6 Mar 2015 : Column 1189

House of Commons

Friday 6 March 2015

The House met at half-past Nine o’clock


[Mr Speaker in the Chair]

Jonathan Evans (Cardiff North) (Con): I beg to move, That the House sit in private.

Question put forthwith (Standing Order No. 163).

The House divided:

Ayes 0, Noes 41.

Division No. 169]


9.34 am


Tellers for the Ayes:

Mr Christopher Chope


Jonathan Evans


Baldry, rh Sir Tony

Bingham, Andrew

Boles, Nick

Bone, Mr Peter

Bottomley, Sir Peter

Brake, rh Tom

Brazier, Mr Julian

Brennan, Kevin

Brokenshire, James

Brown, Lyn

Campbell, rh Mr Alan

Elliott, Julie

Eustice, George

Field, Mark

Fitzpatrick, Jim

Freeman, George

Garnier, Mark

Gwynne, Andrew

Hancock, rh Matthew

Hands, rh Greg

Heath, Mr David

Hollobone, Mr Philip

Jenkin, Mr Bernard

Johnson, Joseph

Jones, Susan Elan

Leadsom, Andrea

Leslie, Chris

McFadden, rh Mr Pat

Murrison, Dr Andrew

Newmark, Mr Brooks

Penrose, John

Perry, Claire

Rees-Mogg, Jacob

Sawford, Andy

Selous, Andrew

Slaughter, Mr Andy

Swayne, rh Mr Desmond

Swire, rh Mr Hugo

Vaizey, Mr Edward

Webb, rh Steve

Young, rh Sir George

Tellers for the Noes:

Mr David Evennett


Mr Ben Wallace

Question accordingly negatived.

6 Mar 2015 : Column 1190

Mutuals’ Deferred Shares Bill [Lords]

Consideration of Bill, not amended in the Public Bill Committee

Clause 2

Restriction on voting rights

9.45 am

Sir Tony Baldry (Banbury) (Con): I beg to move amendment 1, page 2, line 14, leave out clause 2.

Mr Speaker: With this it will be convenient to discuss amendment 2, in title, line 3, leave out from “shares;” to end.

Sir Tony Baldry: I should make it clear at the outset that the Bill is an extremely valuable and useful one. The House is grateful to my hon. Friend the Member for Cardiff North (Jonathan Evans) for promoting it here. The Bill started in the other place, where there was a comparatively short debate on Second Reading and no Committee stage. I believe that, because time was short, the Government Minister said to the Bill’s promoter, Lord Naseby, “If you agree to certain amendments, we will support the Bill. If you do not, we will not support it.” Lord Naseby, being a very wise former Deputy Speaker of the Commons, agreed to the amendments and came to a sensible compromise. The Bill came to the House of Commons and was debated in Committee, which was skilfully navigated by my hon. Friend, because he managed to persuade the Chair to have one debate on all the clauses. There was no reference whatever to clause 2 during the debate.

The reason I tabled amendment 1 as a probing amendment is that there is potentially a conflict in the Bill. The Bill seeks to help mutuals to raise further money, funds and solvency. On the other hand, it says that however much anyone invests in a mutual, they will get only a single vote. I will describe this in more detail in a second, but the European Union Commission has proposed a statute for European mutuals. Under that proposed European law, members of a mutual would have more than one vote, and decisions would be made by a majority vote. The potential conflict is this: how do we encourage people to invest in mutuals but at the same time tell them that, however much they put in, they will get only a single vote?

Mutuals are an important part of what is known more broadly as the social economy, which staggeringly accounts for 10% of all European undertakings—the amount undertaken by mutuals in the UK is less than the amount undertaken by mutuals in other EU member states. Mutuals have been described as voluntary groups of persons whose purpose is primarily to meet the needs of their members rather than to achieve a return on investment. All hon. Members will recall mutuals in their constituencies that go back to the 18th or 19th centuries—they would have been set up in workplaces or neighbourhoods to provide sickness help, funeral cover and various reliefs of that kind, some of which were overtaken by the Beveridge report and the welfare state. There has always been a sense of each person making a contribution and getting something out.

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Mutuals were put into difficulty because of the so-called solvency II directive, which called for increased solvency margins, but there are differences between different financial services providers. Smaller and medium-sized mutuals are often focused on one risk or cover one homogenous group. As a consequence, they have more difficulties in acquiring risk capital compliance with the solvency II rules. That has significant consequences for them and can result in their dissolution. As I understand it, the Bill seeks to deal with that conundrum in the solvency rules.

The basic principles behind the solvency II directive, which was adopted in 2009 and came into force in 2013, are that insurance institutions in Europe should be based on a better risk assessment, better spreading of risks and better financial foundations so as to improve the stability of the market and reinforce consumer protection—all sensible stuff. The main innovation introduced by the directive is that in establishing an improved foundation for the insurance sector, the directive concerns more than only the capital solvency requirements as they existed at the time, and it also lays down rules on the whole organisation of insurance takings in Europe. Within the European Union, it also concerns the taking up and pursuit of self-employment activities—the direct insurance and reinsurance, the supervision of insurance and reinsurance groups and the reorganisation and winding up of direct insurance undertakings.

Jonathan Evans (Cardiff North) (Con): For the avoidance of doubt, I should call attention to my interests in this respect. I am the chairman of a regulated insurance company, but it is not a mutual company. I was on the board of a mutual company but not since I have been a Member of Parliament.

My right hon. Friend mentions solvency II, but it is important to remember that that is an effort by Europe to catch up with a regime that has already been in operation in the United Kingdom for 10 years or so. The issue that he has outlined in relation to better risk assessment is something that our regulators required companies to do a decade or more ago. Europe is catching up in that regard.

Sir Tony Baldry: I have no doubt that Europe is seeking to catch up with the United Kingdom in many instances, but in reality the Bill is trying to square the circle of how mutuals manage to cope with increasing solvency requirements, whether imposed by domestic legislation or by EU directives. One of the interesting factors of mutuals is that at present they cannot and do not cross national boundaries. If a mutual wants to trade in more than one EU member state, it can do so at present only by setting up a joint stock company to manage the variations in the regulations and laws between the different member countries.

I would be interested to learn from the Minister—I am pleased to see her in her place on the Treasury Bench—what approach the Government think they should take to legislation that would make it easier for mutuals to operate across Europe and, especially if the UK is in the lead in certain aspects of mutual activity, how we could take better advantage of that. The EU internal market rules apply generally to the operators insurance

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sector, but it is predominantly attuned to for-profit companies, and it is widely acknowledged that the rules do not always recognise the specific position of other company forms such as mutuals.

Within the framework of completing the internal market, with a view to allowing the free movement of people, goods, services and capital with equal terms of competition between different sectors and legal forms in the same markets, way back in 1992, the European Commission proposed regulations for a European mutuals statute, together with statutes for co-operatives and associations, in order to improve the legal embedding of the social economy in the European Community. Each draft regulation was supplemented by a directive on the involvement of employees. In the opinion of the Commission, mutuals, like other organisations within the social economy, should have been able to take advantage of the single market in exactly the same way as other companies, without having to discard their specific characteristics. It was considered that a European statute would help mutuals overcome the legal and administrative difficulties hampering their cross-border and transnational activities and co-operation in the internal market.

Returning to my amendments, the draft regulations were revised in 1993 and a statute proposed for European mutuals, including provisions for members of a mutual to have more than one vote and for decisions to be taken by a majority vote. I would be interested to hear from my hon. Friend the Member for Cardiff North and the Minister how they see this circle being squared—there is the perfectly understandable desire to get more money into mutual societies so that they can meet the solvency requirements, but how can that be done if those who invest substantial amounts get only a single vote? Given the history and record of mutual societies in this country, would it not be more sensible to use European-wide legislation that would enable UK mutuals to work and win business elsewhere in Europe, without companies having to go through the rigmarole of setting up joint stock companies to act as a bridge between other mutual societies in other member states?

Jonathan Evans: Having spoken to my right hon. Friend the Member for Banbury (Sir Tony Baldry) earlier, I know that he is a friend of the mutuals sector and that his aim is not to undermine the intention of the Bill.

Sir Tony Baldry: I come to praise my hon. Friend’s Bill, not to bury it.

Jonathan Evans: I am much aware of that. My right hon. Friend and I have spoken about this matter and I know that that is his motivation.

I do not know whether this will help my right hon. Friend’s career—he and I are both leaving the House, so perhaps it does not matter—but we are good Europeans. We have always understood that it is in our country’s interests to engage positively with Europe, so I am pleased by his references to the European landscape. Most of my colleagues are aware that, having served in the House in the 1990s, I then spent a decade in the European Parliament as an MEP and for some of that time I was leader of the Conservatives in the European Parliament. The two aspects he has drawn to the House’s

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attention—the potential European mutuals statute and the debate about the European solvency rules—are matters that I have spent pretty much a decade of my life arguing about.

Given that my right hon. Friend drew attention to the European mutuals statute and quoted the original 1992 provisions and the 1993 revision, it might be worth pointing out that the important word, which he mentioned, was “draft”. The draft was produced, but there was then a long period of decided inactivity. In fact, those of us elected to the European Parliament first in 1999 had to engage in a major effort to get the issue of the European mutuals statute on to the European agenda. Given that, although my right hon. Friend referred to the restriction on voting rights in clause 2—which, he rightly said, might be inconsistent with a report produced more than 20 years ago—it is important to see that report in its context.

10 am

That report was produced in the context of the European mutuals landscape, which is rather different from the landscape in the United Kingdom. As I will set out—if, as I hope, we reach Third Reading—the history of the mutual sector in the 1980s saw a significant number of companies demutualised, for a range of reasons. That experience did not happen in Europe; therefore, our mutual sector today is something in the order of a third to a half of what it is in Europe. That report reflected much more the European experience, rather than taking into account the difficulties that arose for us in the United Kingdom, where so many companies demutualised in the 1980s.

Throughout the history of the mutual sector, companies and societies have had to raise regulatory capital through the retention of undistributed profits. That restraint has from time to time constrained the ability of those in the sector to invest in the growth of their businesses, as and when market opportunities arose. Mutual businesses accordingly responded to those constraints by building up large capital reserves. That is why in the 1980s, and also the early 1990s, many mutual companies had what might have been regarded as significantly more capital than they required to be able to run their businesses. That was an incentive for the invention of carpetbagging—the whole business of demutualising companies in ’80s and ’90s, so that depositors and policyholders could get their hands on that capital. The mutual sector also fell victim to boards that were keen to significantly grow their businesses and then required the freedom to raise capital through company share issues—which, as my right hon. Friend rightly outlined, is the situation for those who are unable to go through the mutual mechanism.

As my right hon. Friend said, more recently, major changes in the capital solvency rules—not only in relation to insurance, but in relation to building societies—have driven a need to ensure that mutual companies can raise regulatory capital much more easily. It is worth making the point that we have a range of iconic mutual companies in this country—companies that are currently going through the solvency II process, but which are fully and adequately reserved and would be among the leading companies in terms of solvency ratios. It is therefore certainly not the case that we need to get this measure through in order to put the mutual sector in a position to comply with solvency II. However, the experience of

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solvency II has shown us that there may be occasions when—whether for reasons of growth or, alternatively, where additional capital may need to be raised in circumstances that had not been anticipated—the mutual sector is at a disadvantage in responding to those challenges compared with the shareholder/proprietorship companies.

In the building society sector, there is a new instrument, called the core capital deferred shares structure, which has achieved regulatory recognition. I pay tribute to Nationwide’s work in promoting that concept. I also pay tribute to Members on both sides of the House who have helped to ensure that regulators understand the need to respond dynamically to the pressure. However, although core capital deferred shares have been approved as an instrument in the context of the building society sector, they do not have the same effect in relation to mutual insurers and friendly societies, which is why the Bill was needed.

As I have said, the main purpose of the Bill is to create a new class of shares, which are not shares within the meaning of the Companies Act 2006. If the position were otherwise, the mutual status of mutual insurers and friendly societies would be compromised. The purpose of the Bill is to enable mutual insurers and friendly societies to issue shares in a way that satisfies the core regulatory capital requirements of the regulatory supervisors, whether they are in the United Kingdom or in Europe.

