My hon. Friends have mentioned the difficulties of expecting children with vastly different ages to share a bedroom, and the difficulties experienced by families with a disabled member. Let me lay out the nature of the Government’s policy. A family with two children

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under 10 in a three-bedroom house will now need to move to a two-bedroom house. When a child turns 10, they will need to go to a three-bedroom house but if one child moves out, they will have to go to a two-bedroom house. If both children move out, they will have to move to a one-bedroom home, but what about if one child wants to come home? What about the cost of this measure? Will children have to move school? What happens to the community? This policy is nonsense.

Others have spoken in detail about the situation of separated couples, but I have one question: will mothers allow their children to stop with their father overnight if the father is in a bedsit and the child has to share a bed with dad or sleep on the couch? The Government just have not thought this through.

I have already spoken in this House about Isabel and her son Carl who has Down’s syndrome, so I will finish by talking briefly about two people who came to see me last week as a result of my asking the Prime Minister whether he had ever met anyone who was losing their home because of the bedroom tax. The Prime Minister replied that he often met service people in his constituency, although he did not tell us whether they were losing their homes. Stephen and Bill came to see me because they are ex-servicemen.

Stephen and his wife told me that for them this policy feels like persecution. Stephen served for 17 years in the Air Force and then continued to work. He became ill and lost his house; he has had two back operations and has irritable bowel syndrome. His wife is suffering from depression. Stephen has been in his council house for 22 years and told me that he feels that he has made a huge contribution to this country and cannot understand why in his hour of need the country is turning its back on him.

I cannot talk about all of the situation of the other person, Bill, who came to see me, but he lives in an adapted house with a carport, ramp, walk-in shower and stair-lift. Bill is disabled, has anxiety and depression, and IBS. He lives close to his family and gets support from them—and he gives them support; his son is serving in Afghanistan. He is anxious about the bedroom tax and is trying to be proactive, but because of his needs, accommodation is limited. Bill says that the only thing he has to live for in his life is his fishing and he is worried to death that he will not have room for his fishing gear in any other accommodation. He is considering suicide.

This is not scaremongering; it is the reality of people’s lives.

Several hon. Members rose—

Mr Speaker: Order. I am afraid that the time limit must now be cut to six minutes.

6.23 pm

Nia Griffith (Llanelli) (Lab): In Wales, some 40,000 households will be affected by the under-occupancy penalty or bedroom tax, which is 46% of working-age social housing tenants who receive housing benefit. That is one of the highest percentages of any area in the UK, well above the UK average of 31%, and is due to the nature of the housing stock which is mostly three-bedroom houses. In my county of Carmarthenshire the

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housing department has identified 1,341 households that will be hit, 860 of which are in my constituency. At least the department is being proactive and trying to find people and help them, but it is an impossible task.

We have heard a good deal today about the range of people who should be regarded as exceptional cases, and I endorse the idea that people such as foster carers and those in specially adapted properties should not be penalised. The fact remains, however, that many people of working age in social housing are vulnerable individuals but do not count among those who will receive discretionary treatment. They have often been allocated social housing because they are in need—because they have, for example, mental health problems. Clearly, the discretionary money falls far short of what will be needed to cover the whole of the shortfall for those in need.

Where does that leave us? All hon. Members understand that some households have a spare room. That is simply because the overwhelming majority of council housing and housing association housing is three-bedroomed. In an ideal world, we would free up the three-bedroom properties for families who need them, but that cannot be done overnight. People have sometimes had to accept those homes because they are the only ones available. In recent years, housing associations have built one and two-bedroom properties, and Carmarthenshire county council, my local authority, is building some small bungalows, but they are already in great demand, and there is no way that local authorities can suddenly build enough new properties to accommodate all those who will be affected by the under-occupancy penalty.

Many of those who move to the available one and two-bedroom properties are pensioners, who are mercifully exempted from the bedroom tax. The problem, however, is simply that there are not enough one and two-bedroom properties. My hon. Friend the Member for Swansea West (Geraint Davies) spoke of incentives, but even without incentives, many people want to downsize when their children grow up—downsizing means that properties are easier to look after, and people often recognise the social value of giving up their property to a family and moving into a smaller one. However, they cannot do that if there are no properties to move into.

Let us look at the reality of what will happen. Let us be clear: people on low incomes just do not have extra money to cover the extra rent. As is explained in the House of Commons briefing, the amount of money that people receive in benefits has never been based exactly on need. There has always been a compromise between need and what could attract political support, but the fact remains that people on benefits live on scarcely enough to cover basic needs. There is already a massive squeeze on household budgets, with relentless price rises for essential items such as food, energy bills and bus fares. Those on the lowest incomes suffer the most, because they have no spare cash and have already cut back on anything that is not essential.

Many people will try to stay where they are to avoid disruption to their family and their children’s schooling, or the increased bus fares they would have to pay if they moved away. They will desperately try to pay the additional rent from their meagre budgets. That will mean people turning off heating and cutting back on food, and trying their utmost not to spend anything extra. However,

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the chances are that, despite their best efforts to keep their secured council house tenancy, because they value that and realise how difficult life is in the private sector, where they are pushed from pillar to post, they are likely to fall into arrears. That will have a negative impact on council housing and housing association budgets and cash flows, and leave less money for maintenance and new build.

Once a family falls into arrears, their problems will spiral. They will be prey to loan sharks as they try to make ends meet. What happens if they are evicted? The council will have to re-house them. They could end up in bed and breakfast or other privately rented property, all of which would be more expensive than the amount saved by imposing a bedroom tax on the extra room in their house. The trouble is that some private accommodation is only temporary—the family will move from pillar to post, with all the educational disruption that that will cause for their children.

The private sector has problems, because there is a lot of pressure from young professional couples who do not have the job security or deposit to buy their own homes. They are pushing up prices and taking the more desirable private properties. Another problem is that, although we have passed legislation to license landlords, it is taking a while for local authorities to do so. There is a lot of backlog in driving up standards and decency in private sector homes, which are often sadly lacking.

Just one aspect of that problem—letting agents—is being covered by my hon. Friend the Member for Rotherham (Sarah Champion) in the debate in Westminster Hall this afternoon. There is so much to tackle in the private sector to bring it up to standard.

If we take into account the cost of administering discretionary payments and the difficulties of trying to share them fairly, when there is clearly not enough money to go around, we realise that it would be far better not to implement the bedroom tax. It would be far better to stimulate growth, get more jobs and more people in work, and therefore increase the tax take. There would then be a chance to get the deficit down. In the meantime, we could use the money from the 4G sell-off to build more homes so we have less of a housing crisis.

6.29 pm

Jim Shannon (Strangford) (DUP): I thank the hon. Member for Banff and Buchan (Dr Whiteford) for bringing the motion before the House. This is a serious issue that is proving to be stressful for a great many vulnerable people—the elderly, single parents and disabled couples—and that stress is affecting their health. That point has been made eloquently at Prime Minister’s questions and throughout this debate. The Minister is greatly respected and well thought of in all parts of the Chamber for the way he responds to a great many points. My questions and comments are meant constructively, and I would like him to respond to them.

In Northern Ireland, we are faced with 2,000 households in social housing—whether housing executive tenants or housing association tenants—facing a major shortfall in their rent of up to 25%. That means a tremendous number of families are unsure of how and where they will live. I am aware that in many parts of Great Britain

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there are many more smaller social homes with one or two bedrooms, and tenants who want to move have a realistic chance of downsizing to a property the cost of which will be covered by their benefit. That is not the case in Northern Ireland and, while we have started to build smaller apartments and homes, we have nowhere near the necessary number to begin to implement this reform and to move people who cannot afford to pay the difference.

I was a councillor for 26 years before I came to this Chamber. One measure that I pushed for as a councillor 20-odd years ago was for the executive to upgrade its one-bedroom bungalows to two bedrooms. It has taken nearly 20 years for that to happen. Today, we wish we could turn back the clock—the film “Back to the Future” comes to mind. The very thing that we pushed for 20 years ago has to be turned back—a matter of great concern. The Minister for Social Development in Northern Ireland has no option but to implement these reforms, as the Northern Ireland block grant does not allow for a delay. However, his Department is in no way, shape or form ready to follow through on the legislation that has come before this House.

In Northern Ireland, it has been estimated that there will be a housing benefit shortfall of £10 million per year, and I doubt that there are many people on housing benefit who can afford to make up that money themselves. The Minister for Social Development, Nelson McCausland, has said:

“The best way forward is the use of discretionary housing payments. We have increased the money there for those that may be affected.”

Yet again, it must be stressed that the Northern Ireland Executive cannot bear the load of these changes out of the block grant, and that will inevitably lead to severe hardship for many families in Northern Ireland, as it will—I know this from hon. Members who have spoken—on the mainland in Scotland, Wales and England. Elderly widows have been ringing me to ask whether they will be expected, at their time of life, to take in a lodger in their two-bedroom homes. Their fear is palpable, and the state should never be guilty of enforcing that on them.

For some, the new rules will reduce their existing housing benefit by £650 per year. The bottom line will be that if they cannot afford that, they will have to find a new house. The scenario I would like to put to the Minister is this: a divorced mother has two children, a son of nine and a daughter of eight. The new rules say that the children can share a bedroom and the family therefore have to downsize their home. However, that will apply for only a year because the children will no longer have to share when they are 10 and nine, and the rules state that they will then need an extra bedroom. Would it be economical to expect the household to move, or will the housing benefit section have the discretion to waive this tax in those circumstances? How far does this discretion extend? Does it allow for the disabled couple who cannot sleep together and need a carer to sleep in the house at times to help with their care needs? Are they expected to foot the bill because they are disabled and need help?

We recently spoke in this House about needing more foster carers and touched on the effects on them. I do not want to repeat what has been said, but by the same token people on housing benefit will be penalised for

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trying to offer a home to young people who need some love and care. I have to ask: where is the big society in that?

I could go on, but time is limited. We are not ready to implement this either morally or physically. We lambast absent fathers for not playing an active role in their children’s upbringing. We then tell them that they are not allowed to have a bedroom for their child to stay in when they are trying to build a relationship through their visitation rights. We tell people who are married and working, “We have no houses for you in the housing executive, so you will need to rent privately and we will help you with the payments.” We then say, “Well, your private rented house is one bedroom too large, so we won’t help you with this payment anymore, and we can’t rehouse you so you can find a smaller home close enough for your child to walk to school. As you have no car, there is nothing that can be done for you.” Hon. Members—on both sides of the House, to be fair—have asked, “Is this really what the House advocates?” I would say not. I and many other Members do not advocate it. Single tenants regularly come to me, and like others, I am sure, I have helped hundreds with their housing benefit. Often, we find that, because of their age, they are restricted in how much housing benefit they can get. The discretionary payment fund helps them that wee bit along life’s road, but then we find that this payment, which helps them to develop their quality of life, get a job and so on, is being taken away from them.

We need to make changes to the housing sector, but we cannot enforce changes without the infrastructure in place to implement them. I do not want to be part of a measure that puts 32,000 families in housing stress. Is this something that the Minister is prepared to implement before the foundations have been laid? I hope that he will allow the infrastructure and details to be put in place before this is pushed through.

