today. Under negotiation are separate EU measures, such as the directive in the fight against fraud to the Union’s financial interests by means of criminal law, known as the PIF directive, as well as the Eurojust regulation. The PIF directive in particular will affect how an EPPO would deal with cases on a day-to-day basis. It is therefore extremely difficult for us to know what effect an EPPO will have on existing EU co-operation mechanisms and systems. It is also still too early for the presidency and other member states to consider how an EPPO will impact on the UK. We totally accept that, as stated by the noble Baroness, Lady O’Loan, there will be very serious implications for the UK, including Scotland, and these will need to be addressed and assessed. However, there will be a continuing need to engage closely in the negotiations, and where we deem that so-called internal issues directly affect the UK we will continue to strongly raise our concerns. We also continue to make it clear that we want to strengthen the existing—

Lord Spicer (Con): The Minister says that there could be serious effects on the UK. Is one of those effects that we could have to go across to a different form of law?

Lord Bates: I do not think that is the particular effect that I was thinking about in this context. Clearly we have a system that works to a degree at the moment with Eurojust and OLAF as the two bodies that then refer back, in our case, to the Serious Fraud Office and the newly established National Crime Agency, which is doing very good work in tackling fraud of this nature. They are then prosecuted through a court in the UK. It is more that operational level which the Government are thinking about at this time.

Lord Hope of Craighead: I am grateful to the Minister for allowing me to intervene. The point that really gives rise to concerns for the Lord Advocate is confusion about competence and jurisdiction. At the moment we

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have complete clarity as to which body is entitled to prosecute in our courts. They have a complete understanding, rights of audience, and so on. Introducing this outside body would give rise to differentials and demarcations. That in itself would give rise to disputes and we would have a sort of preliminary session as to whether one body or the other should prosecute, which gives rise to delay. So it is not really a matter of resources so much as a matter of confusion, which is why the call for further detail is really so important and why I still support the line that the Government are taking.

Lord Bates: That very clearly makes the point that we are talking about, and perhaps explains why it has been impossible to find a way forward so far. I would also mention some of the challenges, which may be insurmountable, in trying to progress down this model. The Government are absolutely committed carefully to watching the negotiations and ensuring that our interests are defended.

The noble and learned Lord also asked about shared competence. Ideally member states would retain competence. It is the only way in which they could contain the elements of the Commission’s proposal that they favour. An independent prosecutor would investigate cases inside member states free of bribery and corruption. We believe that that would be the only way in which the EPPO would add any value to the fight against EU fraud. The UK would prefer the EPPO to have as little competence as possible.

In response to a number of questions raised particularly by the noble Baroness, Lady Corston, in her introduction, it is worth putting on the record and restating the fact that the UK Government are absolutely committed to the fight against fraud. We certainly cannot envisage any circumstances in which it would be tolerated that the UK could become a safe haven for fraud. We are expressing confidence in our own legal systems and existing cross-border co-operation to ensure that that does not become the case.

Lord Pearson of Rannoch: While he is on that subject, can the Minister give noble Lords any estimate of the annual amount of EU fraud across the European Union? Do we have a modern figure for that?

Lord Bates: A figure has been mentioned. I am trying to put my hand on it. I wonder whether the noble Lord would accept the Commission’s estimate of the level of fraud. Those of us who are participating in this debate are still trying to recover and see whether we are on the right track when praised by the noble Lord, Lord Pearson, on European matters. It slightly shook our confidence, but we are recovering from that, and I think we are all on the same page here.

The Commission’s estimate of the level of fraud in July 2013 in the impact assessment put EU fraud at not detectable, and therefore unknown, at around £2.55 billion a year. I am reading out this figure and am aware that it is slightly contradictory to say, “not detectable, and therefore unknown”, when the estimate is around £2.55 billion a year. But that is the Commission’s estimate.

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Baroness Corston: Can I point out to the Minister that evidence given to the EU Justice, Institutions and Consumer Protection Sub-Committee before this inquiry was that the dimension of fraud against the European Union budget was probably about €5 billion a year?

Lord Bates: Yes. They are extraordinarily large and very worrying sums of money, and this Government remain absolutely committed to tackling that. We continue to support efforts by the EU anti-fraud office to tackle EU fraud, we value the role of OLAF and Eurojust, and we want to minimise disruption to current and future anti-fraud cases if an EPPO is created.

We understand that the EPPO-to-Eurojust relationship and the EPPO’s impact on OLAF will not be discussed until later in the negotiations. We also have no further information from the Commission on any plan for reform of OLAF. I appreciate that this lack of clarity makes assessment of the impact of an EPPO difficult at this stage. The Luxembourg presidency may be in a position in the latter half of this year to begin constructive discussions on EPPO interactions with other EU bodies, third countries and non-participating member states, but that is highly likely to depend on where things stand in June. As soon as there are significant developments, we will update noble Lords in the normal way.

Lord Spicer: We always used to be told that European criminal law would not incurse itself into our law, which is a different form of law. This is surely an example of the reverse; this is the incursion of European criminal law into our common law-based system. It is very serious from the point of view of this country, surely.

Lord Bates: These are important constitutional matters. I am looking across to the Benches where we have a distinguished constitutional academic and a distinguished former member of the Supreme Court, who may offer opinion, but I think I will slightly side-step the question.

Help is at hand.

Baroness O'Loan: My Lords, the proposal is that prosecutions will occur in British courts under British law. This is not a proposal that European law will be exercised in British courts, so the reservations of the noble Lord are not warranted.

Lord Bates: I could not have put that better myself.

Lord Pearson of Rannoch: I am not quite sure whether the Minister was attempting to answer the question that I put to him, but just to be sure I will repeat it. What happens if the Commission decides to plough on with this proposal? Are we capable of stopping it or must we just live with the muddle, the increase in fraud and the damage that will ensue, thanks to the Commission’s activities?

Lord Bates: If the Commission continues down that line, there will have to be treaty changes. Negotiations will have to take place on the implications for non-member states and third-party countries as well as for member states. However, the proposal is in such flux at the

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moment that trying to judge what it is is nigh on impossible at present, let alone what a future Government’s position would be in responding to it. The fact is that we would have a position, there would be a negotiation and there would have to be agreement as to how it would operate in this country. The report, which has been presented so ably today, has highlighted the many complex issues that will need to be addressed by a future Government.

3.53 pm

Baroness Corston: My Lords, I am very grateful to all noble Lords who have taken part in this debate. While it has been a short debate, it has been an excellent one. I am very grateful to my noble friend Lady O’Loan for drawing your Lordships’ attention to the possible dimensions of fraud against the European Union, particularly so-called carousel fraud. We all take that terribly seriously and want it to be addressed, except that we do not think that the EPPO is the remedy.

I also want to reassure the noble and learned Lord, Lord Hope of Craighead, that no discourtesy at all was intended in not referring more comprehensively to the evidence submitted to us by the Lord Advocate for Scotland, Frank Mulholland QC; we found his contribution to be both cogent and persuasive and based very much on practical experience. I also want to thank the Minister for his thoughtful response.

Motion agreed.

