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House of Lords

Wednesday, 3 November 2010.

3 pm

Prayers-read by the Lord Bishop of Gloucester.

Middle East: Refugees


3.06 pm

Asked By Lord Hylton

Lord Wallace of Saltaire: My Lords, there is a range of refugee problems in the Middle East, including those of the Kurds and the Iranians, mostly in Iraq. The two major refugee issues are of course the Palestinian refugees from Israel in a number of countries, and the 4 million Iraqis displaced both within Iraq and as refugees in surrounding countries. A comprehensive settlement of the Palestinian issue will have to include a settlement for refugees as part of the final agreement. The Iraqi problem depends on restoring stability in Iraq.

Lord Hylton: I thank the noble Lord for his reply. Does he agree that the Palestinian refugees registered with the United Nations number some 4.8 million, and that Syria, Jordan and Lebanon contain about 1.7 million Iraqi refugees? This amounts to a population larger than that of many small states. Therefore, will the Government work not only for the comprehensive agreement that he mentioned, but more specifically for the resettlement of these people who have suffered so much for so long?

Lord Wallace of Saltaire: My Lords, the Government are working with the UN High Commissioner for Refugees and the UN relief and rehabilitation organisations to assist these refugees. Most of the Iraqis wish to go back to Iraq when they can. We will have a Question tomorrow about continuing violence in Baghdad and elsewhere, which is part of the problem. For the Palestinian refugees, this is of course a much longer-term and much more complex issue that has to be part of the negotiations for a comprehensive settlement of the Israeli-Palestinian dispute.

Lord Anderson of Swansea: Does the Minister agree that it would be unwise to encourage expectations of a mass Palestinian return to Israel, as both sides now accept that only a limited number will be allowed to resettle in the event of an agreement? Does he also agree that Arab states should be urged to do more financially to help Palestinian refugees settle and have a decent standard of living, either where they are or in the territories?

Lord Wallace of Saltaire: My Lords, I think that it is recognised on all sides that not all Palestinian refugees will return home. That is part of the necessary compromise that will have to be in a comprehensive settlement. We all understand also that reaching a compromise will be

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very difficult, and that we will need to address the issues of compensation and of a moral acknowledgement by Israel of the suffering endured by Palestinian refugees.

Lord Eden of Winton: My Lords, in attempting to deal with the problem of refugees, comprehensively or otherwise, might it not be helpful if action were encouraged to prevent the creation of new refugees? I have in mind particularly the persecution of Christians in Iraq and in Iran.

Lord Wallace of Saltaire: My Lords, we have a Question on that tomorrow, and it is probably more sensible to leave discussion until then.

Lord Clinton-Davis: Will the noble Lord agree that Jewish refugees have also been threatened and menaced throughout the Middle East and have gone to Israel? Does he agree that it is imperative that there should be discussions between Israel and Abbas immediately to ensure that the Palestinians can create a viable second state?

Lord Wallace of Saltaire: My Lords, the Government agree entirely. We very much hope that the current negotiations will continue to make progress and we would be deeply disturbed if they were to break down.

Baroness Falkner of Margravine: My Lords, is my noble friend aware that organisations such as the World Zionist Organisation have had campaigns to encourage British Jews to move to Israel and the Occupied Territories of Palestine? What discussions are the British Government having with the Israeli Government, because many of these people risk contravening international law-the International Criminal Court Act 2001 and other protocols-by settling in the Occupied Territories?

Lord Wallace of Saltaire: My Lords, Her Majesty's Government have made it perfectly clear that we are in favour of a two-state solution and that this two-state solution rests on the establishment of a viable Palestinian state. That means that a number of the settlements currently taking place on occupied territory will have to be removed.

Baroness Symons of Vernham Dean: My Lords, I think we are all aware that Palestinian refugees currently in Jordan are one of the most difficult and probably one of the most intractable of all the refugee problems in trying to settle the Middle East peace process. Can the Minister tell us what level of aid we are giving to the UN to sustain the Palestinian camps in Jordan? I am sure he will be very familiar with the camps and it would be interesting to know how much we are putting into them at the moment. Can he also tell us what direct discussions the Government are having with the countries of the Arab League, some of which are very rich indeed, about what aid they are prepared to make available both in budgetary and programme terms for resettlement in the future?

Lord Wallace of Saltaire: My Lords, I do not have the figures and will have to write to the noble Baroness with them. It is not only a question of the refugee camps in Jordan; as she will know, in many ways, the problems of the refugee camps in Lebanon and-worst

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of all-of those settled in Gaza are much more acute. I have seen Palestinian refugee camps in Damascus which I have to say were relatively well integrated into Syrian society. That seems to me very much the way forward. I agree with her that we should be asking members of the Arab League to provide more assistance.

Baroness Deech: Can the Minister give an assurance that he will in the mean time encourage that human rights prevail in the treatment of refugees in the Middle East? I am thinking in particular of the lack of rights of Palestinian refugees in Lebanon who are apparently unable to own property and who are excluded from healthcare. There is no reason why those rights should not be extended to them in the mean time.

Lord Wallace of Saltaire: My Lords, Her Majesty's Government are strongly committed to human rights throughout the Middle East, including in the Occupied Territories.

Lord McAvoy: My Lords, we all support a comprehensive peace settlement between Israel and the Palestinians. Will the UK Government, in supporting that comprehensive peace settlement, indicate quite clearly that they recognise the acknowledged security interests of Israel? Will they also take the opportunity to impress on the Israeli Government that there is no security in ruling all land between the River Jordan and the Mediterranean?

Lord Wallace of Saltaire: My Lords, the Foreign Secretary is in the Middle East at the moment and is talking to members of both the Israeli and the Palestinian Administrations.

Businesses: Contracts and Payments


3.14 pm

Asked By Lord Steel of Aikwood

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): The Government support the Institute of Credit Management's prompt payment code, which requires signatories to pay according to agreed terms and to give clear guidance to suppliers. The code is working-Experian analysis suggests that signatories represent around two-thirds of total UK supply chain value. We are also helping suppliers to help themselves through the managing cash-flow guides, which help suppliers to manage their customer relationships, payment terms and invoicing arrangements.

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Lord Steel of Aikwood: My Lords, that is a most welcome and encouraging reply, following as it does on the policy of the previous Administration and the CBI and the Institute of Directors. Will the Government go a little bit further and consider establishing a blacklist of companies which fail to observe these exhortations when it comes to giving public sector contracts?

Baroness Wilcox: My Lords, the question was whether the Government will create a blacklist of firms which consistently act in an inappropriate manner. I do not think the previous Government did that and I do not think we will. The Government are working with the UK's main business organisations and UK business to promote and encourage good practice. If the noble Lord knows of a practice that has been brought to his attention which is not being sorted, I hope that he will contact me to see whether my department can help in any way.

Lord McFall of Alcluith: My Lords, the situation is not working just now. Last year, NatWest research showed that three out of four small and medium-sized enterprises are suffering with a £63 billion mountain of unpaid bills. It is very important that we recognise that large firms, as Serco indicated, are working on the back of small firms to improve their cash flows. I think it is time for a level playing field between the public and private sectors. Can the Minister look at the prompt payment code that was introduced in 2008 and build on it so that we have well defined time periods for the private and the public sectors in order to get rid of the bullying that we saw the other day with Serco?

Baroness Wilcox: My Lords, the noble Lord raises two points. He is talking about the private sector and the public sector, which are not necessarily exactly the same. He will know about the work we have been doing in the public sector on speedy payments. The public sector is paying faster than ever before. Central government departments aim to pay 80 per cent of invoices within 10 days. There is now a contractual requirement for main contractors to pay their own suppliers within 30 days. With regard to the private sector, the law stands. We also have very big organisations, such as the CBI and the Institute of Directors, with which we work all the time, as did the previous Administration, to see whether encouragement can be given-not to intervene in that sector, as that would not be correct. I have been a small supplier to a large company. I would say that there needs to be more training and education and more pressure on small companies to ensure that, when they get wonderful contracts with big companies, they do not get overexcited and that they reward the salesman but do not reward the invoice clerk in the back office who gets the invoices wrong 30 per cent of the time.

Lord Harrison: My Lords, has the noble Baroness reflected on the solutions offered by the Federation of Small Businesses, to which I drew attention in a Question I asked last week, which included obliging firms to pay their subcontractors as quickly as the Government

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pay the contractors, thereby easing the cash flow of small businesses, which is such a vital advantage in this competitive market?

Baroness Wilcox: Yes, my Lords, I well remember that Question being asked by the noble Lord and the supplementary question. Central government is paying within five days. I also know that some of the people it is paying within five days are paying their people within 20 or 30 days of sight of invoice. We shall certainly look at all those contracts that have been set up as soon as they come to their due date. You can be absolutely certain that I, as a Business Minister, who has been on the receiving end of that, will ensure that the terms are right all the way through the system.

Lord Butler of Brockwell: My Lords, will the Minister say how the Government square their support for the prompt payments code with Sir Philip Green's recommendation that the Government should pay their bills more slowly?

Baroness Wilcox: My Lords, I am a bit of an expert on Sir Philip Green's report because I have read it now. His report says nothing specific about government payment terms. In interviews, he says that the norm in most departments is to pay suppliers in five days, compared with the standard 30-day-payment period for most private sector transactions and the 45 days demanded by some bigger companies like his own. If the Government demanded a minimum of 30 days of credit from suppliers, they would save hundreds of millions of pounds in financing costs. That is what he has said in conversation but his report actually says nothing at all about it.

Lord Sugar: My Lords, the business department-

Noble Lords: BIS!

Lord Sugar: Will the noble Lord, Lord Strathclyde, consider issuing vuvuzelas to his Benches? They would make a much better noise. In the document recently published by BIS, Backing Small Businesses, I have read many of the claims which the Minister has stated today about 80 per cent of invoices being paid in five days, prime contractors paying their subcontractors within 30 days, and 15 per cent of business being dished out by Government to small businesses. That is a restatement of what the previous Chancellor said in the Budget of 25 March this year. Do the Government have any of their own ideas of what they are going to do to back small businesses instead of restating policies that have already been implemented?

Baroness Wilcox: My Lords, the noble Lord, Lord Sugar, knows what a fan I am of his, so I will always try and please him. I am delighted to know that the previous regime did such work in this area and we intend to do good work to build on that. I hope he will give me time to get that all under way.

Lord Cotter: My Lords, can the Minister clarify one brief and concise point? When it comes to government contracts being given to big companies, is it not right and proper that those big companies should be required by Government to pay small suppliers within the same time that the Government undertake to do so?

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Baroness Wilcox: I have sympathy with that and we are certainly looking into all the government contracts we have to see how they have been dealt with in the past. We can see that there is great room for improvement and I hope the noble Lord will follow my progress on this.

Coroners: Terminally Ill Patients


3.22 pm

Asked By Baroness Finlay of Llandaff

The Minister of State, Ministry of Justice (Lord McNally): My Lords, the Government are committed to improving the coroner system. In taking forward the changes outlined in my Written Statement of 14 October, we shall be considering the secondary legislation and guidance which governs coroner investigations. The issue that the noble Baroness raises will be included as part of that work.

Baroness Finlay of Llandaff: I thank the Minister for that reply, but how will the Government detect, evaluate and deal with the poor performance of a coroner without the long awaited chief coroner? Quite specifically, what powers are in place to influence Greater Manchester's coroners' anomalous ruling that the expected deaths of terminally ill patients at home must be referred to the police if the GP is unavailable to write the death certificate, tying up between 4,000 and 8,000 hours of police time annually, and causing unnecessary distress to families who have complied with the patient's wishes to be cared for and die at home?

Lord McNally: My Lords, as the noble Baroness will be aware, the coroners' service is under local jurisdiction and the protocol established in Manchester is something that has been decided between the coroner's office and the police in Manchester. It does give us concern and the department intends to issue guidance under its new powers which we hope will smooth out some of the variants in how coroners apply their powers. This is one of those that will be looked at.

Lord Bach: The Minister will know that the director of the Royal British Legion, no less, has said that the Government's decision to scrap the new post of chief coroner is a deep betrayal of bereaved service families. Does he agree that during the passage of the Coroners and Justice Bill all sides of this House were as one in believing that not only was the reform of the coronial system an urgent necessity but also that the establishment of a chief coroner, along side a chief medical officer, with powers to set national standards, to lead, and to hear the new system of appeals, was at the heart of the reforms? Why have the Government taken the absurd

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and counterproductive step which, in the words of the co-director of INQUEST, renders the new model "completely hollow" before it has even started, and a step that has, moreover, managed so deeply to upset bereaved service families and the Royal British Legion?

Lord McNally: My Lords, I am sorry that the Royal British Legion has made that judgment. The decision not to go ahead with the chief coroner was made, as the noble Lord knows, mainly on financial grounds. The setting up of the post would have been expensive. The alternative that was put forward in my Written Statement is that we are going to take much of what was in the legislation in-house in the Ministry of Justice and do the tasks ourselves. I am well aware that in so doing we set ourselves a pretty important task because, as the noble Lord rightly said, when the Coroners and Justice Bill was going through this House all sides wanted to see an improvement in consistency in the coroners' service. That is what we intend to do in-house and we will be judged on our performance.