6.35 pm

Mr Jamie Reed (Copeland) (Lab): It is a genuine pleasure to follow the hon. Member for Strangford (Jim Shannon). It is clear from the testimonies of my hon. Friends that the consequences of this ill-thought-out tax on families will be enormous. I fear that the great number of letters that my hon. Friends and I have received from families up and down the country who are extremely worried about their futures as a result of these changes is just the tip of the iceberg—thousands of people who will be affected by the bedroom tax do not yet know it.

Analysis by the National Housing Federation shows that the bedroom tax will hit 2,000 families in my constituency—each to the tune of more than £500 a year—and every day I hear from constituents worried about how they will cope. The economy of my constituency is based on public spending. It needs to be rebalanced, and I have worked consistently to do that, but this latest blow will undoubtedly hit economic demand in my constituency even further, making that task even harder. The bedroom tax will have an effect on my local high street, businesses and other economic activities, and the same will be the case in constituencies and communities across the country.

We need to speak to housing officers from social housing providers about the bedroom tax. They know

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who the good and bad tenants are on their patches. I used to be one myself.


A housing officer, not a bad tenant, that is! We need to ask them how the bedroom tax will affect their tenants, and they will say that, for some, it will be crucifying. Not everyone can move to different properties, because they are not available, so instead some will be faced with paying a tax they simply cannot avoid. This tax demonstrates what we all know—that the Government come up with policies that are ill-thought-out, damaging and disproportionately targeted at the least well-off in our society.

Instead of spending their time cobbling together disjointed, contradictory and weak justifications for the shameful bedroom tax, the Government should do the right thing and drop it. I can think of few more embarrassing, cringe-worthy illustrations of a rotten defence of a rotten policy than that provided by the Minister in the Lords, Lord Freud, on BBC Radio 5 Live recently, when he told concerned social housing tenants that they should seek to take in lodgers in order to pay the tax. How delusional, how detached, how dangerous! Here we have a Minister telling people that to pay the Government’s punitive tax, they should break the terms of their tenancy agreements and so risk eviction. I would urge students of bad policy, bad communication, bad government and political incompetence to read a transcript of the noble Lord’s interview.

The Government claim that the bedroom tax will solve the issue of under-occupancy. Has it not occurred to them that the people affected will not be able to avoid it? All the policy will mean is that low-income families will be hit in the pocket. It is a tax on the poor. It means less money available for food, groceries, school trips and school uniforms, heating and transport. It is a policy of the madhouse that will push people closer to the poorhouse. Alongside the Tory NHS Bill, Liberal Democrat support for this marks the point at which they have become a wholly owned subsidiary of the Conservative party.

There simply are not the excess houses available for people to move into. The Secretary of State has offered no solution to the mismatch between families’ needs and the accommodation available. This mismatch is highlighted in his Department’s own policy assessment, so what are the Government going to do about it? What kind of dysfunctional Department is he running, when fundamental issues arising from such massive changes have not even been considered?

Like, I suspect, hon. Members on both sides of the House, I have many constituents who will be hit by the bedroom tax. Oblivious to the impact of his own policies, the Prime Minister said again today that he was happy to look at individual cases, and I will be sure to forward him the many that I have already received. Perhaps he will be able to explain to the divorced father in my constituency who has joint custody of his children where his children will stay when they are with him. Perhaps he will also be able to explain to the many disabled people in my constituency, who have already had their homes adapted to suit their needs, why they are being penalised. And perhaps he can explain to the parents in my constituency whose children are serving

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our country in our armed forces why their mandated time away from home will either hit their pockets or cost them their homes.

The actions of this Government have left many people with no option but to lower their living standards or lose their homes. It is no wonder that the Secretary of State is known as the quiet man—he has much to be quiet about. This bedroom tax is unacceptable, indefensible and increasingly typical. It will not be forgotten.

6.40 pm

Hywel Williams (Arfon) (PC): I am glad to rise to sum up on behalf of Plaid Cymru, the Scottish National party and the Green party. We have heard 26 speakers in the debate today, including the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), which is ample proof that we made the correct choice in putting this subject up for debate. I will try to mention all the speakers briefly, although I am anxious to allow the Under-Secretary of State for Work and Pensions, the hon. Member for Wirral West (Esther McVey) ample time to defend her Government’s position. To that end, I might sit down a little early.

The debate was opened by my hon. Friend the Member for Banff and Buchan (Dr Whiteford), who pointed out that the proposed penalty was inherently unfair, that it had structural problems and that it would hit disabled people, foster carers, separated parents and many others. She outlined some mitigation measures that could be taken, but her choice—and that of my right hon. and hon. Friends and me—is that the Government should abandon the penalty.

The Minister of State then gave us a clear explanation, as he always does. I will not go into the details of his speech, but he made some interesting points. He stated clearly that one of the purposes of the penalty was to save money; we would argue that that is its main purpose. He also said, to some surprise, that these were Labour cuts. I thought that it was the Conservative and Liberal parties that were in government, and that Labour was in opposition, but there we are. That is what he said. He also said that there was a spare room subsidy. We have been calling it a bedroom tax. May I suggest that we all call it a penalty? It will be a penalty on ordinary people.

The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) discussed the problems that will arise from the penalty, especially in a time of recession, and the problems that people would face in moving when there was no possibility of their doing so. The hon. Member for Keighley (Kris Hopkins), who is no longer in his place, talked about his constituency. The hon. Member for Glasgow North (Ann McKechin) said that the Government were unprepared, that great disruption would be caused, and that we needed solutions for housing problems as a whole, and not just in terms of the money involved.

The hon. Member for Leeds North West (Greg Mulholland) explained his position with some care and eloquence, and I hope that he might be persuaded to join us in the Lobby this evening, rather than abstaining. The hon. Member for Newport East (Jessica Morden) outlined some heartrending cases and talked about the nature of the Welsh stock. She made a point that many other hon. Members made, which was that many people

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have no choice. The Government might think that there is a choice, but there ain’t. The hon. Member for Battersea (Jane Ellison) called on Labour to pledge to reverse the measure if it was in government, and that reasonable request is echoed on these Benches as well. However, I do not think that she quite understood the delightful intricacies of devolution, or the fact that the SNP is actually in government in Scotland.

The hon. Member for Brighton, Pavilion (Caroline Lucas), who apologises for being unable to be here this evening, highlighted the Kafkaesque point that if the Government’s intentions are carried out, they will save no money—that is, that people would move and no money would be saved. She also talked at some length about other practical points, and ended by saying that while the banks got bailed out, the poor got thrown out. The right hon. Member for Wokingham (Mr Redwood) recognised the difficulties involved in downsizing, and emphasised the value of incentives rather than penalties. He also talked about eligibility, and I am afraid that he then strayed into the immigration debate.

My hon. Friend the Member for Dundee East (Stewart Hosie) gave the House a riveting explanation of the situation in Scotland. He also pointed out that 79% of the households in Scotland had a disabled person living in them, which is an even higher figure than for England or Wales.

The hon. Member for North East Somerset (Jacob Rees-Mogg) overstated the case. Initially, I thought he was falling into the schoolboy error of overstating people’s case in order to knock it down more easily. Then, however, I realised that he actually believes this stuff.

The hon. Member for North Ayrshire and Arran (Katy Clark) pointed out some problems that will arise and spoke about the misery that will be caused. The hon. Member for Bolton South East (Yasmin Qureshi) said that, in reality, spare rooms are not spare. My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) outlined some of the factual background and outlined ways in which these sort of problems are tackled elsewhere—in Ireland and the USA, for example.

The hon. Member for Inverclyde (Mr McKenzie) supported the motion, and the hon. Member for Swansea West (Geraint Davies) spoke in his own inimitable style about the impact on working class people. The hon. Member for Rutherglen and Hamilton West (Tom Greatrex) talked about the problems for foster parents, which are indeed severe and need to be looked at again.

The hon. Member for Bishop Auckland (Helen Goodman) gave us a very interesting account of her attempts to live on benefit. It might well be a salutary lesson for some Conservative Members to repeat the experience she had in that respect. The hon. Member for Edinburgh East (Sheila Gilmore) outlined many of the practical difficulties, while the hon. Member for Glasgow North East (Mr Bain) talked about the macro-economic effects and the blow to local economies.

The hon. Member for Dumfries and Galloway (Mr Brown) spoke about the effects on disabled people and on the poorest, and called for ameliorating measures. The hon. Member for Bolton West (Julie Hilling) talked about the effect on local housing providers and the effect on real families—not the families of the Government’s

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imagination. The hon. Member for Llanelli (Nia Griffith) talked about the inflexible nature of the housing stock and the consequences from it, while the hon. Member for Strangford (Jim Shannon) gave us a welcome perspective from Northern Ireland and spoke about the problems this penalty will cause there. Last but not least, the hon. Member for Copeland (Mr Reed) said that what we have heard this afternoon is only the tip of the iceberg.

As I said, we have heard 26 speakers. However seductively the Minister will present her arguments, it is clear to the House this afternoon that the Government’s main aim is to cut the housing budget, taking money from the pockets of some of those least able to afford it. As has been said, two thirds of those affected are disabled or have disabled partners, and I point out that half the people affected have been tenants for 10 years or more. Conservative Members are fond of complaining about crime and disorder on estates. These longer-term tenants are the sort of people we want to stay on estates to give leadership to the local communities, but they are the people who will be moved on by this penalty.

As has been mentioned, 46% of housing benefit claimants will be affected in Wales compared with 31% for Great Britain in general, showing that this is a particular problem for Wales. My own local authority of Gwynedd is a case in point as 1,378 families will lose between £8 and £24 a week. If they try to follow the Government’s advice and move within the housing stock, they will encounter difficulties, especially if they try to move into the private sector. People wanting to move within the stock in Gwynedd will face competition from the tourism industry, which has proper needs that should be addressed by the local housing stock. In the city of Bangor, the people wanting to move will be competing with many thousands of students. What are they looking for? They are looking for one-bedroom or two-bedroom properties—for small places. Those will be the local effects stemming from this change.

The Government say, of course, that people could find work. Average incomes in my area are £15,000 a year, and I have no idea how people are going to find the £700 to pay this penalty when they are not able to move. I do not think that the Government have thought that through; and if they have thought it through, they do not care. I can tell the Minister that it is not just a matter of taking up a few hours of extra work serving in a shop or working in a care home. Taking more work is not a possibility when hundreds of people are chasing every job, and when disabled people always come at the end of the queue when the jobs are being handed out.

Perhaps we should be charitable to the Government. They say that they are introducing this change to improve occupancy, and—as the Under-Secretary of State for Wales, the hon. Member for Preseli Pembrokeshire (Stephen Crabb), said this morning—to alleviate homelessness. However, there are currently 19,000 homeless people in Wales, and I think that this measure will merely add to that total. Some people will say, “We will pay.” Some will say, “We will do without, and we will pay.” Some will be forced to say, “There is nothing left to do without, and we will not be able to pay.”

It seems that it is up to me, as a mere Welsh nationalist, to draw the Government’s attention to the English saying “An Englishman’s home is his castle.” They assail that castle at their peril.

