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for the work that he and others did to build tremendous consensus, which is sustained today. He referred to the necessity of proactive enforcement, and that is key. He put the case very well.
My hon. Friend the Member for Birmingham, Erdington, has a great background in this issue, not as a Member of Parliament, but as part of the wider civic engagement through the trade union movement. He reminded us that behind all the debates about where the GLA goes is the human tragedy that inspired it, and that necessitates its continuation in a dynamic, proactive form. He talked about support extending from plough to plate, across all parties and across society. He also said that we can look at using the model we have to end the scourge of modern slavery, which still exists.
The GLA, which was established in 2004, was designed to do a number of things. One was to establish a level playing field across industry, so that we could avoid undercutting and take out rogue operators. It was about improving the working lives of the vulnerable, and its success in doing that has been proved. It was also about assisting in the battle against criminality and human trafficking.
It is important to set out the GLA’s successes, and we heard earlier about its measurable, tangible successes. The annual report for 2010-11 showed that 845 cases of worker exploitation were identified in that year. Some 91%—that is, 78 cases—of the GLA’s intelligence-driven operations identified serious cases of non-compliance. Thirty-six cases of unlicensed activity were uncovered, and 33 licences were revoked, with 12 successful prosecutions. The case for the GLA continuing its work is therefore still crystal clear; abuses are still happening. Even with the GLA’s dynamic, fleet-of-foot approach and proactive enforcement, there are still cases out there to be pursued and prosecuted.
The GLA has had a significant wider impact because of its deliberate efforts to go after high-profile cases with a high media impact to get the message out to rogue employers that they cannot continue doing what they are doing. That has been very successful.
There has been continuing support for the GLA. When surveyed in 2008, eight out of 10 respondents said they were in favour of licensing, while seven out of 10 felt the GLA was doing a good job. Only 18% described contact with the GLA as being in any way burdensome.
In that respect, does the Minister have a view about the GLA’s role on forestry? There has been great discussion with forestry employers and unions about whether forestry needs to be retained in the remit of the GLA as currently structured. Some have put forward the view that certification means it is very difficult to find unregulated, rogue operators in the forestry regime. Does the Minister think there might not be a case for forestry remaining in the current structure? I would be interested to hear his views on the issue, and particularly what discussions he has had on it with the unions.
Let me turn to the question of whether the GLA is efficient as well as effective. There is no doubt that it is effective. As to whether it is efficient, the organisations using the GLA as an example of how to implement an efficient regulatory control framework include not only
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the TUC, but the Joseph Rowntree Foundation, with its research reports, the Centre for Crime and Justice Studies, Oxfam, the Wilberforce Institute for the study of Slavery and Emancipation, the International Labour Organisation, the Organisation for Security and Co-operation in Europe, the Dutch national rapporteur on trafficking and the Harvard university programme. One after the other, they line up to say that the GLA is not only effective, but efficient. It does what it does leanly and with minimal resources. If it works so well, my question to the Minister is: why would the Government tinker with it without a darn good reason?
That is before we look at the issue of where the GLA should go now. In one sense, the debate is about the future of the GLA as currently formed and in the sectors it currently looks after. In another sense, it is about where the GLA goes from here. As we have heard from hon. Members, the TUC and others believe that there is a strong case for extending the GLA licensing scheme, and the Select Committee on Home Affairs said the same in its report on the issue.
“Another problem is that the remit of the GLA is currently confined to the oversight of labour in the food and agricultural sectors, while exploited foreign labour may now be found in the service and construction industries as well as in care homes. In our evidence-gathering it became clear to us that there seemed to be no good reason for the vital work of the GLA not being expanded to include these other sectors and to cover other forms of contract employment and outsourced work, and that employers who used such labour should hold some responsibility for wages and conditions.”
There have been other reports, such as Oxfam’s “Turning the Tide: How to best protect workers employed by gangmasters, five years after Morecambe Bay”. We have also had the TUC’s commission on vulnerable employees and the Health and Safety Executive’s report on deaths in construction, “One Death is too Many”. They all proposed that the scope of the sectors covered by the GLA should be under consideration for extension.
Finally, I recommend that the Minister reads, if he has not done so, the report by the TUC and the Union of Construction, Allied Trades and Technicians, “The Hidden Workforce Building Britain”. One of the many examples in it concerns a UCATT investigation in July 2008, which showed that on a private finance initiative hospital site in Mansfield, workers were being paid a total of £8.80 for a complete 40-hour week. The union took the case to the employment tribunal. It was contested. The company is a large one, by the way, which carries out many large public sector contracts throughout the UK. It, of course, insisted that the workers were self-employed and did not come under the national minimum wage regulations. On and on it went. The GLA would be effective for that sort of anomaly.
The debate is a genuine one. We want the GLA to be safe in its current form, not weakened; and we want to ask what consideration is being given in government and Whitehall to extending its remit, and how that would happen. Where would that remit go, and is anything happening at the moment? There is strong support for the Minister to take the matter forward proactively, rather than simply putting it under the banner of the red tape review so that the GLA becomes diminished without our even considering its success and whether it should be taken further.
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The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon): I start by paying tribute to the hon. Member for Edinburgh South (Ian Murray) for raising this important matter. I am desperate not to sound patronising; it is in the finest tradition of this House, when the Government are considering a way forward, for the Opposition—rightly—to push their view and to push the Government in the direction they want.
It has been a useful debate and a very good one, showing the passion that surrounds the issue, and reminding us that the Gangmasters Licensing Authority was created at the time of an appalling tragedy, which we must never forget. We narrowly avoided a repeat this year in the Ribble estuary when there was a bonanza—a sort of Klondike operation—for cockle-picking. Interestingly, as my hon. Friend the Member for Southport (John Pugh) said, the GLA worked well in those circumstances with the local authority, the Inshore Fisheries and Conservation Authority, the police and the Marine and Coastguard Agency to close down that activity. I deeply regret that the fishery had to be closed, but it was necessary because of the activities of certain people; in many cases it was individuals who were involved, but there was also some evidence of illegality. That is an example of the GLA working well with other agencies.
I am pleased to have a debate today about the future of the GLA. It is a body that the Department for Environment, Food and Rural Affairs sponsors because its remit is focused on agriculture and food processing. As has been mentioned, normally the Minister of State would have responded. However, today is a significant one in the farming calendar and he is attending the National Farmers Union annual conference in Birmingham. So, too, is the Secretary of State, who made a keynote speech at the conference this morning. In that speech she announced the publication of our response to the farm regulation taskforce.
As hon. Members would expect, the taskforce, which was chaired by Richard Macdonald, had a very informed view about the work of the authority and made recommendations on how the GLA might be improved. The GLA is also subject to continuing Government reviews, including one on workplace rights compliance and enforcement, and the red tape challenge, which have been mentioned by hon. Members. The review process is under way and the views that have been expressed today, very eloquently, will be considered as part of that. We have already announced, and confirmed in our response to the farm regulation taskforce, that we endorse the need for the GLA to enforce protection for vulnerable workers in the relevant sector—those who are least able to take action on their own account. I hope that that offers some reassurance to hon. Members.
I want to take up some of the points that were made, and I have already alluded to cross-agency working; we must not think that the GLA operates in a bubble. It is vital, particularly when it works in areas of high criminality and large amounts of money—where there can be criminality through the supply chain—that it should work with other agencies. That holistic approach is important. The hon. Member for Wrexham (Ian Lucas) talked in an intervention about health and safety legislation and I would link that with the point made by the hon. Member for Birmingham, Erdington (Jack Dromey)
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about regulation and where the Government sit on those two matters. I assure him and other hon. Members that there is no clove or garlic or cross in my hand. We are not talking about no regulation, or less regulation per se; we are talking about better regulation. We are not talking about ending health and safety legislation through any Government review or challenge. What we want is regulation that is better, more fleet of foot and less cumbersome, but also effective. We want to provide that for employers, who will hopefully, in the future, employ people who are currently unemployed; and we want it to be part of the rights of workers, wherever they come from.
We will continue to look at what more the GLA needs to do to tackle non-compliant high-risk operators while also reducing unnecessary burdens on those who are compliant. Those are complementary and mutually reinforcing goals, which we are keen to bring about. We are actively looking at what needs to be done to ensure that they happen. We are not—with respect to the GLA and employment law more widely—removing essential protections for vulnerable workers. What we are doing is about ensuring that there is a legislative framework that safeguards workers’ rights while reducing onerous and unnecessary demands on business. I hope that hon. Members understand that. That is surely an objective we all can, and should, share.
It is also important that the GLA should continue to be supported by industry, including by retailers who work with the authority because they want to maximise assurance about the proper working of the supply chain. I entirely take the point that was raised by hon. Members about good farmers, employers and businesses being disadvantaged by those who act illegally. It is important that we understand that. The GLA should also be supported by labour providers and other employers, who need to be able to operate on a level playing field, where good employers are not undercut by those who seek to gain a competitive advantage by flouting the law and taking advantage of their workers.