International Science, Technology, Engineering and Mathematics Students (S&T Committee Report)

Motion to Take Note

3.55 pm

Moved by Lord Krebs

That this House takes note of the report of the Science and Technology Committee on International Science, Technology, Engineering and Mathematics (STEM) students (4th Report, Session 2013–14, HL Paper 162).

Lord Krebs (CB): My Lords, I declare two interests, first as principal of Jesus College, Oxford, where we have many international students, and secondly as chairman of Oxford Risk, a small-business spin-out of Oxford University that has an interest in recruiting the best talent from around the world.

I thank the members of the Science and Technology Select Committee for their excellent contributions to this inquiry, as well as our outstanding specialist adviser, Professor Sir William Wakeham, for his wise and expert advice and, of course, the committee clerk and policy analyst for their superb support. Noble Lords will be aware that this report is a historical throw-back to my time as chairman of the S&T Select Committee and I am pleased to note that it is the last of the reports under my chairmanship to be debated.

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I also thank the noble Baroness the Minister for the Government’s response to our report, although I have to say that the response was a little less positive than we had hoped. We made nine recommendations, of which one was accepted unequivocally, four were rejected and four were considered, I suppose. I hope that at the end of the debate, the noble Baroness will bring us an update on the Government’s thinking.

I start by clarifying what it is we are talking about. Noble Lords will be aware that there is a broader debate about measures to reduce net migration into this country. Our inquiry falls within that broader context. We looked, in particular, at undergraduate and postgraduate students from outside the UK and European Union, referred to either as overseas students or international students, coming to this country, or not, to study science, technology, engineering and mathematics—STEM subjects, as they are commonly known. We were particularly concerned with what we called “hard STEM subjects”, such as physics, maths, chemistry, engineering, computer sciences, medicine and biology, rather than the softer subjects that come under the broad heading of STEM used by the Higher Education Statistics Agency and which include courses such as architecture, building and planning, forensic science and equine studies.

When we think about students who are studying what we called “hard STEM subjects”, the first point to note is that we have a national skills shortage. The CBI estimates that 43% of employers have recruitment difficulties with STEM graduates and that, in order to fill the requirements of industry, the number of graduates will have to rise by 40% from today’s levels. Similarly, the Social Market Foundation has proposed that we need an extra 40,000 STEM graduates per year up to 2020. Another metric is the shortage of physics teachers in state schools. It is estimated that more than 500 state schools have no qualified physics teacher at all and that there is an overall national shortage of about 4,000 physics teachers. If we are to develop the high-tech, science-based economy that was referred to in yesterday’s Budget, we need to be able to educate and employ more STEM graduates.

International STEM graduates are a very important part of the higher education ecosystem. In total, there are between 50,000 and 60,000 international STEM students in the UK, if we include both undergraduate and postgraduate. Some university courses are hugely dependent on international students for their sustainability. For instance, almost half of those enrolled on taught master’s courses in computing and engineering come from outside the UK and the European Union.

In spite of our dependence on international students both in our educational system and for employment in our science and engineering industries, it seems that our ability to attract international STEM students is declining relative to our competitors. The question we asked in our inquiry was whether this decline, which started about five years ago, has been caused at least in part by the serial changes to immigration policies that have been introduced since 2010 as part of the Government’s aim of cutting net migration. Before 2010, the number of so-called hard STEM students from overseas was steadily increasing year on year, but

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since then the overall number has not increased, and in some cases there have been dramatic declines.

The picture is not uniform across subjects, across courses and across countries of origin. I will not go through all the detail of the figures we were given by BIS, but suffice it to say that the most dramatic decline post 2010 is in students coming from the Indian subcontinent. Indian student numbers declined from around 12,000 to 5,000 over the two years post 2010, while other countries, notably China, have continued to show an increase. Looking at subjects and kinds of course, the biggest declines within subjects are in engineering, computer science and subjects allied to medicine like optometry and pharmacology, and that is true whether looking at undergraduate numbers or those taking postgraduate taught master’s degrees. There has been no discernible trend towards a decline in the number of students studying for PhD degrees—research students—but the numbers here are in any case relatively small. The decline in particular subjects and courses may actually be linked to the decline in geographical origin because many Indian students who used to come here would study the subjects in which there has been a marked decline in overall intake.

The question is this: what has caused these changes? Is the correlation between the decline or levelling off in some areas and the introduction of changes to the Immigration Rules for students sufficient for us to infer causation? The problem with interpreting the trends is that, of course, we do not have the counterfactual; we do not know what would have happened had there not been any changes to the Immigration Rules. Would the increase in students from China have been even steeper? Would India have continued to rise instead of falling? We were told by officials from BIS that other factors may have influenced the trends. They mentioned, for example, exchange rate fluctuations, particularly the fall in the value of the rupee, and they also referred to more aggressive marketing and recruitment by our major competitors such as Australia, the USA, Canada, Singapore and other EU countries. But while we saw a 42% decrease in Indian students between 2010 and 2012, Germany and Canada both saw an increase, and the USA had a mere 7% decrease. Since the fall in the value of the rupee would surely have affected these countries too, it would appear that exchange rate fluctuations cannot be the whole story.

A report published last month by the British Council draws on the figures from the Higher Education Statistics Agency. It highlights how we are losing out to our competitors. Our market share of international students globally—not just in STEM, it has to be said—has fallen over the past four years by more than 4% and there is no sign of that decline slowing down. So in spite of our natural advantages—the English language and our global connections through the Commonwealth—our competitors seem to be eroding our market share. This is bad news for universities and for the much-needed skills that I have already referred to which international STEM students could bring to our industries, not to mention the soft power effect of building relationships with other countries for the future.

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We cannot be absolutely sure what has caused the slow-down and in some cases the decline in the arrival of international students, but the circumstantial evidence we heard suggests very strongly that government policies on immigration have played a significant role in preventing STEM students from coming here to study and work. I will not attempt to speculate whether this was the Government’s intention, but we know from the Statement made in another place by the Home Secretary in March 2011 that the aim of the changes to which I am about to refer was to reduce net migration and,

“to return some … sense to our student visa system”.—[

Official Report

, Commons, 22/3/11; col. 856.]

So there probably was some element of intent in that.

To summarise the evidence, we heard about three kinds of factors that might be putting off students from outside the European Union coming to this country. The first is perception, the second is bureaucracy, and the third is specific barriers. I shall say a little about each of those.

On perception, as a result of the changes that started in 2010, some overseas students appear to have got the message that the UK does not welcome them. That is great news for our competitors. I know that the Prime Minister and the former Minister with responsibility for science, David Willetts, have gone to great efforts, including travelling to India, to say that the UK is open for business and welcomes international students. But once confidence has been eroded, it is not easy to rebuild it, and I think that more work needs to be done. Although the numbers are very small, my own informal survey of international students at Oxford University tells me that there is still a perception in India and elsewhere that the UK is less welcoming than it used to be.

On bureaucracy, we heard in our evidence that the frequent changes in immigration policy—it was not just a one-off; many things have changed since 2010—and the bureaucracy associated with applying for visas is off-putting to potential students.

On both those issues, the Government in their response appeared to be pretty well satisfied with the current situation. However, I would like to ask the noble Baroness the Minister whether the Government have done any research to ascertain the perceptions of students themselves, both those who choose to come to the UK and those who considered coming here and have gone elsewhere. In a moment, I will refer to such a survey carried out by an independent body. I think that market research of that kind might help as a reality check to see where we are.