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6.50 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Esther McVey): I thank Members on both sides of the House for their valuable contributions to this important debate. It is good to have an opportunity to respond to a number of the points that were raised, and also to correct some inaccuracies.

Having listened to the whole debate, I know that there are some issues on which we all agree. Consensus is an important point at which to start, because we are all looking for a solution to a problem that the coalition Government have been handed, so I will begin by listing the facts on which we are agreed.

There is a considerable lack of social homes, because very few have been built in recent years. The Secretary of State has referred to a complete collapse in the building of social housing under the last Government. Housing benefit has doubled in the last 10 years. We all agree that we will have to manage the bill for that, but how are we going to deal with it? How are we going to find a solution to such a large problem? We all probably agree, too, that fairness must be at the heart of that solution: fairness to those who are in overcrowded homes, fairness to those who are under-occupying, and fairness to the taxpayer.

Let me begin, however, with the removal of discrepancies in the rented sector between those who are privately renting and those who are socially renting. An arrangement whereby people living next door to each other are renting under different systems is innately unfair, and must be addressed. I think all Members will be pleased to hear that I shall be taking Labour’s lead in this instance. Labour introduced the local housing allowance for private sector tenants who did not receive housing benefit for a spare bedroom, which seems a good point at which to start. We are doing the same, in that we are introducing equality in the system for everyone who is renting.

The second issue that we must tackle is the problem of people who are living in overcrowded accommodation. As my hon. Friend the Minister of State said, a quarter of a million people are in that position. My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Battersea (Jane Ellison) also mentioned those people, but Opposition Members refused to discuss them.

We also all agree that we are talking about family homes. They are not just houses; people have lived in them. That is why we have exempted those who are above the state pension credit age. We recognise that pensioners would be particularly affected by these changes. My hon. Friend the Member for City of Chester (Stephen Mosley) reminded Labour Members what they had repeated time and again. They must get a grip of the housing benefit bill. They never managed to do that in government, but they must do it if they are to be even a credible Opposition.

My hon. Friend the Member for Battersea made a very important point. When Opposition Members said that they would vote against the measure because they disagreed with it, she challenged them by asking whether they would reverse it and put that in their manifesto. Silence came from the Opposition Benches.

On discretionary housing payments, many Members raised specific issues and complex cases. Specific groups

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were identified, such as foster carers and people who live in houses with major disability adaptations. Rather than central Government defining exactly what should happen in every case, we have allocated the money we think is needed and given it to local authorities so they can respond on a case-by-case basis. Such local discretion is right. We might think that many different individuals should be exempt, but it would be impossible to write that into regulations and statutory instruments. That is why we have allocated discretionary housing payments of £60 million this year and £155 million next year to local authorities.

In the past, discretionary payments have been seen as a temporary fix for a short-term problem. However, under the new system these new payments can be for the long term, because some situations will not change, and if someone lives in a house that has been substantially adapted, they will need to keep it.

We have debated this subject for over six hours and many inaccurate things were said and many questions were raised and remained unanswered, so I will canter through quite a few of them. The hon. Member for Dundee East (Stewart Hosie) asked about children at university. Children absent at college are covered by the normal rates of absences and will not be affected if they are returning for holidays. My hon. Friend the Member for Leeds North West (Greg Mulholland) asked whether people can apply ahead of their need arising. They can: they can apply for these payments now, although, obviously, they will not be paid until the payment is needed.

The hon. Members for Dundee East and for Strangford (Jim Shannon) asked about people with a disability who need an overnight carer. Obviously, they are exempt, regardless of whether they need an overnight carer all the time or just occasionally. Again, Opposition Members got their facts wrong.

The hon. Member for Dumfries and Galloway (Mr Brown) questioned the number of spare bedrooms. There are 1 million spare bedrooms in properties occupied by working-age people alone, so that does not include pensioners. The hon. Member for Glasgow North (Ann McKechin) asked why Lord Freud could not attend a meeting. He could not do so because he was involved in a debate in the other place. However, I am happy to confirm that he will make that visit very soon. That is being arranged with the Secretary of State.

The hon. Member for Westminster North (Ms Buck) said that if people are moving around, this policy will not save any money. That is incorrect. She is not taking account of the previous circumstances of the people who will be moving into the vacated properties. [Interruption.] They may have been in more expensive private or temporary accommodation, so this dynamic benefit will save money. [Interruption.] Opposition Members are perpetuating inaccurate myths. [Interruption.]

Mr Speaker: Order. The hon. Member for Denton and Reddish (Andrew Gwynne) is shouting more loudly at the Minister than I shouted for Arsenal at the Emirates last Saturday. It really will not do.

Esther McVey: The hon. Member for Swansea West (Geraint Davies) talked about under-occupancy among homeowners and asked what we are doing about that.

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The Government support homeowners taking in a lodger if they wish, just as we do for people in social housing. There will be a £4,250 income tax exemption should somebody want to take in a lodger.

The hon. Member for Brighton, Pavilion (Caroline Lucas) talked about borrowing more money. We cannot keep on borrowing. That is what got us into this situation. We need to stop borrowing and start living within our means.

Let me finish dealing with the questions that were raised. Many hon. Members asked about the cost of moving—

Pete Wishart: claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Main Question accordingly put.

The House proceeded to a Division.

Mr Deputy Speaker (Mr Lindsay Hoyle): I ask the Serjeant at Arms to investigate the delay in the No Lobby.

The House having divided:

Ayes 224, Noes 265.

Division No. 167]


6.59 pm


Abbott, Ms Diane

Abrahams, Debbie

Alexander, rh Mr Douglas

Alexander, Heidi

Ali, Rushanara

Allen, Mr Graham

Anderson, Mr David

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Banks, Gordon

Barron, rh Mr Kevin

Bayley, Hugh

Begg, Dame Anne

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blears, rh Hazel

Blenkinsop, Tom

Blomfield, Paul

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brennan, Kevin

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Buck, Ms Karen

Burnham, rh Andy

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Champion, Sarah

Chapman, Jenny

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Connarty, Michael

Cooper, Rosie

Cooper, rh Yvette

Corbyn, Jeremy

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Sir Tony

Curran, Margaret

Dakin, Nic

Danczuk, Simon

David, Wayne

Davies, Geraint

De Piero, Gloria

Dobbin, Jim

Dobson, rh Frank

Docherty, Thomas

Donaldson, rh Mr Jeffrey M.

Donohoe, Mr Brian H.

Doran, Mr Frank

Doughty, Stephen

Dowd, Jim

Doyle, Gemma

Durkan, Mark

Eagle, Ms Angela

Eagle, Maria

Efford, Clive

Elliott, Julie

Ellman, Mrs Louise

Engel, Natascha

Esterson, Bill

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Flint, rh Caroline

Flynn, Paul

Fovargue, Yvonne

Francis, Dr Hywel

Gardiner, Barry

Gilmore, Sheila

Glass, Pat

Glindon, Mrs Mary

Goggins, rh Paul

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Griffith, Nia

Gwynne, Andrew

Hain, rh Mr Peter

Hamilton, Mr David

Hanson, rh Mr David

Harman, rh Ms Harriet

Havard, Mr Dai

Healey, rh John

Hepburn, Mr Stephen

Hillier, Meg

Hilling, Julie

Hodge, rh Margaret

Hodgson, Mrs Sharon

Hoey, Kate

Hood, Mr Jim

Hopkins, Kelvin

Hosie, Stewart

Howarth, rh Mr George

Hunt, Tristram

Irranca-Davies, Huw

Jamieson, Cathy

Jarvis, Dan

Johnson, Diana

Jones, Graham

Jones, Helen

Jones, Susan Elan

Jowell, rh Dame Tessa

Joyce, Eric

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lammy, rh Mr David

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lewis, Mr Ivan

Llwyd, rh Mr Elfyn

Love, Mr Andrew

Lucas, Ian

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

Mahmood, Mr Khalid

Mahmood, Shabana

Malhotra, Seema

McCabe, Steve

McCarthy, Kerry

McClymont, Gregg

McDonagh, Siobhain

McDonald, Andy

McDonnell, John

McFadden, rh Mr Pat

McGovern, Alison

McGovern, Jim

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meale, Sir Alan

Mearns, Ian

Miliband, rh Edward

Miller, Andrew

Mitchell, Austin

Morden, Jessica

Morrice, Graeme


Morris, Grahame M.


Mudie, Mr George

Munn, Meg

Murphy, rh Mr Jim

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Pearce, Teresa

Phillipson, Bridget

Pound, Stephen

Powell, Lucy

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Mr Jamie

Reed, Steve

Reynolds, Emma

Reynolds, Jonathan

Riordan, Mrs Linda

Robertson, Angus

Robertson, John

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruane, Chris

Ruddock, rh Dame Joan

Sarwar, Anas

Sawford, Andy

Seabeck, Alison

Shannon, Jim

Sharma, Mr Virendra

Sheerman, Mr Barry

Sheridan, Jim

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, Angela

Smith, Nick

Smith, Owen

Spellar, rh Mr John

Straw, rh Mr Jack

Stringer, Graham

Stuart, Ms Gisela

Sutcliffe, Mr Gerry

Tami, Mark

Thomas, Mr Gareth

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Umunna, Mr Chuka

Vaz, rh Keith

Walley, Joan

Watts, Mr Dave

Weir, Mr Mike

Whiteford, Dr Eilidh

Williams, Hywel

Williamson, Chris

Wilson, Phil

Winnick, Mr David

Winterton, rh Ms Rosie

Wood, Mike

Woodcock, John

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Pete Wishart


Jonathan Edwards


Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Steve

Baldry, Sir Tony

Barker, rh Gregory

Baron, Mr John

Bebb, Guto

Beith, rh Sir Alan

Benyon, Richard

Berry, Jake

Bingham, Andrew

Birtwistle, Gordon

Blackwood, Nicola

Blunt, Mr Crispin

Bone, Mr Peter

Bradley, Karen

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Browne, Mr Jeremy

Buckland, Mr Robert

Burley, Mr Aidan

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, rh Paul

Burt, Alistair

Byles, Dan

Cairns, Alun

Carmichael, rh Mr Alistair

Carmichael, Neil

Carswell, Mr Douglas

Cash, Mr William

Chishti, Rehman

Chope, Mr Christopher

Clark, rh Greg

Clarke, rh Mr Kenneth

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Crabb, Stephen

Crouch, Tracey

Davey, rh Mr Edward

Davies, David T. C.