I am happy to recognise that the GLA is widely regarded in many circles as having brought about significant improvements to the treatment of the most vulnerable workers in the areas it regulates. I join the hon. Member for Hayes and Harlington (John McDonnell) in paying tribute to the staff of the GLA, and to those who were at its birth and campaigned for it. Often the workers about whom we are concerned share a number of common factors: they have no fixed place of work; they are located in rural and less accessible settings; they are undocumented and often unsupervised labour; they are low-skilled migrant workers with little or no working knowledge of English, and accommodation or transport is provided as part of their employment. However, the GLA’s experience of operating under the terms of the Gangmasters (Licensing) Act 2004 suggests that there is room for a number of improvements. It is clear, for example, that there are areas that it covers that are dominated not by the presence of vulnerable workers who are at risk, but by skilled workers who are articulate and more than capable of enforcing their own employment rights.
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The issue I have just outlined is one of those that we want to look at in more detail as part of the ongoing red tape challenge process. We want to come forward with proposals on it in due course. Building on the successes it has already had in improving its operations, the GLA is running its own pilot project in the forestry sector, designed to apply a light-touch enforcement approach. To answer the point made by the hon. Member for Ogmore (Huw Irranca-Davies), the forestry regulation taskforce will report shortly, and make some recommendations, which will no doubt be of great interest to him.
There was some talk in the debate about the construction industry, which is obviously not an area covered by my Department. However, the industry has made significant improvements in the past 10 years in the number of serious accidents and fatalities. I cannot say that about agriculture, which is the industry I come from. I am not proud of that. I am happy to debate the issue when we have more time, but the Government are considering the issue of enforcement as a whole, across Government. No doubt the statistics will be part of that. We are not talking just about safety in the sense of health and the number of fatalities in an industry, but about exploitation, which is more complex and requires a more nuanced approach. There is a lack of hard evidence about employment abuses in construction. It does not feature in the Low Pay Commission’s top 12 low pay sectors. According to data from the annual survey of hours and earnings, only 0.7% of construction workers were paid at the national minimum wage rate in April 2009. Pay is sometimes below union-negotiated rates but above the minimum and not illegal. The issue then is not about extending the scope of the GLA—
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Mr Christopher Chope (Christchurch) (Con): The purpose of this short debate is to use the force of argument to put further pressure on the Government to abandon their policy of taking child benefit away from children who have a parent who is a higher rate taxpayer. I also wish to address the alternative approaches if the Government wish to raise even more money from higher rate taxpayers.
“This is hopefully good news for tens of thousands of families, as well as many Conservative MPs who had raised concerns about the penalties.”
I congratulate and thank the Prime Minister for having responded to those concerns, which I and many others had expressed on that issue. I hope a similar response will be forthcoming to the even greater and more widespread concerns that are the subject of this short debate.
I recognise that a substantive response may have to wait until the Chancellor’s Budget speech next month. I can assure him that all MPs will be raising their papers if he is able to use similar phraseology about good news for families and Conservative MPs. One essential difference between the two issues is that the removal of child benefit from higher rate taxpayers is something that concerns many more MPs, not just Conservative MPs but MPs right across the house. Many more families are affected as well—anything between 1.5 million and 1.8 million families with, collectively, about 3 million children.
There are relatively few political issues on which, over the generations, there has been a cross-party consensus. One issue is the support for the principle of a universal, non-taxable cash payment for families with children. That is now known as child benefit, which was initially introduced in 1977. Child benefit replaced child tax allowances, which dated back to 1909, and family allowances, which were introduced following the Beveridge report in 1946.
“help to parents in meeting their responsibilities, and as an acceptance of new responsibilities by the community.”
When child benefit was introduced by the Labour Government, it enjoyed all-party support. Indeed, its introduction proceeded despite the desperate financial crisis at that time, in 1976-77, when this country was under the cosh of the IMF—the IMF was effectively running the Treasury. No politician at that time made the argument that the Chancellor of the Exchequer did in the House on 20 October 2010. He said:
“The debts of the last Labour Government, and the need to ensure that the better-off in society also make a fair contribution, make this choice”—
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“unavoidable.”—[Official Report, 20 October 2010; Vol. 516, c. 959.]
We have afforded universal benefits for children in families from 1976 to the present day. The state has grown in size since then. Why are we talking about removing this universal benefit at this stage? In my submission, it is avoidable, and must be avoided.
To emphasise just how far the Government are now proposing to go to destroy the previous consensus, it is worth noting that the Child Poverty Action Group, which supports universal child benefit, says:
“Those with children have higher costs than those without and they need additional support at whatever level of income they live on.”
There was no hint at the last general election that the consensus would be broken. Conservative party policy was set in stone. Indeed, the Prime Minister, as Leader of the Opposition, made this boast:
“I want the next Government to be the most family friendly Government we’ve ever had in this country.”
At a public meeting in Bolton on 5 March 2010, he said that he would not “change child benefit”. He was undoubtedly taking a leaf out of the then shadow Chancellor’s book who addressed the matter at the Conservative party conference on 6 October 2009. He said:
“We will preserve child benefit”.
“we have decided to freeze child benefit for the next three years. This is a tough decision, but I believe that it strikes the right balance between keeping intact this popular universal benefit, while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.”—[Official Report, 22 June 2010; Vol. 512, c. 173.]
The Prime Minister and his predecessors have so frequently professed their support for “hard-working families” that the expression has become a political cliché. How extraordinary, therefore, that the Government are still persisting with a policy that will undermine those hard-working families, especially those families in the squeezed middle. What families could be more hard working than those 55,000 or 60,000 single parent families where the lone parent works long hours in a demanding job to earn more than £43,000 a year, thereby qualifying as a higher rate taxpayer and a victim of this policy? Such families also often have very high child care costs. In the league table of hard-working families, they are closely followed by two-parent families where the breadwinner supports a spouse who cannot work, whether because of disability, long-term sickness or the need to support a child who is disabled or sick.
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A family in the last category came to my constituency surgery in autumn 2010 and impressed on me the utter folly of the Government’s proposals. I then engaged in correspondence with the Treasury. On 18 January 2011, the Exchequer Secretary responded to my letter of 16 October—the fact that it took three months to get a response indicates something—in which I had specifically asked the Chancellor about the impact of his policy on those in receipt of carer’s allowance. My constituent’s wife earns slightly above the higher rate threshold, while he stays at home to look after his two children, one of whom has Down’s syndrome. The point that I wished the Chancellor to address was my constituents’ concern that in households where, through circumstance rather than choice, only one parent is able to work, the higher rate tax payer is normally compensating for the lack of earning capacity of the other. As my constituents said:
“This penalises families of those who live the true spirit of social responsibility each and every day.”
After a three-month delay, I received my reply; I had hoped for a better response. It merely asserted that the policy is tough but fair and that affected families are within the top 20% of the income distribution of all families. I immediately wrote back asking my hon. Friend the Exchequer Secretary to address specifically how the impact of the proposals on families such as that of my constituent could be regarded as fair. I am sorry to say that it was another three months—on 12 April—before my hon. Friend replied. He said:
“Inevitably, introducing a simple change to a universal system can create some difficult cases and it would unfortunately be difficult to create an exception for families where one partner is a carer.”
He repeated the assertion that the Government believed the policy to be fair, but how can it be fair to target such families, by asking them to make a greater contribution to reducing the deficit, while exempting families with earnings of up to £84,000 a year that are spread equally between both parents?
Fewer than one in 10 of the families from whom child benefit is to be taken away contain two higher rate taxpayers; I think that the number is 130,000 families. Almost all the remainder, therefore, will or may be in a weaker position to bear such a loss of benefit than those households with two persons earning up to £84,000 a year between them.
When I corresponded with the Treasury, the threshold for higher rate tax was £43,876. Since then, despite rising inflation—there has been a 3.1% increase in the retail prices index in the last year—the starting rate for higher rate tax has been reduced by £1,400, while the threshold for 2013-14 is still unspecified. Therefore, even more families will be affected by this change than was originally envisaged.
The policy that we are discussing today has never been properly thought through. By all accounts, it was included in the Chancellor’s speech at the 2010 party conference at the last minute, after an earlier plan to announce the withdrawal of child benefit from all children over the age of 16 was scrapped. That is why the early estimate of the contribution that this policy will make towards reducing the deficit was £1 billion. That early estimate was wrong, but in typical Treasury fashion the Government now say that anyone who opposes the withdrawal of child benefit must come up with an alternative means of producing £2.4 billion a year to go towards deficit reduction.