Clause 2 provides safeguards against demutualisation. My right hon. Friend the Member for Banbury seems to believe that it would somehow be more difficult to secure the investment if a requisite number of votes were not attached to it. Those of us who have spent a significant amount of time in the mutual sector—as I said earlier, I served on the board of NFU Mutual for a decade, but I also chair the all-party parliamentary group for mutuals—will recognise that if a member investing in such a way had disproportionate influence, we might see expected and, indeed, unsatisfactory outcomes in relation to the capacity of the investor to demutualise companies, which is against the whole thrust and purpose of the Bill. I believe that the investor who seeks to put up capital to assist a mutual company will be much more interested in what the return may be than in the individual number of votes that may be available for the purposes that accompany such voting power.

Clause 2 provides for the making of regulations to meet the tests that financial services regulators will require before they are prepared to recognise capital raised in this way for solvency capital purposes. I believe that removing the clause would defeat our objective in the Bill, and I know that that was not my right hon. Friend’s intention. The power to make the regulations is exercisable by statutory instrument, and is subject to the affirmative procedure. It will still be possible to ensure that the clause is applied in a reasonable and effective manner, and when the regulations appear, Parliament will have an opportunity to do that.

I hope that my right hon. Friend has found my explanation helpful, and that, in the light of what I have said, he will feel able to withdraw his amendment.

Chris Leslie (Nottingham East) (Lab/Co-op): I think that, on this fine morning, I too should declare an interest, although there is no requirement for me to do so. I am a Labour and Co-operative Member, and have

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received support from the Co-operative party. More generally, the House is aware of my historical support for the mutual sector. Unlike other Members, I come to the Bill at a late stage in its progress, and I commend, in particular, the hon. Member for Cardiff North (Jonathan Evans) and Lord Naseby for their diligence.

As the hon. Member for Cardiff North explained, after the global banking crisis had swept across the world like a tsunami and the tide had eventually ebbed, one of the critical risks that were revealed was the issue of the ability of organisations—in this instance, mutual insurers and friendly societies—to withstand, and have the capacity to absorb, difficult circumstances that might make a call on their capital. So the need to resolve this has been a priority for these institutions, although I feel that regulators and others have perhaps not put this as high up the agenda as it should have been, hence the point made by the hon. Member for Cardiff North about the building society sector getting its house in order in terms of the core capital deferred shares, but now we also require a similar set of instruments for the insurance sector.

It is important to put on the record the work done not just by the Building Societies Association but the Association of Financial Mutuals and many others who have helped create a potential solution here. It is not absolutely necessary for the sector, which is able to cope with the new regulatory requirements, but it would certainly make it easier and provide much more of a level playing field, given the ability of the PLC shareholder sector to obtain capital in a far simpler way.

I also want to commend the right hon. Member for Banbury (Sir Tony Baldry) for at least taking the opportunity to put the spotlight on clause 2 and the question about the number of votes. Having listened to his comments, however, I would not want to see that part of the Bill taken out. The hon. Member for Cardiff North was very persuasive in pointing out that the particular character of mutual insurers and friendly societies is that their members together have control and ownership of the organisation, and history shows, through demutualisation efforts in the past, that we need to safeguard the ownership and the integrity of those organisations in this way. Therefore, I am persuaded that the single vote, regardless of the amount of the investment, through the deferred shares is the right way to proceed.

This is a sensible set of measures. It is important that we have them on the statute book. However, we are at a late stage in this Parliament and I ask the Minister to clarify the Government’s intentions for bringing forward the regulations and making sure we can get these changes through, because this is a piece of primary legislation that then enables regulations to be made by affirmative order, hopefully in quick succession. I therefore ask the Minister to give us a sense of the time scale for when that may happen, because, with the level of scrutiny we have had on this, there is quite a lot of consensus on the matter and we need to ensure that the financial services and insurance sectors have this diversity. The gradual disappearance of mutuals in this area will be to the detriment not just of the sector and competition, but

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consumers as well. Therefore, we have to modernise and sustain the mutual sector. The Bill provides worthwhile provisions for doing that and has the support of the Opposition.

The Economic Secretary to the Treasury (Andrea Leadsom): I would like to put on record my great pleasure at the extent of cross-party consensus on the importance of this Bill to support the mutuals sector. I thank my right hon. Friend and constituency neighbour the Member for Banbury (Sir Tony Baldry), who raised some important points. I hope he will be persuaded to withdraw his amendments, as there are clear reasons for doing so.

One of the Government objectives for the Bill is to preserve the mutual status of firms in the sector. Government amendments give firms the option to provide membership rights to deferred shareholders, if they so wish. However, if deferred shareholders do become members of the firm, they will not be entitled to additional voting rights, regardless of the value of their deferred shareholding. This clause serves to protect the principle of mutuality. My hon. Friend the Member for Cardiff North (Jonathan Evans) set out very clearly why that is vital to ensure the success of this sector, which the Government have been so keen to support.

The proposals in the Bill have been carefully drafted to provide mutual organisations with a means to raise external capital in a way that preserves the mutual status of firms. This is no easy task, and the merits of attracting external capital into the mutual sector have been debated at length by mutuals, and some mutual organisations have taken steps to reform and issue mutual capital instruments. For example, in recent years building societies have commonly issued permanent interest-bearing shares that pay the holder a fixed rate of interest. The shares cannot be sold back to the society, although they can be bought and sold on the stock exchange, which means that the price can vary. Changes in banking regulation mean that those instruments will no longer be classed as core tier 1 capital, so the building society sector has designed a replacement mutual capital instrument, known as core capital deferred shares, which will enjoy the same tax treatment as ordinary shares.

10.15 am

Lord Naseby’s Bill originally permitted the Treasury to make regulations allowing friendly societies and mutual insurers to issue deferred shares, and to permit co-operative and community benefit societies to issue redeemable shares. The Government have, however, expressed caution about the merit of the redeemable share instrument for co-operative and community benefit societies, which already have a means of issuing redeemable shares, The Government do not therefore see a clear industry need or demand for such an instrument.

The Government take the view that it is too early to provide for co-operative and community benefit societies to raise further capital by means of redeemable shares, as there is no need at this stage. That position was agreed in Committee in the other House and was supported by Lord Naseby. The Bill as it stands today reflects that agreement. I strongly submit to my right hon. and hon. Friends that the deferred share capital instrument for mutual insurers and friendly societies is a good way

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forward, and that friendly societies and mutual insurers have demonstrated a clear need and demand for this instrument.

My right hon. Friend raised the matter of legislation that would allow mutuals to operate across Europe. The Government certainly want to promote the continued liberalisation of the European single market, and I would welcome comments from the industry regarding barriers to mutuals trading across Europe, as it has not previously raised the issue. In conclusion, I hope that my right hon. Friend will be minded to withdraw the amendment.

Sir Tony Baldry: Having heard the cogent and compelling arguments from my hon. Friend the Member for Cardiff North (Jonathan Evans) and the Economic Secretary to the Treasury, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

10.17 am

Jonathan Evans: I beg to move, That the Bill be now read the Third time.

I should like to thank Members on both sides of the House, as well as the minor parties, for their universal support for the Bill. My right hon. Friend the Member for Banbury (Sir Tony Baldry) has made it clear that we have seen Bills move more swiftly than this through their parliamentary stages, but I would not want anyone to think that this Bill has not received a significant amount of attention. It has had a gestation process of about three years, and support from Members on both sides has enabled the Government to bring forward a Bill that has universal support.

For more than 300 years, friendly societies and mutual companies have been an important part of the corporate landscape of our country. From the time of the industrial revolution, the needs of working people for greater security against unemployment, sickness and funeral costs have led to the creation of many such societies, all of which were committed to the principles of mutuality, customer focus and trust. Some, such as Royal London, the NFU Mutual—on whose board I served for a decade—and LV, have become major landmarks of the financial services industry.

I want to refer briefly to the Tredegar Medical Aid Society, which brought working miners together 120 years ago and mutually provided medical insurance care. The society was the first to make provision for its members to get two weeks of sickness benefit, when needed. In 1911, a parliamentary commission from this place visited Tredegar in the south Wales valleys—my home town—to examine the scheme, which led to the universal introduction of sickness benefit in the UK. In 1947, Aneurin Bevan, who served on the society’s board with my grandfather, a working coal miner, told Parliament that the Tredegar Medical Aid Society was the model for the NHS and therefore he was not nationalising health care but “Tredegar-ising” it.

The important contribution that mutuals have made over the years to innovation and corporate diversity has, as we have heard, been significantly undermined in recent decades by the inability of mutuals to raise regulatory capital, other than by retaining past profits—the danger was always losing their mutuality. I will not repeat the points made during the debate on the amendment

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tabled by my right hon. Friend the Member for Banbury (Sir Tony Baldry), because we see the way in which the mutuals sector, through this difficulty, shrank to being a fraction of the size of the sector in Europe. I believe we are all agreed that that was undesirable. The problem led to all political parties recognising that something urgent needed to be done to allow mutuals to raise additional capital, if required, without losing their mutual status. That is what this Bill is all about.

Before closing, I wish, with your indulgence, Mr Speaker, to pay one or two tributes. Lord Naseby, a former Deputy Speaker of this House, has been part of the journey throughout the three-year period to which I referred. He and I have worked closely on this, as he is my vice-chairman on the all-party group on mutuals. I also wish to pay tribute to Peter Hunt and Mutuo for all the work they have done, and to mention some people within this House.

The Minister has consistently offered Government support for the Bill. The hon. Member for Nottingham East (Chris Leslie) and I have discussed the position of mutuals and what we can collectively do to enhance their position within the corporate landscape of our country. Whatever political differences there may have been between us on a range of other things, it would be difficult to find much on this agenda on which he and I do not share either the same objective or the same means to get to that objective. I am very grateful to him for all the support he has given.

I wish to mention two other people, the first of whom is the hon. Member for West Bromwich West (Mr Bailey), my predecessor as chairman of the all-party group. He worked consistently and hard to try to get Members on both sides of the House—the hon. Member for Nottingham East knows that each of us struggled with our own side—especially the Front-Bench teams, to understand what we understood needed to be done. There cannot be many people in this House who have worked as hard as the hon. Member for West Bromwich West in that regard.

Finally, I wish to thank my hon. Friend the Member for Christchurch (Mr Chope). He and I represent the two plane wings of the Conservative party. As long as each of our wings is intact, the Conservative party will fly with power, not least in the forthcoming election. He has proved to be of immense assistance to me, not only on my previous private Member’s Bill, the Off-patent Drugs Bill, which may return to the House in due course, but on the procedure in dealing with the measure before us. As we are drawing near to three weeks until the end of my service in the House, I want to thank him very much for the help he has given me.

I have one final comment to make. I first stood for Parliament more than 40 years ago, against Michael Foot, in my home town. At the beginning of that campaign, Michael Foot gave me a copy of his biography of Aneurin Bevan. I thought it immensely generous of somebody who was, in a sense, one of the iconic figures of British politics to give a gift such as that to somebody who was barely 22 years of age at the time. The reason he gave it to me was not just an act of generosity. He drew attention to page 63 of that biography, in which he talks about Bevan’s involvement with the Tredegar Medical Aid Society and the working miners who formed it, one of whom was my grandfather. There is no better way of drawing an end to my service in this House than by

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doing something to ensure that the mutual principle in our country to which my grandfather contributed in some way is carried forward through this Bill.

10.25 am

Sir Tony Baldry: My hon. Friend the Member for Cardiff North (Jonathan Evans) is owed a debt of thanks from the House for navigating the Bill through the Commons and it is clear that he has strong family reasons for doing so.

It is worth observing that half the UK insurance market was mutual as recently as 1995, but since then, in just over 20 years, it has shrunk to just over 7.5%. Mutual insurers have 50% of the market share in Holland and 45% in Germany and I think that in this country the insurers demutualised in large part because they needed to raise additional capital and improve the services they thought they were offering to their customers.

During the debate on the amendments, my hon. Friend the Member for Cardiff North made a telling point. What is important to investors in mutuals, as for those investing in any other financial instrument, is the return on their investment. Sometimes, the process of demutualisation has not been helpful to policyholders because in many instances since that process they have seen falling returns.

Let me give one example, Scottish Widows—I think we all love the lady in the Scottish Widows advert. Scottish Widows converted to a plc in 2000 and paid out, some of us will recall, a £6,000 windfall to each policyholder. Before demutualisation, in 1998, it paid out £107,000 for a 25-year with-profits policy based on premiums of £50 a month. Someone who invested £50 a month for more than 25 years got £107,000 at the end of that policy period. Statistics posted in 2011 show that that has plummeted since demutualisation to £28,000.71, which is more than 34% less than the average mutual was paying out. As regards returns for investors, this is not just a piece of regulatory tinkering but is very important.