Davies, Glyn

Davies, Philip

Dinenage, Caroline

Djanogly, Mr Jonathan

Dorrell, rh Mr Stephen

Dorries, Nadine

Doyle-Price, Jackie

Drax, Richard

Duncan, rh Mr Alan

Duncan Smith, rh Mr Iain

Dunne, Mr Philip

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Featherstone, Lynne

Field, Mark

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Freer, Mike

Fuller, Richard

Gale, Sir Roger

Garnier, Sir Edward

Garnier, Mark

Gauke, Mr David

Gillan, rh Mrs Cheryl

Glen, John

Goldsmith, Zac

Goodwill, Mr Robert

Gove, rh Michael

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, rh Damian

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, Stephen

Hancock, Matthew

Hands, Greg

Harper, Mr Mark

Harris, Rebecca

Hart, Simon

Hayes, Mr John

Heald, Oliver

Heaton-Harris, Chris

Hemming, John

Hendry, Charles

Herbert, rh Nick

Hollobone, Mr Philip

Holloway, Mr Adam

Hopkins, Kris

Horwood, Martin

Howarth, Sir Gerald

Howell, John

Hurd, Mr Nick

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Johnson, Joseph

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Laws, rh Mr David

Leadsom, Andrea

Lee, Dr Phillip

Lefroy, Jeremy

Leigh, Mr Edward

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Liddell-Grainger, Mr Ian

Lilley, rh Mr Peter

Lloyd, Stephen

Lord, Jonathan

Loughton, Tim

Luff, Peter

Macleod, Mary

Maynard, Paul

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, rh Maria

Mills, Nigel

Milton, Anne

Mitchell, rh Mr Andrew

Moore, rh Michael

Mordaunt, Penny

Morgan, Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Mundell, rh David

Murray, Sheryll

Neill, Robert

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Nuttall, Mr David

Offord, Dr Matthew

Ollerenshaw, Eric

Opperman, Guy

Ottaway, Richard

Paice, rh Sir James

Parish, Neil

Patel, Priti

Paterson, rh Mr Owen

Pawsey, Mark

Penrose, John

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Poulter, Dr Daniel

Prisk, Mr Mark

Pugh, John

Raab, Mr Dominic

Randall, rh Mr John

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Rifkind, rh Sir Malcolm

Robathan, rh Mr Andrew

Robertson, rh Hugh

Robertson, Mr Laurence

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Scott, Mr Lee

Selous, Andrew

Sharma, Alok

Shelbrooke, Alec

Shepherd, Sir Richard

Simpson, Mr Keith

Skidmore, Chris

Smith, Miss Chloe

Smith, Henry

Smith, Julian

Soames, rh Nicholas

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stephenson, Andrew

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Stunell, rh Andrew

Sturdy, Julian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Tapsell, rh Sir Peter

Timpson, Mr Edward

Tomlinson, Justin

Truss, Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Walter, Mr Robert

Watkinson, Dame Angela

Weatherley, Mike

Webb, Steve

Wharton, James

Wheeler, Heather

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Williamson, Gavin

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Yeo, Mr Tim

Young, rh Sir George

Tellers for the Noes:

Mr Robert Syms


Mark Hunter

Question accordingly negatived.

27 Feb 2013 : Column 426

27 Feb 2013 : Column 427

27 Feb 2013 : Column 428

27 Feb 2013 : Column 429

Business without Debate

Deferred Divisions

Motion made, and Question put forthwith (Standing Order No. 41A(3)),

That, at this day’s sitting, Standing Order No. 41A (Deferred divisions) shall not apply to the Motion in the name of Greg Clark relating to Capital Gains Tax. —(Nicky Morgan.)

Question agreed to.

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Capital Gains Tax

That the draft Building Societies (Core Capital Deferred Shares) Regulations 2013, which were laid before this House on 28 January, be approved. —(Nicky Morgan.)

Question agreed to.

27 Feb 2013 : Column 430

Financial Services and Markets

[Relevant documents: oral evidence taken before the Treasury Committee on macro-prudential tools, HC 546-i and -ii; and written evidence reported to the House by the Treasury Committee on 17 July and 20 November 2012 on macro-prudential tools.]

7.19 pm

The Financial Secretary to the Treasury (Greg Clark): I beg to move,

That the draft Bank of England Act 1998 (Macro-prudential Measures) Order 2013, which was laid before this House on 24 January, be approved.

One of the most significant failings of the previous system for regulating financial services was the lack of clear responsibility for financial stability. It has been all too easy for the identification and management of risks to financial stability to fall in the cracks between what those organisations believed were their respective roles in protecting and promoting stability in the financial sector. That confusion was a key contributing factor to the emergence of the financial crisis in 2007. None of the institutions involved was effectively horizon-scanning to identify macro-prudential risks to stability across the financial system.

In the light of those failings, the Bank of England Act 1998, as amended by the Financial Services Act 2012, gave the Bank of England clear responsibility for financial stability. To support that objective, the Act creates a new committee of the Bank, the Financial Policy Committee, with the role of identifying, monitoring and managing systemic risks to the UK financial system. In order to carry out that role, the FPC will need macro-prudential measures to mitigate the risks to stability it identifies. The FPC will act through the regulators, which work directly with financial institutions.

The FPC will do that in two ways: first, through recommendations, which can be made to the regulators, to industry, to the Treasury, within the Bank and to other persons; and, secondly, through directions that can be given to the Prudential Regulatory Authority and the Financial Conduct Authority. The FPC’s direction power is governed by the measures set out in the order before the House. The regulators must comply with a direction, but they will have discretion over its timing and implementation method.

Before discussing the measures that will be granted to the FPC, it is worth noting that there is an international consensus on the need for macro-prudential regulation. International regulations such as Basel III and the capital requirements directive IV go some way towards establishing minimum standards while retaining room for national discretion, although areas such as the leverage ratio remain under discussion. The UK strongly supports the ability of national supervisors to exercise discretion where appropriate.

In February 2011 the Government and the Bank established an interim FPC to undertake, as far as possible, the work of the statutory FPC ahead of the passing of the relevant legislation. One of the tasks set for the interim FPC was to analyse and recommend macro-prudential measures over which the statutory FPC would have direction-making powers.

27 Feb 2013 : Column 431

Mr Andrew Tyrie (Chichester) (Con): The Minister has just mentioned the leverage ratio. There are two crucial issues: first, the leverage ratio should be firmly in the hands of the FPC, not the Government; and, secondly, the UK should be able to act unilaterally, rather than necessarily having to wait indefinitely for international agreement—we should not move at the speed of the slowest. Indeed, the United States demonstrates how necessary that is. Does the Minister agree with that sentiment and, if so, why is that not reflected in what he is announcing today?

Greg Clark: As my hon. Friend knows, that has been a matter of much debate in the Treasury Committee and the Banking Commission, both of which he chairs. It is appropriate to have regard to the international debate on this. There is a difference between the debate on the leverage ratio and the two other tools that we will move on to talk about, the sectoral capital requirements and the counter-cyclical buffer, over which, it has been established internationally, there should be domestic discretion. We are not at that stage with the leverage ratio, as he will know, but I can certainly confirm to the House that the Government’s intention is to provide the FPC with a time-varying leverage ratio by 2018, subject to a review by the European Banking Authority, which is planned for 2017.

Chris Leslie (Nottingham East) (Lab/Co-op): I am intrigued by the Minister’s 2018 commitment, but would it not make good and prudent legislative sense to take the opportunity in the draft Financial Services (Banking Reform) Bill, which will arrive in the House imminently, to insert provisions that would allow the leverage ratio to be triggered sooner if there is a delay in the international discussions?

Greg Clark: We do not expect such a delay. The discussions are continuing and are live, as we know, so we do not expect to need that, but of course it is open to the House as it debates the Bill, presumably at some length, to keep that under review as the discussions progress.

The statutory instrument we are debating today relates specifically to the ability to set sectoral capital requirements. I will deal with that tool first before briefly covering the others. The interim FPC recommended that the statutory FPC should have a power of direction to vary financial institutions’ capital requirements against exposures to specific sectors over time. It argued that the over-exuberance that precedes crises often begins in specific sectors before spreading further. The Government agree that this targeted approach would allow these risks to be managed more effectively and proportionately than raising capital requirements more generally. The FPC has stated that it would wish to avoid what it terms an

“overly activist, fine-tuning approach”,

which should limit this risk. However, there may be times when using the tools in a granular way may be necessary, so the Government will keep the use of this tool under review to ensure that it is being used effectively and proportionately. There is also a risk that imposing sector-specific requirements could displace excessive risk into other sectors, so the FPC will need to monitor carefully the impact of any policy interventions using

27 Feb 2013 : Column 432

this tool and perhaps consider adjusting more general capital requirements if displacement turns out to be a significant problem.

I should take this opportunity to bring to the House’s attention the one change that the Government have made to the order following the consultation that we undertook on the draft version that was made available for that purpose. The current order excludes investment firms that are not regulated by the PRA from the FPC’s power. This will ensure that systemically important firms are captured while smaller firms that are not systemically important will not be subject to additional requirements.

Let me discuss briefly the other macro-prudential tools that the Government intend to give the FPC: the role of setting the UK’s counter-cyclical capital buffer; and, as we have briefly discussed, the power to intervene to limit leverage ratios. These are not covered by the draft order, but it might be useful if I provide a bit of context to the debate. The counter-cyclical capital buffer is part of the Basel III agreement, and it will be implemented in Europe by the capital requirements directive, commonly known as CRD 4. The directive aims to ensure that banking sector capital requirements take account of the macro-financial environment in which banks operate. It will be deployed by national jurisdictions when excess aggregate credit growth is judged to be associated with a build-up of system-wide risk to ensure that the banking system has a buffer of capital to protect it against future losses. Banks, building societies and larger investment firms will be required to build up capital during upturns. This will help to increase the resilience of the financial system and might also dampen the credit cycle. Unwinding these requirements in the downturn once the threat has passed might help to mitigate contractions in the supply of lending.

It is clear that with its macro-prudential focus, the FPC will be the body best placed to determine the level of the counter-cyclical capital buffer. This was supported by the results of the Government’s consultation. As the counter-cyclical capital buffer is expected to be provided for in CRD 4, on which discussions are continuing, the simplest way to incorporate it into UK law is via regulations made under section 2(2) of the European Communities Act 1972 to transpose into UK law the provisions of CRD 4 which relate to the counter-cyclical capital buffer.

It is vital that the FPC’s decisions in relation to the counter-cyclical capital buffer should be subject to comparable procedural and reporting requirements to the FPC’s other tools. Therefore, in addition to the requirements imposed by the EU legislation, the Government intend to ensure that the counter-cyclical capital buffer will be subject to the same transparency requirements as other FPC decisions, with a summary of the FPC’s discussions when taking decisions on the buffer set out in the FPC’s meeting records, and the FPC’s use of the buffer covered in the biannual financial stability report. The Government will make any necessary changes to achieve this in the regulations that incorporate CRD 4 into UK law.

The interim FPC recommended that the statutory FPC should have a power of direction to set and vary a minimum leverage ratio. The Government think that a leverage ratio could indeed be a useful macro-prudential tool for the FPC. The unweighted nature of the measure

27 Feb 2013 : Column 433

would guard against risk weights underestimating the true riskiness of assets and provide a directly comparable figure across firms. Firms’ leverage ratios were a useful indicator of failure during the last crisis, and the period immediately preceding the crisis was characterised by sharp increases in leverage. The Government strongly support the inclusion of a backstop leverage ratio in the EU prudential toolkit and consider it an essential measure to ensure that leverage remains at sustainable levels. It is clear that there is some way to go, but the review in 2017 will address that, and it will not be implemented across the EU until 2018, so we have some time to consider it.