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It is worth reminding ourselves that families are already contributing to the reduction of the deficit through the freezing of child benefit. That policy alone will save about £1 billion in 2013-14 and the total contribution that it will make during the three-year freeze is about £3 billion. In addition, many of the families who are affected by withdrawal of child benefit will lose £550 a year in basic child tax credit from this April onwards.
In responding to this debate, I expect the Minister to argue that he is in pre-Budget purdah and that he will treat what I have said as a representation, but I want him to say specifically why the Government’s proposal to increase the tax burden on hard-working families is not being defined as a tax increase but as an expenditure reduction. We know that the Chancellor has always been keen to present his deficit reduction plan in terms of achieving a fair balance between Government expenditure reductions and tax increases. Without getting into an argument about the extent to which the original target of expenditure reductions has been missed, I must ask: is it not disingenuous to regard the withdrawal of child benefit in terms other than a tax increase? After all, the antecedents of child benefit lie in the concept that there should be a higher tax allowance for those with dependent children than for those without dependent children. In essence, the Government’s policy is to remove that tax allowance and thereby increase the tax burden.
Steve Baker (Wycombe) (Con): My hon. Friend makes a powerful case. Does he share my inclination to believe that the Government might be able to extricate themselves from the set of powerful problems that he describes through some combination of a transferrable child tax allowance and the universal credit system?
Mr Chope: My hon. Friend makes a really good point. Many of us thought, because we went into a general election committed to having transferrable tax allowances and to promoting family values, that those allowances would be implemented. Although there was provision in the coalition agreement for the Liberal Democrats to abstain or vote against those allowances, it was expected that the Conservatives would introduce them and that the House would have an opportunity to judge them.
A lot of the difficulties that have been brought about as a result of the analysis of the proposal to remove child benefit come from the fact that we have abandoned the idea of using the tax system to say, “Well, if you’ve got two equivalent families, one with three or four children and the other without any children then the costs of the family with children must be greater than those of the family without children, and therefore there should be a greater tax allowance for the family with children than for the family without children.” That is the basic principle. We could have restored it or indeed enhanced it by having transferrable tax allowances, which was a commitment in our manifesto.
What depresses me, however, is that in the 16 months since October 2010, when the original proposal was made by the Chancellor, nothing seems to have been done to take forward those issues and to try to find a fair solution. Obviously, implementing something like
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transferrable tax allowances would take some time; we would need to have draft legislation and any such allowances probably could not be implemented by January 2013, when the Government have committed themselves to impose this burden on higher rate taxpaying families.
The Government have missed a big opportunity on transferrable tax allowances, and I hope that my hon. Friend the Minister will have time to explain why that happened—because, as I have said, introducing those allowances was a Government policy that had been announced—and also why the Government recently reconfirmed that they have no intention whatsoever of proceeding with transferrable tax allowances.
I will give my hon. Friend the Minister some time to respond to this debate, but I should like to make some other points. I think that the Liberal Democrats are rather in favour of the policy of withdrawing child benefit from higher rate taxpayers, because they want to remove as many tax benefits from higher rate taxpayers as possible. But of course the Liberal Democrats would also like that policy to be dressed up as an expenditure reduction, because that expenditure reduction would be balanced with a tax increase and therefore there could be an additional tax increase on top of removing child benefit from higher rate taxpayers. That would also take the pressure off finding genuine reductions in expenditure, which would be achieved by reducing the size of the state.
I hope that my hon. Friend the Minister can address that issue in his response to the debate, because there is a real definitional problem here. The way that the Government are proposing to introduce this tax penalty on higher rate taxpayers with children is effectively to require the family to declare whether or not the taxpayer or their partner are in receipt of child benefit, and then the taxpayer would be taxed 100% on that child benefit. Surely, that is a tax increase rather than an expenditure reduction.
As a contribution to this debate, the Institute for Fiscal Studies has produced a devastating but none the less very useful report, and I hope that some of the issues identified in that report, which my hon. Friend the Minister will probably have been studying closely since it was published about a fortnight ago, will be addressed in his response to this debate.
Why do the Government want higher rate taxpayers with children to make a greater contribution towards deficit reduction than higher rate taxpayers without children? Surely, it would be fairer if all higher rate taxpayers contributed equally towards deficit reduction. Any changes in the higher rate tax band needed to achieve that aim would be simple, fair, easy to collect and difficult to avoid. In other words, they would meet all the original objectives of a good tax, unlike the Government’s current proposals, which, as I have said, have been the subject of withering criticism from the IFS. In its report, the IFS estimates that £90 million of the supposed yield from this new policy would be uncollectable, that £60 million would be lost through non-compliance, that £280 million would leak through what is described as tax planning and that, in addition, there would be administrative costs and a need for extra Inland Revenue staff. There has not been a defined estimate of those additional administrative and staff costs, but a rough estimate of at least £130 million has been proposed.
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Could anyone think of a more absurd and ludicrous policy to introduce than this one? It increases the complexity of the tax system; it adds to the demand for more civil servants in Her Majesty’s Revenue and Customs to examine the changes that will be made; it encourages people to fiddle their arrangements; and it exacerbates the problem of what happens when people live together during a year without declaring it. The Government were committed to reducing the couple penalty, but this proposal will actually exacerbate it. I do not think that there is anything commendable or sensible about this policy, and there are alternatives to it.
I asked the Library if it would be possible to come up with an alternative. I do not take this view myself, but if one thought that the way to deal with this issue was to say, “If there are two higher rate taxpayers in a family, they should forfeit their child benefit”, that change would affect only 130,000 families. It would not generate much income, but it would apply to those 130,000 families who definitely have a joint income that is greater than the £84,000 to which I referred earlier.
I asked the expert in the Library whether it would be possible to have a system whereby people could claim relief against loss of child benefit by certifying that the total gross income of their household did not exceed £85,000. The answer was that, in principle, that would be possible, but that it would require joint filing for households with at least one higher rate taxpayer. One presumes that having made a return at the end of the year showing total joint income was no more than £85,000, child benefit would not be withdrawn from that household.
There are ways of generating some income in the context of this policy, but I do not think it is worth the candle, because it cuts across the dearly and long-held principle that we should have a universal benefit for families with children.
The Exchequer Secretary to the Treasury (Mr David Gauke): Thank you, Mr Dobbin. It is a great pleasure to serve under your chairmanship. I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on securing the debate.
Government policy towards higher rate taxpayers and welfare go to the very heart of the challenge to tackle the tough economic circumstances that we face today. It is right and fair that we support hard-working families through these difficult times, and it is vital to ensure that all parts of society contribute to tackling the economic legacy that the Government have inherited.
When we came to government, we had been through the deepest recession since the war. We inherited an economy crippled by the biggest financial crisis in almost 100 years and the largest budget deficit in our modern history. Tackling that deficit is the vital precondition of sustainable growth. Only by tackling the deficit can we provide the certainty, stability and low interest rates that are critical to our recovery and renewing our prosperity across the country. Cutting the deficit is a vital precondition of growth. It has meant that we have had to make some very difficult choices to tackle the profligacy of the previous Government and target spending where it is most effective.
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The Government believe that the welfare system must remain fair and affordable while protecting the most vulnerable, and that work must pay. To achieve that, we have had to make tough decisions such as raising the state pension age to 67 between April 2026 and April 2028, not going ahead with the planned £110 above inflation increase to the child element of the child tax credit, and not uprating the couple and lone parent elements of the working tax credit in 2012-13. Those are tough decisions to make, but we have sought to make sure that they are fair across income distribution. That is why the Government have, for the first time, undertaken and published a distributional analysis of the impacts of the autumn statement 2011 and previous fiscal events.
After combining the impact of tax, tax credit and benefit and public service spending changes introduced at the autumn statement 2011 and previous fiscal events, the analysis demonstrates that the top 20% of households will make the greatest contribution towards reducing the deficit as a percentage of their income and benefits in kind from public services. It is fair that higher rate taxpayers, who are better off, make a greater contribution to those savings. We are committed to the same approach as we reform child benefits.
Let me start by saying that we fully understand how important child benefit is to millions of families across the country. For many families, it provides a vital income boost to parent income, recognising the extra costs that they face compared with non-parents. Currently, child benefit is paid to around 7.5 million people, around 95% of whom are women, in respect of 13 million children and young people. Child benefit is paid at a rate of £20.30 a week for the first child and £13.40 for each subsequent child. It is a substantial income boost to families, but it also comes at a substantial cost to the Exchequer. Child benefit already makes up around 7% of total social security and tax credits spending, and each year those spending levels rise.
Furthermore, we already pay more than £2 billion pounds a year in child benefit to higher rate taxpayers. At a time when we face constrained resources, we have to focus the resources that we have where they are needed the most.