I turn now to some specific barriers. The first thing to say about the evidence that we heard is that the cost of a student visa to come here is higher than in eight out of nine competitor countries for which we have evidence. The sums of money may not be huge—they are in the order of tens to hundreds of pounds—but the implicit signal is clear: we want to make it more difficult to come here, through what we will charge you for a visa, than some of our competitors do. I think that that is a continuing problem.

Perhaps the most important barrier that we heard about is the change in the rules allowing students to stay on and work after they have qualified. Some,

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perhaps many, international STEM students, having qualified in a UK university, would like to stay on and work. This is surely a good thing, given that we have trained and educated them to provide the skills that our industry desperately needs. You would think it a no-brainer that we would want to try to persuade them to stay here.

Under the old arrangements, prior to 2012, the so-called post-study work route entitled international students to stay on and work for up to two years before applying for a tier 2 skilled worker visa if they had a job. In 2012, the post-study work route was abolished and replaced with a new scheme in which students have a mere four months to find a job, not after they have graduated but after they finish their course and have to have a salary, which is today more than £20,500, to apply for a visa. We heard that this is a major deterrent to overseas students coming here. Our time limit of four months is shorter than in any other English-speaking or EU competitor country. For instance, Germany has a period of 18 months; the USA, 29 months after STEM graduates finishing the course; and Australia, depending on the course and the circumstances, has a period of between 18 months and four years.

Look at the numbers. In the year before the old tier 1 post-study route was abolished, just under 35,000 visas were issued. In 2013, under the new tier 2 “general” route, only 4,175 visas were issued. That is an 88% drop in one year. We heard abundant evidence that the current arrangements are not only bad for UK universities but also bad for UK business. One of our witnesses Sir Andrew Witty, the chief executive of GlaxoSmithKline, told us that the new arrangements are “not great for employers” and that students have,

“vanishingly small amounts of time”,

to secure a job. As I said, the four-month clock starts ticking as soon as they finish their course, which may be many weeks ahead of the time that they receive their degree or final qualification, especially if it is a Masters degree with an element of a viva. The time that they have after they know their qualification to complete a visa application and job application is vanishingly small, as Sir Andrew says.

The Engineering Employers Federation also commented to us on the difficulties of the new arrangements, particularly for businesses that need to get a sponsorship licence. As I declared at the beginning, I am chairman of a small business. This morning we discussed there the fact that the UKVI guidance book that we must study if we want to get a sponsorship licence is a mere 144 pages long. We are not making life easy for small businesses to hire skilled STEM graduates from overseas. Would the Minister agree that our evidence from industrial employers shows that the current arrangements are really not fit for purpose? Why should the Government ignore the comments of those working hard to build a UK science-based economy?

Furthermore, an independent survey carried out by Hobsons of 70,000 prospective international students who made inquiries to UK universities between March 2011 and 2013 demonstrated that perceptions

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of visa restrictions, including the post-study work route, was a major deterrent to students coming to this country from overseas.

Let me end with, very briefly, two individual case histories that both relate to my college at Oxford, Jesus College. One student who gave written evidence to the committee is a Canadian citizen who studied medicine at King’s College London before coming to Oxford for further specialist training. She went back to Canada briefly to complete Canadian medical exams in case at some point in her career she wanted to practise there, but she wanted to come back and work in the NHS. However, in the brief period she was away, the rules changed and she was told that she was no longer eligible for further medical training in the UK. It seems to be madness for us to invest years in training a doctor and then tell her that she cannot come and work here.

My other case history is a Chinese engineering graduate from Jesus College who set up her own company, Oxford Space Structures, which is building consumer products as a spin-out of the European Space Agency’s research. Apparently, her company’s product is a light-weight travel cot based on technology developed for satellites—I look forward to buying one for my brand-new granddaughter, who arrived last Saturday. The BBC covered the story two weeks ago under the banner headline, “The global fight to attract foreign entrepreneurs”. It seems like a good news story, and indeed it is. However, when I clicked on the link to the UKTI Sirius scheme, under which the Chinese engineer was able to set up her business and which is designed to attract such entrepreneurs, I read that it is currently closed. Does UKTI have future plans for attracting overseas entrepreneurs if the Sirius scheme is now closed?

I could make a number of further comments about our report, but I prefer to hear what other noble Lords have to say. I just end by noting that our report is by no means alone in highlighting the problems to which I have alluded. In 2011, the Home Affairs Select Committee in another place advised against the closure of the post-study work route. Just last month, the All-Party Parliamentary Group on Migration published a report that reached a very similar conclusion to ours, based—as was our report—on a substantial volume of evidence from universities, students and employers. I beg to move.

4.13 pm

The Earl of Selborne (Con): My Lords, the whole House will be grateful to the noble Lord, Lord Krebs. He speaks with great experience about these matters, as we have just heard. He has chaired the Science and Technology Committee for some time. I was very privileged to serve with him and to succeed him. We are enormously grateful for the way he introduced this report. I was particularly taken by the case histories he mentioned from Jesus College. I cannot, alas, from my own background quote such specific examples but I am absolutely certain that it is only when we get to the detail of some of these astonishing cases that we realise that at the moment we seem to muddle our way into making life difficult for the very students we wish

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to attract. Before I start my main observations, perhaps I may say also how much I am looking forward to the maiden speech of the noble Earl, Lord Kinnoull.

There are two government policies that are both perfectly worthy but are proving difficult to reconcile. The first is to increase numbers of international students and the second is to deal with the historic abuses which certainly happened in the international student visa system. If we are to deliver what the Budget set out yesterday, which is a competitive economy, we simply must attract students to our world-class universities in competition with other world-class universities in competing economies. That, I am certain, is universally accepted. We have to look at how successful we are in that, the first and most important of the Government’s policies. We know that our economy’s success in creating employment will depend on an industrial strategy of building on existing strengths. For example, I could mention healthcare, aerospace, biotechnology, renewable energy, the automotive sector and many more. They are often multidisciplinary, with an interaction between chemistry, biology, medicine, engineering and much else. We will need to attract inward investment, which will come when those who have the inclination to invest are persuaded that the quality of the science and engineering is the highest, and that a reservoir of skilled persons is available to drive that knowledge economy.

We have a skills shortage. The noble Lord, Lord Krebs, mentioned the figures issued by the CBI. Employers throughout the country are struggling to meet demand, particularly for engineers, but for other skilled graduates in the science and technology sectors. The number of UK-based engineering students over the past 10 years has risen a little, but very disappointingly, from 12,700 in 2004 to 13,700—an increase of 1,000 over four years. The number of non-EU international engineering students increased by much more, by about 70% from 3,200 to 5,500. The Institution of Engineering and Technology estimates that to meet demand from employers we need 87,000 new engineers per year. Even if the Government do not accept that figure—which I accept may be special pleading—I think we all recognise just how dire the shortage can be in those specialist skills areas. Sir James Dyson, who has advised the Conservative Party on these matters, recently stated in an article in the Guardian:

“But I do worry about Britain’s ability to make, make, make. Make engineering breakthroughs. Make scientific progress. And, yes, make money for UK plc”.