Mr Tyrie: Will the Minister explain what possible logic there is to maintaining the leverage ratio at exactly the same level as a back-stop for risk weights of more than 10% as when the risk weights were set at only 8%?

Greg Clark: The discussions on those need to proceed separately—I think that the Financial Services (Banking Reform) Bill Committee will have some vigorous discussions—but the order relates solely to the sectoral requirements.

The Government will, of course, be able to add to the suite of macro-prudential tools in the future by further order, subject to the approval of this House and the other place. At the moment, we believe that the measures I have described are appropriate and sufficient starting points for the FPC. The Government expect the tool kit to adapt and evolve as the international debate and academic literature on the subject develops and empirical experience becomes more widely available. We expect the FPC to make recommendations to the Treasury if its macro-prudential measures require amendments or the addition of new measures is required. I hope that my explanation has been helpful.

7.30 pm

Chris Leslie (Nottingham East) (Lab/Co-op): The jargon in this order may deter not just members of the public but—dare I say it?—hon. Members from rolling up their sleeves and getting involved in this debate. I contend, however, that, in layman’s turns, the order involves an incredibly important set of issues. We are talking about giving the regulators of the unelected Bank of England’s Financial Policy Committee incredible powers that will enable them to tell people the level of deposit required for their home loan purchase and, potentially at a moment’s notice, that minimum repayments on their credit cards will need to rise from, for example, 2% to 5%. They will also be able to tell businesses that loans and overdrafts that they may have already arranged with their banks are no longer feasible. We are talking about the significant potential impacts that macro-prudential policy making could have downstream on the economy and consumers. As we have said many times, although prudential regulatory theory is fine—it is difficult to disagree with the concept—the practical reality and serious questions about how it will work merit consideration.

We support the creation of the FPC at the Bank of England. An important lesson from the global financial crisis is that we need better systemic oversight, not just firm-by-firm regulation. We have to see the wood for the trees. However, as was said last year during the passage of the Financial Services Act 2012, questions linger about the FPC’s accountability and the rationale

27 Feb 2013 : Column 434

behind the choices it will make. Asking very clever people to gaze into a crystal ball and predict the economic future is a big thing for Parliament to do. We are asking them to improve their foresight when most people find it easier to draw conclusions in hindsight. There is, therefore, a lot of responsibility on the shoulders of the Bank of England and, of course, this provides a perfect vehicle for it to be landed with the blame by politicians if things go wrong. Members of the FPC will no doubt be well aware of those responsibilities.

As the Minister has said, the order is relatively straightforward. It gives the Prudential Regulation Authority, which is an arm of the Bank of England, the power to make banks and investment firms increase their capital holdings—in other words, their additional own funds—in relation to their exposure to residential property, commercial property or the financial sector. It will also give the PRA the power to make those banks and investment firms treat exposures to other financial services companies, residential property or commercial property as riskier ventures than they might otherwise have done—in other words, to raise the risk weightings on those holdings.

It was interesting to hear the Minister say that, after the consultation, the Government changed things so that the PRA-regulated firms would be those that are systemically important. That throws up a question that has just occurred to me. I had assumed that all residential mortgage loans and commercial transactions would be affected by a turn of the dial by the FPC. As it turns out, the Minister is saying that only transactions undertaken by systemically important organisations or the larger banks will be affected. Will he tell the House what proportion of residential and commercial transactions will not be affected if the FPC decides to adjust the availability of finance in those sectors or the capital requirements affecting those sectors? I assume that the vast majority of the firms in those markets are systemically important, but it would be interesting if the Minister gave a breakdown. If he cannot tonight, I would be happy if his team wrote to me on that issue.

There are other macro-prudential tools. The Minister mentioned the counter-cyclical capital buffer. That is part of the Basel III requirements which will be implemented through European directives and so forth. I want to ask him about some of the other macro-prudential tools that were discussed in a long document by the FPC.

I am pretty sure that the Minister is saying that, by and large, the sectoral capital requirements are those that are dealt with in the order, but I am not entirely clear about that. If one wanted to be very theoretical about macro-prudential policy, one could argue that history shows, whether through the South Sea bubble or the tulip boom, what has happened to various sectors that nobody predicted would become overheated. I do not necessarily see all sectors coming under the potential purview of the FPC. I assume that the Government would simply vest the FPC with other sectoral issues if they felt that there were emerging pressures or credit bubbles in other sectors. It does not seem that the Minister is today allowing the FPC to intervene across the whole landscape.

The hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, rightly asked about the leverage ratio. I am surprised that the Minister wants to wait until 2018 for that. He says that he hopes there will not be slippage, but he has been around the European

27 Feb 2013 : Column 435

policy-making circuit for long enough to realise that a commitment to do something in 2018 means that it may well not materialise until 2022 or even later. One just has to look at the solvency II discussions, which seem to be generational. I regret that the Government seem reluctant to take a British approach to regulating on the leverage ratio. I do not think that we should simply wait for Europe to determine such matters for us. It would be better if the Minister gave a commitment that he would at least consider including in the Financial Services (Banking Reform) Bill the recommendations of the Parliamentary Commission on Banking Standards on giving the FPC the right to get into some of the leverage ratio questions.

I have a number of other points that I want to ask the Minister about briefly. On the enforcement of prudential regulation, will he elaborate on the penalties or disciplinary steps that the regulator will have at its disposal if an investment firm or bank contravenes the imposed requirements of the FPC? If we have a body that is making policy, we must ask how it will be enforced. So far, a lot of the penalties in the Financial Services (Banking Reform) Bill seem to involve an individual seeking redress through the civil courts, which seems quite weak. What will happen if a bank steps across a line?

Members will recall the debate that we had during the passage of the Financial Services Act 2012 on the stability rules that the Government originally proposed to give to the Bank of England. They wanted to emphasise stability, which of course is vital, but they left out the importance of getting the economy growing and creating jobs, especially when times are tough or when there is a deflationary environment. Eventually, the Chancellor of the Exchequer was forced to relent and an amendment was inserted in the House of Lords to ensure that the FPC has regard to the economic objectives of Government policy.

Are we in danger of repeating the same lopsidedness in the regulations, or of an asymmetrical approach to attempts to control the heat of the economy? The measures in the order specify that banks must hold “additional” funds if lending to households or businesses, with a view to slowing things down and taking the heat out of the economy. That, of course, is a necessary part of the toolkit, but what happens if things slow down too much and the economy needs more lending to businesses and households, or more inter-bank and financial services mutual investment? The order does not seem to contain corresponding or parallel powers to dial things down, relieve capital requirements or remove “additional own funds” provisions if they prove in retrospect to have gone too far. Is that a problem with the order? Should not the power be symmetrical? I would be grateful if the Minister would consider that point.

On enforcement, are there dangers and risks of gaming in sectoral capital requirements? If we draw up operational targets that focus on the means rather than the ends, will the Minister assure the House that some of the specific requirements on residential or commercial investment cannot be evaded by twisting definitions, deliberate misinterpretation or gaming? I gather that that point came up at the Treasury Committee last year and there are important concerns.

27 Feb 2013 : Column 436

Will the Minister update the House on the latest information about who will make decisions on the loan-to-value and loan-to-income ratios on mortgages? There was a bit of pass the parcel between the FPC Committee and the Treasury last year when it came to mortgage regulation. The Treasury wanted the Bank of England to do the deed, but the Bank said it was a political decision and wanted Ministers to make decisions restricting LTV ratios. Will the Minister say where things currently stand, because such things do matter? As Adrian Coles from the Building Societies Association has rightly said, a change to the loan-to-value ratio may not matter much to those wanting to get a foot on the property ladder who have already got access to deep pockets or the bank of mum and dad, as it is known, but rapid decisions to increase the amount of deposit a home buyer needs will hit the least well off in society. Who will decide those things—the Treasury or the FPC?

My final two points are on geographical regulation and business lending. Will the sectoral powers be available for the Bank of England to use area by area, region by region, and locality by locality? In other words, will the Bank be able, or is it seeking, to take heat out of certain geographical housing markets and not others? I do not advocate this, but if it so wished could the Bank use these powers to make it harder to buy a house in London than in Cornwall, or vice versa? Will the Minister clarify how specific—or area-specific—the Bank can be with these powers?

Lending to small and medium-sized enterprises has fallen off and is still doing so. The funding for lending scheme was supposed to change that but its rules are skewed towards residential lending rather than business lending. Is the order to be seen in parallel with that scheme, and can the scheme be reformed to favour business lending? Will the Chancellor consider those issues in the Budget?

Transparency and the openness of the FPC must be considered and many, including the Council of Mortgage Lenders, have said that we need proper analysis by the FPC about what it is doing and an explanation of why it is using its powers. A narrative requirement on the FPC is a reasonable request, so will the Minister explain why that is not in the order?

The Opposition support these general powers but we hope for refinements and improved accountability in the enactment of some of these tools. We want Parliament to have better scrutiny of these measures and for the Treasury to ensure that when the tools are granted, whether or not that is in the next wave or regulations or legislation, the Treasury Committee and others will have a better opportunity for proper oversight of how the Bank of England is exercising these considerable powers.

7.44 pm

Mr George Mudie (Leeds East) (Lab): I rise to put two points to the House. First, I object to the statutory instrument on a matter of principle, which I will outline. Secondly, I want to ask the Minister why he included residential property among the first prudential tools. Some of the tools make sense—including commercial, and, obviously, investment and financial services—but the residential property one does not.

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Specifically, I object to how we are dealing with discussion, debate and decisions on the macro-prudential tools. I have constantly raised the matter in the Treasury Committee and the Independent Commission on Banking, and I have raised it on the Floor of the House with the Chancellor. As my hon. Friend the Member for Nottingham East (Chris Leslie) said, these can be seen as boring matters, but it is accepted that they could lead to decisions that affect the standard of living of many of our constituents; affect the future of industries such as the construction industry; and affect the economy. The decisions will be taken by non-elected individuals and tonight appears to be the House’s only opportunity to debate and challenge the measures.

The matter is being dealt with by statutory instrument. In other words, we have 90 minutes to discuss the measures and cannot amend them. We can only vote against the whole measure if we disagree with it or feel strongly about any part of it. The measures are proposed by the Government. If Opposition Members have strong feelings, they have only one chance to influence the decision, and they must turn down the whole order. That is a nonsensical procedure.

I have raised the matter with the Chancellor of the Exchequer in the Chamber. He indicated that he understood the measure’s sensitivity and importance and that he had an open mind. He accepted that the usual channels would deal with it. I pay tribute to him for placing the order on the Chamber’s agenda rather than dealing with it upstairs in Committee in the normal way. That is a step forward. The FPC is made up of unelected individuals, but they set policy, so the statutory instrument is a pretty disgraceful way to deal with the matter. Statutory instruments and secondary legislation are not supposed to deal with policy or principle—they deal with measures that need to be adjusted as time passes. They are not a way to decide things of such importance.

The Treasury Committee raised the matter with the Minister when they discussed macro-economics. He seemed to accept what we said and I have a quote if he challenges me. However, his approach to the question—sadly, because he is a well regarded Minister—was this: “We’ve appointed these individuals and should not second-guess them.” That is a recipe for disaster.