Mr Chope: If that is so, why was that not said by the Chancellor of the Exchequer in the June 2010 Budget? Why did he say that he was going to freeze child benefit? Why did he not say what my hon. Friend is now saying? It seems that the Government—perhaps because of the minority party in the coalition—have now shifted their ground and are reneging on a pre-election promise not to interfere with child benefit.
Mr Gauke: As I said earlier, we were conscious that we had to take difficult decisions in the run-up to the comprehensive spending review in October 2010. We had to come up with spending decisions that would enable the Government to have plans that met fiscal targets. In the process of preparing for the spending review, tough decisions had to be made. When faced with the various options, the Chancellor decided that it was necessary to look again at child benefit and to ensure that that spending was targeted as best as possible.
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Mark Reckless (Rochester and Strood) (Con): Given the need to target child benefit as well as possible, can the Minister tell us how much child benefit is being paid for children resident outside the United Kingdom—for instance, in Poland and Lithuania? Would it not be appropriate to tackle that issue before dealing with the 40% taxpayer?
Mr Gauke: I have a great deal of sympathy with my hon. Friend’s concern. I may or may not be able to furnish him with the numbers that he has asked for. None the less, we have looked at that issue on several occasions. He will not be surprised to learn that we are constrained by European regulations relating to social security payments, which means that we are not able to address his concern in the way that he would like. European economic area nationals can claim child benefit and tax credits as long as they meet the relevant conditions. That is the constraint, I am afraid. There is not the easy choice that he seeks.
“a system that taxes working people at high rates only to give it back in child benefit is very difficult to justify at a time like this.”
“We simply cannot ask those earning just £15,000 or £30,000 to go on paying the child benefit of those earning £50,000 or £100,000.”
The debts of the previous Government have to be addressed. Consequently, we have had to make difficult choices. By removing child benefit from higher rate taxpayers, the Office for Budget Responsibility estimates that we will save £2.5 billion a year. The savings mean we can continue to direct child benefit support to where
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it is needed most, supporting millions of families, and millions of children from birth until the time when they leave full-time education at the age of 18 or even 19.
Julian Sturdy: I want to touch on the transferable tax allowance, which has already been mentioned. I have written to the Treasury about it, and it is a way of bringing fairness back into the system. Will the Minister respond to that?
Mr Gauke: I am grateful, because I want to respond directly on that point. The Government, as stated in the coalition agreement, want to recognise marriage in the tax system. We remain committed to that and we will introduce proposals at an appropriate time, as is consistent with the coalition agreement. We remain committed to what is in the coalition agreement.
I appreciate that there are a number of concerns about how this policy will be implemented and how it will impact on hard-working families. We have been clear that the reform needs to be as simple as possible. That is why we have sought to withdraw child benefit from households with the higher rate taxpayer and not pursue a complex means-testing regime that would require Her Majesty’s Revenue and Customs to contact 7.8 million households in receipt of child benefit.
From a customer perspective, this delivery option does not place a burden on all child benefit claimants and it limits the impact on households containing a higher rate taxpayer. The Chancellor and I will be working closely with our officials to scrutinise the available options as to how we will implement this policy and find a sensible way forward. Plans for implementation will be set out in the next few months.
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Barry Gardiner (Brent North) (Lab): I have no declarable interests relating to the sustainability of the London Olympics, other than that more than a decade ago I was the founding chair of the all-party group on the Olympics. We formed the group to encourage a then hesitant Government to bid for the Olympic games. My father was an Olympian in 1936, playing as a Scotsman for the British football team—those were the days when the Scottish Football Association had no qualms about joining the football associations of the other home nations to field a strong British team. My point is simply this: if I am critical of aspects of the 2012 games, it is not because I am or ever have been antipathetic to the Olympics; it is because I care passionately that the games in London this summer should be the best ever staged and that nothing should be allowed to bring them into disrepute.
At the start, let me make common cause with the Minister in applauding much of the work done by the Olympic Delivery Authority in achieving so much of the vision of an Olympics that respects sustainability. I praise the London Organising Committee of the Olympic Games and Paralympic Games for becoming the first games organising committee to be certified to the British standard 8901 specification for sustainability management systems for events.
I recognise that the Olympic Delivery Authority for London 2012 is creating venues, facilities and infrastructure that will leave a lasting social, economic and environmental legacy for London and the UK while minimising any other adverse impacts during the design and construction of the Olympic park, venues, infrastructure and housing. The creation of new infrastructure, sporting facilities and housing in an area currently experiencing high levels of deprivation will help to create neighbourhoods and vibrant places where people will want to live and work after the games are over. Communities are being reconnected by the building of more than 30 bridges across the waterways, railways and roads that currently divide the Olympic park area. All that is good.
The ODA has also sought to minimise carbon emissions associated with the development and to optimise efficient water use—indeed, many of the construction materials have been brought on site by barge via Prescott lock to reduce road traffic congestion. To reduce the risk of flooding in the Lea river valley, 100 hectares of new green space has been created. The ODA has worked with the construction industry to source environmentally friendly and ethically produced materials to produce a low-carbon construction footprint. Even rubbish and waste have been thought through: a contractor has been engaged specifically to compact and transport waste from site by barge, and 90% will be recycled or reused. For all that, John Armitt, the ODA’s chairman, and Dennis Hone, its chief executive, deserve Parliament’s thanks and praise. On the site itself, the ODA has spent in excess of £1.8 million cleaning up the toxic legacy of chemical contamination that blighted the area. The remediation of the site has brought the land back into public use and has been a wonderful focus to improve the environment and quality of life for people in that part of London.
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What an irony, then, that this most sustainable of all Olympic games should embrace as one of its key sponsors a company whose name is inextricably linked with the worst chemical disaster in human history—a company that owns Union Carbide Corporation, which was responsible for up to 25,000 deaths that have been directly associated with the Bhopal gas tragedy in India. To this day, the company has failed to remediate the Bhopal site: the water table is now so contaminated that children in Bhopal are born with deformities at 10 times the rate elsewhere in India. In this debate, I will claim that the Dow Chemical Company, which owns Union Carbide Corporation, has failed to live up to the high corporate social responsibility standards that are supposed to characterise the Olympic movement across the globe and the London games in particular—standards that Lord Coe, the chairman of LOCOG, referred to in his evidence to the Select Committee on Culture, Media and Sport as ethical, social and environmental.
Michael Connarty (Linlithgow and East Falkirk) (Lab): Does my hon. Friend agree that Union Carbide is different from Union Carbide India, and that Union Carbide was bought by Dow nearly 12 years after the Bhopal disaster? It would be good to clarify ownership.
“Sustainability is one of a number of core elements which together represent what value for money means to LOCOG. As a result it will place a high priority on environmental, social and ethical issues when procuring products and services for the Games. This means we want to do business with responsible suppliers and licensees; companies who treat their staff and sub-contractors well, who understand the nature of the products and materials they are supplying, and who recognise their responsibility to protect the environment and foster good relations with their local communities.”
The Minister is here today to respond to this debate on behalf of the Secretary of State, who is, after all, the chair of the Olympic Board. With reference to the sustainable sourcing code, I challenge the Minister to provide justification on three distinct points relating to the appointment of Dow Chemicals Ltd as a sponsor of the London Olympics: first, the propriety of the procurement process itself; secondly, Dow’s legal responsibility for Union Carbide and the consequences of the Bhopal tragedy, which my hon. Friend the hon. Member for Linlithgow and East Falkirk (Michael Connarty) mentioned; and thirdly, the wider ethical concerns about Dow’s practice as a company and its suitability as a sponsor.
I want to be sure that the Minister has no grounds to think that I have misled him, so I ask him to intervene on me at any stage if he thinks that I have misrepresented a fact pertaining to the case. If he does not I will assume that, although he may disagree with the conclusions I draw, he none the less accepts the facts as I have stated them.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose):
To pick up on the hon. Gentleman’s kind invitation, I might intervene if I am so concerned, but it is also possible that I will want to reserve my remarks until the end in order to
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wrap them all up in one go. Therefore, if I do not intervene, it is not because I necessarily accept what he is saying. I will deal with it either then or later.
Mr Andrew Smith (Oxford East) (Lab): I congratulate my hon. Friend on securing this important debate. His concerns are shared more widely in the House. Will he also take it that those of us who do not intervene agree with the facts that he is presenting?
First, I will raise my concerns about the chronology, openness and transparency of the Olympic wrap procurement process. I understand that just three months after Dow was confirmed as an official partner of the International Olympic Committee, LOCOG chose the Olympic stadium wrap as one of the areas of the Olympic budget that would be cut. I accept that that was a perfectly proper response to the spending review, but reports from LOCOG at the time estimated savings from the wrap at £7 million. It was also reported at the time, by the tenacious Sunday Express journalist Ted Jeory, that the Secretary of State for Culture, Media and Sport had been informed that finding a private sector partner for the wrap was highly likely—that was in an e-mail from the Department on 16 December. We now know from Architen Landrell, a UK company based in Chepstow, that it was appointed under a tier 3 contract by Sir Robert McAlpine, the main contractor for the stadium’s construction. Architen Landrell was asked to produce eight test panels and give a final costing for the stadium wrap, which it did, at a price of approximately £1.5 million.