I think that sums up what an awful lot of captains of industry would say and the evidence that the committee heard. We need to attract more of our UK students into STEM subjects, we need to attract more international STEM students and we need to attract more highly qualified scientists and engineers, even if they have not done their research training and graduate or postgraduate studies here, to make up our numbers.

That brings me to the second government policy, which is proving incompatible with the first: the policy of tightening procedures and qualifications for student visas. We have heard about the added complexity, cost and bureaucracy and the perception, particularly in India and Pakistan, that once you have graduated you are no longer welcome. Some pretty lurid headlines in

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the Indian papers said just that. I give credit to the Prime Minister, to David Willetts, and to other Ministers who had the thankless job of trying to reverse that perception but, as the noble Lord, Lord Krebs, said, once the perception gains currency it takes an awful lot of hard work to reverse it.

We must acknowledge that there has been historic abuse of student visas by some institutions that I would call marginal. In the past, there has been a danger of international graduates, once they finished their studies and decided to stay in this country, taking jobs for which they were overqualified—unskilled jobs—therefore increasing the competition for jobs for our nationals. These issues need addressing. Clearly, you need to make sure that, having trained people for skilled jobs, they take on the skilled jobs. It is important that we do not allow such abuses, but we must not try to deal with these problems at the expense of jeopardising that overriding national need to equip ourselves with a competitive knowledge economy.

The Government said in response to our committee’s report:

“There have been a number of myths and inaccurate perceptions, which we are determined to correct, in partnership with the sector who also have an important role to play in this”.

I hope my noble friend the Minister will concede that the well documented examples in the report of added costs and complexity which have fallen on students, the higher education sector and employers amount to more than myths and inaccurate perceptions, although there are indeed those as well. The abuses certainly needed tackling but, equally, genuine students deserved a better visa service than they were receiving in some of the instances on which we took evidence. I acknowledge that since our report there have been some improvements, although it will take years for some of these perceptions, however ill founded, to be redressed.

An example of the complexity which the Government have imposed on the system is the tier 5 route, for people who want to come to the United Kingdom for a short period to do work experience, training, research or a fellowship through an approved, government-authorised exchange scheme. As paragraph 106 of our report said:

“The University of Manchester described the Tier 5 route as ‘unpopular with both our students and employers … We are not familiar with any students actually taking a Tier 5 experience at Manchester’”.

If the Home Office really sought to work in partnership with universities to implement a reformed student visa regime—as the Government’s response suggested and as I am sure it does—it would surely have been much more productive to have worked closely with the sector in designing measures which were effective, fit for purpose, less complex and, above all, did not need changing rapidly and repeatedly at short notice. It would also have been desirable, if possible, to have a scheme which would be less expensive for students.

The Government remain determined to cling to a net migration target that includes students as its largest component. They plead the need to comply with UN regulations. The United States also includes students in its overall migration figures and then excludes them for migration policy purposes. This would also have been the sensible way for us to proceed. As international

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student numbers grow, the United States has no inducement to limit their share of this expanding market. While we insist on including students in the national migration targets, we will be conflicted and remain so until international student numbers level off or decline. The huge public benefit derived from international students coming to Britain will be compromised.

4.23 pm

The Earl of Kinnoull (CB) (Maiden Speech): My Lords, it is an honour and a privilege to rise for the first time in your Lordships’ House. In the last weeks, I have been much touched by the warmth of Members of the House, many of whom have been generous of their time and canny in their advice. I would particularly like to cite the noble Lords, Lord Laming and Lord Aberdare.

I am also grateful for the staff of the House who have helped me in very many ways. I have discovered one thing—that there is finally something for which there is no iPad app: that is, of course, navigation around your Lordships’ House. Like every other new Peer I have been lost frequently but, always with good humour and a smile, put back on the right road. I dare say that for some moons to come, they will be doing the same.

I congratulate the noble Lord, Lord Krebs, and his committee on their report. Its clarity, its appealing logic and the good body of evidence it assembled in its recommendations were a cracking read. I would like to add a very few thoughts to it, because it was settled roughly a year ago.

My first thought can be summarised in the proposition that British international business needs the international STEM student product. Here I declare an interest: I have worked for more than 25 years in British international business and for a very large number of years in senior levels at the Hiscox insurance group, in which I declare a financial interest, as I do in Schroders plc. International business naturally likes STEM graduates. They are numerate, flexible-minded and well trained. If we like them, we like the international STEM graduates even more, because they bring with them the two additional dimensions of knowledge of another culture and, one hopes, linguistic skills. When put together in a team trying to win business internationally, having a balance in the availability of all of those features is something which often, in my experience, makes the difference between success and lack of success.

It has been marvellous for all the British international businesses to be able to participate in the annual milk rounds around the various universities to attract the best and the brightest and to try to sell our businesses and the excitement of doing things in our businesses to those students. Anything that reduces the availability of the pot of good students is something which is not in the interests of British international business. I put it to the Minister that, in consideration of the matters considered in this report, the interests of British international business should always be borne in mind.

I decided to do a little private update to see what it was like in the front line; it was a very limited exercise. I contacted the department of chemistry at Oxford.

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I should declare another interest in that in the 1980s, for four very happy years, including a year in research, I studied chemistry there. The department was very helpful and sent me an enormous lot of comment and figures, most of which I have sent straight on to the secretary of the committee in the hope that, when the committee returns to the subject—as I very much hope it will—it will be of some help to it.

I would like to bring to your Lordships’ attention three things that came out of that exercise. First, my own fiddling around with the statistics showed something pretty interesting to me about the chemistry department, which is that, roughly speaking, half the chemistry product at Oxford—both graduate and undergraduate—goes into business. The second thing I was not expecting at all, as it did not arise out of any of the questions I had asked. It came from an unsolicited email from Lucy Erickson, an international STEM graduate, who was my conduit at the department of chemistry. It was through her that I was contacting quite a large number of people. I think your Lordships should hear her words:

“I am an international alumna (Canadian) and graduated from Oxford in 2011. I’ve been working in Oxford since then and have seen many contemporaries struggle with visas.

I was lucky enough to get a Tier 1 Post-study Work Visa after my degree, which allowed me to stay and job hunt in the UK for two years.

However, after I finished, the post-study work visa was abolished. This had a huge negative effect on my colleagues who graduated after 2012—it was a real struggle for people to find sponsored work in just 6 months.

For example, two of my close friends were forced to leave the UK and move back to America when they were desperate to stay here. Those are just two examples but I know of many other people who were affected negatively by the change”.

I must say—slipping back on the British international business hat—that I find it very disappointing that we were not able to get access at least to try to attract those obviously high-potential graduates into our world.

British international business tends to operate on an annual recruitment basis. It is simply not practical to run induction and training programmes more than, say, once a year. If one is doing that, it takes several months to run a process from the opening of applications to the awarding of jobs. One is therefore looking, in the interests of British international business, for STEM students to be allowed to stay in the country for at least 15 months. I will come shortly to a practical suggestion about how that might be addressed.