Baroness Gardner of Parkes: Can the Minister tell me how lawyer coroners-I understand that most will be legally qualified but they will no longer be obliged to be medically qualified-will obtain assurance of the standards of the post-mortems that they commission?

Lord McNally: I understand that my noble friend in the Department of Health will be establishing the post of medical examiner. Medical examiners will be able to give this advice.

Lord Walton of Detchant: Does the Minister accept that very rarely at the time of a coroner's post-mortem is permission sought for the retention of tissue samples and slides after the post-mortem? Such archive material is invaluable for research into human genetics and into the management of human disease. Will the Minister ensure that coroners are advised to seek such permission when coroners' post-mortems are undertaken or at least consider amending the Human Tissue Act to make such retention of material obligatory?

Lord McNally: My Lords, as I said in my initial reply, my department is looking at comprehensive guidance to coroners. I note what the noble Lord has suggested, and I will make sure that that is considered as part of the guidance.

Lord Christopher: My Lords, will this review include some clarification on what is admissible as evidence in an inquest? I am aware of a very unfortunate case of a death where there had been a settlement and admission of responsibility, but the coroner would not allow evidence to that effect to be given.

Lord McNally: My Lords, I note what the noble Lord asks. I think I will have to take legal advice about how we should respond to that matter. I know that in looking at this review and at our powers, we are in contact with the Lord Chief Justice.

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Lord Phillips of Sudbury: My Lords, I declare an interest as having been, a long time past, a coroner's officer and having occasionally deputised for a coroner. I ask the Government to be very careful not to trench upon the independence of coroners who are judicial officers. All the advice and the rest of it that is being recommended should have respect for that crucial independence.

Lord McNally: I do not think there is any question of us trampling on the independence of coroners. What slightly surprised me when coming to this and looking at the file is the wide variation in the behaviour of coroners, which is not likely to produce public confidence. That was one of the reasons why the idea of a chief coroner was put forward. As I explained at the beginning of this exchange, when we looked at it, it proved to be too expensive, but the bulk of the suggestions and of the content of that Act will now be brought in-house. Judge us by what we do. We will follow the guidance of the Act in bringing consistency to the coroner system, but not on the basis of a rather expensive, at this stage in our careers, chief coroner.

Health: NICE


3.30 pm

Asked By Baroness Sherlock

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, it is important to make clear that the National Institute for Health and Clinical Excellence does not have any powers to ban the use of drugs in the NHS, so suggestions that this is a role that will be removed from it are based on a misunderstanding of the position. Our NHS White Paper makes it clear that the role of NICE will continue and, indeed, that it will be extended.

Baroness Sherlock: My Lords, I thank the Minister for that Answer. I am a little confused, but perhaps he can help me to understand the change. In the world that he envisages, is it intended that every single GP consortium will take its own decision about which drugs it is willing to fund? If that is the case, will it be about every single individual drug or treatment? And, if that is the case, can the Minister explain how he will protect patients from the uncertainty and confusion that must arise from a return to a postcode lottery of that magnificence?

Earl Howe: My Lords, currently the NHS is faced with the decision of whether to say in effect yes or no to a new drug at the price that is proposed by a pharmaceutical company. We want to change that so that the price of a drug to the NHS is based on an assessment of its value, rather than pharmaceutical companies being free to set whatever price they choose and expecting the NHS to pay. So value-based pricing,

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which is the term we have used, will ensure that licensed and effective drugs are available to NHS clinicians and patients at a price to the NHS that reflects the value that they bring. That should get rid of the postcode lottery.

Lord Alderdice: My Lords, of course we already have four NHSs in our United Kingdom. What discussions are there among the authorities of the four NHSs when decisions are being taken about medications of this kind?

Earl Howe: My noble friend is, as ever, on the case. My officials in the Department of Health are in active discussions with their counterparts in each of the devolved Administrations on the kinds of changes that we envisage to the pricing of medicines.

Lord Turnberg: Does the Minister agree that to devolve responsibility for prescribing expensive drugs to GPs faces them with a very difficult ethical dilemma? Should they prescribe a very expensive drug, costing thousands of pounds, with only marginal benefit for the heart-rending patient with cancer facing them, knowing that to do so may prevent them from funding 20 or 30 patients requiring eye operations or hip replacements or drugs for schizophrenia, or should they refuse that treatment? Have the Government thought through the implications of devolving the cost-benefit analysis that NICE does so well?

Earl Howe: My Lords, I think the noble Lord has perhaps misunderstood the purpose of the plans that we have set out. Prior to the introduction of value-based pricing, we will continue to ensure that the NHS funds drugs that have been positively appraised by NICE. I hope that that reassures him that clinicians are not going to be placed in an awkward position. We will be consulting on our plans for value-based pricing before the end of the year, but I can assure the House that the point of moving to a new pricing system is to increase patient access to new effective drugs. That is what we aim to do.

Baroness Trumpington: My Lords, my noble friend has already spoken about the time it takes to develop a drug-often many years. This costs money and accounts, in some cases, for the high price of the drug.

Earl Howe: My noble friend, with her experience, is of course quite right. I am told that it costs upwards of $1 billion to develop a new molecule and bring it to the market. It is a very expensive process. That is recognised in the freedom of pricing that currently exists for drug companies at launch and in the patents that they are able to enjoy in subsequent years.

Lord Crisp: My Lords, I declare an interest as I was in the Department of Health at the time that NICE was created. If the Minister accepts that the NHS, which spends upwards of £11 billion a year on drugs, is right to have a clinically-led method of assessing whether they work satisfactorily, will he confirm-there seems to be some confusion-that that will not be replaced by some hundreds of separate ways of doing the same thing? Will he also confirm that, whatever

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new arrangements he has in mind, the Government will speed up the process? There is sometimes that complaint about the NICE process at the moment.

Earl Howe: My Lords, we have been very clear that NICE, which enjoys international pre-eminence in the evaluation of drugs and health technologies, will continue to have an important expert advisory role, including the assessment of clinical benefits for new medicines. The noble Lord will know, I am sure, that in recent years NICE has done a lot to speed up its evaluations of new medicines and has introduced end-of-life flexibilities, for example, which have meant that patients have had increased and improved access to those new medicines.

Parliamentary Voting System and Constituencies Bill

First Reading

3.36 pm

The Bill was brought from the Commons, read a first time and ordered to be printed.

Higher Education: Funding and Student Finance


3.36 pm

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, with permission, I will repeat a Statement made by my right honourable friend the Minister of State for Universities and Science.

"I would like to make a Statement on higher education funding and student finance. This follows the Statement made by my right honourable friend the Secretary of State on 12 October.

Our higher education system has many strengths, but also faces challenges-the need for more focus on the student experience, the need to widen access and the need for sustained funding. These challenges led the previous Government, on a cross-party basis, to set up the Browne review. We are grateful to Lord Browne for his excellent work. I think that he has made us all re-examine our positions.

On 12 October, my right honourable friend said that the coalition endorsed the thrust of Lord Browne's report, but was open to suggestions before making specific recommendations, which would be radical and progressive. We have listened very carefully and with open minds. I can now give the details of our proposals.

First, we will introduce a progressive system of graduate contributions to the cost of their university education, with nobody having to pay up-front fees. Lord Browne suggested that there should be no cap on the graduate contribution. We believe that a limit is desirable and are therefore proposing a basic threshold of £6,000 per annum. In exceptional circumstances, there would be an absolute limit of £9,000. No publicly funded university will be able to charge more than this for its undergraduate courses. Since there will be a cap,

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we see no need for institutions to pay back a proportion of the graduate contribution as a levy to the Exchequer, as proposed by Browne.

We are also proposing a more progressive repayment structure. At present, graduates start repaying when their incomes reach £15,000. We will increase the repayment threshold to £21,000, and will thereafter increase it periodically to reflect earnings. The repayment will be 9 per cent of income above £21,000, and all outstanding repayments will be written off after 30 years. Raising the threshold reduces the monthly repayments for every graduate.

We will introduce a real interest rate on a progressive taper. For graduates earning below £21,000, the real rate of interest will remain at zero. For graduates earning between £21,000 and around £41,000, a real rate of interest will be tapered in to reach a maximum of inflation plus 3 per cent. When graduates are earning above £41,000, they will be making a full contribution to the costs of the system, but still incurring interest well below normal commercial rates. Under our proposals, a quarter of graduates-those on the lowest incomes-will pay less overall than they do at present.

The Government are committed to the progressive nature of the repayment system. It is therefore important that those on the highest incomes post-graduation are not able unfairly to buy themselves out of this progressive system by paying off their loans early. We will consult on early repayment mechanisms, similar to those paid by people who pre-pay their mortgages. These mechanisms would need to ensure that graduates on modest incomes who strive to pay off their loans early through regular payments are not penalised. For example, a 5 per cent levy might be charged on additional repayments each year over a specified amount such as £1,000 or £3,000. Alternatively, those on higher incomes-that is, over £60,000-who made an additional repayment could be required to pay a 5 per cent levy on this sum.

Whilst participation in higher education has improved in recent years, there has not been enough progress in securing fair access to some of our best known universities. We can make progress by improving the school attainment of pupils from disadvantaged backgrounds. That is why the Government are investing in a new premium for two year-olds and in the pupil premium. But we want that focus on improving the life chances of those from disadvantaged backgrounds to continue through to university. That is why, as previously announced by the Deputy Prime Minister, we will also establish a new £150 million national scholarships programme. This will be targeted on bright potential students from poor backgrounds to encourage them to apply to university and to meet their aspirations.

All universities that want to charge a higher graduate contribution than the £6,000 threshold will be obliged to participate in the national scholarships programme. We will consult students and university organisations on the details. We will look to increase the leverage of government funding by getting matched contributions from universities. Our current preference is for universities to offer scholarships to targeted students-including the principal beneficiaries of the pupil premium. That would mean that at least their first year is free. Other

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attractive ideas include expanding the model of a foundation year for young people with high potential but lower qualifications.

To ensure that the universities that charge tuition contributions above the £6,000 threshold take account of their particular responsibilities to widen participation and fair access, we will introduce a tougher regime of sanctions. Each institution will draw up a new access agreement with the Office for Fair Access. This would be expected to include activities such as outreach initiatives to attract more pupils to apply from disadvantaged backgrounds, and targeted scholarships and financial support for poorer students. OFFA will agree with universities a programme of defined progress each year towards their access benchmarks as calculated by the Higher Education Funding Council. If they are not making adequate progress towards these benchmarks, a mechanism will be established to allow OFFA to redirect a proportion of the income from contributions over £6,000 to specified access activities.

Our student support system is currently one of the most generous in the world. We will make it more progressive. Lower income students, while studying, will get improved help with their living costs. Students from families with incomes up to £25,000 are currently eligible for a maintenance grant, which is not repayable, of £2,900; we will increase this to £3,250. Those from families with incomes up to £42,000 will be entitled to a partial grant. There will also be increases in maintenance loans for students from families with incomes from £42,000 to £60,000. We will retain a higher maintenance loan for those studying in London.

All parties agree that the present system gives a raw deal to part-time students. They are particularly likely to be mature or disadvantaged students. Even the great higher education reports of the past, such as Dearing and Robbins, largely ignored them. Lord Browne has confronted the challenge head on. At last, under our proposals, part-time students will be entitled to a loan for tuition on the same basis as full-timers, and this support will be available to those studying for at least a third of their time, unlike the present grants for tuition which are available only to those studying for over half of their time.

Overall, this is a good deal for universities and for students. The bulk of universities' money will not come through the block grant but instead will follow the choices of students. It will be up to each university or college to decide what it charges, including the amounts for different courses. All universities and colleges, whatever contribution they decide to charge, will be expected to publish a standard set of information about their performance on the indicators that students and their parents value: contact hours, teaching patterns and employment outcomes. We also propose to open up higher education provision to new providers, including further education colleges.

These proposals offer a thriving future for universities, with extra freedoms and less bureaucracy, and they ensure value for money and real choice for learners. We need to act quickly so that prospective students know where they stand. We intend to implement these changes for the 2012-13 academic year. We will therefore bring to the House our proposals on changes to graduate

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contributions before Christmas. Both Houses will have the chance to debate the proposals before a vote is taken. I am today placing in the Libraries of both Houses additional material that explains the modelling that we have done. We will also take powers next year to set a real interest rate for graduate contributions.

We will, as usual, publish the details of the university financial settlement for 2011-12 in our annual funding letter to HEFCE next month. We will therefore publish, later this winter, a higher education White Paper covering the wide range of long-term issues that arise from Lord Browne's report. We hope to bring forward legislation in due course. Given the timescales, we would not expect to be implementing changes before the 2013-14 academic year.