The Treasury Committee yesterday heard evidence from the Monetary Policy Committee, including officers and non-executives from the Bank of England. It was a hairy meeting, because those individuals take decisions, but there was no sign that the battle of inflation is definitely winning the argument against the battle for growth. If we read the words of the former Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling), and see the present Chancellor, we can see the difficulty they have had in getting so-called independent bodies to accept the sensitivity of some of their decisions. It is an impossible task. The bodies shelter under their independence. Both Chancellors have experienced this, and if they want bodies to do something they feel is necessary, the issue of independence is thrown back in their face: “You gave us independence and therefore you should not interfere”. I am worried about this issue, which is why I am taking the opportunity to put it on the record.

On residential matters, to which my hon. Friend the Member for Nottingham East referred, one of the macro-prudential tools discussed in the Financial Policy

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Committee and dropped was loan-to-value mortgages. Most of us were pleased when that was dropped, but it was a runner and was being discussed in Financial Services Authority circles for some 18 months. I am certain, from watching the industry, that that had a great effect on the industry’s decisions—it was trying to second-guess the FSA. The business of 90% and 80% mortgages had a devastating effect on individuals and couples who were trying to buy a house and begin family life. They were unable to take that step because the regulator was signalling to the regulated that they should be going in the direction of 90% and 80% at a time when the economy was dying for the construction industry to pick up and start building houses, which would have had a roll-on effect of people buying carpets, furniture, curtains and so on. The regulator was conditioning the decisions and behaviour of the regulated—it is that sensitive.

On a higher level, we are going through this business with the Monetary Policy Committee. As someone said—maybe in a crowded House this might have an effect—when an individual or a couple cannot get a mortgage, they do not blame the building society. When the building societies say it is the Monetary Policy Committee, they come to see us and we say it is the Monetary Policy Committee. The ordinary person in the street will ask, “Who set up the Monetary Policy Committee? Who is it answerable to?” It is answerable to us, but it is not really answerable to us because there is no real opportunity to make things happen. A yearly remit from the Chancellor is hardly a procedure for democratic accountability, and we are prevented from dealing with these matters on the Floor of the House in order to indicate our displeasure and unhappiness. I see the Treasurer of Her Majesty’s Household, the right hon. Member for Uxbridge and South Ruislip (Mr Randall), a very prominent member of the usual channels sitting in the Chamber. I hope he is listening to this debate and gets people to think about it.

I want to ask the Minister why on earth residential property was placed in the initial order. This is 2013. The Minister is as anxious as I am—probably more than I am—to see houses being built and sold and the whole procedure started. There is no question of any systemic risk in the foreseeable future. Even when the problems were at their worst, there was no systemic risk, just an industry with problems. I accept that some banks that had over-extended on their loans had real problems. I accept the point about the commercial side and the likes of RBS and HBOS—it was on a greater scale and of greater concern than on the residential side—and the point about investment and financial houses. However, for the MPC to start worrying—in shades of the FSA—about systemic risk in the construction industry spreads unnecessary alarm.

Greg Clark indicated assent.

Mr Mudie: I see the Minister nodding. I am sure that he will explain, but that is the sort of thing I am talking about. If the loan-to-value ratio had been in this statutory instrument—if the interim FPC had stuck at it—I think this place would have been full and the Minister would have had little choice but to allow the thing through. None of us could have tabled an amendment stating how important it was that the rest of it went

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through; as politicians and constituency MPs, we would have had to vote against the whole thing to prevent it from happening. I hope that the Minister will consider both those issues.

7.56 pm

Greg Clark: Let me respond to the points made by the hon. Members for Nottingham East (Chris Leslie) and for Leeds East (Mr Mudie). They made some thoughtful points about the House’s ability to scrutinise the powers that will be available to the FPC, particularly those relating to residential mortgages. Their comments went to the heart of the dilemma behind the setting up of these institutions and powers. The purpose of macro-prudential policy is—to adopt the analogy often used—to take the punch bowl away from the party just when the guests are getting over-exuberant. For the first time, there will be a group of people with the explicit task of monitoring conditions and taking a considered view of what is in the interests of financial stability but which might not be at the forefront of the minds of the people participating, either as practitioners, commercial players or politicians.

The hon. Member for Nottingham East acknowledged the consensus on the need to set up these institutions of macro-prudential policy, but that does not take away from the fact that their establishment is designed deliberately to introduce a necessary tension into the debates. The question arises, then, of whether these powers can be exercised appropriately—for example, whether the House has appropriate scrutiny and discretion over them.

One reason why we have initially given the FPC a minimal—I think he will agree—set of powers through a statutory instrument being debated on the Floor of the House is that these things should be properly scrutinised. We timed this debate so that it could follow the hearing of the Treasury Select Committee, of which the hon. Member for Leeds East is a member and which has considered this matter in recent days. Our intention is that these things should be properly scrutinised and well considered. It is for the Government to bring forward proposals about what the tools should be. Future proposals will be put before the House, and Ministers will be accountable to the Committee and the House. Indeed, the statutory instrument is available for debate. As the hon. Members would acknowledge, we have not loaded it with so many different provisions as to give the House a Hobson’s choice.

Mr Mudie: As a member of the Treasury Committee, I hear it said all the time that we have the ability to scrutinise, and that people are accountable to us. That carries little weight with me; it does not impress me. This is ultimately a question of who takes the decisions when a Minister or a Chancellor—such as the last Chancellor—going through a crisis meets an unelected Governor and asks him to do something in the interests of the economy and the future of the country, and the Governor says no. That is what we are talking about.

Greg Clark: Let me go on to describe some of the other elements involved. I said that we had committed to bringing to the House particular measures that could be debated. The hon. Gentleman has anticipated one

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such possibility. He was correct in suggesting that, if we had been proposing a power over the loan-to-value rate, the House would have been substantially more occupied than it is at the moment, that such a matter would engage Members and that there would have been a fuller debate on the matter. However, this is not the only mechanism by which scrutiny can take place.

The secondary objective of the Financial Policy Committee has been mentioned. Through the scrutiny of the House and of the hon. Gentleman’s Committee, that objective has been set up, and it means that the FPC’s duty to support the court of the Bank of England in achieving its financial stability objective is subject to supporting the policy of Her Majesty’s Government, including their objectives for growth and employment. That is significant. That power is there for a reason, and we expect it to be used. It requires the Chancellor of the day to write annually to the FPC to set out what he expects it to have regard to in making its decisions. The House will have the ability through that mechanism to scrutinise and take a view on whether Ministers—in this case, the Chancellor—are giving the right directions to the Committee in terms of what it should understand the Government’s economic objectives to be. I believe that the mention of growth and employment will address one of the concerns that has been raised.

It is worth noting that the measures we are talking about relate to peacetime; they are not for use in a crisis. The Chancellor will retain the ability to give directions to the Bank in a time of financial crisis, for example, when that is in the public interest. The measures before us are for use in the normal course of events.

There will also be a requirement on the FPC to account for its decisions. It will appear before the Treasury Committee after it has held its meetings and published its reports, and it will have to explain the basis of its recommendations and directions. It has made a commitment to setting out in advance the types of indicators that it will bring to bear on those questions, so there will be no arbitrary use of discretionary powers. The committee will seek to be predictable in regard to the types of instrument that it will use.

On the format of statutory instruments, the parliamentary Delegated Powers and Regulatory Reform Committee will take a view on whether the choice of procedure is appropriate. I think that the hon. Gentleman will approve of the fact that the affirmative resolution procedure is to be used in these circumstances.

Let me address the hon. Gentleman’s point about residential property, which is of course a matter of interest to our constituents. It has been pointed out that all these matters have a bearing on our constituents. I think he would acknowledge that any review of the recent financial crisis—and, indeed, of financial crises around the world—would note that housing bubbles are often associated with the kind of over-exuberance and excess that contributes to financial instability, which the arrangements that we have in place are designed to address. It is appropriate for the powers to be there. These sectors have been debated at the European level, and this is one of a limited number of sectors for which it is anticipated that the national regulators should have a sectoral power.

I think it important to note that the power to make recommendations and give directions is available to the FPC, but that there is no requirement that it should get

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in the business of micro-managing these sectors. It seems to make sense, on the basis of history, for this initial set of sectors to be included. The powers are there, as I say, but there has been some debate about whether they should be more specific in respect of loan-to-value powers, which is not part of the proposals. It is no part of the Government’s purpose, as the hon. Gentleman rightly anticipates, to prevent what we hope will be an increase in home ownership and house building as a result of the order.

Let me deal with some points raised by the hon. Member for Nottingham East. He forcefully made the point that we need an explanation from the Financial Policy Committee of why it is using its powers. This should not take place in a vacuum or in secret. I completely agree, and this is provided for in the Financial Services Act, as the hon. Gentleman, a veteran of the Committee, knows. Section 9S requires the FPC to give an explanation of the reasons for its use of direction powers, and the explanation needs to be published in the financial stability report and it needs to account to Parliament for its use of the powers.

Let me pick up one of the hon. Gentleman’s earlier points, which was not quite right. He mentioned credit card repayments, for example. The powers provided for in the statutory instrument do not go into that level of detail, and the FPC will not have those powers and they are certainly not in this order—and neither are the loan-to-value powers available.

The secondary objective addresses the hon. Gentleman’s point about the necessary symmetry of these arrangements. Macro-prudential regulation is certainly about damping down excessive exuberance when it takes place, but on the other side of the cycle, by retreating from some of the provisions by varying requirements downwards, it also has the power to reverse the dampening of those sectors.

Chris Leslie: I am sorry, but as I read the order, I note that it says that UK firms can be required to maintain “additional” funds, but there seems to be no provision to dial it down the other way. Have I misread the order?

Greg Clark: What I am referring to is the fact that if the requirements have been dialled up, they can be dialled down. That will be required. The fact that they are time varying precisely reflects the different conditions that will apply from time to time.

The hon. Gentleman mentioned the exemption for small firms, and he was quite right to raise the issue of what proportion of mortgages might be covered. To be clear— when he sees my remarks, he will be clear—the exemption applies to small investment firms. It is still the case that all deposit takers and banks, including building societies, will be within the scope of the power. That contribution will be recognised.

As to whether we should take the power—either through the order or, more likely, through the Banking Reform Bill or previous legislation on the leverage ratio, which is a live issue—it is already possible by order under the Financial Services Act to make provisions to vary the leverage ratio. Such an order would, of course, be subject to prior parliamentary approval. There is no requirement for additional primary legislation; the powers will be there at the time we expect to bring the provisions into force.

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The hon. Gentleman asked about the penalties for contravening the views of the Financial Policy Committee. The committee makes recommendations to the regulators, and it is the regulators—the PRA and the FCA—who are responsible for implementing them. The hon. Gentleman will know—again, from the Financial Services Act—that considerable powers are available to the FCA and the PRA, in the form of regulatory sanctions, constrictions on firms’ activities, and unlimited fines. That is why the sector regulators have the powers of direction.