I suppose that, net, that is slightly bad news. However, something that is, net, very good news came out of my mini-survey—and this is the third and final point on that. It was an email from the careers service team at Oxford University which states:

“While the lack of post study work opportunities has caused concern, the new ‘Tier 1 Graduate Entrepreneurship Visa (GEV)’ has enabled Oxford to endorse 40 international graduate students to stay in the UK with their new business ideas and the scheme has been very positive”.

I was not really aware of that scheme, but I am now. In further questioning, it turned out that more than half those 40 students were STEM students. When I looked at the high-level summaries of the business ideas, I was most impressed. However, there was a mild warning

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gong. It turned out that Oxford had the impression that only 135 GEVs have been issued so far. If that is the case, Oxford has a market share—if that is the right expression—of rather more than 25%, which suggests that the GEV is possibly not well enough understood or not well enough known about by a large number of other higher education institutions in the United Kingdom. I am coming on to a practical suggestion about how that should be looked into as a matter of urgency.

I realise that touching on anything to do with immigration at the moment is, at the very least, a warm potato, but I put it to the Minister that she would be able to instruct officials during the election break to look at the two issues I have raised and to see whether it would be possible to raise the post-study work time allowed to international STEM students from four months to the minimum of 15 months that I suggested, and how to do it; and to look at the GEV point I have made to see whether there is anything in that. Officials could be asked to report back by mid-June so that the report arrives absolutely fresh on the desk of the new government Minister, who would then be able to consider the findings and act accordingly and rapidly.

4.33 pm

Viscount Hanworth (Lab): My Lords, we must congratulate the noble Earl, Lord Kinnoull, on a most interesting and engaging maiden speech, which conveyed some important and compelling evidence. His speech is a contribution to a debate on a most important issue in which, remarkably, three earls are speaking. The noble Earl, Lord Kinnoull, trained and practised as a lawyer and has spent 25 years in the insurance industry. We have just learnt that he is also a chemistry graduate. He will bring significant professional expertise to the deliberations of this House, and we can look forward to his well informed contributions in the course of what he has promised will be his regular and diligent attendance.

The excellent report of the Science and Technology Select Committee, which we are debating today, was published in April 2014. Since then, almost a year has passed, during which time the policies that the report wishes to see amended have been inflicting severe damage on our universities. The problems that the report instances have arisen from measures that have been enacted in response to an unguarded declaration of the Prime Minster concerning the number of immigrants to the UK. In a speech in March 2013, the Prime Minister declared that net migration needs to come down from hundreds of thousands per year to just tens of thousands. It seems that no serious thought had been given, in advance of the statement, to how this objective might be achieved.

In one unguarded moment the Government became hostage to the right wing of their own party. They suffered acute embarrassment at the failure to come anywhere near to achieving the declared target. They have handed ammunition to another party, which in contrast to the leadership of the Conservatives, is strongly opposed to our membership of the European Union, which allows citizens to migrate freely within its territories. The ineptitude in that connection is

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staggering, or at least it would be so had we not witnessed other, similar instances of such extemporary and troublesome policy declarations. The collateral damage that has been inflicted on the universities by an attempt to staunch the flow of immigrants in fulfilment of the policy has been immense.

To understand how foolish was the statement concerning net migration, one need only glance at table 1 of the committee’s report, which shows that in 2012-13 the total number of immigrants, which was roughly 500,000, was divided almost equally between immigrants from the European Union and from elsewhere. Short of leaving the Union, the Government can exercise no control over the numbers of European immigrants. Unless those people can be disbarred from coming to the country, there is no way in which net migration can be reduced to the tens of thousands. When we look at the figures for non-EU immigrants, we find that in the year in question nearly 170,000 out of 240,000 immigrants were entrants to courses at publicly funded higher education institutions. That is a fraction in excess of two-thirds. It is only by radically reducing those numbers that any significant reduction in net migration could be achieved.

In providing courses to overseas students, the university sector constitutes a major export industry. It appears that the Government have been prepared to curtail those valuable activities of the sector solely for the purpose of saving themselves the embarrassment of a failing political agenda that has arisen from a foolishly unguarded statement.

The committee’s report has urged the Government to remove students from the net migration figures. That was also urged upon the Government, almost unanimously, by those who participated in a previous debate on higher education. However, the Government have been intransigent on this point. By removing student migrants from the total, the Government could surely cut the numbers of recorded immigrants at a stroke. Their unwillingness to do so is almost incomprehensible. The only conceivable reason for not doing so is that by removing the students from the figures the Government would be denying themselves a valued opportunity to show that their policies are having an effect on the numbers of immigrants.

It may be that the Government have begun to believe their own propaganda. They may be imagining that, contrary to all the evidence, many of the non-European Union students are intent on exploiting the opportunity to come to the UK as a means of gaining permanent residence or of neglecting their studies in order to exploit other opportunities. The few instances when that has been the case have been widely publicised in support of a highly erroneous perception.

The supposition that a large proportion of the students have fraudulent intentions goes some way towards explaining the nature of the numerous additional provisions and restrictions that have been imposed upon overseas students. The conditions of the tier 4 student visas have been made increasingly stringent. The rules regarding the funds for their maintenance and for paying their university fees, which the students must have in their bank account if they are to be allowed to join a course, are now disbarring many of them. Perhaps the greatest discouragement to prospective

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students has been the way in which the routes to post-study work, which is so valuable to postgraduate and doctoral students, have been closed.

The increasing burden of regulations has been administered in a careless way. Changes in the regulations have occurred without sufficient prior announcement to allow the institutions of higher education to adapt to them. They have often occurred midway in the cycle of student recruitment, which has created severe difficulties for the institutions.

The rule changes have also had very distressing impacts on individual students, who have discovered that the suppositions under which they embarked on their courses are no longer valid. Thus, for example, the work experience components that may have been an attractive feature of many courses have, in certain instances, ceased to be available at a midway point in the course, in consequence of the new regulations.

One applicant to a doctoral program, with whose case I am well acquainted, was subjected to a test of his competence in the English language. This person originates in one of the central Asian republics. His written English is superb but his spoken English is hesitant and strongly accented in consequence of his lack of practice. On these grounds, he has been disbarred from pursuing his doctoral studies in the UK under the supervision of one of my academic colleagues.

I must now respond to the fact that the committee’s report is devoted primarily to the impact of the immigration regulations on the recruitment of students in science, technology, engineering and mathematics. A large proportion of these students are at the postgraduate level pursuing masters or doctoral studies. In their absence, many of our MSc courses would not be viable and would have to close. In effect, we depend upon overseas students for the maintenance of our scientific and technological skills. We shall continue to do so until a scientific and technological revival in the UK allows us to fill our courses with native students. For this purpose, we should need to provide adequate funding for our postgraduate students.

I should take the opportunity now of drawing attention to the fact that we are failing to produce sufficient numbers of scientists, technologists and mathematicians to staff our universities. A cursory glance at the staff list within academic departments will reveal that the majority of them are non-native. In the past, we have been able to celebrate the fact that our academic staff have been drawn from many other nations. We have had a genius for converting such people into British citizens with strong allegiances to this country, from whom we have profited greatly. Such circumstances no longer prevail.