Lord Browne's report has rightly generated much debate. When the review was established exactly a year ago, it was on a cross-party basis. I hope that the Opposition will feel able to maintain that spirit. From our side, the two parties in the coalition have accepted the report's broad thrust and are today putting forward a single, coherent and progressive policy. It will deliver a better deal for our students, for our graduates and for our universities".

3.50 pm

Lord Triesman: My Lords, I thank the noble Baroness, Lady Wilcox, for repeating the Statement and for providing another opportunity to look at this matter. I hope it is also an opportunity when some of the questions that have been pressing the whole way through might be addressed.

I probably ought to also say that, unlike normal circumstances where you see the Statement about half an hour or so before-it was in the other place earlier-we had what I ought to describe as the benefit of hearing it made by a Minister not responsible for this area at all, Michael Gove, on the radio this morning. I was surprised by that because I am an avid fan of the coalition document. I have read it many times and hope that I have become more illuminated as a result. I recall that on page 26 it talked about a very much more open and transparent parliamentary process in which it would not be the case that vital statements were made first for the benefit of the "Today" programme rather than in Parliament. I regret that this announcement was, because it diminishes the authority and the importance that we ought to place on this matter in Parliament.

We have had in effect four announcements on this subject in three weeks. The first, by the Secretary of State, welcomed the Browne report unreservedly-Browne was in. Then there was the formal Statement in which a number of the issues that the noble Lord, Lord Browne, had raised were thought not to be appropriate-he was out. Then we had the debate last week in which his status was restored once again-he was in. Now we have the whole of the mechanism in which there is going to be a cap, and a number of the other proposals that he made are out again. The process strikes me as more like the hokey-cokey than the making of serious policy. It also does not surprise me that we have arrived at this position despite the very clear view that had been expressed by at least one of the coalition

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parties. I wish briefly to quote its manifesto to its Members, because it must be important to stick to some kind of values in this. They said that they would:

"Scrap unfair university tuition fees for all students taking their first degree, including those studying part-time, saving them over £10,000 each".

I will not carry on with the quote but there was also a "financially responsible plan" which dealt with the alternatives.

I once watched a very bold young man from this country go down the Cresta run as fast as he could on a bicycle. He did not get the whole way down. When I said it was an act of complete madness, I was told it was just an extreme sport. We have got into the period of extreme policy-making. It is not thought through. It has none of the fundamental elements in making vital policy for higher education. I appreciate that it has been welcomed by some institutions and I am hardly surprised. Anybody stripped of 75 to 80 per cent of their unit resource for teaching will welcome the lifeboat as their ship goes down.

I do welcome parts of the Statement. I welcome what is said about part-timers. The noble Baroness is right to say that that had the support of all parts of the House and it is true. I also welcome what has been said about foundation year development. That was always an area where a good deal more work would be useful. At the heart of this, however, it is so thoroughly piecemeal that it is about as sensible as going down the Cresta as fast as you can on a bicycle. There are no decisions on any of the mitigating factors which would produce the fairness that should go alongside-it is said-these highly inflated fee figures. The fee figures are there because they have to be-we know that prospectuses are about to be written-but none of the rest is there and there are no guarantees that any of the rest ever will be. Nothing is said about the way in which decisions among some universities to push toward fully privatised status will result from this, although it is quite clear from a number of vice-chancellors that they intend to do precisely that. In that sense, as we said last week, this is not about fees. It is about the ending of the concept of the public infrastructure role of universities. There is no serious debate on what that means or where it will lead. If we debated it, we might choose that road. What I know is that we have never once debated it.

I have looked through the Statement, as many noble Lords will have done. I can see now more clearly what a number of the figures are and, for those reasons, I shall make a couple of comments because I do not think that all the things said should pass unchallenged. I will turn then to the questions which, once again, I believe must be answered. I am astonished that the idea of treating the payment system like a mortgage system should have been raised at this stage without any firm information about whether it is going to be introduced and whether it would iron out unfairness. Saying that it is an attractive idea is quite different from introducing it. I am surprised by what is said about the "generous" increase in maintenance grants for lower-income students. The generous increase is £6.70 a week. I do not know what that buys nowadays-not a great deal, I suspect.

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I turn to the questions which I believe must be answered today. I ask again about middle-income families and the longer time it will take for those in the second and third quartiles of income distribution to pay than those in the top quartile, because if the figures are as we believe it is not a progressive arrangement and could never be described as such. How much longer is it? I hope that the noble Baroness will not direct me to the BIS student loan repayment ready reckoner-the most obscurely written document that I have read in many a long year. Can she just tell us whether it is right, broadly speaking, that it would take someone from those two quartiles 14 years longer to make the repayment than somebody from the top quartile and whether it is the case that, unless you had some kind of mortgage penalty system to correct that, the outcome is as I have described?

I ask another question again. Are women, with the career patterns that they have-they are for reasons that we all know-being discriminated against and is that actionable discrimination? Is the assumption that higher fees will not adversely affect participation rates evidence-based or based on the anecdotes of some of those in the higher education system? I do not believe that there is good evidence, but I may well stand corrected. What is the Government's impact study? What is the elasticity of demand? We should know that today.

What is going to be done about the arts, humanities and social sciences, which are the heart of our culture and, indeed, of world culture? The downgrading of these subjects to non-priority status is an astounding reversal of the very idea of a university. How will they be encouraged and protected as subjects? Will the Government fund the cash-flow and balance sheet deficits that will occur because there is a gap between the cuts that they are going to impose and the first receipt of these higher-level student fees, which are timed to come in in 2013? That is a penalty which no university could reasonably have anticipated. Will the Government pay it or will a still greater cut simply have to be absorbed? What do the Government recommend to make up the shortfall in the teaching unit of resource-approximately £1,500 per year-for those universities that face the cut and charge just £6,000? Is it okay, today, in our universities to slash the unit of resource in that way?

What are the Government's plans for the problem of Islamic finance approaches to usury, for which most of the things here suggested are abhorrent? Will the Government tell us how they will handle the growing pressure from universities, freed of any significant government expenditure on teaching, to become private-the issue which I think lies behind all these announcements? Finally, will the Government tell us their view of the rate of return on investment in university teaching with the fee at its current level, and whether the damage to investment is something that this country really ought to avoid?

Baroness Wilcox: This is a big subject, my Lords, and I want to answer as many of the questions of the noble Lord, Lord Triesman, as possible. I thank him for his comments and for his questions on what is a

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very important subject. I want to avoid turning this into a yah-boo-sucks time; I do not think that that sits well in this House. I could talk about the fact that the Leader of the Labour party and his supporters do not speak from the same hymn sheet, but I do not think it is the right moment to be doing things like that. Instead, I shall try to answer some of the questions the noble Lord has asked me.

We feel that the Government are placing universities on a more stable footing and allowing institutions to flourish. Our universities, as we know, are internationally renowned, but many of the strongest have told us that they need further investment in order to maintain their position, and so it is that we are taking this brave new stance, based, of course, upon a piece of work commissioned from the noble Lord, Lord Browne, by the noble Lord, Lord Mandelson, and the Labour party, and supported by us at the time. We are basing this upon six principles that he outlined.

The noble Lord talked about the arts, humanities and social sciences. Does ceasing their funding mean killing them and sabotaging some of the key sectors to drive us out of recession? We do not think that we are cutting the income of these departments. They are just going to have the money flow into them from a different route; it is going to be directed by the choices made by students. Those courses will still be there; they will be well promoted, and we hope that the young at school will better understand what choices are available to them, so that they bring the money with them. It will flow into those departments, as it always has; it will just be coming from a different direction.

I was asked why we are being less generous than the noble Lord, Lord Browne, for people earning over £35,000. Is this not another hit on the squeezed middle? We are committed to ensuring that higher education is affordable for everyone. This is a system that provides adequate support for students from low-income and middle-income families, but is also financially sustainable for the nation. We will give more maintenance grant to those with household incomes up to £37,000 and make available some non-repayable maintenance grants for those with household incomes between £25,000 and £42,000. This means that, compared with now, there will be more overall maintenance support to those with household incomes up to £45,000.

This is a generous package that benefits the vast majority. More than half a million students, as I have already said, will be eligible for non-repayable grants for living costs, as they are now, and almost a million students will be eligible for more overall maintenance support.

It was asked, given that over half of undergraduates are women, what the differential impact of today's announcement would be on men and women. It is no pleasure to any of us to know that women still earn less than men do in the marketplace, and I hope that we will be able, in the time that we are the Government of this country, to help that to change. Because of that pay differential, women are less likely to be high earners. They will pay less and their repayments will be frozen when they are not earning-when they are having children and taking time off-and because of

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the long repayment time, the chances are that after 30 years they will not have finished paying and therefore it will just fade.

What about loans from Muslim students who believe that it is wrong to take out student loans because they attract an element of interest, and the payment of interest is against Islamic Sharia law? We want a single student loan system that can meet the needs of the majority of students, of course. The Government heavily subsidise the student support system and will continue to do so; we do not make a profit from student support. In circumstances where students feel that loans offered by the Government are against their law, students can take out a Sharia-compliant loan offered by one of the commercial banks at the moment, such as the Islamic Bank of England, Lloyds TSB and HSBC. I have spoken to my Muslim friends about this and they do not seem as exercised about this as maybe we think they are, because they do not see that there is a profit element in it to cause them great distress. I hope that I have been able to answer that question.

I shall see if we have any more answers; it is easier if we can get more answered now. I was asked if we will do what the noble Lord, Lord Browne, says and allow private providers to access public funding. We want to remove any undue barriers and make it easier for private providers to enter the market. We are committed to a level playing field for all providers. This will mean more and better choices for students and better value for money through new and potentially innovative and lower-cost approaches to teaching. We will consult further on this through a higher education White Paper this winter.

I doubt that I have answered all the noble Lord's questions, but I will write to him with any answers that I have not been able to give now. No doubt other noble Lords in the Chamber are looking forward to asking questions that I hope I will be able to answer on my feet; if not, of course I will write.

Lord Desai: My Lords, I welcome this-

Noble Lords: This side!

Lord Desai: Why?

4.07 pm

Baroness Sharp of Guildford: My Lords, there is a good deal to be welcomed in the package that has been presented today. It is indeed a more progressive package than the current loan repayments scheme with its current level of fees. The extension to part-timers and the way in which the interest is being tapered off mean that, again, the cost to those earning less is going to be less. It is a very clever system, and the Government should be congratulated on what has been achieved here.

As the Minister knows, though, I continue to have considerable worries about the degree to which some of those earning at middle-income level will never repay the loan completely and will therefore be confronted for 30 years by a marginal rate of tax of approximately 40 per cent, by the time that you add on the 9 per cent. Has any thought been given to the disincentive effect of this higher marginal rate of tax on young graduates,

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in relation to either their not wishing to go to university or to their going abroad instead? The logical thing would be to take your loan and then dash off abroad. Given that the loans are to be paid also to EU students, what is the record to date of EU students repaying their loans? Are we likely to see many of them also absconding and not repaying their loans?

Baroness Wilcox: I am very grateful for my noble friend's warm words. She has asked questions that I hope I will be able to answer for her. Middle income is obviously a worry. Yes, she is right; it will not be paid off by the end of the 30-year period. It will lapse.

As for how these changes will affect international students, the Government have made it clear that they want to continue to attract the brightest and best international students to the UK. EU students have a right to be treated equally as regards tuition costs. UK students benefit from the tuition support available in other EU countries.

Support for tuition has been available for EU students since 2006-07. This support is paid directly to the higher education institution not to the student. The overwhelming majority of overseas borrowers are honest and want to repay the loans that they have received. Generally, European Union students are young and mobile and, when they graduate, will have a significantly higher earning potential because of their UK higher education. We are obviously concerned that, if any students are due to repay and are not doing so, the SLC will be robust in tracking down the borrowers to get back the money that they owe. We will make sure that that is done.

Effective collection across the EU is underpinned by EC regulations, which allow the SLC to obtain judgments in UK courts that can be enforced by courts in other EU countries. We will use this whenever necessary. It is heartening to know that, generally speaking, the European Union students pay their bills. As to the other question, I will come back to my noble friend.

Lord Desai: I welcome the fact that the Government have gone half way to accepting my suggestion that they should not have a fixed limit of £6,000. They have not gone to £10,000, however, as I suggested. Is it not better for the Government not to have an upper ceiling at all and to allow universities to charge differentially for different courses? This would make allocations for universities easier. It would also make the Government's job easier because otherwise there will be far too much rationing and control of universities. That will lead to some terrible mistakes, especially in subjects such as the humanities, which could be taught for much less than the kind of fees that the Government want to charge.