The hon. Gentleman raised a geographical point, asking whether the sectoral powers could be used to specify a particular area. The answer is that they could, if there were evidence of a particular problem in a particular area. However, as he will recall, there is a general requirement for the FPC to act proportionately, and one of the principles that has been agreed is that it should not become involved in the micro-management of these matters or in close detail. I consider it unlikely that it would make recommendations on a narrow geographical basis.

I hope that I have responded adequately to the points that have been made this evening. I gather from the Whips that I may have done so to the satisfaction of the House, and I hope that it will agree to the recommendations.

Question put and agreed to.


That the draft Bank of England Act 1998 (Macro-prudential Measures) Order 2013, which was laid before this House on 24 January, be approved.

Business without Debate

Delegated Legislation

Mr Deputy Speaker (Mr Lindsay Hoyle): With the leave of the House, we shall take motions 5 to 11 together.

Motion made, and Question put forthwith (Standing Order No. 118(6)),


That the draft National Employment Savings Trust (Amendment) Order 2013, which was laid before this House on 15 January, be approved.

Local Government

That the draft East Hertfordshire and Stevenage (Boundary Change) Order 2013, which was laid before this House on 22 January, be approved.

That the draft Gateshead and Northumberland (Boundary Change) Order 2013, which was laid before this House on 22 January, be approved.

Financial Services and Markets

That the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2013, which was laid before this House on 28 January, be approved.

That the draft Financial Services Act 2012 (Consequential Amendments) Order 2013, which was laid before this House on 28 January, be approved.

That the draft Financial Services Act 2012 (Misleading Statements and Impressions) Order 2013, which was laid before this House on 28 January, be approved.

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That the draft Uncertificated Securities (Amendment) Regulations 2013, which were laid before this House on 28 January, be approved.—(Greg Hands.)

Question agreed to.


Human Rights in India

8.11 pm

Mr Jim Cunningham (Coventry South) (Lab): I know that there is to be a debate on this subject tomorrow.

The petition, to which there are more than 2,000 signatures, states:

The Petition of residents of Coventry and the United Kingdom,

Declares that the Petitioners believe that the UK Government should encourage the Indian Union to take immediate action to stop human rights abuses facing minorities in India and that India should sign and ratify the Rome Statute of the International Criminal Court and the UN Charter against torture and other cruel, inhumane or degrading treatment or punishment which encompasses the death penalty and thus India should abolish the death penalty as it is a cruel, inhumane or degrading form of punishment; further declares that the UK Government should campaign to stop Balwant Singh Rajoana's death sentence and have him released from jail as he has served 17 years in custody and that the Indian Union should release all political prisoners, prisoners of conscience and prisoners who have been imprisoned without trial.

The Petitioners therefore request that the House of Commons urges the Government to appeal to India for the above actions to be taken, and request that the House holds a debate on these issues and brings them to light in the European Union and United Nations.

And the Petitioners remain, etc.


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Country of Origin Marking (Manufactured Goods)

Motion made, and Question proposed, That this House do now adjourn.—(Greg Hands.)

8.11 pm

Tristram Hunt (Stoke-on-Trent Central) (Lab): You can rest easy now, Mr Deputy Speaker. After all that gobbledegook about Basel III and socially dubious uses of money, we can return to the subject of the real economy. It is a great privilege to have secured this important Adjournment debate.

The issue of countries of origin and the right of consumers to know where goods, foods and materials emanate from is particularly important at present, as we battle with the ongoing horsemeat crisis. Indeed, that scandal is a textbook example of the need for clarity of information on sourcing, but what my colleagues and I wish to address this evening is origin marking in the ceramics industry, and especially the issue of what we call bogus back-stamping—the misleading allocation of country of origin details, designed to confuse the consumer.

It is said that we can always recognise a Stokie by their feverish examination of the back-stamp on any cup, saucer, plate or bowl. I am talking about the celebrated “turnover club”, as the plate is whisked over to examine the mark of origin—although I must add that there are some etiquette issues as to when we can do that when eating out.

I am glad to say that we have some excellent Stoke ware here in the Palace of Westminster. We have Wedgwood plates, some fine Dudson cups—from the constituency of my hon. Friend the Member for Stoke-on-Trent North (Joan Walley)—and if you were to join me for a cup of tea in my office, Mr Deputy Speaker, you would find some beautiful Emma Bridgewater mugs and Portmeirion cups and saucers.

It is a source of great pride to our constituents that pottery has been thrown in Stoke-on-Trent since the late-1500s. Out of the blue and yellow North Staffs clay came butter pots and flowerpots. In the sun kilns of Bagnall and Penkhull, local artisans started to glaze their earthenware and develop a reputation for craftsmanship. In their wake came the great houses of Wedgwood, Spode, Royal Doulton and Minton, names celebrated around the world for the excellence of their craftsmanship. Stoke-on-Trent gained the title “The Potteries” as “Made in Staffordshire” became a global hallmark of excellence.

When J. B. Priestley visited Stoke-on-Trent in the mid-1930s, he was taken aback by the beauty of the bottle kilns. He wrote:

“They represent the very heart and soul of the district…unless you are prepared to take a deep and lasting interest in what happens inside those ovens, it would be better for you to take the first train anywhere.”

Today, we make a lot of other stuff in Stoke, but the good news is that, after decades of decline, the pottery industry is roaring back to life: investment is up; orders are coming in; the kilns are alight; jobs are coming back from the far east; and we are all looking forward—as is the entire nation—to a successful royal birth this summer, with attendant ceramic sales. The key to success is the quality of our artists and designers, the new plant and

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equipment, and the artisan skills of the work force, which means it is more important than ever that consumers are able clearly to know what they are buying.

This is the problem we face: if a mug is made in Indonesia or Thailand, it can be transported into the UK and then have the word “England” stamped on the bottom of it. Similarly, if a mug is made in Vietnam or Turkey and then finished in England, it can have “Made in England” or “Made in Britain” stamped on the bottom. That is what we call bogus back-stamping—the wrongful attribution of country of origin labelling—and it is harming jobs and investment in the UK, and especially in Stoke-on-Trent. More than that, morally, it is trading off the skills, sweat and application of generations of Stoke-on-Trent workers, who turned the “Made in Staffordshire” brand into a world-class mark of excellence.

I have no problem with goods being made abroad and finished in the UK. This is not about protectionism. In a globalised marketplace, the supply chain will often cover many different continents. Many hundreds of jobs in the ceramics industry involve production abroad and finishing in the UK, and the companies concerned are often good firms that do the right thing. However, what I and my colleagues do have a problem with is goods that are made abroad being classed as being made in Staffordshire or Stoke-on-Trent, when they are not.

The rules are very clear. As you know, Mr Deputy Speaker, European Union directive 2025/73 states that it is the so-called ”blank”—where the first firing of the ceramics takes place—that determines the origin of the ware, irrespective of subsequent processes, such as finishing, decorating or glazing. It is about the first firing, and if that takes place in Jakarta, the product is Indonesian-made and should not have “England” stamped on the bottom.

For years, UK Governments of both parties—of all parties now—have opposed the compulsory indication of the country of origin of goods. Lord Mandelson attempted to introduce such a scheme in 2005 when he was the European Union Trade Commissioner, whereby there would be mandatory country of origin marking on certain products imported from third countries.

Jim Shannon (Strangford) (DUP): Will the hon. Gentleman give way?

Tristram Hunt: I am happy to give way.

Mr Deputy Speaker (Mr Lindsay Hoyle): Jim Shannon!

Jim Shannon: It is a big surprise. I spoke to the hon. Gentleman before the debate and asked for his permission to intervene, and I thank him for allowing me to do so.

Mr Deputy Speaker: Order. This is an intervention so you do not need to worry about that. I was more bothered about the fact that you came into the Chamber after the hon. Member for Stoke-on-Trent Central (Tristram Hunt) had started.

Jim Shannon: I appreciate that, and you are very gracious, Mr Deputy Speaker. The hon. Gentleman has spoken eloquently about the issue in Staffordshire and England. This is a devolved matter for Northern Ireland, Scotland and Wales, but does he feel that we need a UK-wide policy and strategy, and legislative change

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that would include the whole United Kingdom—Great Britain and Northern Ireland—so we could fight this issue together for all these reasons?

Tristram Hunt: I am grateful for the hon. Gentleman’s intervention. This issue, be it, famously, about Scottish knitwear made in Morocco or goods unique to Northern Ireland which are made somewhere else and then passed off—

Jim Shannon: Giant’s causeway.

Tristram Hunt: Giant’s causeway is an excellent example, although it would be hard to make another Giant’s causeway in other parts of the world. As I will set out, this is an issue where we want central Government direction but then for things to be implemented locally. We want the push from the centre but for the approach to be rolled out to the devolved Administrations, and I agree with what the hon. Gentleman said in his intervention.

The attempt to introduce mandatory country of origin marking has not worked. After seven years of trying, it was dropped in the European Commission and I fear we will not have it back again. So I am not making a case this evening for reviving mandatory country of origin marking. Instead, I wish to make the case for focusing on those companies that are misleading consumers on country of origin claims.

Joan Walley (Stoke-on-Trent North) (Lab): It is so important, particularly for the work force in Stoke-on-Trent, that we get some response from the Minister tonight. Does my hon. Friend agree that the real issue is that when people buy ceramics they want to be in a position to make an informed choice? Therefore, labelling is really important, as are the Consumer Protection from Unfair Trading Regulations 2008. If we are not going to go down the route of further legislation, we need proper enforcement, particularly by trading standards officers. We have seen a lack of trading standards officers because of the cuts to local government, so will the Minister therefore assure the House that the Department for Business, Innovation and Skills will give a real lead on requiring trading standards officers to take action on this issue of bogus back-stamping?

Tristram Hunt: My hon. Friend has been fighting for the ceramics industry for far longer than I have, and her achievements with Steelite, Middleport and Royal Stafford are known throughout Stoke-on-Trent. She rightly makes the case that this is about consumer rights; it is about consumers knowing that when they buy wares that are “made in Stoke-on-Trent” and “made in Staffordshire”—the finest in the world— those goods have an authenticity about where they are made.

In the last debate the House had on this issue, the hon. Member for South Staffordshire (Gavin Williamson), who is not in his place but who has a history of working in the ceramics industry, asked what country a plate made by his fictitious company “Gavin Williamson English Chinaware” might be made in. What he illustrated was just how ambiguous the current framework is when the history and tradition of English or British manufacturing is integral to the branding of certain products, whether they are actually manufactured here or not.

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The potters are proud of their history and consumers want to be sure that they are purchasing the true heirs to 300 years of craftsmanship. Of course, back stamping is not a legal requirement and the absence of a back stamp usually tells us as much about an item’s origins as a stamp does. However, if a back stamp or any product labelling is applied, the Trade Descriptions Act 1968 requires these marks to be accurate indications of the

“place of manufacture, production, processing or reconditioning”

of the goods. That is where bogus back stamping comes in, undermining the “Made in Stoke-on-Trent” brand and misleading consumers. The onus lies with the trading standards authorities to weed out that practice.

Too often, Business Ministers have listened to the big retail chains and superstores as they demand cheap goods at any price and claim that any attempt to inform the consumer is protectionism. Well, it is not. It is about transparency and rebalancing the British economy; it is about honesty for the consumer, and a decent industrial strategy for the UK.