Nowadays, the numerous overseas recruits to our university departments are typically short-stay visitors. In some academic departments, in my experience, a staff turnover of as much as 30% per annum is not unusual. If such circumstances are to continue, and there is no indication that they will not do so, then the effect upon the quality of higher education in the UK and upon our scientific research capacity will be dire.

It is typical when discussing in this Chamber the circumstances of UK higher education to hear fulsome assertions regarding its outstanding quality and world-beating status. Such assertions usually come from

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people who are only tenuously connected to higher education. They relate to past glories and to their lingering effects. The view from inside could not be more different; and the well informed prognosis for higher education in the UK is a grim one, which foresees a terminal decline.

4.42 pm

Lord Rees of Ludlow (CB): I thank the noble Lord, Lord Krebs, for chairing this study, and for his comprehensive speech. I echo his thanks to the staff of the committee, and I declare an interest as a member of Cambridge University.

We must be aware that overseas students display huge diversity in interests as well as nationality. The bulk of them are doing undergraduate degrees, but those doing masters or doctoral degrees tend to be a larger proportion of all students in those categories. We are in an international market for talent in which our strong higher education system ought to give us an edge. My concern is that the various obstacles being put in the way are preventing us from achieving our potential.

The most insistent theme of our committee’s evidence was the general regret at the removal of the post-study work visa scheme in 2012 and unease with the more stringent and vexatious requirements that have replaced it. As the noble Lord, Lord Krebs, has said, a specially compelling witness was Sir Andrew Witty. He came as chancellor of Nottingham University but spoke with the authority of a chief executive of a major company, GSK. He noted, with regard to the four-month limit, that the clock starts when the students finish their course, not when they formally graduate. This puts them under even greater time pressure in seeking a job. Some try and fail, but too many are less confident: they assume failure and do not even try. Sir Andrew recommended a year from finishing the degree, which might then obviate the need for the specific entrepreneurial route. In the US, for instance, students are given a five-year visa for a four-year course, which makes it possible to gain work experience without hassle. Germany offers 18 months.

It was pointed out, particularly in evidence from Leicester University, that for students from India or Pakistan the work experience is perceived as a highly valued supplement to one-year master’s courses. Let us not forget what a huge investment in rupees Indian students make and how life-changing their experience here can be. The decline in perceived opportunities tilts the balance, in their minds, in favour of the US, Canada and elsewhere. Of course, such perceptions feed back to India and weaken the field applying here in future years.

Another issue that we raised is the salary threshold of £20,700. The Government’s response was that this was not too high and that its purpose was to prevent people staying on in unskilled occupations. However, we were told in evidence that new graduates in a subject such as pharmacy, without professional accreditation, would not get an offer at that level, but they would get lower-paid jobs offering the kind of valuable experience that would help them and convince them that they had made the right decision coming

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here. In fact, a similar concern was expressed recently in a radio interview with no less an authority than David Willetts, who pointed out that the threshold salary may be appropriate for London but is not so easy to achieve in the Midlands or the north of England, and so has the effect of sucking overseas graduates into the south-east. He suggested that there should be flexibility, with rather lower wage requirements in other parts of the country. Technical jobs paying less are genuinely valuable work experience—certainly not the same as unskilled work. The potential of such work is part of the package that allows students from India and Pakistan to get good value from the sacrifices that they make to come here.

A further impediment is that employers, especially in SMEs, continue to perceive complexity in the current rules for becoming sponsors. This was clear from the evidence, despite the official claims that it takes only 30 minutes to do so. The doctorate extension scheme is welcome, but again there were concerns that the application was not straightforward because the application has to be made no more than 60 days before the uncertain completion date of a PhD.

Subsequent to our report, further measures have been introduced by the Immigration Act 2014. These need to be carefully monitored. For instance, the NHS surcharge will increase application fees significantly. For a PhD student on a four-year course, visa and associated costs will increase from £310 to around £1,000, with the same amount for each dependant. The pilot scheme in the West Midlands for immigration checks by landlords would need thorough assessment before any decision was made to roll out the requirement nationally. There is a risk that it will deter landlords from renting to overseas students, especially in university cities where accommodation is already scarce.

The Government did not accept our committee’s recommendation for a biennial review to monitor the impact of frequent policy changes such as these, which are widely reported overseas and fuel the perception of the UK as inconsistent and unwelcoming to international students. Universities would like a period of stability, not only for their planning purposes but because it would give confidence to potential applicants. Of course, there was huge relief in January when there was no follow-through on the Home Secretary’s proposal to abolish even the four-month grace period, but the fact that this was prominently floated will surely in itself have deterred some applicants this year.

Many are perplexed at the Government’s reluctance to distinguish in their public pronouncements and policy between students and other immigrants—something that has been urged by several other committees apart than our own. Students are a substantial fraction of non-EU arrivals. As we know, the Government are being pressured about the gap between their 100,000 target and the three-times higher reality. It seems baffling that they are not eager to highlight the distinction and thereby at least blunt the manifest contradiction between the rhetoric from the Home Office and that from BIS. Perhaps the Minister could clarify that.

There is a growing worldwide demand for young people with STEM qualifications, and indeed with expertise in other fields of learning. As has been said,

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our universities are especially well placed to attract students at all levels: undergraduates, those who seek the professional development that a taught master’s course provides, and those seeking PhDs. In the competition for talent, our traditional rivals have been the US, Canada and Australia, but mainland Europe is more attractive now to students, especially from Asia, because courses are also offered in English.

We should surely also prepare for the disruptive effects of distance learning. So-called massive, open, online courses—MOOCs for short—have perhaps been overhyped, but they have their greatest potential at the level of vocational master’s courses, especially in subjects that do not require laboratory work. These MOOCs offer the UK an opportunity; the Open University especially has a real chance to excel in marketing this kind of distance learning. Its downside will be that as online courses develop, expensive residential courses in the UK will lose their allure unless enhanced by the genuine prospect of work experience, which requires relaxing visa regulations.

It may not be easy, even with optimum policies, to sustain the level of foreign students, the best of whom are surely an asset who should be welcomed and encouraged to stay. That is why we must surely avoid the own goals stemming from erratic and burdensome regulations. Foreign students who stay enhance our talent pool; those who return can forge links with this country that enhance our soft power. Overseas students should be welcomed—their paths should be smooth.

4.51 pm

The Earl of Dundee (Con): My Lords, all of us will be grateful to the noble Lord, Lord Krebs for introducing this debate. We have also heard from the noble Earl, Lord Kinnoull, in what was an excellent maiden speech. The House is very fortunate that he has joined us and to be able to look forward to his future contributions.

To attract here students of these subjects, in particular those from overseas, I would like to make a few brief points. There is an obvious need: to increase foreign student numbers which have been declining; to make them feel welcome and thus also, in the first place, to simplify their process of application for entry; to encourage them to stay to find employment with UK businesses and industry; for proper monitoring of our policies and assessments of their results—these to be viewed against those of our competitor countries; and for our Government to be alert to other associated and constructive expedients—for science, technology and mathematics not least would such include the considerable scope, to mutual advantage, for student exchanges between United Kingdom institutions and those elsewhere.