Baroness Wilcox: I wondered whether the noble Lord, Lord Desai, would ask why we rejected uncapped tuition costs. I wondered if the noble Lord, Lord Desai, would ask this. The noble Lord, Lord Browne, made important recommendations about the structure and level of graduate contributions. We have considered them carefully. However, on balance, we have concerns that uncapped costs would put off some applicants,

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particularly those from lower-income families. For UK and EU undergraduates, we are proposing a threshold of £6,000 for graduate contributions, with an upper limit of £9,000. All universities and colleges will be expected to publish a standard set of information about all the courses that they provide. Universities may set whatever levels they consider best meet their individual circumstances, with £6,000 being the level above which additional requirements on access will be set. There will be an upper level of £9,000.

Lord Quirk: I imagine that most people will welcome the fact that the Government propose to follow the Browne recommendations as regards giving help to part-time and mature students. However, is the Minister aware that one of those recommendations-namely, to tie eligibility for financial help to the UCAS tariff points system-would be detrimental to part-time students who, after all, constitute something like 40 per cent of the student population, and a large number of whom fall well below the number of UCAS tariff points that would attract student support? This recommendation may be fine for traditional universities but it surely is not fine for part-time students. Do the Government have any view on that yet?

Baroness Wilcox: I think the answer is no; I do not think that we have. I am sorry but I do not think that I can answer that at the moment.

Lord Willis of Knaresborough: Will my honourable friend the Minister answer a very simple question? I am sorry, I should have said, "my noble friend". I apologise for that; I am very new to this place. The Government have confirmed today that new providers will come into the higher education market. She also confirmed that universities will be able to expand their student numbers according to demand. However, she said nothing about whether there will be an overall cap on the number of students. Unless there is a balance between the overall number of students going into the system and the resources which the Government are to make available in terms of loans and grants, the whole system is likely to collapse. Will the Minister say something about the total number of students that the Government will allow to enter higher education?

Baroness Wilcox: I am told that we are going to consult on this in the White Paper. Browne recommends allowing student numbers to grow. The current package should enable student numbers to be broadly maintained. However, we do not believe that we should set unsustainable targets for growing HE student numbers. This risks perpetuating the idea that the only positive option for an 18 year-old is a three-year academic course at university. We think that we should be concentrating more on breaking down barriers between academic and vocational education so that an apprenticeship and various other courses are considered as valid as a degree. As I say, we will consult on this in the White Paper.

Lord Winston: My Lords, I declare an interest as chancellor of Sheffield Hallam University. As I speak, thousands of students from both universities in Sheffield-Sheffield Hallam is Mr Nick Clegg's constituency-are

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demonstrating against the Government's plans. Will the noble Baroness be kind enough to tell us what plans she has as a Minister to engage students who would never have gone to university had they belonged to a previous generation as regards the fairness and acceptability of the Government's plans for the funding of universities?

Baroness Wilcox: There is no doubt that there has been a big gap in recent times between universities and schools as regards careers advice and communication. We are committed to ensuring that students and their families know exactly what is available to them. As the noble Lord knows, I was for many years chairman of the National Consumer Council. Very often, the thing that constituted a barrier for people in this area was language. Often they did not understand exactly what was going on.

It is very important that we get universities to push back into schools-as they will-to ensure that schools well understand their requirements. We will get the business community to explain what qualifications it requires students to gain at university, or whatever other form of further education they are hoping to take part in. We are already starting to determine how we can best communicate what this change means and how empowering it will be for students. They will be able to ensure that they get the courses they want.

Universities will start to improve not just their academic performance but what they offer students to prepare them for life after higher education. After all, some students will be older, some will be younger and the way that all this is explained, and the way that we get it out there to the students, really requires a new look. We are excited about having the opportunity to do that.

Lord Sutherland of Houndwood: My Lords, the foundation years that were mentioned are one of the few ways that have been shown to work in dealing with the gaps in school education that sometimes afflict our young people. That being so, who will pay for these? Will there be a Government grant, or will there be an additional year's burden on the student who has to contribute towards the costs?

Baroness Wilcox: I am sorry, but I may not have understood that carefully. If we are talking about fees, students will not pay any fees, of course, while they are students. Is that what the noble Lord is asking? They will not pay any fees at all until they are graduates.

Lord Sutherland of Houndwood: I ask permission of the House to restate the question. Courses that are foundation years often involve an extra year's study. Who will pay for that? Will it be the state or the student who will incur an extra year's debt?

Baroness Wilcox: I think that it may be as part of the national scholarship programme that we will engage with that.

Lord Pearson of Rannoch: My Lords, as we need to save money in our higher education system, may I suggest that the Government take a close look at the humanities departments of the former polytechnics? I ask the question against the background of my 10 years

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on the Council for National Academic Awards, which validated all the courses in the polytechnics until those were miraculously changed into universities in 1992. That experience led me to see that, although the former technical colleges continued to provide excellent quality after they were subsumed into the polytechnics, many of the new humanities departments-that is, the "poly" bit of the polytechnic experiment-did not. As far as I am aware, there is no quality control in this area. There is quality assurance, but that is a very different thing. I welcome the fact that the Statement says that all universities will be expected to publish standard information on employment outcomes. Will the Government ensure that this information reveals any weaknesses in the areas that I have mentioned, so that the huge sums of money that currently support such departments could be released for better departments and better institutions in the system?

Baroness Wilcox: I think that I agree with all of that. All universities and colleges, whatever contribution they decide to make, will be expected to publish a standard set of information about their performance against the indicators that students and their parents value. Listening to how the noble Lord described the matter from a polytechnics background-which is where I am from-I think that that will drive through very well, and I can only agree with him.

The Earl of Selborne: The Statement refers to the present system giving a raw deal to part-time students, and I think there will be general agreement around the House that this is correct. Clearly, what is needed is not just better part-time provision but much greater flexibility and much better contacts with universities and with industry. To what extent will the proposals deliver that?

Baroness Wilcox: The proposals are a good deal for part-time students. Institutions with large numbers of part-time students, such as Birkbeck and the Open University, have been poorly treated in recent years because of, for example, the previous Government's block on second-chance education. We share the conclusion of Lord Browne's report that the exemption from up-front charges should be extended to part-time students, who have been unfairly discriminated against hitherto. We will therefore implement his recommendations.

This is very good news for part-time students. I was a part-time student once, and you had to pay everything up front. I was able to do that, but for several people with me it became too much. It was a shame because we lost such talented people at that time. We are looking forward to implementing the proposals.

Lord Richard: My Lords, I have a fairly simple question. How on earth do you empower a student by doubling his debt?

Baroness Wilcox: You empower a student by allowing him or her to go through the whole of their university time without fear or worry for money. Only after they have started to earn more than £21,000 a year will they even start to pay back anything.

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In fairness, we are looking at a very different way of thinking. The money will be returned as the people earn a great deal more. As we all know, anybody who has been to university will earn a lot more during their working life than if they had not. Very often, the money that has enabled students to go to and enjoy university has come from people doing jobs that do not pay a great deal, but those people are paying tax that feeds through to students. I refer to people who work in any one of a million jobs but who have not benefited from a university education. The money comes back eventually-slowly-through the system, and the next set of students go to university. It is important to look at this in the round.

Lord Elystan-Morgan: In relation to the capping of tuition fees, have Her Majesty's Government conducted any study of the possible and likely deleterious and injurious effect that this would have on higher education in Wales? If so, what conclusions were arrived at and what discussions were conducted with the Welsh Assembly and the Higher Education Funding Council for Wales?

Baroness Wilcox: I am afraid that I do not know. The devolved assemblies will carry on doing things in the way that they wish, and we will consult them. However, today I am speaking for universities in England. Of course, as time goes on and we go forward, we will debate and consult with all the devolved assemblies in Wales, Scotland and Northern Ireland to see how we can best work together and learn from best practice.

Baroness Symons of Vernham Dean: My Lords, the noble Baroness has done her best to answer the questions, but it might be helpful if she gets a rather fuller briefing before dealing with a Statement of such enormous importance.

I return to the point raised by my noble friend Lord Triesman. I am sure that she heard her colleague, Michael Gove, on the radio this morning. He announced the main points in his interview on "Today". The Front Bench opposite has said all sorts of things about election promises, but one thing that is certain is that Ministers must abide by the Ministerial Code. Has the noble Baroness read the code? If she has, she will remember that Section 9.1 states:

"When Parliament is in session, the most important announcements of Government policy should be made in the first instance, in Parliament".

That is an unequivocal statement that all Ministers must abide by. Will she tell us what in that unequivocal statement the Government do not understand?

Baroness Wilcox: I do not know the circumstances of the interview and I do not know whether it was leaked. Michael Gove made a very good statement. It has been a very busy day, we have a lot to do and the noble Baroness has been, as she always is, very gracious. However, I have read the Ministerial Code, so I do not think that she can find me wanting on that point. She may feel that my knowledge of the breadth of the brief that I have is not as great as that of others. In this House-as the noble Baroness knows from the debate that we had last week-we have some wonderful minds

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and noble Lords who represent some of the finest universities not only in this country but in the world. I have tried my best today to do what I could-it is a very big brief-and, if I did not answer as well as the noble Baroness hoped, I am very sorry. However, if anyone wishes to write to me with other questions, I will happily answer them.

The Browne report, which was commissioned by the then Labour Government and which we have supported, is ground-breaking stuff. We are only too pleased that the previous Administration commissioned the noble Lord to do this work. We have taken on board the six principles that he outlines. This is a very exciting way to take our country forward. The report talks about building the greatness of our nation for tomorrow's world and I do not think that I could end on any better line than that. We as the Government of this country will do our best to achieve that.

Subsidiarity Assessment: Food Distribution (EUC Report)

Copy of the Report Vol 1

Motion to Take Note

4.30 pm

Moved by Lord Roper

Lord Roper: My Lords, with your Lordships' leave I shall also speak to the second Motion in my name.

Your Lordships will recall that two weeks ago on 20 October the House was first asked to consider a report from the European Union committee with a reasoned opinion to the effect that in its view a European Union legislative proposal did not comply with the principle of subsidiarity. Our second report of this Session, which is the subject of these Motions, relates to a proposal concerning the distribution of food products to deprived persons in the European Union and contains the recommendation that the House should issue a reasoned opinion on it and on its subsidiarity. Our sub-committee on agriculture, fisheries and environment initially considered the proposal before it came to the Select Committee. The noble Lord, Lord Carter of Coles, the chairman of that sub-committee, is present today, but we have agreed that I should move these Motions.

I do not need to set out again today at length the legislative background, but I stress that through the second Motion today this House is again being asked to exercise new powers under the treaty of Lisbon that became available only on 1 December 2009. The deadline for submitting such a reasoned opinion to the authorities in Brussels is on this occasion 15 November, so we are in plenty of time to get it in.

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I turn to the proposal assessed in our report. There is some history which I shall deal with briefly. The food distribution programme, to which the proposal relates, was introduced in 1987, and at that time its primary purpose was to help reduce stockpiles of basic commodities that had been purchased and brought into public intervention stores under the common agricultural policy in order to support prices on the European Union market. Stocks of butter, milk powder, beef, sugar, rice and cereals were released to charitable organisations in participating member states on an annual basis to distribute to the poorer sections of the community.

As your Lordships will know, successive reforms of the common agricultural policy in the 20 or more years since then have greatly reduced the level of intervention stocks, combined of course with the improvement in world commodity markets. As a result, the nature of the scheme has altered, with an increasing focus on purchasing products on the open market.

The current proposal, amending the regulations previously agreed for the scheme, has several objectives. These include formalising the provision for common agricultural policy funds to be used to purchase goods not just from intervention stocks but also on the open market: widening the range of goods that can be purchased in order to take into account nutritional balance; allowing member states also to give preference to food products of union origin; establishing three-year programmes instead of the current annual rounds in order to allow longer-term planning by member states and charities; introducing co-financing by participating member states, generally at a minimum of 25 per cent of eligible costs, with an annual ceiling of €500 million for co-financing from the European Union budget; and enhancing reporting obligations, both for participating countries and for the Commission.

In putting the proposal forward, the Commission has offered a number of justifications for it. They include addressing the problems of hunger, deprivation, poverty and social exclusion in the spirit of the treaty, which states that the Union's aim is to promote,


and to contribute to meeting the CAP's objectives of stabilising markets and ensuring that supplies reach consumers at reasonable prices.

The participation by individual member states in the scheme has always been on a voluntary basis and it will remain so under this proposal. The United Kingdom has not participated in the scheme since the mid-1990s and, in their Explanatory Memorandum to us, the Government have said that this has been because of dwindling UK intervention stocks and the bureaucratic overhead associated with ensuring compliance with the scheme rules in order to prevent fraud. They have also said that they are unconvinced of the merits or appropriateness of the revised proposal. In the Government's view, the European Union should act only where there are clear additional benefits from collective efforts.

As regards the Commission's justification that addressing problems of hunger, deprivation, poverty and social exclusion can be considered to be in the

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spirit of the treaties, we comment that the spirit of the treaties can be perfectly well respected without European Union action and can, in any case, be promoted by the Union without following this legislative route. Member states are capable of acting individually to address the issues highlighted.