My initial ask of the Minister is for the Department for Business, Innovation and Skills to allocate some funding to secure protection for this nationally important sector, as it has for other sectors under the Trading Standards Institute—most notably and recently the money-lending industry. Secondly, I ask her to write to the Office of Fair Trading to ask it to take a close look at the issue and report to Parliament on how it is seeking to protect the branding and property rights of UK ceramics companies. I also ask her to lead by example. There are mugs in BIS with no back stamp, there are plates in British embassies that are made in Thailand, and I have found in august institutions such as the Royal Society and the Imperial War museum ceramics bedecked in the imagery of Britain but imported from abroad. If Business Ministers are serious about supporting the march of the makers, they could begin with Government procurement policy.

My hon. Friends and I are seeking from this debate a commitment from the Government to take bogus back stamping seriously; to allocate time and attention to the question; to explain to the OFT and trading standards authorities that this is a priority issue and that they have the resources to deal with it; and to support our great ceramics industry through a detailed procurement process. If the Minister does all that, my hon. Friends and I might just think about welcoming her into the “turnover club”.

8.27 pm

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): I am delighted to respond to the hon. Member for Stoke-on-Trent Central (Tristram Hunt) and I congratulate him not only on securing a debate on an issue that is very important for his constituency but on the passionate and humorous way in which he managed to convey the issues with a great degree of eloquence. He spoke from the heart about the importance of this fine industry and the role it can play in our nation’s heritage and our nation’s future.

It is not surprising, given that the hon. Gentleman represents the potteries area, that the ceramics industry was uppermost in his speech. Of course, it is a UK

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sector with a well-deserved worldwide reputation for the design and quality of its products. I can attest to that, as I was delighted to receive some when I got married two years ago. Such china makes a very fine wedding present, I must say.

Like the hon. Gentleman, the coalition Government are rightly proud of British manufacturing. I am delighted to hear the success stories of the potteries industry and, in particular, the recent improvements that mean that things are going very much in the right direction. We are clear that we want to secure and drive through growth, proclaiming what is made in Britain, invented in Britain and designed in Britain. The Department has championed that through the “Britain is Great” campaign and it is important that we champion the merits of our industries, which create so much fine produce in manufacturing.

I know that the hon. Gentleman and the other MPs from the Stoke area have recently had separate meetings with my right hon. Friend the Secretary of State and the Minister for Trade and Investment in the other place, Lord Green, to raise the issue of misleading origin marking. I hope those meetings reassured the hon. Gentleman to some degree that the Government take information for consumers seriously. Both the Secretary of State and Lord Green will write to him soon on this and other issues that he raised with them.

I agree that there is a place for country of origin labelling—that is, for positive country of origin marking, done because UK manufacturers think that is the right thing to do for themselves and for their customers. I would argue that legislation is not needed beyond the existing protections against counterfeiting and false advertisement, but that it can be done voluntarily. Of course many UK producers already do so because the companies rightly perceive a marketing benefit in being able to show that stamp of quality—hence the “turnover club”. The Government have consistently supported the use of voluntary country of origin marking, but we are cautious about adopting a legislative approach to origin labelling of manufactured goods.

The House will be aware of the Government’s concern that poorly designed regulation can be unnecessarily burdensome and complex, and duplicate requirements in other regulations, which can impose excessive and unnecessary costs on business. Introducing the debate, the hon. Gentleman stood up for businesses, so I am sure that he does not want them to face unnecessary costs either. We are trying to eliminate avoidable burdens of regulation and bureaucracy, so we will consider introducing new regulation only as the last resort. Overall, our aim is to reduce the amount of regulation, and that includes a commitment to improving and reducing the burdens imposed by European legislation.

That means we have to explore thoroughly alternatives to legislation, and in this case, I would argue that the alternative is voluntary labelling. The hon. Member for Stoke-on-Trent North (Joan Walley) asked whether, if the legislative route is not to be adopted, voluntary labelling can be properly enforced. She is right to highlight the key importance of enforcement. It is important to make it clear that because of rulings by the European Court of Justice and our single market obligations, the UK cannot unilaterally impose compulsory “Made in Britain” labelling, even if we wanted to; nor can we impose origin marking unilaterally on imports, because that would be contrary to our single market obligations.

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Business can of course label if it wants, but that does not mean that such labelling is unregulated. Labelling has to be clear, accurate and not misleading to the consumer. The hon. Member for Stoke-on-Trent Central said he had a problem with claims that goods are made in Staffordshire or Stoke-on-Trent when they are not, and I wholeheartedly agree with him. Under current consumer protection regulations, it is a criminal offence to present false information and deliberately mislead consumers. The key test is whether the information encourages consumers to make a purchasing choice that they would otherwise not have made, and it includes misleading or false information on the origin of goods, however it is provided. That law exists.

The hon. Gentleman mentioned European Union directive 2025/73 and talked about origin being defined by where the initial firing takes place. That directive deals with the tariff treatment of ceramics and is therefore not strictly relevant to the Court’s judgment on consumer issues, where the key test is whether the consumer’s behaviour is affected. If it were deemed not to affect the consumer’s purchasing decisions, the information being wrong would not be deemed to be misleading.

Joan Walley: Let us imagine someone going to buy a wedding present of china: does the Minister not accept that if the impression is given that the china was made in this country and it has all the attributes of pottery made in Stoke-on-Trent, but in fact the blank was manufactured abroad, it cannot be accurately described as manufactured in this country? That is the misleading aspect. It is similar to the situation my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) described involving beefburgers and horsemeat. In the remaining time, will the Minister stress how we can deal with disingenuous attempts to relabel an item as something other than what it actually is?

Jo Swinson: I will certainly endeavour to do so, because ensuring that existing provisions in law can be used is key to the question that the hon. Lady raises. The issue has not yet been tested in the courts in relation to origin markings. It is a broad concept, but the basic rule is that if consumers are likely to be misled in their purchasing decision, an offence is likely to have been committed.

Without commenting on specific examples, let me say that it is up to the enforcement authorities to consider whether there is any evidence of possible offences, and then it is for the courts to decide. The protection is not just for consumers—as in the example of gift buying outlined by the hon. Lady—but serves to ensure a level playing field for businesses that are honest and that give accurate information, so that they are not disadvantaged in relation to businesses that engage in deceptive practices. Local authority trading standards officers and the Office of Fair Trading are the relevant enforcement authorities in such a circumstance. The OFT’s role usually relates to matters affecting the general interests of consumers, rather than specific complaints, which are dealt with by trading standards officers. I encourage Members to ensure that any evidence of possible offences is brought to the attention of the relevant local authority, as has been alluded to.

Trading standards officers are, of course, answerable to their local authority and to local councillors. It is not the Government’s role to set local priorities for local

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enforcement activities, as they rightly depend on the issues arising in each area, and inevitably they will vary from authority to authority. In setting their priorities, however, local authorities must take into account the potential impact of particular behaviour not just on local consumers but on the wider well-being of the community, including the business community. Where local authority powers can be used to address matters that are having an adverse impact on a local economy with a particular concentration of businesses, it is reasonable for those matters to achieve the priority that they merit in that area.

Tristram Hunt: The Minister is making an informative speech. Does a case need to come to trading standards officers to encourage them to act, or can Members of Parliament, for example, make a generalised request to them to look into a specific sectoral complaint?

Jo Swinson: Clearly, trading standards can look where there is evidence, or where they perceive that there might be evidence of a breach. I am sure that specific cases would greatly assist them in making their inquiries more fruitful more quickly. I encourage hon. Members to speak to their local trading standards teams. I know that the council in Stoke-on-Trent is run by the hon. Gentleman’s Labour colleagues, who, I am sure, will be willing to listen attentively to his representations on the matter. I urge him to take up the matter with them, as they have powers to deal with misleading information that encourages consumers to make a different decision on product purchases. Although part of the problem is that that has not been tested, I wholeheartedly encourage the taking forward of such matters. Given the various ways that Members have of raising matters in the House, I am sure that the hon. Gentleman will not let the matter rest if he does not get satisfaction through that route.

On the issue of the misleading of consumers, it is important to understand what matters to the consumer. In a Eurobarometer survey in autumn 2010, 75% of people questioned said that origin did not affect their purchasing of textiles and clothing; for electronic products, the figure was 68%. I am not sure whether ceramics were included in that study. We need to be clear about how consumers prioritise different pieces of information in their buying behaviour: price, design, brand name and origin. In making any purchasing decision, consumers will consider a variety of such factors. Of course, it is true that some consumers are very concerned to ensure that they support British or locally made products and will want information on their origin.

I will turn briefly to the European Commission’s 2005 proposal for a regulation on compulsory labelling of imported consumer products. The Commission intends to withdraw the proposal, as I am sure the hon. Gentleman will be aware. I know that the UK’s ceramics sector has been a consistent supporter, but the Government have strong reservations, as was outlined in the Adjournment debate secured by my hon. Friend the Member for South Staffordshire (Gavin Williamson) in 2011, which other hon. Members have referred to and, indeed, participated in.

The reason the Commission gave for withdrawing the proposal was the lack of agreement in the Council and developments in the interpretation of World

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Trade Organisation rules that make it outdated. We expect confirmation on that in April. The proposal received a mixed response from member states. Many saw it primarily as a protectionist measure that discriminated between imported and EU-produced goods. Consumer information is important, but we do not necessarily want to go down a protectionist route.

The Government obviously share the concerns about the need to tackle counterfeit goods and provide accurate information and the genuine concerns about trademark and design breaches and the mislabelling of imported goods from some sources, as the hon. Member for Stoke-on-Trent Central has outlined, but it did not seem that the Commission’s proposal would add anything to the debate except additional administrative and cost burdens, so it is right that it is likely to be withdrawn. There was also a customs issue relating to the cost that would be imposed, particularly in the context of the public expenditure constraints we face. If that is not the best way to achieve the outcome the hon. Gentleman wants, which is to allow companies in his constituency a level playing field and enable consumers to be well informed, alternatives such as the ones I have talked about and better enforcement are a better way forward.

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I will turn to the specific questions the hon. Gentleman asked towards the end of his remarks. He asked what funding the Department for Business, Innovation and Skills might be able to bring forward. The Department does not fund individual enforcement actions, but it does fund the National Trading Standards Board. As he might be aware, the trading standards landscape has been changing, because there were concerns that trading standards were too dispersed. The board will have greater power. We can bring the issue to the attention of the Office of Fair Trading, but it is up to it to consider whether an investigation is merited.

With regard to the “turnover club” and the mugs in the Department with no back-stamp, I must say that I brought my own mug to the Department when I arrived. It commemorated the suffragettes and I enjoy drinking my tea from it. I have never turned it upside down to see what stamp is on it, but I will do so, although not when it is full of tea—as the hon. Gentleman rightly said, it is not always an appropriate moment to do that. I was intrigued to hear about the “turnover club” and will endeavour to take up his challenge to see where the goods in the Department come from and pass on his concerns to others.

8.43 pm

House adjourned without Question put (Standing Order No. 9(7)).