The noble Lord, Lord Krebs, mentioned falling numbers; my noble friend the Minister may point out that there has been a slight recovery. This can be noticed in recent figures for Indian students coming here. There have also been useful government missions to build up trade and investment between the United Kingdom and India. That apart, there is still a much reduced number of students coming here from India and other states.

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Several aspects may put off foreign students, and each of these is in our power to change. There is a need for greater clarity in the publication of immigration statistics. So far, our presentations do not sufficiently distinguish student figures from those of all other immigrants. This category is overseas students in possession of tier 4 visas. Does my noble friend the Minister agree that clear publication of their numbers as a separate immigration component would achieve two purposes: first, the removal of a government policy anomaly, where a Government restrict general immigration on one hand yet seek to increase student immigration on the other; and, secondly, that it would serve to help reverse the impression of many potential overseas students, to which many of your Lordships have referred, that they are unwelcome in the United Kingdom?

Foreign students are discouraged as well by unnecessary remaining complications within the application process itself. There is a strong case, therefore, for its simplification and streamlining, and the Select Committee has recommended that. Might the Government perhaps pursue this recommendation?

The Government have introduced a scheme for foreign students to stay on as graduate entrepreneurs. This is to be welcomed. It also connects to arrangements for students to complete PhDs and for corporate interns. Nevertheless, as the noble Lord, Lord Krebs, and others have stressed, the Select Committee has expressed much concern about the government scheme that has replaced it, named post-study work. It recommends that the Government should reinstate the latter. Does my noble friend concur that, if combined, the PSW and graduate entrepreneurs scheme together would send out a very positive message? Thereby, foreign students would have much greater opportunity than they do now to prolong their studies and to take up employment with United Kingdom business and industry.

We also need frequent reviews of the effect of policies and of how our results compare with those of competitor countries. Does my noble friend support this? If so, might the Government introduce those constructive procedures for monitoring and assessments? Whether in the humanities or sciences, the pursuit of opportunities for student exchange is always worth while and to the advantage of all. It also reflects a paradox. In this case, it demonstrates how co-operation transcends competition while still retaining all the benefits of the latter. That comes from academic exchange and working synergies between universities and institutions in different countries. As a Council of Europe parliamentarian, it is a great privilege for me to have been asked to help with programmes for such exchanges between the United Kingdom and elsewhere.

At the same time, as the noble Earl, Lord Kinnoull, reminded us, the United Kingdom must not fall behind the standards of competitor countries, which equally seek to attract foreign students to their own economies. There is every good chance that we will not do so and, instead, build up very good practice. Meanwhile, and to that end, we are fortunate to be guided by this useful Select Committee report.

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4.57 pm

Lord Stevenson of Balmacara (Lab): My Lords, I begin by thanking the noble Earl, Lord Kinnoull, for his very fine maiden speech, which has already been referred to around the House. We are all very grateful to have him with us to join in our discussions. I send my particular welcome to him as a fellow chemistry graduate from the same university, although, I think, of a different generation. In fact, I think that we did the same thing, which was to take the best of the chemistry courses on offer and then immediately go off and do something else—in my case, an accountancy and professional administration degree. Nevertheless, the lessons that we learnt will stay with us. Indeed, the noble Earl was able to use his business experience to contribute directly to this debate and we were all informed by that. His point that international businesses need international STEM graduates is very important, and it is a theme that comes back throughout the report.

It is no disrespect to the noble Earl to say that the other people who have contributed to the debate have also made it a very high-quality one. The point was made that it was rather weighted on the scales towards the aristocratic side, with three earls and a viscount. Indeed, I got so freaked by that that I decided I had better have some reserves, so I brought along my good and noble friend Lord Grantchester. Unfortunately, he scarpered just before he had the chance to bolster up what I was about to say, but I am sure he will come back.

I thank the committee and particularly the chairman, the noble Lord, Lord Krebs, for an excellent report on international science, technology, engineering and mathematics students and for trying to tease out some helpful recommendations for the benefit of your Lordships’ House and, indeed, of the Government. Once again, it is fair to point out that there has been a delay of nearly a year before your Lordships have been able to discuss such a good report. That is to be regretted.

It is a fine report and it is in the best traditions of the House. It is one that we expect to see but it is also important to recognise how good it is. It is a process of taking evidence, reflecting on and sifting through it, and then reporting carefully on the issues and offering suggestions to the Government on how many of those issues might be resolved. Sadly, as the noble Lord, Lord Krebs, said in his introduction, the Government’s response to the report is rather defensive and, in some cases, rather brusque to the point of rudeness. I may be wrong but I wonder whether anybody else got from the response, as I did, some Orwellian overtones, with the assertive mantra: there was a problem; the government have acted; there is therefore no longer a problem; and no further work is required. For example, the introduction to their response states:

“The Government has reformed the student visa system to cut out the abuse of the system, and will continue to do so. We have also taken steps to continue to attract talented international students to our world class universities. We have been very clear that there is no limit on the number of international students and there are no barriers to studying in the UK”.

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It is pure aspiration and rhetoric. It is not evidence-based or thoughtful in terms of the report. It continues with the rather chilling phrase:

“There have been a number of myths and inaccurate perceptions, which we are determined to correct”.

That smacks more of Room 101 in the Ministry of Love than a considered response from BIS and the Home Office.

In my view, Britain has long been and must remain an optimistic, outward looking and confident nation. When more people travel and trade physically and virtually across borders than ever before, no country can pull up the drawbridge. Our economy and culture have benefited immensely from those who have come here through the generations. We should be proud of being British and we should rejoice in the confident British diversity that occurs right across the country, and which London showed off for us in Olympic year. As we have heard today, the impact of the Government’s student visa policy is both economically illiterate and culturally bankrupt. Bringing more talented students, whether from China, India or Brazil, to learn at Britain’s universities not only brings in substantial investment in the short term but helps Britain to build cultural and economic links with the future leaders of the fastest growing economies on earth.

Britain has a long and proud history of being the destination of choice for potential students from around the globe. Our universities are highly regarded and the UK provides a rich, diverse and safe environment to study. All of this is detailed in the report. It seems to me that, given the comparative advantage that we have established, and the place we hold within the world, UK higher education should be front and centre of an active government strategy to generate growth. If we are going to keep up with our competitor countries we need to be bringing in more talented students from around the world to learn at Britain’s top universities. It not only brings in substantial investment but helps Britain to build important cultural and economic links—the soft power referred to by other speakers—and we should be absolutely getting behind it and backing it all the way.

Why is the Government’s policy so confused? Why is it so destructive? It is already having negative impacts, as we have heard, on the perception of the UK as a good place to study. A recent NUS survey of international students found that 40 per cent of those who were here said that they would not advise a friend or relative from their home country to come to the UK to study. That does not seem to be the best possible advice. Everybody knows that the best advertising for any product are the clients and customers. If they turn against it, there is a problem.

As we heard today, the main charge is that there is a causal relationship between the immigration changes brought in by this Government and the erosion in our market share of students coming to study STEM subjects. The evidence is that there is a perception around the world that Britain no longer welcomes its international students. As we heard, the Indian subcontinent has been one of the worst examples of that. We think that many of the students who would previously have come here have gone to Canada, Australia

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or America. We doubt whether that will ever revert back to the normal situation. The evidence is difficult to prove. As was said, there is no test that could be carried out on what would have happened if the world had not changed, but it seems to be convincing that so much has happened within the period of four years in which these changes have come in. Changing the rules continuously, as has happened, and as documented in the report, fuels that perception, whatever the Prime Minister or Ministers may say.