As regards the Commission's assertion that purchases from the market contribute to the objectives of the common agricultural policy, we see this as questionable, as the extent of such a contribution must depend on numerous factors, including the quantity of food purchased from the market, any reduction in purchases by deprived persons who become eligible for the scheme and the price paid. We see no reason at all why the Union is better placed to organise the purchase of products from the market than member states. We comment as well that the failure of member states to act is not in itself a reason for the Union to act. In any case, the voluntary nature of the scheme suggests that there is no demonstrable need for action, particularly at the Union level. We conclude that there appears to be no compelling argument to suggest that the Union is better placed than member states to ensure a food supply to its most deprived citizens.

We have ensured that the assessment that has been set out in our report has been communicated to national parliaments in other European Union member states. At present, we have heard that only the Swedish parliament may be considering the proposal from a standpoint that is close to ours. Unless several other chambers make similar moves in the next two weeks, the threshold for reaching the formal yellow card is, unfortunately, unlikely to be reached. In my view, that will not prevent the opinion of this House from having a political impact. I am glad to see the Minister nodding at that remark.

Let us be clear; the burden of our report is not to stand against measures to help the neediest members of our society, if appropriate, by providing them with food. We recognise that there may well be a need for such action, but we consider that any such action is best taken by national, regional or local governments, who can best assess the needs of their own populations and can also best design measures to meet those needs. The European Union scheme, which is the subject of this proposal, was devised more than 20 years ago in a very different environment, primarily as a channel for siphoning off surpluses from the common agricultural policy. Now it has largely lost that rationale, and the justifications which the Commission is advancing for its continuation seem to us to be ill founded and unconvincing. We see no necessary role for European Union action in this area and, accordingly, we see this proposal as incompatible with the principle of subsidiarity. I beg to move.

4.39 pm

The Earl of Caithness: My Lords, I declare my interest as a member of Sub-Committee D. The noble Lord, Lord Roper, has given a very extensive introduction to this rather erudite matter. That is certainly going to shorten what I was going to say quite a lot and I am grateful to him. He is right to take us back to the history of the CAP, and it was perhaps right in the late

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1980s and 1990s to utilise the surpluses that we had under the inadequate CAP policy of the time. But as he so rightly said, times have changed and reform of the CAP has taken place. I draw your Lordships' attention to the committee's report in 2008 on the future of the CAP, which states in paragraph 6:

"The mid-term review of the Agenda 2000 agreement resulted in the 2003 CAP reform, which marks the culmination of a gradual shift in farm support from product support to direct income support".

So the CAP has changed, but that has not stopped some in the Commission trying to perpetuate the bad old ways.

A similar proposal to what we are looking at today was presented in the 2008-09 Session and the scrutiny reserve was lifted then. But the committee supported the then Labour Government in their opposition to the proposals and there was a blocking minority in the Council. Following discussions with the European Parliament, the Commission has tweaked its proposal and sent it back to us, and this is what we are discussing today. I would summarise the Commission's proposal as grandiose empire-building by a few who wish to preserve their jobs in view of the 2013 spending review, which is coming up. I can see them all shuffling papers on their desks, looking to preserve their jobs.

There is no question in my mind that the justification put forward by the Commission is weak and very unconvincing. It fails on two grounds. It goes against the recent trend of CAP reforms, and there is the budget reform in 2013 that I have alluded to. It is quite wrong for the EU to be buying food on the marketplace rather than using intervention stocks. If the intervention stocks have dwindled, and rightly so, then the policy ought to be discontinued from the CAP point of view. If it is felt that this policy ought to continue, then-as the noble Lord, Lord Roper, said-it ought to be down to member states and Governments, but it is a social policy and not a common agricultural policy. It also fails on the grounds of subsidiarity because there is no justification that the Union can do this job better than member states. The fact that it is voluntary and that Britain has not been participating since the mid-1990s shows that it is not something the Union ought to take up.

I have two questions for the Minister. When we held this matter up for scrutiny a couple of weeks ago, we were informed that the Council had yet to adopt a position. I would be grateful if he could tell us what the position is in the Council and whether there is still a blocking minority for this, and whether the Government are still of the view that this is a social policy measure rather than a CAP measure.

4.43 pm

Lord Carter of Coles: My Lords, I am grateful to the noble Lord, Lord Roper, for moving today's Motion. The EU Sub-Committee on Agriculture, Fisheries and Environment, which I chair, gave detailed consideration to the proposal in relation to the scheme for food for the deprived, which is the subject of the report now before the House. However, I am sure that your Lordships will share my appreciation of the knowledge and insight into the wider political and institutional context

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which the noble Lord, Lord Roper, has brought to this debate, not least in his role as chairman of the EU Select Committee.

It may be of interest if I quote from the website of the European Commission. The Commission's agriculture and rural development directorate-general states that the scheme was:

"Originally designed to provide surplus stocks of farm produce ('intervention stocks') to needy people, the scheme was amended in the mid-1990s to make it possible to supplement intervention stocks with market purchases in certain circumstances".

In looking forwards, the Commission goes on to say, and this is very apposite:

"Now that surplus stocks are extremely low and unlikely to increase in the foreseeable future, the scheme should allow market purchases on a permanent basis, to complement remaining intervention stocks".

I need hardly remind your Lordships of the consequences of the common agricultural policy 20 years ago when, as the noble Lord, Lord Roper, said, we had mountains of butter, milk, sugar, cereals and so on. At that time, it was a practical solution to let charitable organisations in participating member states distribute those goods to the poorest sections of the Community. For all that the process of reforming the CAP still has further to go-my sub-committee expects to look closely at reform options from the Commission at the end of the year-it is fair to say that the changes made since the 1990s have been constructive and far reaching. As the Commission has said, surplus stocks are now very low, and they are expected to remain low.

For the proposed EU scheme to work in future, food needs to be purchased on the market and then put into the distribution system. Twenty years ago, the scheme was based on the availability of surplus stocks; now, with no stocks, it looks as if we will just go out and purchase it. This transformation begs questions about the scheme's efficiency and about its relationship with the CAP. The Commission claims that the scheme helps to meet the CAP's objectives of stabilising markets and ensuring that supplies reach consumers at reasonable prices. We could discuss those claims, but they are not the issues on which this report turns. The central issue is our subsidiarity assessment.

Why should the European Union be considered to be in a better position to determine the nutritional needs of deprived members of member states' communities, and to respond to those needs, than national, regional or local governments? For example, here the Government have introduced the Healthy Start scheme, and I hope the Minister will say more about it. I mention it only because it seems to me to exemplify the role of a member-state Government in looking at the need in the population for which they are responsible and designing an appropriate scheme to meet those needs.

As we acknowledge in the report, member states' participation in the scheme is voluntary and, although the UK has not participated since the mid-1990s, the Commission states that 19 member states currently do. I am tempted to repeat the saying that there is no such thing as a free lunch, not because the scheme rests on cofinancing between member states and the Commission, but because, if we fail to flag up what we

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see as a failure to comply with the principle of subsidiarity, we risk paying a longer-term price in terms of blurring the lines between actions appropriate for EU involvement and actions which should rightly stay with member states at national, regional or local level.

The sub-committee was clear in its view that this proposal does not comply with the principle of subsidiarity, and I hope that your Lordships will share that view.

4.48 pm

Lord Teverson: My Lords, I remember when the UK last participated in this scheme because I benefited from it. Before I receive commiserations from noble Lords, it was not because I was a poor member of the public who received the unfrozen butter that came out of cold stores in the south-west, but because I was a Member of the European Parliament representing Cornwall and Plymouth and it was a fantastic photo opportunity around Christmas time, when these schemes, whether at European or UK level, strangely came out. I was able to do a press release, and I was reported in the press as securing the south-west's share of this bounty from the European Union. Unfortunately, I was not pictured distributing our share as Father Christmas, but it was a good wheeze then.

Things were very different at that time. There were surpluses within the common agricultural policy, and rather than export them and destroy the third world's farming populations, we instead decided to try to save some of our own populations from poverty and starvation at Christmas, which I suppose was not a bad objective. Despite being one of the most pro-European Members of this House, I would say that one of the most important things about Europe is that it knows its limits. Certainly, even when I was a Member of the European Parliament, I voted against things like the working time directive and the drinking water directive, not necessarily because I was against them but because they were things that the European Union should not have been involved in. They should have been left to the member states, which were best placed to decide what was right for them. There is no better example of that than this regulation which is being discussed at European level. I should be very interested to hear from the Minister as to where those negotiations have got to.

I raise one other question, which perhaps is more to do with the administration of the House. Perhaps the noble Lord, Lord Roper, can inform me as to whether he believes that we now have procedures in the House suitable to ensure that whenever an issue such as this comes up again-exercising our judgment in terms of the yellow card procedure-we can do this quickly enough so that we can raise support among other national Parliaments within the European Union to make sure that our message is heard. I am disappointed that it is just the Swedes who are following our example-that is not a good sign-but I do not commiserate at all with the Members of the European Parliament in the UK this Christmas who will not have the opportunity that I had back in 1994.

Baroness Howarth of Breckland: My Lords, I declare an interest as new girl on Sub-Committee D, although I have spent a number of years on Sub-Committee G

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and on the Select Committee. One of the other things I have done in my life is to look at institutions and large organisations. One of the cultural problems of institutions is the difficulty they have in moving forward when times change. That is particularly so when there is no check on personnel or financial commitment. It is even more difficult to make organisations change when the issue looks like "a good thing", such as this one; the distribution of food products to the most deprived persons in the Union. For someone like me from a social care background, that looks like a good thing. However, as we have heard, the programme began at a time when the excess of food stocks was purchased into public stores under the old common agricultural policy scheme and the temptation to continue the intervention into the affairs of member states by purchasing food from markets for distribution through the EU food programme is almost irresistible, certainly for those committed to work within the Commission.

However, as I said, having spent some years as chair of Sub-Committee G, and now as a member of this committee, I am more than aware of the danger of the Commission moving into areas best served by member states themselves. In Sub-Committee G, we were constantly on the alert for encroachments into health and consumer issues. I spent more than one afternoon thinking about the working time directive. Not to be misunderstood, I am a committed European. There is much we can do as a community to further the lives and interests of our citizens. Food safety and security are clearly such areas close to this debate, where the wider community can and does add value, but some things are not only the right and responsibility of member states, but are local within that state. The distribution of food to poor citizens is one of these.

Tim Lang, professor of food policy at the City University, defines food poverty in the UK as follows:

"Food poverty is worse diet, worse access, worse health, higher percentage of income on food and less choice from a restricted range of foods. Above all food poverty is about less or almost no consumption of fruit & vegetables".

Other factors include access to a range of healthy foods in local shops, transport, fear of crime, knowledge about what constitutes a healthy diet and the skills to create healthy meals. Is that really an issue for Brussels?

For many years, I was a member of the board of the Food Standards Agency, the independent department set up to protect public health and consumer interests in relation to food. The FSA runs the annual Dame Sheila McKechnie awards for community food groups. I have seen at first hand what local action on food can achieve. Community food projects work to tackle food poverty in their local areas, giving the power of choice and change back to local communities. Projects include food co-ops, community cafes, cooking and nutrition programmes, and courses, markets, breakfast or lunch clubs, school tuck shops, peer training and any project which improves people's access to healthy, affordable and sustainable food. It is about as local as local action gets.

Community food mapping can identify where food poverty exists. The technique uses local people's knowledge to map food availability in a specific area. The results can be combined with data from other organisations, such as local authorities, the NHS and business-again,

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all local. The results can then be used to implement solutions to food poverty by designing initiatives tailored to those local needs.

One example is the North East Food Access Network, which is,

At times of austerity, such projects as these are vital to the life of local communities. Certainly, they could use more funding. One of my questions to the Minister is about how local community groups are going to be supported in the future. That would be of great value if it came direct without the added expense that must be involved in the Commission buying goods on the open market for redistribution, which, in addition, can easily distort the markets.

If we are to convince our citizens of the benefits of Europe, rather than it being seen just as an additional drain on the nation's purse, we should focus EU efforts where they bring best value and doing those things that sovereign states cannot achieve alone. Food networks are local, direct and know their communities. They are not overbureaucratic and, consequently, are flexible in responding to need. Above all, they are transparent. We should leave them uncluttered by intervention by the Commission, however well intended. After all, we know that this kind of centralisation by any institution leads to more money being spent on staff to make assessments to decide on criteria, more forms, applications to be vetted, assurance schemes to prevent fraud and so on.

I would conclude that not only does there appear to be no compelling argument to suggest that the Union is better placed than member states to ensure a food supply to its most deprived citizens, it appears to me that to do so would divert resources from those in non-governmental bodies who do it so well. I support the Motion to issue a reasoned opinion.