Two questions arise from that. Why did the Secretary of State believe it was highly likely that a private sponsor would be found for the stadium wrap? Why were the media given the figure of £7 million as the projected saving, when the actual saving was known to be only £1.5 million?
On 8 February 2011, it was reported that the tendering process for a company to sponsor the wrap would go ahead, with expressions of interest due by 18 February. That was an extraordinarily short time in which to source a major supplier. The public might consider it inconceivable that only 10 days were allowed for such a major tender, unless there had been clear and ongoing discussions with potential partners before the announcement. In a recent response to a written question to the Department, I was told that the shortest period that the Department had allowed in the previous 12 months for any tender where the contractor would be paid more than £1 million was 28 days, yet LOCOG allowed only 10 days for someone to bid to pay a sum, publicly estimated to be £7 million, to sponsor the wrap. Does the Minister think that LOCOG would have set the tender window at a mere 10 days if Dow Chemicals had not already been lined up as a sponsor?
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announced saving. That prompts several further questions. What discussions did the Department, the ODA and LOCOG have about the decision to put the wrap up for sponsorship? Did the International Olympic Committee put any pressure on LOCOG to provide a niche for Dow as a sponsor of the London games? If the Government simply wanted to achieve savings in the original budget, why did they not press on with the Architen Landrell wrap, which would have shown a saving of £5.5 million against the original budget and given the project to a British company?
“As a public body the ODA is required to operate in the procurement framework set out by European Union Procurement Legislation and UK Regulations.”
Was that the reason why the procurement of the wrap was passed from the ODA to LOCOG—LOCOG is not a public but a private body and was therefore not obliged to follow the standard EU and UK procurement rules?
Another company, the Nottingham Textile Company, is adamant that it submitted an expression of interest before the deadline of 18 February. It heard nothing for a long time and eventually inquired why it had received no response. The company was told by LOCOG that its submission had been too late. Will the Minister undertake to check the date on which Nottingham Textile Company’s submission was received by LOCOG and whether, in fact, it was in time?
Let me be clear: I believe that the Government quite properly wish to achieve savings in the cost of the Olympic games. I also believe that Dow Chemicals was putting pressure on the IOC to find a way for it to become a key sponsor with sector-exclusive marketing rights for the London games. I believe that LOCOG wished to assist the IOC in that endeavour and therefore suggested that £7 million could be saved by taking the wrap away from Architen Landrell and procuring it under a sponsorship deal with Dow. I believe that the Government knew that a sponsorship deal was being negotiated and were content to collude with the IOC and LOCOG to facilitate a major IOC sponsor and to pretend to the public that in doing so, they were saving £7 million. In short, the procurement process was rigged in favour of Dow Chemicals. It was a sham.
Zac Goldsmith (Richmond Park) (Con): I congratulate the hon. Gentleman on securing this important debate, and I agree with much of what he says. I hope he does not mind my adding that Dow Chemicals has or shares responsibility for 96 of the US’s so-called superfund toxic waste sites, which are the most polluted sites in the entire United States. That makes it one of the world’s most polluting companies. Given that the emphasis is on a green Olympic games, it is hard to imagine a less appropriate partner.
Sadly, LOCOG is a private organisation that is not subject to the Freedom of Information Act 2000. On 18 December last year, I therefore wrote to Lord Coe, chairman of LOCOG, asking many of the above questions and many more. To date, he has not seen fit to answer
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them. When asked on 24 January this year in the Select Committee whether he thought it
“appropriate for London 2012 to be so closely associated with a company like Dow Chemicals”,
“Obviously it is a decision for LOCOG, but it is a decision that, as a result of the controversy that we had last autumn, I looked into very carefully. After looking at it very carefully, I…wholeheartedly supported the decisions that LOCOG had taken.”
“they did not own Union Carbide at the time of the Bhopal disaster in 1985”—
a point made by my hon. Friend the Member for Linlithgow and East Falkirk. In fact, it happened in 1984, but that was perhaps just a simple slip of the tongue by the Secretary of State. He also said that Dow did not own Union Carbide
“at the time of a final settlement with the Indian Government in 1989”
“that has been upheld three times in the Indian Supreme Court”—
“it was a very reasonable decision.”
Many commentators have found it frankly astonishing that both LOCOG and the Secretary of State seem to have taken Dow’s claims regarding those cases at face value and repeated Dow’s press lines verbatim. Surely the Secretary of State knows that when someone purchases a company, they purchase both its assets and its liabilities. Before the Minister repeats his Secretary of State’s evidence to the Select Committee, where the right hon. Gentleman opined of Bhopal:
“I do not believe that Dow were responsible and I think we should support them as a company”,
let me ask the hon. Gentleman whether he is aware that Dow’s wholly owned subsidiary, Union Carbide Corporation, is wanted by courts in India on criminal charges of culpable homicide? Because UCC is considered to be a fugitive from justice in India, and because Dow wholly owns UCC but has not produced it in court, I understand from legal advice that I have taken that that puts Dow in the position of sheltering a fugitive from justice. Does the Minister’s own legal advice concur with that?
Is the Minister aware that Dow Chemicals itself is a named respondent in public interest litigation in the Madhya Pradesh high court, seeking remediation of the abandoned Union Carbide factory site? Is he aware that Dow is a named respondent in a forthcoming curative petition in India’s supreme court that aims to address the inadequacies of the 1989 civil settlement made by Union Carbide of $470 million—a figure that equates to approximately $600 per victim? Compare that with what happened in the Gulf of Mexico and the payout that the American Government demanded of BP. By some ironic coincidence, the hearings on the petition were granted on 28 February 2011—the same day the sponsorship contract closed—by a five-judge bench that included India’s chief justice.
Union Carbide is also subject to a civil action in the southern district court of New York. The action relates to the ongoing contamination in Bhopal through chemical dumping by the company in and around the factory. Significantly, the US court accepts that that is a distinct case from the 1984 disaster and that it has not been
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dealt with under any pre-existing settlement. In New York, Dow’s wholly owned subsidiary UCC has pleaded that only Indian courts can order it to remediate the site; but in India, both Dow and UCC have pleaded that the Indian courts have no jurisdiction over them.
Dow has consistently claimed to the Indian authorities that Dow and UCC are independent entities and that on those grounds Dow should be held immune from prosecution in relation to the Bhopal disaster. Documents made public in The Independent by Nina Lakhani two weeks ago, however, have revealed that Dow Chemicals secretly traded through a network of intermediaries to avoid a legal ban imposed after the Bhopal tragedy on the sale of UCC products in India. The documents prove that, far from being a separate company, Dow Chemicals controlled and manipulated its wholly owned subsidiary, setting prices and setting up supply chains to secure profits for Union Carbide products that in India were illegal. As Tim Edwards from the Bhopal Medical Appeal said,
“these documents...show Dow shielding UCC and obstructing justice. If however Dow is also misrepresenting its relationship with UCC, then it is obstructing justice and shielding itself from trial. Either way, LOCOG’s insistence that Dow is a fit sponsor for Britain’s Olympics appears perverse.”
In a letter addressed to IOC President Jacques Rogge, a copy of which was sent to Lord Coe, V. K. Malhotra, the acting president of Indian Olympic Association, stressed that there were active court cases against Dow. He said:
“A false campaign has been launched by the Dow Chemicals saying that the matter has been settled. It is not correct. The case is still pending in the court and no final compensation has been made.”
“This means we want to do business with responsible suppliers and licensees; companies who treat their staff and sub-contractors well, who understand the nature of the products and materials they are supplying, and who recognise their responsibility to protect the environment and foster good relations with their local communities.”
When LOCOG awarded the sponsorship contract to Dow, was it aware of the pending criminal charges for culpable homicide against Dow’s fully owned subsidiary UCC in the Bhopal criminal court? Was LOCOG aware that Dow’s fully owned subsidiary, UCC, was declared by that court as an absconder from justice as long ago as 1992, and that the company remains an absconder from justice to this day?
John Penrose: I am conscious of the passage of time and want to make one point en passant, in case I do not have time to cover it. The hon. Gentleman asks whether LOCOG was aware of the situation when it awarded the sponsorship contract. I am not clear whether LOCOG was aware of it. I understand that he has already asked LOCOG that question, and LOCOG is the body who can answer it. However, he should bear in mind that LOCOG did not award the sponsorship contract: it was awarded by the International Olympic Committee, not by LOCOG.