My hon. Friend the Member for Cardiff North mentioned Michael Foot. I, like my hon. Friend, am soon to leave the House. When I joined the House, there were three former pupils of Leighton Park—Michael Foot was one and I was another. So interested was he in my political career that in the 1983 general election he came to Banbury with a view to trying to see that I did not get elected. In the 1983 general election, Banbury was the seat that Labour would have needed to win to get an overall majority. Michael Foot had a run of bad luck, because he came to Banbury street market and went up to the first person, surrounded by television cameras and wanting a quote. He did not know that the man running the fruit and veg stall ran the bingo in the local Conservative club in his spare time. Michael Foot said to Denis, “Denis, what do you think of life?” Denis said, “Not very much, but this, Mr Foot, I do know: No. 10, Maggie’s den.”

10.29 am

Chris Leslie: I have my own Michael Foot story. I will come to it in a minute, but first I wish to support the Bill, which will make a vital change to support the integrity of mutual financial services and the insurance sector.

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I echo the tributes that the hon. Member for Cardiff North (Jonathan Evans) paid to all those involved, and I should mention Mutuo and Peter Hunt, who have been crucial in ensuring that the Bill’s details are right.

The Bill will provide a more level playing field for the sector, so that it can cope with difficult circumstances that might call on capital in the future. The creation of the deferred share facility is very important and does not jeopardise the fundamental values of these institutions, which are so vital to preserve the integrity of organisations that are owned and controlled for the benefit of their members. That is an important principle. It would be a great shame if that alternative model disappeared and we were dominated by the monoculture of the plc shareholder structure. This important Bill could bring the extra capital that we need into the sector, while safeguarding against demutualisation and risks to the sector.

I had not realised that the hon. Gentleman stood against Michael Foot at the outset of his career. When I was a mere stripling—I know that hon. Members think that I still am—my father wrote to Michael Foot because he knew that I was interested in parliamentary procedure for my first degree. By return of post, to complete strangers, Michael Foot sent his own signed copy of “Erskine May”. The generosity of a great parliamentarian and bibliophile was overwhelming. I regarded that as one of the key spurs that made me get involved in politics, and here we are today. Some people may regret that, but I regard it as a mark of the man.

The hon. Member for Cardiff North mentioned the beginning of his career, and he has had an important political career in this place. The House will be worse for his departure, but whatever may happen in the future, I wish him well. This Bill will be useful testimony to his support for the sector. I urge the Minister to tell us when the starting gun will be fired on the regulations, because the Bill facilitates a great change, but that does not necessarily mean that it will actually happen.

10.32 am

Mr Christopher Chope (Christchurch) (Con): I had not intended to speak in this short debate, but having listened with embarrassment to the kind words of my hon. Friend the Member for Cardiff North (Jonathan Evans), the least I can do is thank him very much for his service to the House and to the Conservative party. I hope that his wisdom and experience will continue to be used by and available to our great party. As he says, our party is at its best when it embraces all strands of Conservative thinking.

My hon. Friend is still the chairman of the party in Wales, and I hope that in that capacity and as a member of the board of the Conservative party, he will continue to have a significant influence on the party’s affairs and ensure that our leadership is always mindful of the fact that we are a broad church. We have a large umbrella over us, and if we try to reduce the scope of that umbrella, the likelihood is that alternative parties will try to get into the space that is vacated. That mistake has been made in Germany by the Christian Democrats. They have in a sense given space for the Alternative für Deutschland to enter the fray, and I hope that something similar does not happen in this country and that we continue to maintain a broad church in our party.

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I congratulate my hon. Friend on successfully steering the Bill through the House. I helped in every way that I could to try to ensure that his balloted Bill—the Off-patient Drugs Bill—got on to the statute book, but it was blocked in a rather unfortunate manner by the Government. Having originally not been open with him about whether they were for it or against it, we forced them to come clean in the end and say that they were against it in principle, which they could have said many months earlier. That is typical of the problems that we have with Friday business, but I am sure that, as my hon. Friend said, that Bill of his will reach the statute book in due course.

10.34 am

Andrea Leadsom: I congratulate my hon. Friend the Member for Cardiff North (Jonathan Evans) on his speech, and on all his work in this area. I have certainly enjoyed working with him during his last few months in the House. He is well known as a strong supporter of the mutual movement, and has spent many years as the chairman of the all-party parliamentary group for mutuals, promoting the sector.

I thank my hon. Friend for piloting this Bill on an important and valuable issue, and for securing a prompt date for Third Reading. The Bill started in the other House, where it also had cross-party support. I congratulate my noble Friend Lord Naseby on his work to promote the merits of the Bill. The Government support the key aim of the Bill, which is to provide friendly societies and mutual insurers with the means of raising external capital in a way that does not impinge on their mutual status. I am grateful to my right hon. Friend the Member for Banbury (Sir Tony Baldry) for withdrawing his amendments, and would like to record my personal gratitude to him, as my constituency neighbour, and wish him a happy retirement from this place.

Access to capital and credit is the lifeblood of any company. It poses a specific issue for mutuals, as they are designed to serve their members, and were not designed with capital investors in mind. Unlike other firms, mutuals cannot issue shares, which deprives them of access to the equity markets. This means that, in broad terms, mutuals access their regulatory capital from retained earnings and by issuing subordinated debt. This long-term approach is often seen as a strength of the sector, but mutuals have long made the case that the restrictions on accessing external capital can act as a brake on their ability to adapt and respond to new market conditions. The sector has also argued that it limits firms’ ability to secure maximum investment, to develop new and innovative products, and to grow through acquisition.

The Bill has been carefully drafted to enable friendly societies and mutual insurers to access external capital

6 Mar 2015 : Column 1202

in a way that does not impact on their mutual status. This enabling Bill would allow friendly societies and mutual insurers to issue a new class of deferred share. The Bill has two substantive clauses. Clause 1 allows Her Majesty’s Treasury to make regulations that would permit friendly societies and mutual insurers to issue new deferred shares. The Treasury will work with the regulators and all interested parties to determine the details and the process for issuing the deferred shares, and to ensure that these instruments are marketed to the appropriate investors.

My answer to the hon. Member for Nottingham East (Chris Leslie)—I apologise for not having an answer for him earlier—is that we will consult the Prudential Regulation Authority and regulators as soon as possible after Royal Assent to ensure that the procedures are right. We will progress with this as soon as the legislative timetable permits.

Clause 1 also sets out the key features of deferred shares, and explains that prior consent of the appropriate authority—either the Prudential Regulation Authority or the Financial Conduct Authority—must be obtained before a friendly society or mutual insurer can issue deferred shares. Clause 2 sets out the conditions that will preserve the mutual status of firms that wish to issue deferred shares. Mutuals will be able to provide membership rights to deferred shareholders, but no friendly society or mutual insurer will grant more than one vote per deferred shareholder, and no deferred shareholder will receive more votes than an ordinary member by virtue of being a deferred shareholder. That will respect and preserve the “one member, one vote” principle of mutual organisations. In addition, the regulations enabled by the Bill will restrict the voting rights of certain members who hold deferred shares, so that they cannot vote in any decisions to transfer, merge or dissolve the mutual. That serves further to protect mutuality. Clause 3 sets out the definitions of terms used in the Bill, and clause 4 contains the title of the Bill, and confirms that the Bill extends to the whole United Kingdom and will come into force when the Treasury makes the regulations provided for in clause 1. The Government can confirm that the Bill raises no human rights issues.

The Government fully support the Bill, which is of course consistent with the commitment in the coalition’s programme to promoting mutuals and fostering diversity in financial services. This short Bill could provide a huge opportunity for the mutual sector. I hope that all Members will be able to support it.

Question put and agreed to.

Bill accordingly read the Third time and passed, without amendment.

6 Mar 2015 : Column 1203

House of Lords (Expulsion and Suspension) Bill

Further consideration of Bill, not amended in the Public Bill Committee

Clause 1

Expulsion and suspension of Members of the House of Lords

Amendment proposed (27 February): 1, page 1, line 4, leave out paragraph (a)—(Mr. Chope.)

10.40 am

Question proposed, That the amendment be made.

Madam Deputy Speaker (Mrs Eleanor Laing): I remind the House that with this we are discussing the following:

Amendment 2, page 1, line 7, leave out subsection (2).

Amendment 7, page 1, line 17, at beginning insert “in relation either to an expulsion or to a suspension”.

This is linked to the amendment below which prevents retrospective judgement of behaviour leading to a final expulsion of a member of the House of Lords.

Amendment 6, page 1, line 17, after “Act”, insert “and any Standing Orders made under subsection (1)”

Amendment 19, page 1, line 17, after “Act” insert

“and any Standing Orders made under this section”.

Amendment 8, page 1, line 18, leave out paragraph (b).

This removes all reference to previous conduct that was not public knowledge.

Amendment 9, page 1, line 18, at beginning insert

“in relation only to a suspension”.

This removes the power of expulsion in respect of previous conduct that was not public knowledge.

Amendment 10, page 1, line 18, leave out from “Act” to end of line 19 and insert

“but since 1 January 2015”.

This limits the application of the Bill’s sanctions to previous conduct that was not public knowledge to just the current year.

Amendment 11, page 1, line 18, leave out from “Act” to end of line 19 and insert

“but since 1 January 2000”.

This limits the application of the Bill’s sanctions to previous conduct that was not public knowledge in the past 15 years only.

Amendment 12, page 1, line 18, leave out from “Act” to end of line 19 and insert

“but since 1 January 1985”.

This limits the application of the Bill’s sanctions to previous conduct that was not public knowledge in the past 30 years only.

Amendment 13,  page 1, line 19, after “knowledge”, insert “in the United Kingdom”.

This limits the scope of public knowledge of previous conduct to what was not known in this country.

Amendment 14, page 1, line 19, at end insert—

‘(4A) A resolution under subsection 4(b) may not relate to expulsion”.

This is an alternative approach to removing the power of expulsion in respect of previous conduct that was not public knowledge.

Amendment 15, page 1, line 19, at end insert—

‘(4A) Standing Orders of the House of Lords set out guidance on what constitutes public knowledge under subsection 4(b)”.

6 Mar 2015 : Column 1204

This allows for some certainty as to what might constitute public knowledge of previous conduct.

Amendment 20, page 1, line 19, at end add—

‘(5) nothing in this section shall authorise the expulsion or suspension of members of the House of Lords on the grounds of age, health or length of service”

Amendment 3, in clause 2, page 2, line 2, leave out “Expulsion and”.

Amendment 4,  page 2, line 4, leave out clause 3.

Amendment 5, in clause 4, page 2, line 9, leave out “Expulsion and”.

Amendment 16, line 1, leave out “expel or”.

Mr Christopher Chope (Christchurch) (Con): We were discussing these amendments last Friday. There was a Division and, because the House was not quorate, under the relevant Standing Order we have, in effect, gone back to the start. That does not mean that it is necessary for me to repeat everything that I said last week, because that is on the record. However, I will repeat the point that the Bill is a very serious piece of legislation, because it provides not only for the suspension from service of Members of the other place, but for their expulsion on the basis of breaches of conduct. My amendments are designed to ensure that the code of conduct in the House of Lords is linked specifically with the Bill, so that expulsions and suspensions can take place only for breaches of the code of conduct, rather than just for conduct, as currently set out in the Bill.

The precedent for my approach is none other than the contents of the 2012 House of Lords Reform Bill, which did not make progress because the Government were unwilling to allow the Bill to proceed to a full debate and wanted to control it by a guillotine process. That Government Bill specifically linked the code of conduct in the other place and powers to suspend or expel.

Last week, in the interests of brevity, I did not address amendments 6 and 19. To freshen our proceedings, it might be worth referring to those. They amount to the same thing. How do those two amendments fit into the Bill? The Bill provides in clause 1(4) that

“A resolution passed by virtue of subsection (1) must state that, in the opinion of the House of Lords, the conduct giving rise to the resolution—

(a) occurred after the coming into force of this Act”.

That is a proviso to ensure that the legislation cannot be retrospective and is limited by clause 1(4)(b), which says:


(b) occurred before the coming into force of this Act and was not public knowledge before that time.”

We had some discussion of that last week. The issue is addressed in some of the amendments tabled by my right hon. Friend the Member for Banbury (Sir Tony Baldry).