4.58 pm

Lord Stoddart of Swindon: My Lords, I have very often criticised the European Union Select Committee as being an expensive white elephant, but I am not going to do that today because it seems to me that it should have praise for the action that it has taken in this instance. Certainly, I shall support the Motion. I am also very pleased to hear so many people, including the noble Lord, Lord Teverson, and members of the committee, standing up for the nation state. In particular, the noble Baroness, Lady Howarth, criticised centralism and is in favour of localism. That is altogether good, but I am not at all sure that that is achieved through the European Union.

It is interesting that the committee is using the subsidiarity clauses. Of course, we have to go back to 1992, when the clauses were introduced into the treaty on European Union. Indeed, the treaty was sold by Mr Major to his own Back-Benchers by introducing the clause. We were assured at that time that that would put a brake on the European Union gaining

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more and more powers. I think that eight members of the Conservative Party were sacrificed-or at least given the sack-because they refused to support the Government, and the Bill only just made it through the House of Commons.

There have been far too few challenges. There should have been many more challenges to attempts-successful attempts-by the European Union to accrue more power to itself. There has undoubtedly been an insidious grab for power by the institutions of the European Union to achieve their aim of ever closer union-do not forget that the achievement of "ever closer union" is still in the Lisbon treaty; I do not know how close it is going to get, but the aim is there-and the emasculation of nation states.

The latest paper from the House of Commons Library shows just how much of our legislation, particularly in regulations, is coming from Europe. It gives the figure of 53 per cent. Some people think that the percentage is greater than that. Now, virtually no area of policy is untouched by the European Union leviathan, and the power grab has been given new impetus by the implementation of the Lisbon treaty, which significantly enhances the power of the European Union and its institutions. So it is indeed encouraging that the Select Committee is increasing its watchfulness to ensure that the subsidiarity provisions are respected.

I have concerns about the seemingly lax attitude of the Cabinet and the departmental Ministers in their surveillance of the extension of EU powers. I can only wonder how much influence they have on decisions that are taken. We do not often hear about COREPER-the Committee of Permanent Representatives-which, as I understand it, meets in secret and whose decisions are simply rubber-stamped by Ministers. I have heard that from the mouths of former Cabinet Ministers. Perhaps the new Administration will take a tougher line, but the activities of that very powerful committee should be transparent, and I do not believe that they are at all transparent at the moment. It should publish minutes setting out the positions taken by its members and how they voted. In the interests of parliamentary democracy, the United Kingdom members of COREPER should be seen to be accountable and subject to parliamentary scrutiny at Westminster.

Having said that, once again, I congratulate the committee, and I shall take pleasure in supporting the Motion.

5.05 pm

Lord Williamson of Horton: My Lords, I, too, support the Motions of the noble Lord, Lord Roper, on the issue of subsidiarity arising on the amended Commission proposal on the distribution of food products to the most deprived persons in the Union. As in a similar case that we debated on 20 October, I consider that our EU committee has done well to examine the question of subsidiarity and to bring it to the attention of the House. It is worth recalling that subsidiarity did not feature in the original Treaty of Rome, but as the role of the Union developed, the member states decided that in cases of shared competence, a treaty provision was needed to police the division between legislative

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action by the Union and action by member states themselves. It is now a treaty requirement that in matters of shared competence, the EU can act only if and in so far as the objectives of the proposal cannot be sufficiently achieved by the member states. In the current state of public opinion, not only in the UK but also across the Union as a whole, it is important that the EU institutions should strictly respect this treaty requirement.

In addition, as a result of the Lisbon treaty this Parliament-under Article 5(3) of the Treaty on European Union and under Article 6 of the protocol, which has treaty force, on the application of the principles of subsidiarity and proportionality-can submit a reasoned opinion on Commission proposals to the European Parliament, the Council and the Commission. We are recommended to do so in this case and I agree that we should now make use of this provision.

There has been perhaps some exaggeration about the volume of our secondary legislation deriving from the EU. The figures that I looked at recently in the Library of this House show that the great majority of statutory instruments are of UK origin and that only a small number directly implement EU law. However, every EU legislative proposal which in our view does not comply with subsidiarity should be challenged. In the case before us today, the history, as other noble Lords have already said, is that from 1987 some excess intervention stocks of food were made available to deprived persons in the Union. In the circumstances of 23 years ago, that was sensible, and I am strengthened in my opinion by the fact that I was in the Commission at the time. That gives me a further reason for thinking that it was a good idea, as well as the advantages given to the noble Lord, Lord Teverson, in his role as Father Christmas at some stage.

However, radical reform of the common agricultural policy, which now bears little resemblance to the policy of the past, has removed almost all intervention stocks, and the welfare programme has turned to the market to buy food. The EU committee sees no compelling argument to conclude that the Union is better placed than member states to ensure a food supply to its most deprived citizens, if that is necessary, and accordingly considers that the proposal does not comply with the treaty requirement on subsidiarity. I support the view of the committee and, consequently, the two Motions tabled by the noble Lord, Lord Roper.

5.08 pm

Baroness Quin: My Lords, like others, I begin by thanking the noble Lord, Lord Roper, and my noble friend Lord Carter of Coles for the work of the European Union Committee on this issue, and for the way that the subject has been introduced to the House. The noble Lord, Lord Roper, reminded us of some of the background considerations to the procedure that we will be adopting today, which are very much in line with the debate held last week on subsidiarity issues as a result of the committee's report. It was the first time that this kind of procedure had been presented to the House. Furthermore, while the noble Lord, Lord Stoddart, and I often do not agree on European issues, I agree strongly that these provisions in the treaty are ones

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that should be used by national Parliaments. They were included to strengthen the role of national Parliaments in European scrutiny, so it is right that when either House of our Parliament feels that these issues are important, they should be fully aired and voted upon. Certainly, our own House of Lords committee has a very good reputation among national Parliaments throughout the EU for its scrutiny work. That is of long standing, as those of us who in the past were Members in another place or Ministers can testify.

Some of the considerations surrounding subsidiarity have been aired. It is felt it should come into play where legislation at EU level is unnecessary-although obviously the word "unnecessary" can be subject to different interpretations-where such activity can be promoted without following a legislative route and where it is better done by member states. As the Government put it in their Explanatory Memorandum,

"the EU should only act where there are clear additional benefits from collective efforts, or 'EU added-value', compared with action by individual Member States either individually or in co-operation".

I believe therefore that the report makes a strong case. It is right to stress, as the noble Lord, Lord Roper, did, that the scheme is voluntary and that the United Kingdom has not participated in it since the mid-1990s. None the less, although we have not participated, as EU members we are fully entitled to make use of the provisions that are available today in making our views loudly heard about this.

I also accept the case in the report that confusion can arise from the parallel operation in a member state of a national scheme and an EU scheme. I also agree strongly that the extent to which purchasers from the market contribute to the objectives of the common agricultural policy in the way that is pursued at present is questionable.

When I first saw the committee's report I was quite startled because, like others, I remember the circumstances in which this measure came into being. Like the noble Lord, Lord Teverson, I was also a Member of the European Parliament-indeed I was a member of the agriculture committee in 1987 when this issue first arose. I remember the senior role that the noble Lord, Lord Williamson of Horton, had in the European Commission at that time. As many noble Lords have pointed out, the circumstances then were very different from those of today. It was basically a measure to distribute high intervention stocks rather than purchasing food from the open market in the way that it has increasingly operated in recent years and seems likely to operate in the future.

I also accept the Government's point that there are a lot of bureaucratic procedures involved in this process. It might be interesting if the Minister can say a little more about the costs of the scheme to those who choose to operate it and why that can be a disincentive to countries adopting the scheme in the way that it is currently provided.

I am glad that this debate is much more timely than last week's debate. Because of the parliamentary Recess, the previous measure relied on the good will of the Commission to accept our view on subsidiarity. That is not a problem with this case, where we are in good

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time. I understand that, according to the Government, a final decision may not be taken until towards the end of next year. Perhaps the Minister can confirm that.

I agree that national Governments and also local and regional authorities are far more appropriate to deal with this kind of issue. I was glad that the noble Baroness, Lady Howarth, mentioned the north-east network in my own part of the country.

I hope that from what I have said so far it is clear that we support the work of the European Committee and support the Motions in front of us. The committee's work is in line with the previous Government's approach to this issue; there has been quite a history of consistency about this in the consideration in both Houses of Parliament in recent years. However, the House of Commons European Scrutiny Committee, which has also recently considered this subject, has injected one slightly different element into the discussion. This is perhaps worth raising here and asking the Minister to comment.

The European Scrutiny Committee in the other place comments that in its view the argument is more about competence than subsidiarity. The committee accepted that where intervention stocks are relied on for food aid the Commission is competent to act, because of the workings of the common agricultural policy, but where the food is sourced from the open market-as we have heard, that is increasingly the case-the link with the common agricultural policy is much more tenuous. Therefore there does not seem to be an appropriate legal base which would confer competence to act. This is an important point and it would be useful to get the Minister to comment on it. As I understand it, the Government have so far said that there may be an issue of competence, but that even if it was then ruled that it came within the Commission's competence under the rules, there would still be an issue of subsidiarity. In that case, of course, the Government would strongly endorse the view of the European Union Committee in this House.

Could the Minister also say a little more, as other Members have encouraged him to do, about the support that we might receive from other countries in this area? In the letter that the Minister recently sent to the chairman of the European Scrutiny Committee, he talked about a small number of countries but certainly more than one-even though only one country has been mentioned here today. It would be useful for the House to be able to consider any further details that the Minister has about that. It would also be useful to know when the opinions of the European Economic and Social Committee and the Committee of the Regions of the European Union will be received and considered.

I noted that the noble Earl, Lord Caithness, saw at least part of the problem in a kind of grab for power and territory by the Commission. That might well be the case; however, the Commission makes the point in its Explanatory Memorandum that, as recently as 2008, 13 million people in the European Union apparently benefited from this scheme. Perhaps it would be interesting for the House to know where the majority of those people are. Is it in the new countries-the cohesion countries? Certainly, it seems that certain organisations

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and populations in the European Union were putting pressure on the Commission to continue this scheme, so perhaps it is slightly unfair to say, "It is just the Commission wanting to extend its territory", although that may be an element in the equation. Also, has there been any pressure from charities in this country to participate, despite the consensus that seems to prevail that it is actually better to deliver such programmes nationally or even sub-nationally?

Finally, the Government make a strong case about this being a social measure and therefore not appropriate to the European Union. While I accept that argument on this occasion, I am sure that the Minister will not be surprised that I do not accept that all social measures are inappropriate at EU level. Indeed, to go back to the European Coal and Steel Community treaty of 1954, social measures were quite an important element in the help to the coal and steel community and to coal and steel-producing areas, so that actually has a long history within the European Union.

I note that, later on, the House will be looking at the European Social Fund after an excellent report that was also from the European Union Committee, so although our support for the Government's stance on this occasion is genuine I hope that the Liberal Democrats in the coalition, despite the reservations about particular directives from the noble Lord, Lord Teverson, will none the less keep the pressure on the Government not to have such total hostility toward anything with a "social label" in the European Union. However, on this occasion, as happened last week, it is obvious that there is widespread consensus in the House and we are therefore happy to support both the work of the European Union Committee and its conclusions on this matter.

5.19 pm

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley): My Lords, I join other noble Lords in saying how grateful I am to both the noble Lord, Lord Roper, as chairman of the EU Committee and to the noble Lord, Lord Carter of Coles, as chairman of Sub-Committee D, for this report. I make it quite clear at once, as I think our Explanatory Memorandum made it clear, that the Government share the committee's concern that the regulation concerned is not consistent with the subsidiarity principle. That means that much of what I say may repeat what other noble Lords have said this afternoon, because there has been general agreement around the Chamber. Still, it is important that it is on the record that these are the views of Her Majesty's Government.

As the noble Lord, Lord Roper, made clear, the then European Community's food distribution programme was introduced back in 1987 and its main aim was to help run down the stockpiles of basic commodities that had been purchased into intervention stores under the common agricultural policy. The noble Lord, Lord Roper, went on to stress that it was the stocks of butter, milk powder, beef, sugar, rice, all those mountains and lakes that we remember-I cannot remember whether it covered wine lakes, but it did cover a whole

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variety of mountains and lakes-that were released to charitable organisations in participating member states annually to distribute to poorer sections of the community.

As has been made clear by a number of noble Lords, we in the United Kingdom last participated in the scheme in 1998-everyone referred just to the mid-1990s, but I can give the precise date. We withdrew both because of the sharp decline in intervention stocks in this country and because of the high administrative overheads, for government and charitable organisations alike, which made participation unattractive. I assure the noble Baroness, Lady Quin, that we still believe that, under the scheme that is being looked at at the moment, there would still be high administrative burdens, which would make it unattractive. I also assure her that we are not aware of any charitable organisations having asked us to participate in this scheme, or, for that matter, to go back into the scheme after the withdrawal by the previous Administration back in 1998.