If bureaucracy is intensifying and the costs are going up, we are hardly being competitive. The world market is competitive and we are falling behind in what we can offer in terms of easy access to courses and then in terms of graduate employment, as shown in the report and raised by a number of noble Lords. We are not able to sustain our postgraduate courses, with all that that implies in terms of what the impact might be on home-based students. It also has an impact on SMEs, as employers’ organisations have pointed out, so it is a perfect storm.

With one or two exceptions, we seem to be agreed in the Chamber that there is a problem and that the solutions put forward by the Government will not clear it up. But as the noble Lord, Lord Rees, said, what is intriguing is why this has happened. The department responsible for higher education, BIS, has in effect been rolled over by the Home Office and the policies of immigration have trumped the policies of growth. An initial idea, which was probably right in instinct and correct to carry out, to clean up what seems to have been a really troublesome FE sector in terms of immigration, has been used to drive a coach and horses through a sector that we should support and cherish.

Can the Minister reconcile what is set out in this excellent report with the aspirations set out in her department’s July 2013 publication, International Education: Global Growth and Prosperity, which is quoted in the Select Committee’s report, which states that international students,

“boost the local economy where they study—as well as enhancing our cultural life, and broadening the educational experience of the UK students they study alongside”.

Is that still the case? Can she confirm that it remains the Government’s intention to leave the immigration system as it is? If so, can she explain how the Government can say that they believe that it is realistic for numbers of international students in HE to grow by 15% to 20% over the next five years? I do not see the evidence to support that. Can she set out for us today the practical steps that the Government are taking to show that the UK values international students, will provide a warm welcome and support while they are here and will keep in touch after they go home?

5.06 pm

Baroness Williams of Trafford (Con): I thank all noble Lords who have participated in this debate today and who have supported the inquiry, particularly the noble Lord, Lord Krebs and the noble Earl, Lord Kinnoull, who made his maiden speech today outlining some of his experiences, which were extremely interesting. I also noted, as did the noble Lord, Lord Stevenson,

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that we are surrounded by three earls and a viscount today, so I stand humbled before the committee and the noble Lords who spoke.

The quality of the debate that we have had today underlines just how important it is to attract and harness the talent across science, technology, engineering and maths, otherwise known as STEM, and how important it is to the economic and social well-being of our nation.

In 2013-14, we welcomed 179,390 new entrants from outside the EU to UK universities, including 56,340 STEM entrants. This year there has been a 6% increase. That is an additional 3,400 STEM entrants from outside the UK. The UK enjoys a 13% share of the international higher education student market. Competing recruiting countries such as Australia, the US and Canada are developing national education brands and marketing activities alongside competitive visa policies. All noble Lords referred to that in some way or other. They raised concerns that changes to our visa regime for international students and specifically those on post-study work options have been a big deterrent. I will try to argue that the latest data show a much more complex and somewhat patchy picture.

There was a 7% growth in visa applications last year and 18% since 2010. That includes an 11% increase for the Russell group. The Government have been very clear that there is no limit on the number of international students and there are no barriers to studying in the UK. It is also true that the Government have made reforms to the student visa arrangements, as many noble Lords pointed out. I will briefly outline why.

Under the system that the Government inherited, there was evidence of the system being abused. My noble friend Lord Selborne alluded to that. An example of the scale of the problem is the findings of the National Audit Office which reported that up to a quarter of the international students who came to the UK in 2009-10 may have come to work rather than to study and 26% of international students at private colleges were potentially non-compliant with immigration control.

Since 2010 the Home Office has revoked more than 860 sponsor licences. The system needed reform, with a series of measures to tackle the abuse, while continuing to attract the best and brightest students, and we believe that we have struck the right balance. Striking the right balance does, however, mean some tightening up of the system in some areas. These changes were entirely necessary to eliminate non-genuine students and to remove those providers not supplying genuine high-quality education. We believe that these changes are helping to protect the reputation of the UK education sector.

The current visa system is a good one but the committee is right to advise the Government to keep the system under review so that we can remain competitive and respond to the changing needs of students, providers and employers. The report recognised that many factors influence international students when they decide where they would like to study and it can be,

“difficult to tease out the motivations of prospective international students with any great certainty”.

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I will now address some of the committee’s key recommendations. The committee recommended that we should change the way we calculate our net migration statistics and not include students when considering immigration policy. A number of noble Lords mentioned this, particularly the noble Viscount, Lord Hanworth. The Government use the UN definition of net migration, which covers all those coming for 12 months or more, including students. There is no need to change the way we measure the statistics and this would not make any difference to our student migration policy. As the Prime Minister said before the Liaison Committee on 13 May 2014:

“We do not need to make a change to our immigration policy or the way we measure statistics in order to have an incredibly positive offer to students around the world”.

The committee also called for a period of stability. We are all aware that there has been significant reform during this Parliament. However, it is important to note that many of the changes to tier 4 have been undertaken in response to requests from sponsors to simplify the system or to provide more flexibility. While we seek to minimise the frequency of changes, it is important to retain flexibility and to react quickly where there is evidence that the system is being abused. That is why the Government are keen to work with the education sector and have set up the education sector forum with those institutions which recruit international students and have the practical experience to identify unnecessary obstacles and work with the Government to overcome them.

The report also recommended that BIS establish a working group to review the effects of a reduction in international STEM students on STEM taught masters courses. The Government response highlighted the fact that the International Education Council, which was set up following the publication of the international education strategy in 2013, would look annually at the trends of international students coming to the UK. I can confirm that the council met earlier this week and the matter was on the agenda. The minutes of the meeting will be published on the GOV.UK website in due course.

We also recognise that there is a job to be done in better communicating our offer. A number of noble Lords talked about this. Other nations are ready and able to pounce on any chink in our armour. In a world of mobile technologies and social media, any perceived difficulties within the UK will be played back not only by the media in our key competitor nations, such as Australia, Canada or the US, but more directly and more powerfully as students share their experience with their peers in Asia, India and the Middle East.

I am pleased to note that the Government have made some progress in improving the information that is available for prospective international students. The Home Office strategic communications team has developed a suite of products for use by stakeholders and migrants which are updated quarterly. The Government are very keen to demystify the student offer for international students, and I am pleased report to the House that the immigration and universities Ministers have agreed to continue to develop

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communications material for international students, their sponsors and employers to explain the different work rights.

I should like to focus briefly on a country which was mentioned by a couple of noble Lords, and that is India. We have seen a fall in the number of Indian students coming to the UK. Our response has been direct and unequivocal. The Prime Minister visited India and stressed that the UK welcomes genuine international students. A series of Ministers, including Vince Cable and David Willetts, have visited India to reinforce the message. Sir Mark Walport, the Government Chief Scientific Adviser, has also visited and reiterated these points. The British Council has used the education element of the GREAT Britain campaign as part of a series of exhibitions and seminars across India to promote the opportunities open to prospective students interested in coming to the UK.