After the words

“occurred after the coming into force of this Act”,

my amendment 6 would add the words

“and any Standing Orders made under subsection(1)”.

Without the amendment the following could happen. A Member of the other House could behave in a way that people found embarrassing, although their conduct was

6 Mar 2015 : Column 1205

not in breach of the relevant Standing Orders and code of conduct of the House, but the code of conduct and the Standing Orders were subsequently changed in order to cover that scenario. In other words, without the safeguards set out in amendment 6 and/or amendment 19, it would be possible for the conduct giving rise to the expulsion or suspension to be conduct which, prior to the change in Standing Orders, would not have been in breach of them.

This is a straightforward issue of whether we support the principles of prospective rather than retrospective legislation. In the 800th anniversary year of Magna Carta, I would have thought that we would be very much against introducing more scope for retrospection in our legislation. In fairness to my right hon. Friend the Member for North West Hampshire (Sir George Young), who is promoting the Bill in this place, he said, when I raised this issue in the Public Bill Committee:

“Serious issues have been raised. I will take advice on the issue that my hon. Friend the Member for Christchurch raised about the issue of retrospectivity between the time that the Act comes into force and the Standing Orders being changed. I cannot promise any amendments, but I will see whether I can get some assurances that shed some light on that.”––[Official Report, House of Lords (Expulsion and Suspension) Public Bill Committee, 4 February 2015; c. 13.]

The amendments are designed to ensure that we have the opportunity to put into the Bill the safeguards that my right hon. Friend, in fairness, accepted were reasonable. I therefore hope that they can be put into the Bill and that he will accept, in particular, amendment 6. I look forward to hearing from him all the reasons why the amendment is technically defective or in some other way falls short of the high standards that he has brought to legislation in this place throughout his very long career. Unless or until I hear what those technical objections are, it would be much better for us to insist that the other place deals with issues relating to discipline on a prospective basis rather than a retrospective basis.

We have had similar issues in our own House. The Standards Committee, on which I have the privilege of serving, dealt with the case of one of our right hon. Friends who was being sanctioned by the Parliamentary Commissioner for Standards on the basis of a fresh interpretation of the rule book which, prior to that, had never been thought to be fair or reasonable. The Standards Committee said that if there was to be a reinterpretation of our code of conduct, it should be prospective rather than retrospective, and that we could not start condemning people for acts that they had had no reason to believe were in breach of the code.

The issue was whether someone should make a declaration of interest to the House—to a Committee—when they did not have an interest but might be thought by somebody to have an interest. Until now, it has always been thought that that referred to other knowledgeable people sitting in the Chamber or in a Committee. The commissioner interpreted it as meaning that it could apply to anybody—the person on the Clapham omnibus—such that if they heard somebody talk about a particular subject, even though that person did not have an interest that should be declared, it might seem as though they ought to have one, and that if the other person thought they might have an interest, there was a need to declare that. That is now being

6 Mar 2015 : Column 1206

incorporated into the new code of conduct, but we took the view that it should not be incorporated with retrospective effect.

That is why amendment 6 is not a mere academic exercise; it goes to the heart of what is fair and reasonable in a rules-based organisation. Before people are accused of breaking the rules, they should know what those rules are, and the rules should not be changed after the conduct takes place just so the person can be brought to book for something embarrassing. That is the brief but fundamental point.

It is clear from the discussions I have had with my right hon. Friend the Member for North West Hampshire that he has sympathy for the amendment, but he may feel inhibited in accepting it, because the Bill is not his Bill. It does not even belong to its promoter in the other place; it is, essentially, like every Bill that comes here on a Friday, a proxy Bill for the Government, who have a veto over all such Bills.

I hope that the Minister of State, Cabinet Office, my hon. Friend the Member for Orpington (Joseph Johnson) will accept that amendment 6 would be a valuable addition to the Bill, rather than detract from it. If he has not had the chance to clear it with the leader of the Liberal Democrat party, I am sure he should not feel inhibited by that and he should feel able to express his view on behalf of the Government today.

The Medical Innovation Bill is also on today’s Order Paper. It was promoted in the House of Lords by my noble friend Lord Saatchi, who was led to believe, as the Bill was going through the other place, that it had the support of the whole Government, but then we read in the Sunday papers that apparently at no stage did it have the support of the Liberal Democrats, although they were not prepared to say so openly. I assume that the Bill being steered through the House by my right hon. Friend the Member for North West Hampshire does have the support of the Liberal Democrats and that they support the principle that we should not legislate retrospectively in relation to conduct that could give rise to expulsion or suspension from the House.

On that basis, I have talked myself into quite an optimistic frame of mind, thinking that the amendment is so compelling that it is likely to be accepted not only by my right hon. Friend, but by my hon. Friend the Minister on behalf of the Government.

Sir George Young (North West Hampshire) (Con): I am grateful to my hon. Friend the Member for Christchurch (Mr Chope) for the reasonable way in which he moved his amendment. As he said, we had a one-hour discussion on this group of amendments last Friday, but we did not focus enormously on amendment 6. It is a serious amendment and I hope to be able to address his concerns. I was heartened by one thing he said last Friday, namely:

“I am sure the Bill will get on to the statute book before the end of this Parliament.”—[Official Report, 27 February 2015; Vol. 593, c. 644.]

That remains my ambition.

I hope I can allay my hon. Friend’s concerns about the scenario he outlined. First, as in the House of Lords, so in the House of Commons: Members can be judged for a breach of conduct only according to the code of conduct that was enforced at the time the alleged offence occurred. That is natural justice, so the code of

6 Mar 2015 : Column 1207

conduct could not be tweaked in order to catch something that happened before the code was changed and then say that it was an offence. I agree with my hon. Friend that that would not be right. The Standing Orders and code of conduct specifically say that it has to be a breach of the code at the time the offence was committed.

I also assure my hon. Friend that the Bill does not amend the code of conduct as to what sort of behaviour is considered to be a breach. The only thing the Bill does is change the penalty that can be applied in the case of a breach. As far as I know, there are no plans immediately to review the code of conduct, although it is kept under review from time to time and brought up to date. The impact of the Bill is simply to change the penalties that apply to a breach of the existing code of conduct.

My hon. Friend is, I think, worried about the gap between the new Standing Orders coming into effect and the Bill receiving Royal Assent. Again, perhaps I can give him an assurance on that. If one looks at the Standing Orders that were activated by the last relevant Act, namely the House of Lords Reform Act 2014, one will see that they were accepted by the relevant Committees in June and adopted by the upper House in July following Royal Assent on 14 May. That gives an idea of the speed with which the Standing Orders can be changed and brought into effect without any long interval.

If one were to make an informed guess as to when the Bill might get Royal Assent, it would be that it might, at the very earliest, be next week, though that would be slightly unusual. It is more likely to be towards the end of this particular Session. It would then not come into effect until three months thereafter, which will be in June. Following our exchange in Committee, I made some inquiries. I would expect work to start on the necessary Standing Orders as soon as possible and that they would certainly be completed by the summer recess, but hopefully before that.

The window that my hon. Friend is worried about is a very narrow window indeed. Given what I said right at the beginning about not retrospectively judging people by a new code of conduct, I very much hope he will agree with that.

Mr Peter Bone (Wellingborough) (Con): I understand entirely what my right hon. Friend is saying, but why is there any danger in accepting the amendment?

Sir George Young: I do not think that the amendment is necessary. Some of the concerns expressed by my hon. Friend the Member for Christchurch do not arise. He was worried that the code of conduct could be changed and then find someone guilty, but that cannot happen under the existing code. Moreover, when we went around this course before, the Standing Orders were changed soon afterwards. The key thing, however, is that peers already know what is right and what is wrong under the code of conduct. We are not changing the code of conduct; all we are changing is the penalties. I do not see how the scenario my hon. Friend outlined could arise, because the question of conduct is wholly unchanged by the Bill and, indeed, by his amendment. We are just giving the other House some additional sanctions, which it wants in order to deal with conduct and extend the period of suspension beyond the lifetime

6 Mar 2015 : Column 1208

of a Parliament. My hon. Friend conceded that that was logical. We are also giving it the ultimate power of expulsion for behaviour that is beyond the pale. Again, that cannot be applied retrospectively under clause 4.

Philip Davies (Shipley) (Con): My right hon. Friend seems to be glossing over the retrospective nature of the punishments, which is also covered by this group of amendments. If somebody committed murder and we brought back the death penalty, I am sure my right hon. Friend would agree that they should not face the death penalty because at the time they committed the murder the death penalty was not in place. His Bill, however, seeks retrospectively to change the punishments for breaching the code of conduct and he appears to be glossing over that.

Sir George Young: Clause 1(4) states:

“A resolution passed by virtue of subsection (1) must state that, in the opinion of the House of Lords, the conduct giving rise to the resolution…occurred after the coming into force of this Act, or…occurred before the coming into force of this Act and was not public knowledge before that time.”

The Bill does not allow for double jeopardy. Any previous investigation into an alleged breach would, of course, have resulted in the behaviour becoming public knowledge, as it would have been reported by the committee at the time of the original investigation. Given those assurances, I hope my hon. Friend the Member for Christchurch will agree that his amendments are not necessary.

The Minister of State, Cabinet Office (Joseph Johnson): It is a pleasure to be here today in support of my right hon. Friend the Member for North West Hampshire (Sir George Young) putting this important Bill on the statute book, particularly given that my present, inward-facing role in the policy unit does not afford me too many opportunities of this nature.

As there was a thorough debate on this group of amendments last week, I shall keep my comments brief. The amendments would strike at the heart of the Bill, which is intended to give the House of Lords the power to deal with conduct that takes place before the Bill is passed. Amendments 1 to 5 and 16 would remove all references to expulsion from the Bill, thereby completely removing the power to expel a peer. As I said, that would strike at the very heart of the Bill, which is intended to give the Lords similar powers of discipline to those we enjoy here in the House of Commons.

11 am

There is no question of peers being expelled for reasons other than misconduct, which is the concern that amendment 20 seeks to address. The Bill clearly states that any resolution to expel or suspend must relate to “conduct”. My hon. Friend the Member for Christchurch (Mr Chope) referred, as he did last week and in Committee, to the House of Lords Reform Bill of 2012. On a point of clarification, that Bill did not make explicit reference to a code of conduct in respect of the proposed powers of expulsion and suspension. Like this Bill, it referred to

“conduct giving rise to the resolution”,

but it did not specify that that conduct had to be a breach of the code of conduct. The reason was that no code of conduct or list of offences can include every

6 Mar 2015 : Column 1209

single example of behaviour for which the other place may wish or need to suspend or expel a Member. The power of this House to expel or suspend Members is not circumscribed in that way. It is surely appropriate that the two Houses of Parliament have broadly equal powers to discipline their Members.

Amendments 7, 8 and 10 to 12 address the potential retrospective provision of the Bill. The Bill allows the House of Lords to expel or suspend a Member for misconduct that took place before the Bill was passed if it was not public knowledge until after the Bill was passed. That means that the House of Lords will not be able to revisit misconduct that has already been dealt with. The Bill therefore does not allow for double jeopardy, as my right hon. Friend the Member for North West Hampshire made clear a minute ago.

Philip Davies: One issue that has not been resolved is what constitutes “public knowledge”. Is it something that is known widely and has perhaps appeared in the mainstream media, so people have had a good opportunity to know it? Alternatively, could it be something that is hidden away in a blog somewhere, which in theory is in the public domain, but which nobody has much of an opportunity to know about? What “public knowledge” means is a bit woolly because these days, with the internet, most things are out there somewhere.

Joseph Johnson: The application of the power is wisely, in the Government’s opinion, left to the judgment and discretion of the House of Lords. Amendments 13 and 15 would require “public knowledge” to be further defined. The Government consider that that would be likely to lead to more difficulties than leaving it in broad terms. The Bill allows for

“the opinion of the House of Lords”

to be given so that each case may be taken on its own merits, rather than attempting to fix the phrase “public knowledge” as a legal concept.

Mr Bone: There is just one point that I am trying to grasp. If somebody committed misconduct in the past, but it was not in the public realm, the sanction against them under the Bill—that is, the possibility of expulsion—would be different from the sanction they would have faced if the conduct had been known about at the time. That does seem to be retrospective.

Joseph Johnson: There is a limited ground there.

Without primary legislation, the House of Lords cannot override the right of individual peers to receive a writ of summons. That would encroach on the Lords position as a self-regulating Chamber and could have other unintended consequences for parliamentary privilege, in that the courts could be asked to judge on the exercise of the powers.