The main purpose of intervention systems, as my noble friend Lord Caithness and other noble Lords made clear, is to support market prices. However, a side-effect-in practice, it turns out to be the dominant effect-is to encourage overproduction and distract farmers from making market-based production decisions. Successive reforms of the CAP have reduced the role of intervention and, together with improvements in world commodity markets, have resulted in significantly reduced EU intervention stocks. Consequently, the Commission proposes to adapt the scheme.

The main stated purposes of the Commission's proposals are to align the legislation to the Lisbon treaty and to modernise the scheme. The CAP is now more market-orientated and price support will play less of a role in future, so, as I have said, the accumulation of large intervention stocks is less likely. The proposal therefore provides for CAP funds to be used to purchase goods on the open market and for a wider range of goods to be purchased by participating member states on the basis of nutritional criteria rather than limiting them to the products for which intervention applies. The other major change is the proposed introduction to the scheme of cofinancing by participating member states. Under current proposals, this will be a minimum of 25 per cent of the eligible costs, with lower ranges of cofinancing, such as 10 per cent, applying to more disadvantaged areas of the European Community.

As before, participation in the new scheme-I think the noble Lord, Lord Roper, made this clear-will remain voluntary, so that, even if it goes ahead, the United Kingdom will not be obliged to participate. Providing effective help to disadvantaged people is clearly an important objective, but, as the Explanatory Memorandum explains, we remain unconvinced of the merits or the appropriateness of the proposal. In particular, we believe that the expansion of the scheme to procuring goods on the open market will mean that the new scheme is essentially a social measure-that is an assurance I can give to my noble friend Lord Caithness-which, by its design, would make it a matter for member states to decide rather than for the EU itself.

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In accordance with the principle of subsidiarity, a longstanding element of European treaties that is currently enshrined in Article 5 of the treaty on the European Union, the Government consider that the EU should act collectively only where there are clear additional benefits, or EU added value, compared with action by member states either individually or in co-operation.

We consider that social matters are a matter for individual member states, and that measures to assist the neediest members of society are more properly and efficiently delivered through domestic social programmes that take account of the prevailing situation and available funding in individual countries. The noble Lord, Lord Carter of Coles, for example, mentioned a scheme, Healthy Start, which is run by the Department of Health. I assure him that that scheme is still there; it is under review by the department and subject to a consultation about various changes in it.

I would like to mention national charitable organisations, such as FairShare. I visited one example of its outlets in the north-east, not far from the former constituency of the noble Baroness, Lady Quin. Many noble Lords will know of the valuable work that bodies such as FairShare can do in distributing food to the less advantaged. To return to the north-east, I was grateful for what the noble Baroness, Lady Howarth, said about the north-east food action programme. It is those kinds of measures-national from the Government, from local government and from charities-that we believe we should be looking to work. I commend those bodies to those who do not know about the sort of work that they do.

The proposal itself was discussed in the Agriculture and Fisheries Council on 27 September. That was followed, as I understand it, by technical consideration by officials. A number of policy and technical issues have been identified. At present-I give this assurance to my noble friend Lord Caithness-there is no qualified majority in favour of it. There might be a blocking minority against, but certainly I assure him that no member state at the moment actually supports the scheme; some oppose it for one reason, some for another. Also, as I understand it, the European Parliament has not yet given its opinion on the proposal.

The noble Baroness, Lady Quin, asked about the timescale. I assure her that we still have quite a long way to go before we get to any final decision, what with the European Parliament having to consider it and some sort of qualified majority having to be found on the Council, which does not seem likely.

In addition to subsidiarity, there are two main concerns among those member states. First there is the legal base.

Baroness Quin: I thought that the proposal reflected some of the amendments that had been passed in the European Parliament, so I am somewhat puzzled that the Minister says that the European Parliament has not considered it.

Lord Henley: As I understand it, the European Parliament has not yet considered the stage that we are currently at. It might be that it considered earlier examples of it. At the moment we are at the stage

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where it has been through the Agriculture and Fisheries Council, which talked in September about co-financing at the 25 per cent or 10 per cent level, but that has not yet gone on to the European Parliament. If I am wrong, I will write to the noble Baroness to correct it. My point is that we still have quite a way to go before any of this gets through, which is why it is important that the views of this House and another place-and those of 26 other parliaments and all the Houses in them, should they wish, although we understand that only Sweden is likely to do this at the moment-should come forward so that we can reach various red lights, green lights or whatever, as appropriate.

I return to the concerns of the member states. First, I was talking about the legal basis. The new proposal is made under Articles 42 and 43(2) of the treaty on the functioning of the EU. This is similar to the existing scheme. These articles would be appropriate if the predominant purpose of the scheme was the supply of food from intervention. However, given the expected focus of the revised scheme on the purchase of goods on the open market, it is very difficult to argue that its predominant purpose is in line with the use of these articles as the legal base. A number of member states share our concern about that.

Secondly, the concept of cofinancing, which I referred to earlier, is strongly opposed by a number of currently participating member states that believe that the scheme, quite naturally, should be wholly community-financed. The Government believe that, were the revised scheme to go ahead, cofinancing would be very important to ensure that each participating member state reaches an informed judgment on how best to support its deprived communities, and because it would likely improve the governance of the scheme.

In conclusion, I emphasise that Her Majesty's Government have not taken part in the existing voluntary scheme for many years and have no intention of taking part in the revised scheme if it were adopted. Given that there is presently no qualified majority on paper in the Council, there seems little immediate prospect of the proposal-at least in its current form-progressing that far. The effect would be that the existing scheme would continue to operate. I understand that there is a challenge before the European Court of Justice on whether the legal base for the operation of the 2009 programme is appropriate. That has yet to be heard. The point remains that it is not an activity that is best undertaken at EU level or, in our view, an appropriate use of common agricultural policy funds. Therefore, I stress that I welcome the committee's report and support the Motion on the reasoned opinion.

Lord Roper: My Lords, I can be rather brief in replying because all those who have taken part in this debate have supported the report and the Motion that I have moved. I was particularly glad to hear from the three members of the sub-committee, their chairman the noble Earl, Lord Caithness, and the noble Baroness, Lady Howarth, who were able to add on the general question. In the case of the noble Baroness, Lady Howarth, we were reinforced with her knowledge of local social projects. We were also very much helped by the fact that three Members of this House had been involved in the scheme at earlier stages. Therefore, the

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contribution of the noble Lord, Lord Teverson, with his fascinating aperçu of acting as Father Christmas, and of the noble Lord, Lord Williamson, and the noble Baroness, Lady Quin, were particularly useful in giving us the background to the scheme. I was glad to have the support on this occasion of the noble Lord, Lord Stoddart of Swindon. I hope he notes that this is one of the benefits of the Lisbon treaty that, as well as other sections, should be taken into account.

I was asked a couple of questions. Before coming to them, one thing that has not been stressed sufficiently is that, although we do not participate in the scheme, the UK contributes to the €500 million that comes from the European Community's budget. Therefore, that should not be overlooked when we consider this matter.

The noble Lord, Lord Teverson, asked me whether the arrangements were satisfactory. The procedure in this House has been satisfactory. We have been found a date relatively promptly so that it can be debated in good time. I will say one thing that I did not mention initially. On this occasion, we consulted our colleagues in the committees of the devolved Assemblies and asked them whether they had any comments, because some of this is the responsibility of the devolved Governments. We have not had a response on this occasion, perhaps because of a shortage of time, but it shows that we feel that we have that responsibility in matters that are not a reserved responsibility for the UK Parliament.

On the consideration in other parliaments, we have communicated with them. In the 19 countries that are participating, people may not wish to upset a continuing Father Christmas role for their countries and might consider themselves rather unpopular if they were to raise issues of subsidiarity on something that might be seen locally as beneficial. I do not know. However, I believe that we were right-as has been shown by this debate-to put forward our reasoned opinion on this particular measure. I beg to move.

Motion agreed.

Subsidiarity Assessment: Food Distribution (Reasoned Opinion)

Copy of the Report Vol 1

Motion to Resolve

5.34 pm

Moved by Lord Roper

Motion agreed.

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Private Finance Projects (EAC Report)

Copy of the Report Vol 1
Copy of the Report Vol 2

Motion to Take Note

5.35 pm

Moved By Lord Vallance of Tummel

Lord Vallance of Tummel: My Lords, although I am no longer a member of the Economic Affairs Committee, I am pleased to introduce its report, Private Finance Projects and off-balance sheet debt, which was published in March while I was still chairman. Before I do so, I should declare an interest as a member of the supervisory board of Siemens AG, one of whose divisions has been party to a private finance project.

I am grateful to all the witnesses who made the report possible and especially to the National Audit Office for its valuable contribution. I should also like to thank Professor Paul Grout of the University of Bristol whose knowledge and experience were essential to our report. The topic is important and affects all of us, but the terminology is pretty turgid: neither private finance initiative, PFI, nor public private partnership, PPP, exactly fire the imagination. "Private finance projects", or PFPs-the umbrella term that we adopted in our report-is scarcely more compelling, but it has the virtue of embracing both the PFI concept introduced by a Conservative Government and its PPP rollout, largely under a Labour Government. The term "private finance projects" also says what it means: doing public projects with private finance. I will use "PFPs" as a catch-all term today.

PFPs use private sector capital and skills to provide public infrastructure for a lengthy fixed period. Schools, roads and hospitals are typical examples. The public sector client pays the contractors fixed sums over about 30 years for design, build, maintenance and some services. This whole-life bundling of costs into one package sounds straightforward enough but PFPs are still controversial. Their defenders say that risk-taking private contractors bring to public procurement the rigour, efficiency and skills needed to get the most out of scarce resources and that they mostly deliver to time and to budget. Detractors say that PFPs are expensive, inflexible and do not really transfer risk from the public sector. It is not easy to show where the truth lies, since lack of data on the whole-life costs of traditional procurement hampers objective comparison. This sometimes encourages heated assertion rather than cool analysis. In our report we tried to take a balanced view of PFPs, but it can be only an interim assessment; no final verdict will be possible until the bulk of the PFP deals signed in the last decade or so have run their course. Even then, the success or failure of PFPs is likely to be judged on a case-by-case basis, with type of project and local factors helping determine how each is finally evaluated.

PFPs grew from a combination of circumstances arising in the post-war decades. Broadly, growth in publicly funded services and rising expectations meant

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that far more public infrastructure was needed, but over time the perception grew that traditional public procurement was inefficient. The public sector specified a project, private contractors built it and the public sector was then left holding the baby. There were delays, cost overruns, contractual disputes and chronic neglect of maintenance. At the same time, Governments trying to find resources to meet ever-rising demand were looking for better value for money. It was clearly in the public interest for them to look for a new and efficient approach to public procurement.

The beginnings of what became PFPs were in the 1980s, when use of private finance in public procurement was still hedged about with restrictions. Those restrictions were largely removed in the early 1990s as the Government set out to attract private capital. Typical PFPs bring together private contractors holding shares in a consortium-a special purpose vehicle, in the jargon-formed to carry out a specific public project. The contract bundles together construction and maintenance over a long period and is financed by the contractors, mainly through debt, in return for fixed payments over the years by the public authority. Although the PFP model emerged under a Conservative Government, its use became widespread under a Labour Government such that by 2009 there were about £64 billion-worth of PFP contracts in force. This rapid growth of private finance projects is striking. It is clear that PFPs have played a significant role in the expansion and renewal of the nation's infrastructure. Most schools and hospitals are now procured through PFPs. It will be interesting to see whether this pattern of procurement continues under the coalition Government.

It is clear that PFPs have built much in a short time, changed the urban landscape and renewed much public infrastructure. It is also clear that PFPs are best suited to certain types of projects, such as roads, schools and hospitals, since they can be clearly specified and are of a size that the private contractor can readily finance. It was striking that very few of our witnesses wanted to go back to traditional procurement in areas where PFPs had become the norm. The PFP model has also been enthusiastically adopted by other countries. On the other side of the ledger, experience already seems to show that PFPs are not the right approach for very large, complex and uncertain projects, such as the renovation of the London Underground. However, even successful PFPs, built to budget and on time, are still at an early stage in their life cycle. Few have been running as long as a decade, whereas many of the contracts are for 30 years. It will be for our successors in the 2030s to draw up a final balance.

Meanwhile our report drew conclusions and made recommendations on the basis of experience so far. Here are some of them. Public authorities should be free to choose the procurement method that offers the best value for money. There should be no institutional bias for or against traditional or innovative approaches. There should be greater clarity about financial liabilities arising from PFPs, which should be published alongside the national accounts. Data should be collected on whole-life costs of projects procured by traditional methods, including maintenance and services over the years, so that there can be meaningful comparison with the value for money of PFPs. The pros and cons

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of establishing a national infrastructure bank, as a means of combining financing at government rates of borrowing with the rigor and efficiency of private-sector delivery, should be kept under review. The operation of the secondary market in PFPs-the buying and selling of PFP contracts-should be monitored for any signs of a drop in build quality where contractors are able to sell completed projects that they would otherwise have to maintain. The public sector should enjoy a fair share of the benefits from any refinancing of PFPs. We also recommended that the Government should monitor the risk of jeopardising the delivery of essential services where public authorities' budgets were constrained and where the obligatory nature of payments under PFP contractual commitments might squeeze out other critical but discretionary expenditure.