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Barry Gardiner: The Minister really needs to get a much better brief because the Olympic programme contract was the contract awarded by the IOC. The contract for the stadium wrap was taken away from the ODA and put to LOCOG precisely because LOCOG was in charge of sponsorship contracts. If the Minister does not know that, he does not understand the core of this debate.
John Penrose: I apologise to the hon. Gentleman if I have misunderstood him. When he was discussing sponsorship, I thought he was talking about becoming a sponsor of the Olympic movement. I have been using a different term and have been talking about the contract for the Olympic stadium wrap as a commercial supplier deal. If he is using the word “sponsorship” to cover both those terms, of course, I appreciate what he is saying and I will happily adjust my language to match his.
Was LOCOG aware that Dow is a party to a public interest litigation suit in India concerning clean up and environmental rehabilitation of UCC’s factory site? If LOCOG was aware of those issues, how were they considered in the decision-making process on Dow’s suitability as a partner for London 2012 on ethical, social and environmental grounds? Did LOCOG seek any further legal or other advice in relation to the issues mentioned, other than that given by Dow and its representatives?
Last month, the procurement process and the Dow sponsorship deal suffered its biggest blow to date. Meredith Alexander, one of the 12 sustainability commissioners, resigned in protest over what she believes was the airbrushing of Dow out of Bhopal and into the Olympics. She has made her case as follows:
“In 2010, the International Olympic Committee appointed Dow as an international sponsor for the Games. This decision was taken in Geneva, and the commission had no ability to take a stand. Then last year, LOCOG, the London Games organiser, invited companies to tender for a major contract to provide a wrap for the main Olympic stadium. Dow won this bidding process.”
“Many groups and individuals raised questions and finally the commission was asked to investigate. I was shocked to see that the result of our investigation was a public statement from the commission that essentially portrays Dow as a responsible company. I had been providing information about Bhopal to commission members and I was stunned that it publicly repeated Dow’s line that it bears no responsibility for Bhopal. I did everything I could to get the statement corrected or retracted. When it became apparent that this would not happen, I realised that the only way to ensure that my name was not used to justify Dow’s position was to resign.”
“And the only way to ensure that the victims’ side of the story was told was to do so in public.”
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“I would like to see Dow take responsibility for the Bhopal tragedy and finally ensure that real justice is achieved for the victims and the families of those who died. This would be a true Olympic legacy.”
Finally, I turn to the wider issues regarding Dow’s reputational and ethical suitability to be an Olympic partner. In relation to ethical sourcing, the Olympic Delivery Authority guidelines on procurement policy state:
“The ODA will seek to work with suppliers who have a good track record in human rights and who use goods and materials that have been produced ‘ethically’. This includes seeking suppliers who operate within the laws of their country and who do not have discriminatory practices.”
Bearing that in mind, it is difficult to see how LOCOG could justify appointing Dow as a sponsor, given the facts that were known at the time about the company and its wider regard for law and regulation. The key facts are these. In February 2007, the Securities and Exchange Commission in New York imposed a cease and desist order on Dow Chemical for its improper payment practice and improper accounting. In September 2010, Dow was blacklisted by the Indian Government for bribing officials in order to fast track licensing of the chemical Dursban, which has been found to be dangerous to human health in the USA. A report by Innovest indicates that Dow failed to disclose in statements to investors its $2 million settlement of a consumer fraud lawsuit brought by the New York State Attorney-General in 2003.
Jim Dobbin (in the Chair): I am sure that the Member leading the debate would like to hear the Minister’s response as well, but unfortunately time is running out. If the Member who is in charge of the debate wants to get complete answers, he must take that into consideration.
Barry Gardiner: Since then, earlier this month, Dow Chemical lost its bid to overturn anti-trust fines totalling in excess of €25 million imposed by the European Union for its part in colluding to fix prices of chloroprene rubber. Just last week, Dow was penalised and heavily fined for underestimating the greenhouse gas emissions from its Grangemouth plant in Scotland.
“LOCOG carried out its due diligence exercise with regard to reputation risk in relation to this procurement. At the time, when the bids were being considered in early 2011 LOCOG found no current media, political or NGO commentary that would give cause for concern.”
“Even a twelve year old could have found them”.
The Minister is not a 12-year-old, and he knows that the public are not naive either. He must not reply with a speech that is long on examples of sustainability and good practice but short on answers to the questions that I have posed about Dow. To assist the Minister in
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preparing for the debate, I sent all the questions I would be raising to his office—
I did so at 3 o’clock this morning, to enable him to come to the House prepared.
Today, the Minister should have the courage to stand up and accept that Dow is not a fit and proper company to be a sponsor of the most sustainable Olympic games ever staged. If he does so, everyone would accept that although a mistake had been made, the Government have the determination to put it right. If he does not do so, he must accept that a cloud will hang over the London games. They will be tainted by a sham procurement process and a sponsor that has shown it is contemptuous of the law, defiant of regulations, willing to engage in bribery and corrupt practices, but indifferent to the continuing suffering of thousands of human beings.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose): Thank you, Mr Dobbin. I am, indeed, aware that I have only two minutes. I am very sad about that, because many important points have been raised and there is virtually no time to respond to them.
I was glad to hear the hon. Member for Brent North (Barry Gardiner) start his remarks by pointing out that there has been a great deal of cross-party support for the entire Olympic bid process, of which he is a long-standing supporter, and for maintaining and delivering the most sustainable Olympics ever. I completely agree
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with his support for that, and I hope that hon. Members on both sides of the House will continue to provide such support.
Incidentally, I should mention that the reason why I am responding to the debate rather than the Minister for Sport and the Olympics is that he is opening an iconic sports facility in Durham, which will be part of the nation’s sporting legacy. I am therefore responding on his behalf.
The limited amount of time available means that all I can say is this. As I am sure the hon. Gentleman is aware, LOCOG is an independent company. The Government have one board member out of 19 or 20. Most of the decisions he is criticising were taken by LOCOG, and asking the Government to respond on behalf of a private organisation on which we have one board seat is, I am afraid, shooting at entirely the wrong target.
I understand the hon. Gentleman’s concerns and, indeed, I doubt anybody here would disagree with his point. I am sure that everybody here shares his concern to ensure that there is justice for the victims of the Bhopal disaster. As another contributor to the debate mentioned, there is a difference between legal liability for the company that Dow Chemical bought after the awful tragedy at Bhopal—as he rightly observes, that persists; when someone buys a company, they inherit its legal liabilities as well as its assets—and being morally responsible for causing the problem. Those two things are linked but distinct. We need to be careful in how we talk about responsibility. He was using that term rather loosely throughout his remarks. I am terribly sorry to have run out of time but, fundamentally, the answer to the vast majority of the hon. Gentleman’s questions is: ask LOCOG.
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According to the Association of British Insurers, Oxford West and Abingdon is the constituency with the 49th highest flood risk in the UK, with more than 2,000 homes and businesses at significant risk of flooding. That assessment excludes risks associated with surface flooding caused by heavy rainfall. Despite the high level of local flood risk, the Oxford flood risk management scheme received such a low cost-benefit analysis that even under the new “all or part or none” funding provisions, it will be necessary to find non-Department for Environment, Food and Rural Affairs funding for 92% of the project, or approximately £127 million of the £133 million project. At the same time, in Abingdon, where nearly 500 homes and businesses were flooded badly in 2007, neither of the flood storage proposals for the River Stert or the River Ock reached even that level of cost-benefit threshold: they were rejected outright as “not economically viable”.
Those decisions have been disappointing to many, especially those whose homes and families are at risk of flooding, but everyone understands that we are in a time of austerity and that the money must go where it will do the most good—that is fair. Having said that, we heard just before the recess the good news that there would be a lot of weir work going on: Osney weirs A and B and Godstow weir B will receive funding. Design and appraisal work for raised flood defences at Lower Wolvercote, and the Farm road scheme in Abingdon in partnership with the Vale of White Horse district council, will go ahead. This last project’s bid for £40,000 in funding was rejected in December. I am pleased that the Environment Agency has had a change of heart on its viability.
I began this debate by outlining at some length the flood context in my constituency, and will come on to discuss the key issue—funding the replacement for Northmoor weir from flood defence funding—for two reasons. The first is to make the Minister appreciate fully that for far too many people in my constituency, the spending of flood defence money is not a bureaucratic issue to do with balance sheets. Hundreds of people were made homeless for months in 2007, losing prized possessions, mementos and even pets to the floods. Those memories are still raw. Given the current economic situation, we have had to cut flood defence funding by 6%. I need to be able to assure those constituents that, even where money cannot be spent locally, the Government are spending, transparently and accountably, each and every penny of available flood defence funding in the best possible way. Anything less than that is unacceptable.