To answer the question from my hon. Friend the Member for Wellingborough (Mr Bone), the Government support the retrospective application of both the Bill’s sanctions because the House of Lords already has the power to sanction a Member who is found guilty of misconduct as part of its inherent power to preserve honour and decency. Therefore, a peer who engaged in misconduct before the Bill came into force would have known that their actions had consequences. Although the power currently extends only to the ability to suspend

6 Mar 2015 : Column 1210

a peer, it would seem extremely odd if the Bill allowed more serious past conduct to go unpunished or to be sanctioned less severely than it could be under the Bill. The public will expect misconduct that comes to light after the Bill comes into force to be dealt with, particularly the most serious misconduct.

On the final point that my hon. Friend the Member for Christchurch raised, given that there is considerable support for the Bill in the House of Lords, it can be expected that the Standing Orders that will give effect to the provisions will be passed swiftly after the Act comes into force. It therefore makes little practical difference whether the powers are dated from the coming into force of the Act or the coming into force of the Standing Orders. The Government therefore do not support any of the amendments in the group.

Mr Andy Slaughter (Hammersmith) (Lab): I will be even briefer than the Minister.

The Opposition have supported the Bill throughout its passage. I agree with the Minister that the overall impact of the amendments would be to weaken the Bill and, thereby, damage its limited but important purpose.

The hon. Member for Christchurch (Mr Chope) spoke about amendment 6 in a moderate and plausible way. He always speaks in a moderate and plausible way. Sometimes—and I thought this might be the case today—what he says is actually moderate and plausible. However, I then listened to the even more emollient words of the Bill’s promoter, the right hon. Member for North West Hampshire (Sir George Young), and, like the Minister, I am persuaded that the amendment is not necessary. It is right to raise the possibility of retrospection but, as has been explained, the Bill is not pregnant with that danger.

We are therefore happy not only to support the Bill, but to oppose the amendments.

Mr Chope: What a short but fascinating debate this has been. I am glad that my hon. Friend the Minister had a chance to stand at the Dispatch Box and participate. During the latter part of his comments, I became more concerned because he made the case for retrospection in relation to misconduct that would give rise to expulsion. That is exactly the concern that I have.

We heard last week from my right hon. Friend the Member for North West Hampshire (Sir George Young) that one course of conduct that their lordships are keen to ensure results in expulsion is repeated breaches of offences. That means that if one was guilty of repeated misdemeanours, there would be the possibility of expulsion. There is therefore all the more reason why none of this should be retrospective. If repeat offences are to give rise to expulsion, rather than just a reprimand, that should only be prospective and not retrospective.

If the House had accepted the amendments in the first group, which we debated last Friday, I do not think that I would be so concerned, because those amendments would have linked the code of conduct much more closely to the provisions of the Bill. However, those amendments were not accepted. I remind the House what Lord Wallace of Saltaire said:

“I read the latest Code of Conduct again this morning, thinking that we need to be sure what we are on about. One of the issues that perhaps we need to discuss informally off the Floor is how far this measure is intended to refer only to conduct that is mentioned in the Code of Conduct or to egregious conduct of

6 Mar 2015 : Column 1211

other sorts conducted by Members of this House. However, that is a question that we need not have in the Bill itself, but it is certainly a question that the Committee for Privileges and Conduct and others will need to consider at a later stage.”—[

Official Report, House of Lords,

21 November 2014; Vol. 757, c. 650-651.]

When I read out that quote last week, I did not get any assurance from my right hon. Friend the Member for North West Hampshire that conduct would be confined to what is in the current code of conduct or in any changed code of conduct. As I have said, the code of conduct is not specifically linked to the Bill. What is in the Bill is “conduct”. Unless we have that safeguard, the Standing Orders of the other place could be amended to impact on conduct that took place prior to the amendment of those Standing Orders, but subsequent to the enactment of the Bill. In my view that represents a danger of retrospection, and I cannot understand why the Government are against this measure. They may say that it is unnecessary in the light of assurances that have been given, but it would not be the first piece of Government legislation that was duplication and unnecessary, so that in itself cannot be a convincing and decisive argument against it. Because of the obiter dicta of people such as Lord Wallace of Saltaire, who seems to have a rather different agenda from that discussed by my right hon. Friend the Member for North West Hampshire, we should make a final attempt to get one safeguard against retrospection into the Bill.

I will therefore withdraw amendment 1, on which we tried to vote last week, and instead I will test the will of the House on amendment 6. I beg to ask leave to withdraw amendment 1.

Amendment, by leave, withdrawn.

Amendment proposed: 6, page 1, line 17, after “Act”, insert “and any Standing Orders made under subsection (1)”—(Mr Chope.)

Question put, That the amendment be made.

The House divided:

Ayes 2, Noes 44.

Division No. 170]


11.11 am


Chope, Mr Christopher

Davies, Philip

Tellers for the Ayes:

Mr Peter Bone


Mr Philip Hollobone


Ashworth, Jonathan

Baldry, rh Sir Tony

Bingham, Andrew

Bottomley, Sir Peter

Brake, rh Tom

Brazier, Mr Julian

Brennan, Kevin

Brokenshire, James

Brown, Lyn

Campbell, rh Mr Alan

Creasy, Stella

Dromey, Jack

Duncan, rh Sir Alan

Elliott, Julie

Eustice, George

Evans, Jonathan

Field, Mark

Freeman, George

Garnier, Mark

Gwynne, Andrew

Hancock, rh Matthew

Hands, rh Greg

Jenkin, Mr Bernard

Johnson, Joseph

Jones, Susan Elan

Kaufman, rh Sir Gerald

Knight, rh Sir Greg

Leadsom, Andrea

Leslie, Chris

McFadden, rh Mr Pat

Murrison, Dr Andrew

Penrose, John

Percy, Andrew

Perry, Claire

Rees-Mogg, Jacob

Robinson, Mr Geoffrey

Sawford, Andy

Selous, Andrew

Slaughter, Mr Andy

Swayne, rh Mr Desmond

Swire, rh Mr Hugo

Vaizey, Mr Edward

Webb, rh Steve

Young, rh Sir George

Tellers for the Noes:

Mr David Evennett


Mr Ben Wallace

Question accordingly negatived.

6 Mar 2015 : Column 1212

Third Reading

11.22 am

Sir George Young: I beg to move, That the Bill be now read the Third time.

I express my gratitude to all those who recently took part in the Division, ensuring that the Bill reaches this important and final stage. I am grateful to a number of people who have assisted me in the preparation of the Bill. The Leader of the House of Lords and her staff have been enormously helpful. Baroness Hayman has also briefed me on it. They managed to get it through the House of Lords with more ease than I have managed to get it through the Commons, which is a tribute to their skill, and an acknowledgement of the relative lack of skill when the Bill reached my hands here.

I am grateful to the three Cabinet Office Ministers who have taken part in our proceedings—my hon. Friend the Minister for the Constitution did the Public Bill Committee, my hon. Friend the Minister for Civil Society was here last Friday, and the Minister of State, Cabinet Office, my hon. Friend the Member for Orpington (Joseph Johnson) graces the Front Bench today. I am grateful to the Cabinet Office for the support that it and its Ministers have given to the Bill. Likewise, the Opposition have had a number of different players on the stage—the hon. Member for Ealing North (Stephen Pound) was on the Public Bill Committee, the right hon. Member for Tooting (Sadiq Khan) was here last Friday, and the hon. Member for Hammersmith (Mr Slaughter) is on the Opposition Front Bench today.

The Bill was not controversial when it went through the upper House, which is the House to which it applies. Peers’ conduct in the course of the parliamentary duties is governed by a code of conduct. That is binding upon Members. Breaches of the code are investigated by an independent House of Lords Commissioner for Standards, who reports his findings and any recommended sanctions to the Committee for Privileges and Conduct, which hears any appeal. It then goes to the House.

The problem is that sanctions are currently limited in two key ways: a peer cannot be expelled except when he or she has been sentenced or imprisoned for more than a year; and a peer cannot be suspended beyond the end of a Parliament, no matter how brief that period might be. There was no dissent on the second barrel of the gun in the legislation.

The debate has been on the power of expulsion. The House of Commons has the power of expulsion. We use it rarely, but it is there. We can also be expelled by the electorate.

Mr Chope: Will my right hon. Friend remind the House when the power was last used?

Sir George Young: It was last used in December 1954—Captain Peter Baker. I speak from memory and stand to be corrected, but the power is there. I hope the

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House of Lords does not have to use its power, but it is there as a possible sanction and an expression of the powers it is prepared to use if behaviour becomes wholly unacceptable.

The Bill is drafted to ensure that the powers apply only in respect of conduct that comes to light after the Bill’s passing. There is no power to impose an additional sanction on misbehaviour that has already been considered and sanctioned under the current regime.

As I have said, the Bill was universally supported in the Lords. Peers from all parties and groups expressed their strong hope that the Bill would pass the Commons during this Parliament—it received an unopposed Second Reading on 23 January in the Commons. It has been extensively considered on the Floor of the House and upstairs. I am grateful to my hon. Friend the Member for Christchurch (Mr Chope) for ensuring that all aspects of the Bill were properly considered. I hope I have given him the assurances he has sought. I am sorry that I did not do that on the last occasion, when we had a Division.

The Bill is an important piece of legislation and I very much hope it reaches the statute book without too much further delay.

11.26 am

Mr Chope: I congratulate my right hon. Friend the Member for North West Hampshire (Sir George Young), who, with typical modesty, suggests that he has been unable to handle the Bill effectively in the Commons. He has handled it highly effectively, as one would expect from somebody with such distinguished service in the House and such an expert knowledge of the procedures. In the discussion on the Bill, we have shown that we need to ask questions of private Member’s Bills, and particularly constitutional ones. He has been eager to answer those questions.

The Bill would have taken a slightly different form if there had been more flexibility on the Government’s part, and if they were willing to accept amendments. That is the nature of the problems we have at the moment, with a Government of two parts. The Liberal Democrats seem to have a veto on everything and are rarely represented in the Chamber on a Friday, and they often say one thing to one group of people while doing something completely different. I am sure they will be here to defend themselves when the House is no longer sitting.

One good thing about the Bill is that it will enable a period of suspension to go beyond the end of one Parliament. I made it clear at the outset that that is a good idea. In answer to my intervention, my right hon. Friend said that 1954 was the last time we expelled anybody from the Commons. I hope that it will be 60 or 70 years before the other place has to expel anybody.

The other place has not been able to sort itself out in terms of numbers, largely because of the patronage of the party leaders. I am concerned that the numbers are so large that they will try to find any excuse to reduce them. I fear that the Bill could be a Trojan horse for reducing the numbers, whereas a much better way forward would be to adopt, for example, the House of Lords (Maximum Membership) Bill, which is on the Order Paper for later today, but which I am sure will be blocked by the Government, as it has been on so many previous occasions. Let us hope that the Bill will make

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the House of Lords concentrate on how it can possibly limit its numbers, not by expulsions or suspensions, but by genuinely recognising that we cannot have the second Chamber of this country being the second largest legislature in the world, after that of the People’s Republic of China.

If we had a House of Lords that was reformed in terms of numbers, many of the problems would be solved, but I know that some people, who would like a complete change in the other place, see the lack of ability to suspend Members as a reason to attack it. I think that we should leave it as it is at the moment, as an appointed Chamber. We should reduce the number of peers, but we should not interfere in a part of our democracy that seems to be working well. I am assured by many of my noble Friends that the Bill will give more power to the elbow of those who want to maintain the status quo in the other place. If the Bill will deliver that, it deserves a Third Reading.

11.31 am

Mr Slaughter: As I said earlier, I have supported the Bill at every stage so I can add my congratulations to those who have enabled its passage through to the statute book, including Baroness Hayman and the right hon. Member for North West Hampshire (Sir George Young), who—with his customary modesty—is not taking credit for it, although he should. I do not know where it stands in his legion of achievements in his many years in the House—that is a matter for historians to judge. As I have noted recently, he has been an excellent MP for North West Hampshire because of the excellent grounding that he got as an MP in Acton. He is one of the best things to have come out of Acton and we can perhaps therefore say that the Bill is, indirectly, another good thing that has come out of Acton.