I am glad to say that the then Government were commendably swift in producing their response to our report. They were positive about many of our recommendations, including the quantification and publication of the country's PFP liabilities and the collection of comparable data on the costs of traditionally procured projects. The previous Government also declared their intention to establish a green investment bank, which would operate on a commercial basis and involve both public and private sector capital. However, that Government dismissed our concerns about the potential effect on the ability of public authorities to deliver essential services as inflexible PFP payments took a higher share of reduced budgets. We were told that PFP payments represented very little threat to the flexibility of the Government's budgets.

There is now a new Government. We note the commitment by the Chancellor of the Exchequer to go ahead with a green investment bank, but we have heard little of the coalition Government's approach to PFPs. Will they still have an important role in public procurement? How far will new private finance projects be constrained by the spending review? What will be the role of the green investment bank with respect to PFPs? Does the coalition agree that public authorities should be free to adopt whatever procurement method offer best value for money? Will the Government ensure that overall PFP liabilities are clearly quantified alongside national accounts? Do the coalition Government share the view of the previous Government that inflexible financial obligations under PFPs will not constrain the ability of public authorities to deliver essential services, even as the comprehensive spending review bites?

We will perhaps not hear all the answers today. That said, it is already clear that PFPs have been a bold innovation and that their impact will remain with us for many years, although, as I have indicated, it is too early for a definitive assessment. Meanwhile, it will remain important for Governments, including the current one, to keep looking for best value for money in public procurement and to keep trying out new methods. These might include: new combinations of private sector rigour and financial accountability with the public sector's ability to borrow cheaply; the extension of PFPs beyond construction, maintenance and ancillary services to include some of the core functions in health, education or even defence; and embracing a flexible approach that allows the choice of the procurement

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path best suited to each project. The guiding principle of procurement should always be to get the best value for the taxpayer, especially while money is tight. I beg to move.

5.46 pm

Lord MacGregor of Pulham Market: My Lords, this was a most interesting inquiry and I was very glad to be involved in it. PFI, or PPP, has come a long way since its initial steps, and it was an appropriate moment to judge its successes and failings and to highlight lessons for the future. It was the first parliamentary inquiry since 2000, and the first comprehensive study outside government. We received a massive amount of evidence and I hope that our report will be a valuable source of information on the issues for national and local government, practitioners and academics. I thank our chairman, my noble friend Lord Vallance, for the excellence with which he chaired some complex hearings. I thank also our excellent special adviser, Professor Paul Grout, our committee clerk and the team.

My noble friend Lord Vallance gave a very clear introduction to the background, and covered some of our main recommendations. I agree with almost everything he said and will try not to go over the same ground, except where I have a particular point to make.

The response of the then Government was somewhat cursory and dismissive in places, with very brief responses to some important recommendations. It bore all the marks of being got out in haste before the election. I admit that they did it pretty rapidly. As my noble friend Lord Vallance indicated, we produced our report on 10 March and they responded on 7 April, so it was perhaps understandable that the response was cursory in places. For example, at the outset they said that PFI remains a "small" but crucial part of government investment in UK infrastructure. It is hardly small, given that by 2009 there were approximately 800 PFI/PPP schemes with a capital value of approximately £64 billion. The then Economic Secretary to the Treasury told us that 70 per cent of hospital schemes and 60 per cent of new schools were being delivered through PFI. However, I concede that the response of the then Government accepted a number of our recommendations.

We now have a new Government and I hope that the debate is a timely opportunity to set out the Government's approach to these issues, particularly bearing in mind something that we were very much aware of in our hearings and that we acknowledged in our report. I refer to the fiscally constrained environment in which we now live, the pressures on public expenditure and the impact of the credit crunch on the willingness of the banks to finance PPP/PFI deals, 85 to 90 per cent of the costs of which are usually met by borrowing.

My early involvement with PFI came with the Dartford Crossing in the mid-1980s. I was then Chief Secretary to the Treasury. That was an early example of a private finance project-not a PFI in the current sense-in what would traditionally have been a purely public sector and taxpayer-financed infrastructure scheme. I recall there was some discussion of whether it breached the Ryrie rules that any privately financed solution must be shown to be more cost-effective than a publicly financed alternative. In my view, going ahead with it

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meant that it was clearly built earlier than it would have been had it taken its place in the priority pecking order in the traditional way, and that was a real benefit. Of course, it was different from subsequent PFIs in that it was financed by tolls not taxation, and it has been very successful.

Subsequently, as Secretary of State for Transport from 1992 to 1994, I was much struck when I first arrived in the department by the average cost overrun on all road schemes of 28 per cent on the original contract. We introduced design and build, which brought the contractor much more into the development, design and construction of the project and helped to bring those cost overruns down. Subsequently, there was design, build and operate and I would very much have liked to have gone further to design, build, finance and operate-finance not through taxation but in schemes that were for motorways or motorway expansion by motorway charging. That was then a step too far for some of my colleagues despite the fact that I produced what I thought was a very good Green Paper, which I still stand by, and I hope that some day it will be done, not least when the infrastructure need on the one hand and the public expenditure constraints on the other make it more desirable.

From the early days, I was a strong supporter of the PFI concept and the report shows that PFI has gone a long way to improving this overrun problem. However, inevitably with a major new innovation one learns lessons as one proceeds and some of the critics of the early PFI projects gave evidence to our committee. Broadly, I think that on the key points that they and others made, lessons have indeed been learnt and implemented and I illustrate this with three examples from our report.

The first is on refinancing. In the early days substantial gains were made by the financial partners by refinancing at lower costs once the building project had been completed and some of the attendant risks had been removed. We drew attention to this in paragraphs 84 and 85 of our report. The National Audit Office particularly criticised the Norfolk and Norwich Hospital project and its refinancing. That was one of the very early ones. Refinancing by PFI partners after the building had been completed resulted in the public sector securing about only 29 per cent of the refinancing gain while increasing the contract's termination costs. In the report, we welcomed the Government's action to secure for the public sector a substantial share of refinancing gains. We believe that that has now been recommended and recognised and accepted.

Secondly, there is the question of lack of skills in government departments-inevitably in project management and contract negotiations in the early stages. Again we made a recommendation on this. We recommended that public authorities should do more to maintain and improve commercial skills of staff dealing with private finance projects, with emphasis on long-term contract management as well as contract negotiation. Again, I think the Treasury has recognised and acted on the importance of this point.

Perhaps the third and most important of all the lessons is the failure of the London Underground Metronet PFP, which as we say in our report gave

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private finance projects in general a bad name. It was of course an exceptional project because of the huge debt guarantees the Government gave-95 per cent of the banks' loans being guaranteed-which meant that the transfer of risk to the private sector did not happen and the loss to the taxpayer was estimated by the National Audit Office to be between £170 million and £410 million. Unfortunately, the government response does not really deal with our recommendation that PFP should not be used where the state is guaranteeing large amounts and a high proportion of debt as a means to make highly geared PFP happen. The then Government's response simply noted our views. I hope that the Minister will look at this one again.

Before I turn to what I may describe as the big issue, there is one other detailed recommendation to which I wish to refer. In recommendation 145 we suggested, as Sir John Bourn told us, that the credit crunch, through its limitation on access to funds, thus making them more expensive and available for a shorter period, has tended to reduce competition. We drew attention to one of the problems about the lack of competition related to the high bidding expenses involved in bidding for PFIs. Of course, reducing the competition for private finance projects would increase the cost to taxpayers. We recommended that the Government should examine possible mechanisms for encouraging competition, such as returning an element of bid costs. The then Government in their reply said that the Treasury was reviewing that and that it would publish its findings shortly. I may have missed it, so I ask the Minister whether that has happened and, if so, could he comment on it?

I turn from the detailed recommendations to what I might describe as the big issue. I was an early supporter of PFI, not least for the better project management it involves and the effect it has on maintenance. Quite clearly, one of the other benefits of PFI is that maintenance is contracted for a long period ahead-and all of us who in the past have been involved in public expenditure issues know very well that if the pressures on public finance are very high, maintenance is often the thing that is cut. One of the benefits of PFI is, of course, to be able to do that.

I became somewhat alarmed at the scale and speed with which the Labour Government over the years embraced PFI and appeared to run away with it. It looked like a big wheeze, getting the credit for substantially increasing capital expenditure but without regard to the implications for many years ahead. Also, many witnesses told us that when they approached local authority projects and other projects, the Government implied that there was no game in town other than PFI. It looked like typical off-balance sheet financing, particularly when so little information was available about the level and future consequences of that PFI expenditure. Just as in the private sector, where off-balance sheet financing led to so many consequences for companies and banks, were we building up equal problems in the public sector? The problem was that, in the early stages, we could not get at the figures. Much progress in the accounting for PFI has now been made. In the earlier years, when many of us were in Opposition, we were already expressing concern about increasing public

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expenditure, and we knew at that stage that this did not even include all the off-balance sheet financing expenditure. At least we know about it now.

Is my noble friend confident that we now have a clear picture of current and future liabilities, and is he satisfied that the response of the previous Government to recommendations 59 and 60 on this matter have been sufficient? Above all, will he look again at our recommendation in paragraph 24? In that recommendation we draw attention to the problem of the build-up of contractual commitments over the years. We advocated that the Government should monitor and control, year by year, the impact of PFI commitments on the budgets of departments and public authorities with a view to ensuring that delivery of essential public services in future years is not unduly constrained or jeopardised by such commitments. As we move into a period of public expenditure constraint, which looks as though it will be here for some years ahead, that becomes more important. The then Government tended to respond by saying that everything was very satisfactory, that there has been full publication of all the details and, after all, that these annual payments under PFI unit charges make up a very small proportion. I do not think that is fully satisfactory. We need to know, and I hope that this Government will look again at our recommendation in paragraph 24. We need to be sure that the crowding-out effect of these future liabilities will not have a major impact on future public expenditure projects. The government response was that if a project had been financed in the traditional way, then of course there would be maintenance requirements in future years. These maintenance requirements were sometimes cut and they will not now be.

Finally, I have one last question on our recommendation on a national infrastructure bank. We recommended that the pros and cons should be kept under review and the previous Government agreed with our recommendation. Can I ask my noble friend to what extent the green investment bank, now proposed by the Government, will meet our recommendation?

In conclusion, there is no doubt that the PFI/PPP project and the whole concept has been a welcome and successful development for all the reasons our report outlines. It has been for many up to now a somewhat esoteric area, perhaps accountancy-led and with, as my noble friend Lord Vallance said, pretty turgid terminology, but it is critical. It needs greater public debate and I am glad that our report has contributed to that. I look forward to my noble friend's speech, not only responding to some of the questions I have raised, but also giving us some idea of how our new Government see the scope and scale of PFI/PPP in future years.

6.01 pm

Lord Lipsey: My Lords, I was not on the Economic Affairs Committee for the whole of the period of this inquiry, but I was there long enough to appreciate greatly the qualities which the then chairman, the noble Lord, Lord Vallance, brought to its proceedings and which he again demonstrated in his admirably concise speech this afternoon. Our report is clear and I do not want to attempt another summary. Rather, I

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want to draw the attention of the House briefly to two things that it does not conclude-the two dogs, as it were, that did not bark in the night.

The first concerns the view put to us by a minority of witnesses that PFI and PFPs are taxpayer-unfriendly rip-offs. This was put to us-not, of course, quite in those terms-by, for example, the trade union UNISON and by Professor Allyson Pollock of Edinburgh University who writes a column to this effect in the Guardian every month or two which I always look forward to. As the chairman of the committee said, it is too early to be sure on a lot of these matters, but the gap between those who advance these arguments and the majority of our witnesses is a Grand Canyon. It would be to go too far to say that we refuted the arguments of the opponents and it is fair to note that many of the witnesses who gave evidence as to what a wonderful thing PFP was were at the same time lining their pockets from the proceeds of it. However, the evidence we received from the NAO, which I think can be taken as objective in this matter, seems to get it about right. The NAO said:

"Having examined many PPPs, we have concluded that private finance can deliver benefits, but is not suitable at any price or in every circumstance. It is one of many routes of delivery, which, when used for the right reasons and managed effectively, can work well. When it is used for the wrong reasons or is managed badly, it does not deliver projects well".

That seems good judgment and it contains the view as to why the critics, in my view, are getting it wrong. What they tend to do is take the odd project that has gone wrong and present that as if it were typical. As every speaker has mentioned so far, the project that most obviously went wrong was the ludicrous London Underground project, which was far too complex to be done through this kind of contractual obligation. I do not expect to say this very often in my life, but Ken Livingstone was right and Gordon Brown was wrong. We need to balance those failures against the many successes and the general feeling that our public infrastructure is a great deal better at less expense and to greater benefit to the public as a result of these schemes.

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