Secondly, I am not taking issue with flood funding provision in other parts of my constituency today. My concern, and that of my constituents, is the Environment Agency’s programme to replace all paddle and rymer weirs on health and safety grounds and, in particular, the replacement of the Northmoor weir in the village of Appleton in my constituency. My constituents in Appleton and elsewhere have opposed the idea since before my election. Indeed, my first meeting with the Environment
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Agency and local residents on the subject dates back to before I was elected in 2010. The Minister knows the background only too well following our extensive correspondence, but for the sake of colleagues, I will outline the salient points.
Northmoor weir, like all paddle and rymer weirs, is manually operated by lock-keepers who pull the paddles and rymers out of the weir system to adjust the water levels. The weir has been operating in that way for more than 200 years. Northmoor weir was extensively refurbished in 1995 and given a 40 to 60-year lifespan. Between 2008 and 2010, however, the Environment Agency decided to conduct extensive health and safety tests on the weirs. It is unclear why it suddenly decided to do so, given that the relevant legislation dates back to 1992, before the refurbishment of Northmoor weir, and given that there is no record of a serious injury, which might reasonably be supposed to have triggered such a response.
The report, by HJ Consultants, was of the opinion that it was only a matter of time before there was a major injury on the paddle and rymer weir. That is despite the fact that the only injuries recorded under the safety, health and environmental reporting and management system since 2000 are strains, sprains and splinters. Even before the introduction of that system, the assessor could only record one brain haemorrhage, in 1991, that may or may not be attributed to the pulling of a paddle and, before the introduction of safety harnesses, an incident in which a lock-keeper at Blakes weir fell in. I assume that safety harnesses have now addressed that situation.
The consultant found that the loads at the weir exceeded the levels recommended by the Health and Safety Executive, but found no evidence that that had caused any significant problem in more than two centuries of use, even though the consultant found that there had been no regular programme of health and safety training offered to lock-keepers, with one lock-keeper last receiving manual handling training more than seven years ago. Just think how many fewer sprains and splinters there might have been if regular training had been provided during that time, and if there was a work pattern that provided a formal break for lock-keepers in the morning, as recommended on page five.
“My work over the years included the operation of both Paddle and Rymer and more modern weirs, and I can say that, with proper training, care and safety precautions, there was very little danger involved. Any equipment can be worked dangerously. The worst scenario was the possibility of misjudging the placing of a rymer or a paddle in the flowing water: one had the choice between trying to save it or losing it through the weir! It was not a very hard choice! Also, it was not actually lost, and would float around in the vicinity until retrieved later.”
That is just one of many similar comments I have received from Thames lock-keepers. Nevertheless, it was on the basis of that health and safety report that the Environment Agency decided it was imperative to spend £2.6 million from the flood defence funds to replace Northmoor weir.
Mr Andrew Smith (Oxford East) (Lab):
I congratulate the hon. Lady on securing this important debate, which of course touches on matters that affect my constituency, too. Will she join me in congratulating the Oxford
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Flood Alliance for its work, and does she agree that the Environment Agency generally takes better decisions when it takes notice of what the OFA and local residents have to say? Even if the health and safety case was accepted, the Environment Agency should be funding the project not from flood prevention money, but from some other budget.
The Environment Agency has stated that the project will improve the weir’s resilience and speed of operation. At a meeting of the Environment Agency, Northmoor and Appleton parish councillors and me in December, the EA acknowledged that there had never been any problem with the operation of the weir, even in times of flood. It is important to note that the project will not reduce flood risk. The EA specifically confirmed to me in writing, and at the meeting of December 2011, that the project will not reduce flood risk in any way, and that in any case—according to the EA—the number of properties affected directly by the operation of the weir amounts to five. That comes out at £500,000 per property, if we are counting. Nevertheless, the finance will still come from the flood defence budget.
According to the EA in December 2011, the project has such high priority that it would go ahead even if it cost £10 million. On hearing that extraordinary statement, I became uncomfortably well acquainted with the health and safety apparatus of Whitehall, as every good constituency MP should. On writing to the HSE, to ask whether such a position was reasonable, I was told:
“The EA has carried out an extensive risk assessment. The aim of the risk assessment is to help the EA identify reasonably practicable ways of reducing or controlling the risks of injury from operating the weirs. As part of this, the EA would need to consider costs and their likely effectiveness in reducing the risks.”
I have been astonished to learn, however, that EA policy is apparently not to conduct cost-benefit analyses for health and safety projects, even if they come from flood defence funding, a budget considered so precious that all flood defence proposals must be subjected to rigorous cost-benefit analysis. I was told by the EA in December that that was because the policy was to eliminate all risk.
Being joyfully unfamiliar with the health and safety world until then, I thought that cost-benefit analyses might not generally be conducted for health and safety. In fact, the Manual Handling Operations Regulations 1992, which are the relevant health and safety regulations, state:
“The extent of the employer’s duty to avoid manual handling or to reduce the risk of injury is determined by reference to what is ‘reasonably practicable’. This duty can be satisfied if the employer can show that the cost of any further preventive steps would be grossly disproportionate to the further benefit from their introduction.”
The concept of “so far as is reasonably practicable” was tested in case law as far back as 1949, in Edwards v. National Coal Board, which established that a computation must be made in which the quantum of risk is placed on one scale and the sacrifice, whether in money, time or trouble involved in the measures necessary to avert the risk, is placed on the other. If it be shown that there
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is gross disproportion between them, the risk being insignificant in relation to the sacrifice, the person upon whom the duty is laid has discharged the burden of proving that compliance was not reasonably practicable.
It is clear, therefore, that what is required by law is not to eliminate the risk, as I was informed, but to reduce the risk to what is reasonably practicable and to consider the cost of doing so. Any action in which the cost was grossly disproportionate would not be required by law, and the HSE expected the EA to have considered the cost. Indeed, freely available on the HSE website I found not one but two helpful documents that walked me through how to do a cost-benefit analysis for a health and safety project, one of which even had a user-friendly checklist. I am not a lawyer, though, so I asked to see the EA’s legal advice, to see if there were grounds for the multi-million-pound health and safety investment that I had failed to grasp. The EA, however, confirmed that before committing to the full replacement of nine paddle and rymer weirs as the only appropriate level of response to its legal responsibilities under health and safety legislation, it had taken no legal advice of any kind.
The picture is now fairly clear, but before closing, I will express one further concern that has arisen in discussions about EA plans for Northmoor weir. It is about the really poor standard of consultation and communication that has marked the process from the beginning. Appleton residents, who will bear the brunt of building disruption if the project goes ahead, found out about the project when there was an application for suspension of parking along the route to the weir. Understandably, that led to outrage in the village and a vigorous local campaign by the parish council and the Weir Action Group, but despite delaying the work for a year, ostensibly to consult with the local community, the only change that the EA has made to the project so far was the proposal for a change of access route, so that Appleton residents experience less disruption during the two years that the work will take.
Obviously, if the weir goes ahead regardless of every objection I have put forward today, it is clearly preferable that the works route is not directly through the village, but the local objections, and the objections from some on the far side of the river and from others at risk of flooding in the rest of my constituency, are not simply about a works route. They are about the whole justification of the project, and its funding from the flood defence budget. To characterise them as anything else is simply inaccurate and misleading.
“At no time has the EA been in direct contact with us (or any of the relevant landowners I believe). I first heard of the whole project in February 2010—the proposed start date for the project then was 1 April 2010! I was then rung by a neighbouring farmer to warn me that the Contractors for the EA were going to come and survey our land but…the Contractors…had been unable to find out who owned our land and had contacted him for our telephone number. I phoned the contractors who paid me a visit prior to doing the survey. They were perfectly pleasant but I think as shocked as I was that the EA had not been in contact with me. The survey was duly done but we have never received any information or follow up from either the Contractors or the EA since”.
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The EA accepted in the December 2011 meeting that there had been significant such failures, but that does not seem to have stopped it, as is evident from a letter from the chairman of the board of the Environment Agency—briefed, I assume, by his officials—to the Minister. The letter claims that I believed that the £2.6 million being spent on the weir should be transferred to other local flood defence schemes. The Minister must know that I have never made that suggestion, and nor would I.
I said that when other flood defence schemes locally were being turned down, it was difficult to justify spending £2.6 million on health and safety, which is what it is. I said that flood defence money must be allocated on the grounds of greatest need, wherever that might be. I fully accept that, and my constituents fully accept that, but I am unable to assure my constituents that that is what is happening in this case, because the necessary due diligence on the project was never done. I said that when every flood defence proposal that is granted funding is first tested to destruction by EA cost-benefit analysis models, it is incomprehensible that in this case the EA is willing to spend millions of flood defence money with no cost-benefit analysis of any kind, with no legal advice of any kind and with no analysis of alternatives that would work for Northmoor weir specifically.