We welcome the Bill. It is relatively modest in its ambition, but it is important, and those tend to be the two criteria that get private Member’s Bills on to the statute book. It is important that proper measures are in place to deal with suspension and expulsion in the other place, although of course the Bill is no substitute for the bigger and wider reforms—to which the Labour party remains committed and which we hope to see in the next Parliament—of hereditary peers and, as the hon. Member for Christchurch (Mr Chope) mentioned, the size of the other place. Some 116 coalition peers have been created since May 2010 at a cost of some £15 million a year. I am not sure that I agree with the hon. Gentleman’s suggestion that this Bill is a Trojan horse for mass defenestration of peers as a way of reducing their number: we will have to find another way to do that, and to introduce some democracy into the other place. I remind the House that substantial steps were taken by the last Labour Government, including reducing the number of hereditary peers to 92; people’s peers; the first elected Speaker; the creation of the Supreme Court, which separated off the judiciary; and the independent House of Lords Appointments Commission. We are, however, still looking for the essential formula for a democratically elected second Chamber, and I hope that we will adopt our proposal for a senate of the nations and regions. That is for the future. For the moment, I repeat our view that this is a good Bill and it is good that it will become law.

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11.33 am

Joseph Johnson: As one of the three Cabinet Office Ministers to have supported the Bill in its passage to this advanced stage, I congratulate my right hon. Friend the Member for North West Hampshire (Sir George Young) on successfully piloting it to Third Reading. As others have said, it is clearly important that the House of Lords has the right powers to ensure that it can deal adequately with serious misconduct, which is why the Bill received overwhelming support in the other place.

The Government support the Bill and are pleased that it will receive a Third Reading and provide a fitting legislative finale to the parliamentary career of my right hon. Friend—at least in this House.

Question put and agreed to.

Bill accordingly read the Third time and passed.

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Wind Farm Subsidies (Abolition) Bill

Second Reading

11.34 am

Mr Peter Bone (Wellingborough) (Con): I beg to move, That the Bill be now read a Second time.

I shall not detain the House too long as we have many Bills to get through today. This is an uncontroversial little Bill with only two clauses. It is wholly supported by the Prime Minister and the Conservative part of the coalition. I welcome my hon. Friend the Minister for Business and Enterprise to his place on the Front Bench to reply to the debate as I know that in his distinguished career in Parliament he has already to a certain extent defied the party Whips on this very issue. He is therefore the right man for the job. We are now all talking with one voice. This is the Prime Minister’s view, the view of the Conservative party and, I hope, the view of the Minister. I do not think that we should take the Liberal Democrats’ view into account if they cannot be bothered to turn up on a Friday.

Sir Greg Knight (East Yorkshire) (Con): Is my hon. Friend aware that the Labour party has made it clear to the industry that if it wins the election it plans a huge increase in onshore wind farms, which would desecrate areas of natural beauty in East Yorkshire and elsewhere? Is not that a good reason to vote Conservative on 7 May?

Mr Bone: There are very many good reasons to vote Conservative in the general election, and that is one of them.

The issue of onshore wind farms has infuriated rural communities the length and breadth of Britain and provoked much debate in the House. Like so many other issues, it is yet another on which I fundamentally disagree with our coalition partners. The arguments against onshore wind are well rehearsed—and they are not what this debate is about—but they should not be dismissed as mere nimbyism, as they go so much deeper. Case studies suggest that wind turbines have an adverse impact on property values, and the Royal Institution of Chartered Surveyors has written to the Government on that point. The institution is clear that the Government need to provide evidence that house prices are not directly affected by nearby wind turbines.

A growing body of evidence also suggests that wind turbines have an adverse impact on health and that ETSU-R-97, which regulates noise produced by turbines, is not fit for purpose. I assumed that that was a European Union directive, but unfortunately it is not. Still, it is the sort of thing that would come out of Europe, if it had the opportunity. I know that the Department of Energy and Climate Change is looking into the issue of amplitude modulation at present, though it needs to get a move on, as I am planning to abolish the Department on 20 March in another private Member’s Bill. Leading experts in the field are also looking into that issue, independently of that process, and it will be interesting to see whether those studies reach the same conclusions. This is one of those issues where the evidence tends not to get in the way of fervent belief.

Resentment in many rural communities is growing. My right hon. Friend the Member for East Yorkshire (Sir Greg Knight) mentioned Yorkshire, but Northamptonshire in particular has been hit hard by

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wind farm proposals in the past few years. Indeed, the Watford Gap—the place where some believe the north meets the south—is perhaps one of the best examples of where the impact that wind turbines are having on our national scenery is visible. The sea of wind turbines has created a semi-industrialised vista, with no regard for local views or for the landscape desecration they cause. Thankfully, people in the area have been well represented in fighting against those monstrosities, and I pay tribute to my hon. Friend the Member for Daventry (Chris Heaton-Harris), not only for all that he has done to highlight this issue locally, but for galvanising support in this place to bring about real national policy change.

We saw a high-profile battle in Northamptonshire over the Barnwell manor wind farm proposal, which, if approved, would have had a ruinous impact on the historic Lyveden New Bield, which the National Trust describes in these terms:

“Set in the heart of rural Northamptonshire, Lyveden is a remarkable survivor of the Elizabethan age. Begun by Sir Thomas Tresham to symbolise his Catholic faith, Lyveden remains incomplete and virtually unaltered since work stopped on his death in 1605. Discover the mysterious garden lodge and explore the Elizabethan garden with its spiral mounts, terracing and canals. Wander through the new orchard, containing many old varieties of apples and pears, or explore the Lyveden Way, a circular path through beautiful meadows, wooodland and villages.”

With its Elizabethan architectural quirks, accompanied by the tranquillity of rural east Northamptonshire, this really is a beautiful spot and absolutely not somewhere for wind farms.

I pay tribute to East Northamptonshire council, led ably by Steven North, along with Councillor Sylvia Hughes, the ward member representing Lyveden New Bield, for their personal efforts to ensure that the local authority courageously battled against these plans. The development had been approved by the Planning Inspectorate on appeal after the council initially refused planning permission. At that stage, it would have been easy for the council to say, “Well, it’s one of those things. It’s been overruled by the Planning Inspectorate”, but it fought on. Working closely with the National Trust and English Heritage, the council opposed the development every step of the way, and finally High Court proceedings quashed the Planning Inspectorate’s approval. To erect a wind farm on the site would have been an utter travesty, and it is staggering that local people, along with their local authority and the organisations mentioned, had to go to such lengths to stave off this threat.

With all that in mind—I am in no doubt that these frustrations are mirrored in communities up and down the country—is it surprising that people have had enough? That said, credit where credit is due: Conservative Ministers have sought to tighten planning controls to give local communities greater power over deciding these matters and, I hope, to give them more protection against unwanted wind farm plans. In July 2013, Ministers unveiled planning practice guidance for renewable and low-carbon energy that was replaced in March 2014 by updated guidance. The aim was to make it clear that the need for renewable energy did not automatically override environmental protections and local communities’ planning concerns, while ensuring that sufficient weight was given to landscape and visual impact concerns. It also included guidance on how local planning authorities should assess impacts such as noise, safety, interference with

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electromagnetic transmissions, ecology, heritage, shadow flicker, energy output and cumulative landscape and visual impacts.

One of my constituents and a keen member of my listening campaign, Brian Skittrall, is working hard to ensure that the north Northamptonshire joint core strategy provides the greatest possible protection against unwanted wind turbine developments. Along with Tom Pursglove, the excellent Conservative candidate for Corby, I am working hard to support Brian’s efforts, and I very much hope that common sense will prevail and that those responsible for the document will adopt his recommendation.

The protections are in the national policy, but it is important that they are fully represented in local planning policy documents. I welcome the fact that the Secretary of State for Communities and Local Government has taken an even greater interest in these matters by calling in a considerable number of wind turbine applications and ensuring that the Planning Inspectorate gives sufficient weight to guidance. I have strong views on the Planning Inspectorate, but those are for another day, and perhaps even a future private Member’s Bill.

While that is welcome, it addresses only part of the problem. For example, turbines often do not work and require regular carbon back-up. They also drive up households’ and small businesses’ energy bills, pushing many into fuel poverty.

Philip Davies (Shipley) (Con): I congratulate my hon. Friend on his Bill, which I wholeheartedly support. Does he agree that it is quite bizarre for the Labour party to complain that energy bills are too high while supporting this kind of energy, which is doing as much as anything to put up people’s energy bills unnecessarily?

Mr Bone: I am not sure my hon. Friend is being fair to the Labour party. Yes, it claims that energy prices are too high but wants more and more wind farms—in Northamptonshire, there are wind farms everywhere—but actually its policy is to freeze energy prices, which means, given that energy prices are falling, that prices would be artificially high. The reason for this policy must be the subsidies it wants for wind farms.

Julie Elliott (Sunderland Central) (Lab): After the general election, Labour’s policy is to freeze energy Bills for 20 months, while the energy market is reformed, but that does not mean that costs cannot come down; it just means they cannot go up artificially.

Mr Bone: I am more confused now. I do not know whether the shadow Minister was announcing new policy, but my understanding of a freeze is that that is the price—it cannot go down. If I am wrong—perhaps Labour has done a U-turn—my hon. Friend the Member for Shipley (Philip Davies) is right and the policy makes no sense. Either it wants higher energy prices, which I understand, or it wants lower energy prices and more wind turbines, which of course it cannot have.

Jacob Rees-Mogg (North East Somerset) (Con): I am grateful to my hon. Friend for his brilliant and inspired Bill. On the socialists’ policy, if it is a cap, rather than a freeze, what company—particularly in the energy market, where prices are so volatile—in its right mind would reduce prices, even if the market price fell, knowing it could not put them back up if the market price rose?

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Mr Bone: My hon. Friend is entirely correct, including in describing it as a socialist policy, because that is precisely the direction we are moving in—we know that Labour has moved significantly to the left. The issue here is that it wants to interfere with prices using a state mechanism, and that always fails.

I shall return to the Bill because I want to be brief and we have a lot of Bills to get through today, and, as I said, it is uncontroversial. In July 2013, the Energy and Climate Change Committee issued its report, “Energy Prices, Profits and Poverty”, which said:

“The main driver behind energy prices has been wholesale gas and electricity costs, but network charges, energy and climate change policies and company costs and profits also contribute. In future, DECC estimates that its energy and climate change policies will add 33% to the average electricity price paid by UK households in 2020, in addition to any potential wholesale price rises.”

That is worth hearing again: “In future, DECC estimates”—it must be right, because it is a Government estimate—

“that its energy and climate change policies will add 33% to the average electricity price paid by UK households in 2020, in addition to any potential wholesale price rises.”

It also concluded that:

“The increasing use of levies on bills to fund energy and climate change policies is problematic since it is likely to hit hardest those least able to pay. We note that public funding is less regressive than levies in this respect.”

The subsidies paid for by consumers are clearly generous, hence the clamour from developers to access them. As long ago as October 2013, an answer to a parliamentary question identified that the Government had hit their targets of 13 GW of production capacity from onshore wind by 2020, with 6.8 GW operational, 6.4 GW consented and 6.4 GW in the planning system. Furthermore, many will question why constraint payments are being made to generators in return for reducing output, as more electricity is being generated than can be used in particular regions because a grid constraint exists. If all that was not bad enough, the subsidies have also been geared up—this is almost unbelievable—in such a way that they will be paid over 25 years, even though, as Dr Gordon Hughes has found,

“few wind farms will operate for more than 12-15 years.”

Therefore, they will operate for 12 to 15 years, but for a further 10 years they will receive subsidies for nothing.

Wind turbines are an expensive way of generating electricity and are clearly bad value for money. I go back to what the Leader of the Opposition said when he was Secretary of State for Energy and Climate Change in the last Labour Government:

“Yes, there are upward pressures on energy bills, and that makes life difficult for people, including those in fuel poverty, but it is right that we go down the low-carbon energy route.”

In other words, he is quite happy for poor people to pay more for their energy because he thinks there is some good in the low-carbon energy route. We should not be so complacent and dismissive of the problem, and the idea that wind turbines are somehow green is stretching it somewhat too, considering the amount of carbon burnt in producing a single turbine, not to mention the amount of concrete poured into the ground to put it up.

Where are we now on this issue? As has been mentioned, the Labour and Liberal Democrat positions are absolutely clear: they want more onshore wind farms wherever

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they can have them. In contrast, I agree squarely with the Prime Minister, who has said:

“I think the public are, frankly, fed up with so many wind farms being built that won’t be necessary. Now we’ve reached some 10 per cent of our electricity by onshore wind, we don’t need to have more of these subsidised onshore. So let’s get rid of the subsidy, put them into the planning system and, if they can make their case, they can make their case. I suspect they won’t.”

Jacob Rees-Mogg: I wonder whether my hon. Friend would go further and say that we should not have subsidies in the energy market at all and that it should be a proper free market, with providers getting a market price and consumers paying the market price, rather than additions for what the Prime Minister once described in fairly fruity terms in relation to greenery.

Mr Bone: My hon. Friend tempts me into a much wider field. I am afraid we are going to keep very much to this little Bill—indeed, it is so small that I doubt whether anyone will oppose it, other than those on the Opposition Benches, which are not exactly packed. If this was a controversial Bill, I would be seeing a sea of angry faces on the Opposition Benches and all I can see is two charming people sitting there.

As with the issue of an EU referendum and the need to tackle immigration from within Europe, once again the Prime Minister has it spot on—and let us not forget that only he and the Conservatives can deliver on these issues. I know that he has fought hard in the coalition to make this happen prior to the general election, and I applaud his efforts in that regard. As on so many issues, however, common sense has been thwarted by the yellow peril. That is why I am bringing this Bill forward today: to support the Prime Minister, support the Conservative party and move this agenda forward. If a local community supports wind farm construction and the project is commercially viable in its own right, fine. However, I see no reason why further generous subsidies should be provided, not least because, by the Government’s own admission, the targets have been met.

I pay tribute to Tom Pursglove, the national director of Together Against Wind, who has provided a lot of the information in my short speech today. He also happens to be the Conservative candidate for Corby at the general election. Indeed, it would be much easier in north Northamptonshire if we had my hon. Friend the Member for Kettering (Mr Hollobone), Tom in Corby and me, all fighting against wind farms, rather than somebody who supports wind farms everywhere in north Northamptonshire. I want to end with Tom’s words:

“The only way to end the wind farm folly, is to knock the subsidies on the head once and for all.”

That is exactly what this little Bill does.

11.55 am

Julie Elliott (Sunderland Central) (Lab): I am afraid this feels like “Here we go again.” Less than two months ago, my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) spoke from the shadow Front Bench against a Bill promoted by the hon. Member for Christchurch (Mr Chope) which would remove all subsidies for offshore wind. Today we find ourselves in a similar debate, on a Bill to destroy the UK’s burgeoning onshore wind industry.

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I think I speak for many Members when I say how much I enjoyed the “Inside the Commons” documentary. I was pleased that it showed people how Parliament works and what MPs do, and that we are, all things considered, still normal people doing a job to the best of our abilities. There was general amusement at the sight of Members from both sides of the House queuing in shifts to secure private Members’ Bills. Two of those people were, of course, the hon. Member for Wellingborough (Mr Bone), who has just spoken, and the hon. Member for Christchurch. I only wish their time in the queue and our time here discussing the Bill today could have been better spent.

Onshore wind is one of the cheapest large-scale renewable energy technologies. With the right support, it could be subsidy-free by the end of the next Parliament. This Bill, in the unlikely event that it should ever become law, would kill the UK’s onshore wind industry and, in doing so, destroy thousands of jobs and millions of pounds of investment and lead to higher energy bills.

Mr Bone: Will the hon. Lady give way?

Julie Elliott: No, I am going to carry on.

If the hon. Gentleman had his way and we shut off support mechanisms such as the renewables obligation and contracts for difference, the UK would simply be more reliant on more expensive technologies to meet our crucial carbon emissions commitments. Opposition Members are committed to decarbonising at the lowest possible cost to the consumer. That is why we are committed to setting a 2030 power sector decarbonisation target, which will give investors the long-term certainty they need to invest.

Let me point out a few important facts. Last year, onshore wind generated over 5% of UK electricity generation, and the independent Committee on Climate Change estimates that onshore wind can provide over 15% of our power needs by 2030. Onshore wind generated over 16 TWh of electricity in 2014—enough to power almost 4 million homes. There is currently more than 8 GW of onshore wind capacity, with a further 1.2 GW under construction and more than 5 GW with consent. Last week saw the results of the first allocation rounds for CfDs. Labour supported the introduction of CfDs, as we did during the passage through Parliament of the Energy Bill. Cost reductions—which mean less subsidy, which translates into lower consumer bills—are real and are happening now. New onshore wind projects from 2016 to 2018 will produce power at £79.23 to £82.50 per megawatt-hour—less than other renewable energy technologies and less than new nuclear. The industry is committed to being the cheapest form of new large-scale electricity generation by 2020—cheaper even than new gas plants.

This is a job-creating sector: the onshore wind sector employs, directly and indirectly, 19,000 people in this country. Onshore wind is popular. The Department of Energy and Climate Change’s public attitudes tracking survey has found consistent public support for onshore wind. The latest figures show that 68% of the public support onshore wind, with opposition at only 12%. That is not just theoretical support for the concept of onshore wind. It is important to note that people support onshore wind developments in their communities. A

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2014 ComRes poll found that 62% of people would be happy for an onshore wind farm to be constructed in their area.

It is, of course, crucial for local communities to be consulted, and to be fully engaged in any renewable energy development. The Government and, in particular, the Secretary of State for Communities and Local Government preach localism. However, the Secretary of State has taken Whitehall intervention in the planning system to unprecedented heights.

If I had a pound for every time I heard a Conservative Member criticise clean energy technologies for reasons that bear no relationship to cost, genuine public concern or engineering feasibility, I could personally fund the levy control framework for several years. The fifth assessment report of the Intergovernmental Panel on Climate Change provided overwhelming and compelling scientific evidence that climate change is real, that it is caused by human activity, and that it will have devastating consequences if urgent action is not taken to cut our carbon emissions and invest in mitigation.

I would have welcomed the time to engage in a serious debate this morning about onshore wind, and about how we can increase investment and drive down costs. However, no debate on a Bill that would implement an effective ban on onshore wind can be a serious one. Let me repeat a question that I have asked Conservative Members before in the House. They do not like onshore wind, they do not like offshore wind, and they do not like solar. Are there any clean energy technologies that they actually support?

All modern economies face the same energy “trilemma”: how can we generate the energy that we need, which is clean, affordable and secure? Onshore wind delivers on all three counts. It is clean, it is on course to be subsidy-free, and it is based in the United Kingdom, boosting local economies and creating jobs.

Perhaps the hon. Member for Wellingborough’s queuing was not a waste of time after all. It has given me an opportunity to expose the Conservative party’s growing hostility to onshore wind, and to set out how the next Labour Government will work with clean energy developers to ensure that we have the affordable, secure and clean energy that our economy needs in order to succeed.

12.2 pm

The Minister for Business and Enterprise (Matthew Hancock): I congratulate my hon. Friend the Member for Wellingborough (Mr Bone) on securing the debate. I know that he has a long-standing interest in ensuring that the nation has affordable, secure, economic and sustainable energy supplies, and the Government fully support that aim. His Bill would eliminate subsidies for onshore wind that are provided by the Government via the renewables obligation, contracts for difference and feed-in tariff regimes, and paid for by bill payers.

Our policy is intended to achieve our goal of reducing subsidies while meeting our global carbon reduction obligations and securing supply at the lowest reasonable cost. The hon. Member for Sunderland Central (Julie Elliott) referred to the “trilemma” in energy policy. Energy policy needs to balance the long-term requirement to live within international obligations on climate change and mitigate the risks with guaranteeing security of supply, which involves the costs of ensuring that enough

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energy infrastructure is constructed, and with ensuring that those costs are as low as reasonably possible. That is the standard “trilemma”, but rising to the challenge means not only balancing those three requirements, but ensuring that our policy can hit all three goals at once when that is possible.

Alongside new nuclear, gas and carbon capture and storage, renewables, including wind energy, are an important component of the balanced energy mix that the Government are creating. It is clear that we need to increase our use of renewable energy. Renewables provide clean energy and reduce our dependence on finite fossil fuels, but they also increase our energy security, because renewable energy is inherently domestic, and they reduce the need for us to import energy from abroad. At the same time, the construction and operation of renewables create jobs and investment in our economy. It is estimated that £29 billion has been invested since 2010.

According to figures that I looked up when I was preparing for the debate, renewables provided nearly 18% of our electricity in the third quarter of 2014. That has enhanced our energy security and reduced our dependence on imported energy. As we know, the United Kingdom is blessed with a huge number of advantages when it comes to wind generation. We have relatively shallow seas, and ours is a very windy country. The resource is even more pronounced in offshore areas, and it makes sense for us to take advantage of it. We are the clear world leader in offshore wind, in terms of both installed capacity and investment attractiveness.

Let me now respond to, and challenge, some of the common concerns that have been expressed about wind energy, including those expressed by hon. Friend today. It is necessary to deal with those important issues, because we must get our wind energy policy right so that wind can play an appropriate role in our energy mix.

The first issue is whether wind energy actually provides electricity at all. I can confirm that it provided 7% of our electricity at the end of the third quarter of 2014. Of course it is intermittent—the wind does not always blow—but that does not mean that it is an inefficient source of energy. Wind turbines tend to generate electricity for 80% to 85% of the time. Of course they cannot generate during periods of windlessness; that is why they must be part of a balanced energy mix, so that we can draw on other technologies when the wind does not blow. As larger proportions of renewables come onstream, that intermittency will become more of an issue, and we shall have to prepare for it very carefully. It is therefore crucial for our energy policy to be set in a long-term framework.

We accept that back-up is sometimes required, including back-up from coal, gas and biomass. In the longer term, intermittent falls in generation can be dealt with by a range of technologies such as demand-side response, interconnection with other countries, and electricity storage. In the United Kingdom, electricity storage generally means pumped-storage hydroelectricity, but an increasing number of exciting technologies will enable us to store electricity and deal with the intermittency.

Mr Geoffrey Cox (Torridge and West Devon) (Con): The figure my right hon. Friend the Minister gives for the standard usability and standard functioning of wind

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turbines of 80% to 85% is one that I do not recognise. Even the wind turbine industry itself suggests the figure is 28% to 30%, and I can tell the Minister that certainly in my constituency the turbines are not working 80% to 85% of the time. When has he ever seen the wind blowing 85% of the time in any part of this country?

Matthew Hancock: Wind turbines require a low wind speed in order to operate and the offshore wind turbines have a very high rate of operation. Moreover, what matters for energy policy is the overall output from any given technology, and while the wind may not be blowing in Devon it may be blowing in Suffolk, so we need to look at intermittency and the impact of the policy throughout the country.

I now want to turn to the impact of intermittency on the stability of the national grid. Research by the Royal Academy of Engineering shows that the grid can accommodate up to 26 GW of wind energy by 2020 without significant grid reinforcement being required, and that is split evenly between onshore and offshore wind—about 13 GW each—as my hon. Friend the Member for Wellingborough set out. We should not be complacent, however. Grid improvements are going to be needed to deal with intermittent renewables of all types and the increasing new nuclear programme. We cannot wait; we need to take action on that now—and, indeed, we are doing so. We will need to be innovative in terms of technology and operational and market incentives to meet this challenge.

I also want to address the point my hon. Friend made about constraint payments. Constraint payments occur when there is insufficient transmission network capacity between where the electricity is generated and where it is used. They are a long-standing part of the system, and to ensure the secure operation of the electricity system the grid is required to balance the supply and demand of electricity at all moments in real time. A cost-efficient transmission network will always have a degree of constraint by design. This system predates wind farms and most constraint payments continue to relate to fossil fuel generators, not wind farms.

National Grid has estimated that about 2% of total metered wind farm output was curtailed in 2013-14. In October 2012 we put a condition in generators’ licences to ensure they cannot profit unfairly from constraints. Constraint costs for wind farms have more than halved since, and we estimate that the total constraint costs of £340 million in 2013-14 represent about 0.7% or £4.20 of the average electricity bill. Of this, £47 million, or about 0.1% or 60p of the average household bill, relates to wind farms. In the medium and longer term, delivery of planned transmission investment will reduce these constraint payments, and there is upgrading work at the moment to ensure that happens.