I ask the Minister, therefore, to ensure that the EA suspends the project until there has been a full and transparent cost-benefit analysis. On Wednesday, I discussed the project with the Prime Minister, as the MP for the other side of the weir, so I know that he has also written to the Minister asking for that to be done. The Prime Minister is also concerned that we should be able to defend our flood defence spending fully to the public. We will not be able to do so, however, until there is also sound legal advice that this multi-million pound health and safety investment is reasonably practicable, and not grossly disproportionate, and, most sensible of all, until we have a genuine Northmoor-specific study to see if there are more proportionate options that will meet the EA’s genuine health and safety obligations.
My constituents face flood risk daily, but they are not asking for preferential treatment or for funding of projects that do not meet the cost-benefit thresholds set by DEFRA. All they want to know is that flood defence money is being spent on genuine flood defence projects, and that every single penny of that budget can be transparently accounted for. All they want is a fair playing field.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon): I congratulate my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) on securing the debate and her reputation around Whitehall as a doughty champion of her constituents. I am delighted to respond to her concerns about the replacement of the manually operated paddle and rymer weir at Northmoor with a mechanised radial gate system.
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My initial reaction was similar: how can the Environment Agency justify spending £2.5 million on a weir when the money could be better spent protecting people and property? I can appreciate people’s frustration with the expenditure of such a large sum of money on the works and with two summers of disruption in the constituencies affected, apparently just to meet a health and safety requirement with little flood risk benefit. My hon. Friend also expressed concerns about the decision to proceed without undertaking a full assessment of the flood benefits of the new structure. I shall take those points in turn.
First, I ought to set out the Environment Agency’s case for replacing the structure. A succession of weirs along the Thames, some in my constituency, regulate water levels. In a flood event, it is vital that the weir does not obstruct the flow of water, otherwise the north side of the river—in the case of the Northmoor weir—will flood.
Nicola Blackwood: The Environment Agency has confirmed that the replacement of the Northmoor weir will not improve the flood risk. Is the Minister claiming that the replacement of Northmoor weir is to improve flood risk?
The Northmoor weir is one of five major weirs being replaced as part of a single contract. The other four are already under construction or are now in place. The high price tag is a consequence of the size of the structure: the weir is more than 22 metres wide, stretching right across the Thames. The replacement has a predicted operational life of at least 60 years, and similar structures elsewhere have already proven effective and reliable. The problems with the existing weir structure have been known for some time.
During flood conditions, Environment Agency staff must lift an effective weight of up to 60 kg to shift the paddles. That is four times the safe working load recommended by the Health and Safety Executive. It is just about possible for two people to operate the paddles together, but at an awkward angle and at twice the safe working load. In the mid-1990s, an attempt was made to find a cheap and cheerful approach to solving the problem by replacing the wooden paddles with fibreglass. That reduced the weight of the paddles, but did little to solve the real problem. The sheer force of water, particularly on the deeper paddles, makes the job hard.
Two independent reports have been produced on the operational risks involved. As well as the weight, manual operation of the weir in response to flood alerts means working in difficult weather conditions for several hours. It is dangerous and tiring work. There are many weirs and gates along this stretch of the river that all need to be operated in tandem to prevent flooding of the houses to the north of the river. That is a key point. The structures need to be operated quickly when flooding is predicted, and an injury to a staff member halfway through would exacerbate local flooding.
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accept that the number of properties directly affected are, as the Environment Agency stated at the December meeting, five?
Richard Benyon: If the weir does not work, properties will be flooded. We can argue that the existing paddle and rymer weir works perfectly well, but as my hon. Friend knows, the Environment Agency has received consultants’ reports stating that the working load is way in excess of what one would normally allow for employees. I am sure that that she would agree that she and I as employers in business would have to take note of advice that is given. One always tries to do that proportionately, but it must be understood that the advice was given. It would be difficult for the Government to sit at arm’s length and ignore advice that the loading is four times too high and the risks that emanate from that. It is difficult for Ministers to overrule such advice, but I will talk about that further.
The Health and Safety Executive has seen the reports from the Environment Agency and the Appleton Weir Action Group and has written back in support of the agency’s position. As a responsible employer, the Environment Agency cannot ignore the advice of the Health and Safety Executive. Sitting back and doing nothing is no longer an option. The weir clearly poses risks to those who must operate it and to those live in the neighbouring constituency. An assessment of risk is not just about whether there have been accidents, but about the potential for accidents. I am a sceptic of all matters relating to health and safety, and I do not come to the matter as a quisling of the health and safety industry, for that is what it has become. I come to it as a sceptic, like my hon. Friend. I have looked at the matter in great detail, and if I were an employer on the board of the Environment Agency, I would find it difficult to ignore the report.
That brings me to the flood benefits of the weir, and why they have not been assessed for this project. The flood risk in the area is well known. Around 80 houses behind the north bank have a 1% chance or greater of flooding each year. In flood conditions, the Northmoor weir is opened, so that flood water can pass through as quickly as possible. The relationship between the weir structure and flood risk is well understood and would not benefit from further investigation. Doing that would have added unnecessary and damaging cost to an already expensive project.
Mr Andrew Smith: If the Minister is relying for this part of his argument on the flood prevention benefit that he supposes exists, is it not right, as the hon. Member for Oxford West and Abingdon (Nicola Blackwood) said, that there should be a cost-benefit analysis? If that is not made and he is relying on the health and safety part of his argument, how can be justify taking the cost from the flood prevention budget? Surely, he cannot have it both ways.
During my long discussions with the Environment Agency, I became convinced that it really does understand the flood risks. I do not believe that it spends money without looking carefully at the alternatives. I have seen all eight or nine alternatives that have been presented—many of them were untried and untested as a means of lifting the paddle and rymers out using mechanical systems—as well as replacements with
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alternative schemes. All of them, because of the design processes that would have to be applied and the further delay, would have cost more. I assure the right hon. Gentleman that it is understood throughout the Environment Agency and my Department that every penny that we spend must be spent in the right way. We ensure that the budgets that we manage go as far as possible, and I will come on to explain why the spending must go ahead.
Given that something must be done, the Environment Agency has focused on identifying the cheapest and best way to solve the problem. It looked into the matter in considerable detail, and I have seen the summary of the detailed analysis, which points to the radial gate solution that the agency is pursuing. The other options would be more expensive, and in some cases there would be no guarantee that they would even work, because they are untried in other areas. Replacing the weir will not remove risks altogether, but it will reduce them to a reasonable level for the staff concerned and provide more reliable long-term protection for those living on the flood plain to the north.
When reviewing the background to the matter, I also considered the steps the Environment Agency has taken to consult local residents on the project. Objections have been raised, primarily from those who are not at risk of flooding, but who will suffer increased traffic and disruption during the work, and I entirely understand that.
Richard Benyon: I entirely accept that. I am talking about the local community, and the most vociferous objections are about disruption. I do not want to disrupt people’s lives more than we must. I am sure that my hon. Friend understands that I want to put on record that others are strongly supportive. Northmoor parish council has twice written to the Environment Agency urging it to proceed with the work as soon as possible.
Proposals to replace the five weirs have been considered by the Thames Regional Flood Defence Committee, and it has agreed to include them in the flood defence programme. That is important because the committee is made up of elected councillors from local authorities in the region. They provide a degree of local democratic input and accountability for decisions to allocate funding. They will not have taken the decision to allocate £2.5 million to Northmoor lightly, and they recognise other flood defence priorities in the region.
Over the past two years, the Environment Agency has consulted extensively with local residents and listened to their concerns about the scheme. I am sure that many would like to have had more, and I will take up the matter of the contractor, which causes me genuine concern. The agency has heard what people have been saying about the increased traffic south of the river and made substantial adjustments to the plans, at an additional cost of £100,000 to the project.
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Agency’s board has allocated funding to allow it to proceed. The chair of the Environment Agency wrote to me last week setting out the justification for the project. I have heard my hon. Friend’s points, and the views she expresses on behalf of her constituents. I have considerable sympathy but, as is common, there are two sides to the story. I am satisfied that this is a case not of health and safety gone mad, but of something needing to be done to solve a problem that perhaps should have been sorted out some time ago. I am sorry, but I do not take the view that, just because there has not been an accident, one may not occur.
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I understand that there may be areas where consultation could have been improved. I will make every effort to ensure that the points that my hon. Friend raised are answered, and I will do so in a letter as we are running out of time. I assure her that I will continue to converse with her and do my best to minimise the impact on her constituents. I want to put it on the record that I fight to ensure that every penny of money that is spent on flood alleviation schemes is spent in the best way possible, and I hope that she will come to realise that the problem has been dealt with in the best possible way.