Another issue that is often raised is whether wind farms actually deliver carbon savings. Wind power has one of the lowest carbon footprints compared with other forms of electricity generation. Work by the Parliamentary Office of Science and Technology published in 2011 looked at the carbon footprint of different forms of electricity generation. This carbon footprint assessment was calculated according to the “life cycle assessment” which aims to account for the total quantity of greenhouse gas emitted over the whole life cycle of a product or process—the making, transporting and erecting

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of wind farms, as well as their operation. The study found that there was a footprint of 488 grams of CO2 equivalent per kWh for a combined cycle gas turbine and 5.2 grams of CO2 equivalent per kWh for installations off the coast of Denmark. Further studies demonstrate that, even taking into account the whole life time impact on carbon emissions, wind farms have an incredibly low impact.

I want to address a point made by the hon. Member for Sunderland Central about the pipeline and industry. Our offshore wind pipeline is very strong. The UK has the most fully installed operational offshore wind capacity in the world—more than 4 GW as of March 2015—and we are committed to a further expansion, with the UK on track to generate around 10 GW by the end of the decade.

As the Prime Minister has said, onshore wind has an important role to play, and much has already been built and we are set for having 10% of electricity from onshore wind. Let me make it clear that we are committed, once we have reached this 10% which is in the pipeline already, to removing the subsidy and putting onshore wind into the planning system, and also to changing the planning system so that local councils have the decisive say. As the Prime Minister has said—and my hon. Friend read out—if they can make their case, they can, but I suspect they won’t.

Mr Bone: The Minister is addressing this point at more length than I thought he would, as I thought it was uncontroversial. He has just referred to the Prime Minister’s comment that when we have this 10%, we are going to get rid of wind farm subsidies. I am just trying to help the Prime Minister bring that forward. I am not entirely sure whether the Minister is supporting or opposing the Prime Minister, and I think the Prime Minister would like to know.

Matthew Hancock: I am sure the Prime Minister would, and I anticipate that come Monday morning he will be reading Hansard closely to follow the debate. I support the Prime Minister—he will be glad to know—but I do not think this Bill is the right way to enact that policy, and I was going on to explain precisely why. I have a lot of sympathy with this, not least because we are reducing the subsidies for onshore wind. The costs of onshore wind are falling, but the question is how we approach this subject, which is why I was talking about the industry. We want to make sure that, especially with the increasing offshore pipeline that is being built up, we can act in a reasonable way that ultimately removes the subsidies for onshore wind. I also want to go further and bear down on the subsidies for all renewables, and we are putting in place policies to do that as well. So we will remove the subsidies for onshore wind, but we need to do it carefully.

I have read my hon. Friend’s Bill and think it has an unintended consequence: removing the support in the way set out in this Bill would have the unintended consequence of our not honouring commitments signed up to in good faith by the British Government, and the UK Government unambiguously honour their debts.

Mr Bone: I want to make it clear that the Bill absolutely does not do what has been suggested. Existing agreements are to continue for the very reason the Minister explains.

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Only for future onshore wind farms will there be no subsidy. It will continue for the ones that are in place—and this is only Second Reading so any such details will be sorted out in Committee and we will be able to make progress very quickly.

Matthew Hancock: I take that as my hon. Friend’s stated intention, but that is not what the Bill would do. There are wind farms under construction that expect to come under the existing subsidy regime and they are being built in anticipation of fitting in with legislation passed by this House in the last year or so on what can fit within the renewables obligation. This Bill would remove the subsidy from them because of the way it is phrased. Clause 1(2) states that only those

“onshore wind farms already operational prior to this Act coming into force”

would be placed outwith the Bill, whereas we have said that the renewables obligation will end next year or, in some circumstances, in 2017. There are people who have committed, in anticipation of legislative support.

Mr Bone: I am entirely persuaded by the Minister’s argument, and I will give him an absolute undertaking that we will table an amendment to that provision in Committee. With that caveat, will the Government now support the Bill?

Matthew Hancock: My hon. Friend is an incredibly persuasive man, but this technical point is important enough to mean that we are still going to have to resist the Bill, while at the same time holding to our clear position of removing the subsidies for onshore wind in an organised and careful way.

Mr Christopher Chope (Christchurch) (Con): My right hon. Friend talks about the importance of honouring existing commitments. How does that fit in with what we read in the press about the Government now insisting on having a golden share in the nuclear plant at Hinkley Point?

Matthew Hancock: The two subjects are slightly separate. On Hinkley Point, as my hon. Friend knows, we reached a strong heads of terms agreement on the price and many other details, which we then took to the European Commission and succeeded in achieving state aid clearance on 9 October. There are lots of details to be put in place, and we are working with EDF and other stakeholders to achieve that. I do not think that there is an issue of consistency there. I also do not think that there is a read-across to the point that I was making. Ensuring that we get the details right is an important part of landing any energy infrastructure project, whether related to nuclear or to onshore wind, to which the Bill refers.

The question of how we are reducing the subsidies has formed an important part of our debate today. In the case of large-scale onshore wind, we have already cut support rates under the renewables obligation by 10%, and the renewable obligation support for offshore wind projects will also drop by 10% by April next year. At the end of 2012, we introduced a cost control mechanism called contingent digression for the feed-in tariff, which is designed to reduce tariffs in line with falling costs and the level of deployment. Last year, tariffs for all wind

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turbines were reduced by 20%, and on 1 October 2014 by a further 10%. Clearly the subsidies are already coming down.

Our new support regime, involving contracts for difference, is designed precisely to get the best possible value for money for the available subsidy by introducing a market in the subsidy. My hon. Friends will not be surprised to hear that when we introduced a market mechanism for the available subsidy, we got better value for money and the price came down. Adam Smith would have been proud of the outcome of the CfD auction. Levels of support are therefore decreasing. Indeed, the market cleared at the much lower than expected price of around £80 per MWh for onshore wind, showing that markets work and increase value for money.

The other interesting outcome of the CfD auction was that onshore wind was not the cheapest form of renewable energy. Solar power came out of that auction as the cheapest. Compared with the £80 per MWh for onshore wind, some of the solar projects came through the auction at £50 per MWh, demonstrating clear evidence of a path to lower subsidies. Indeed, an exciting future will soon be within reach, in which the cost of solar will be compatible with the cost of fossil fuel generation. We have already seen instances around the world of lower-cost solar installations being achieved without subsidy and being cost-competitive with fossil fuels.

Part of getting the balance right involves ensuring that we get a broad mix in the CfD auction, and that we can drive down the costs to consumers of offshore wind as well. We are delivering up to £110 million less overall per year than we were doing in the absence of competition. As a result of the auction, we are offering two contracts to offshore wind farms: Neart na Gaoithe, a 448 MW site in the Forth estuary, and the 714 MW East Anglia ONE project. Together, those sites represent 1.2 GW of renewable capacity.

I shall turn now to the question of reaching grid parity and being able to deliver on the intention behind the Bill without the need to pass it, and to do so in an organised and careful way. Costs in the sector are falling, and we are achieving more economies of scale. In the longer term, that will mean that we can reach parity with other renewable and non-renewable forms of energy supply. Doing that in an organised way will allow us to keep investing in the UK. It is therefore vital to do this carefully and cautiously.

Mr Cox: I entirely understand my right hon. Friend’s desire to observe fairness and equity for those turbine developers who already have construction on hand, but will he acknowledge that he should not underestimate the expectation of those on his own side that the Prime Minister and the Government will stand by their commitment to set a clear deadline for the termination of these subsidies, which are causing so much distress across the countryside and throughout constituencies in the south-west such as the one I represent? We must stand by that commitment. We must set a clear deadline, and that deadline must be soon.

Matthew Hancock: I have considerable sympathy for that point of view. We have made it absolutely clear that

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we will remove onshore wind subsidies in the future, and that the current 10% that is in the pipeline for onshore wind is plenty. After that, if the planning system allows a wind farm to go ahead, and if people want to come forward with a non-subsidised wind farm—and given that the planning system will be tightened to ensure that local people’s voices are heard—there could be future opportunities. As the Prime Minister has said, if they can make their case, they will do so, but I suspect that they will not.

The commitment from Conservative Members is clear. I personally have fought against the placing of onshore wind turbines in some of the most beautiful parts of Suffolk—and therefore the most beautiful parts of the country—in landscapes that were admired and painted by Constable in years gone by and that have changed little since. As a constituency MP, I have fought proposals to put wind farms in places where they would damage the local environment and the local amenity. The policy that we inherited had an override over local considerations because of the impact on climate change of putting up wind farms.

So we have taken steps in the planning system, some of which have been mentioned today, but we are clear that where local people do not want wind farms, the planning system will be strengthened, and there will not be these subsidies when we can remove them. My hon. and learned Friend the Member for Torridge and West Devon (Mr Cox) asked, not unreasonably, for a deadline, so I shall set it out this way. The 10% of the electricity system from onshore wind is expected by the coalition Government by 2020—that is a Government figure—and the Prime Minister has set out that then there will be no need for future subsidies. If, as the costs of all renewables come down, we are able not only to deal with the problem of climate change, but to do so in a way that allows us to remove subsidies sooner, so be it. That framework sets a clear deadline, but the clarity of our commitment to remove subsidies for onshore wind is stark—we shall do this. I hope that gives him the commitment he was seeking.

Mr Bone: I am not sure whether the Minister is talking as a split personality. Is he referring to a coalition commitment or a Conservative party commitment? Is the commitment to having 2020 as the back-stop as the latest time when the wind farm subsidies will go—although it could be earlier—a Conservative commitment or a joint Conservative-Liberal Democrat commitment?

Matthew Hancock: It is certainly not a joint Conservative-Liberal Democrat commitment. Let me be absolutely clear about the distinction. The 10% projection for onshore wind by 2020 is a coalition Government figure—that is a fact on which this discussion can be based—but the commitment is a Conservative party commitment for a future Conservative Government, and we are absolutely clear about that. The distinction is important, but given that we are only a few weeks away from the Dissolution of this Parliament, the way I have been expressing it is that things that have happened in the past and up until now are coalition Government facts or positions, but those relating to the future are, of course, Conservative party positions. That is because we hope and expect to be governing as a single coalition—my goodness, that was a mistake: a single

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Conservative Government after the election. I hope I have made that precise distinction clear, and I am grateful to my hon. Friend for the opportunity to do so.

Before bringing things to a close, I want to set out why we need to do this in a measured way. The decision by Siemens and Associated British Ports to invest £310 million in offshore wind turbine manufacturing in Hull will create 1,000 direct jobs. It was a significant event for that region last year and it will provide an anchor for building the UK-based supply chain, as well as much-needed skilled jobs in one of the most deprived parts of the UK. To a large extent, that decision was based on the expected size of the UK market, but of course there will be the ability to export overseas. Offshore wind is one area where we have a dedicated industrial strategy, created and delivered by a partnership between government and industry, to ensure that we have the right conditions for UK companies to take advantage of this investment. I wish to pay tribute to and highlight the work of the Offshore Wind Investment Organisation—

Mr Chope: The Minister is drifting on to offshore wind but this Bill deals with onshore wind. In so doing, he is alarming me: is he saying that because the subsidies are being withdrawn from onshore wind we are going to carry on with the subsidy bonanza to all the subsidy junkies who are engaged in the offshore wind business?

Matthew Hancock: The commitment I gave is absolutely about onshore wind. I know that my hon. Friend has concerns about offshore wind, especially off Christchurch, and I understand that. We have had exchanges in this House and discussions about it. We are bearing down on the offshore wind subsidy, as the cost is reducing and industry is reducing its costs. There are links in respect of why we have chosen to resist this Bill, despite there being so much in it we agree with, because we want to make sure that we adopt a planned and careful approach, sticking to commitments that the Government have given and that this House has given to industry, which is developing already.

I also wish to discuss the noise produced by wind farms, because I know it is a significant concern to my hon. Friend the Member for Wellingborough, he raised it and it is important to address the point. Again, this is an area where the Government have taken action. The method of assessing the noise impact of a wind farm is described in ETSU-R-97. That requires the likely impact of wind turbines on local residents and those working in the vicinity to be considered in relation to existing background noise levels, taking into account the characteristics of particular locations. Hayes McKenzie reviewed ETSU-R-97, finding that it is fit for purpose but identifying inconsistencies in the way it was being used in practice to measure and predict the impact of noise. In May 2013, the Institute of Acoustics published good practice guidance which addressed the issues Hayes McKenzie identified. The guide, which was endorsed by the Department of Energy and Climate Change, will help to improve the consistency of the application of ETSU-R-97 in the consideration of wind farm projects. I hope my hon. Friend will see that good work is being done by DECC there, and perhaps it will temper his desire to abolish me—it—at the next opportunity with his next private Member’s Bill.