That may be a particularly egregious example. At the same time, however, members raised complaints with the monitoring officer about a highly partisan publication, East End Life, which is the subject of great controversy, and the monitoring officer responded that everything that the mayor had put in that publication was in order. The same monitoring officer gave advice that the mayor was not obliged to answer certain questions from members in the council in relation to the exercise of his functions

16 Jan 2013 : Column 294WH

because that might infringe his human rights. That, frankly, brings the standards regime, which we all want properly and proportionately exercised, into serious disrepute. That is not in anyone’s interests.

The matter that has arisen in relation to Tower Hamlets seems, on the face of it, to be frankly scandalous. It involves one important case that comes back to the whistleblower point. An opposition councillor raised an issue concerning an applicant for a senior post in the council, and it was demonstrated that that applicant’s CV was inaccurate in an important and material respect. The applicant had been obliged to resign from a previous employment, and that was not placed on their CV. That achieved a degree of national and regional publicity, not surprisingly.

The result was a complaint by the same member of the mayor’s cabinet, who was a frequent source of the complaints, against that member. That was investigated and the member set out in considerable detail their side of the matter. The hearing took place within weeks of the abolition of the Standards Board regime, and the member was not present. The upshot—I have to be careful what I say—was that within days of the regime being swept away, rightly, by the will of Parliament, the standards committee, which, I understand, consisted predominantly of members who supported the mayor, referred the matter to the first-tier tribunal, where it remains. The purported view of that seems to be that in relation to a complaint that was some two and a half to three years old—never mind its the merits—there was a desire, frankly, to invoke suspension of a leading critic of the mayor. That was why it was being taken to the first-tier tribunal, which refused to entertain it. Now, I gather, there may be attempts to appeal that.

That sort of abuse of the system brings local government into disrepute. It is right to have that on the public record, because that is not how the system is intended to be used. I hope that the Minister will confirm that the Government’s intention has been that, as of 1 July, the ability to suspend or disqualify a member should not be exercised in the standards regime, but that instead such a power is exercisable when the criminal offence of failing to disclose a pecuniary interest, which came into force on the same day, is committed. The case that I mentioned had nothing to do with a pecuniary interest of any kind; a councillor was doing what many people would regard as their duty by pointing out something that might have been seriously misleading in relation to an important and sensitive public appointment.

The fact that that member should have hanging over their head the prospect of defending themselves in legal proceedings before a first-tier tribunal—brought, of course, at public expense—when it is known, and was known when the decision was taken, that the power to suspend was going to be removed, is an abuse of the system. I hope that we can make it clear and restate that it was never Parliament’s intention that the transitional provisions that were brought into place when the Standards Board regime was abolished should be used in that way. That, too, is an important example of where we need to look more closely at how things work.

I want to refer to one or two other examples that illustrate the issues that need to be addressed, and again, there should be political consensus between us on this. My right hon. Friend the Member for Hitchin and Harpenden referred to the case that occurred with

16 Jan 2013 : Column 295WH

his constituent councillor and what was said in relation to the campaign group, and that is not the only case I have come across. I am aware of a council that resolved that councillors should not meet developers, full stop. It seems to me that that kind of blanket interpretation of the rules goes well beyond anything that Parliament intended. We all know that development applications have to be treated with great care and sensitivity, and it is important to ensure that proper process and probity are observed in all such instances, but the idea of such a blanket prohibition seems to me to be fundamentally wrong.

Richard Drax (South Dorset) (Con): I apologise for being late, Mr Hollobone. My hon. Friend is making an excellent speech and raising some important issues, which occur right across the country. As for councillors’ involvement with local government, when I ask my constituents whether they have spoken to their local councillor, they say that they have but that the councillor cannot say anything—I suspect that many of my colleagues hear the same thing—either because the rules have been misunderstood, or because, in some cases, an anxious or over-zealous monitoring officer has put the fear of God into councillors. Clearly, there is a big misunderstanding in such areas, which should be cleaned up as soon as possible.

Robert Neill: My hon. Friend is absolutely right, and in a number of instances right across the piece, we have come across precisely that fear of God being put into members, many of whom are voluntary public servants, sometimes in quite small district or parish councils, where they do not necessarily have access to independent advice. A forceful expression of opinion, however questionable, by the monitoring officer can often understandably intimidate, whatever the intention. We need to deal with exactly that issue.

One of the things that we specifically did in the Localism Act 2011—again, it was not, of itself, a matter of controversy in the House—was to clarify the law in relation to predetermination. There is no doubt that the common-law rule had been seriously gold-plated in the advice that monitoring officers were giving, to the extent that, essentially, people were being told, “You really cannot say anything about this planning application, otherwise you will be taken to have predetermined it.” That is wrong, and it is not what the case law ever was, but that is how it was interpreted in all too many cases.

I am grateful to my hon. Friend for highlighting that, because the fact that advice to that effect continues to be given demonstrates, despite the will of Parliament and despite the guidance clearly set out by my hon. Friend the Minister’s Department, that that message is not always being taken on board by some monitoring officers. That is in danger of undermining the potentially good work that is being done by the legislation.

My right hon. Friend the Member for Hitchin and Harpenden quoted from the example of his councillor constituent, and I will read out the detail of the advice, because it also touches on the point made by my hon. Friend the Member for South Dorset (Richard Drax). It is worth reading it out to give you the whole flavour. It was headed “Members’ information note”, and it provides

16 Jan 2013 : Column 296WH

“Guidance on pre-determination regarding public meeting ‘to oppose an extension to the Simons contract to redevelop the centre of Hitchin’”.

That is all well and good, and it is an understandable matter of public concern. Under the heading “Summary of advice,” the document states:

“Attendance at a public meeting that has a clear purpose of opposing a particular course of action or proposal, and which includes at item 3 on the agenda a “vote”, is very likely to be regarded as evidence of pre-determination of the matter. Either attending the meeting as an ‘observer or listener’ and/or declaring at the start of the meeting that one is approaching the matter with an ‘open-mind’, could still lead to perceptions and allegations of bias and pre-determination, due to the current stated purpose the meeting.”

The member went back on that advice and, as I say, rightly went along to the meeting.

Frankly, that advice was nonsense. If that sort of advice is being given, the sooner that it stops being given the better, because it is not legally sound and does not accurately reflect section 25 of the Act, which says:

“A decision-maker is not to be taken to have had, or to have appeared to have had, a closed mind when making the decision just because…the decision-maker had previously done anything that directly or indirectly indicated what view the decision-maker took, or…might take, in relation to a matter”.

Simply turning up as an observer is certainly doing something, but it could hardly be regarded on any sensible interpretation of the statute as being an act that would tend to predetermine a councillor in relation to a decision.

Basically, bad legal advice is being given to members, and it undermines the proper purpose of the standards, which is to ensure probity, decency and honesty in the conduct of our affairs. When there is nonsense advice of that kind—if I may put it that strongly—it makes it harder to enforce the system in the important cases where a proper red line has to be drawn in relation to members’ conduct. I am afraid that the example that I have just given is one of a number that seem to exist.

Another issue that has concerned me considerably is the attitude of officers towards members at times. Again, I do not want to say that that attitude exists in all cases. In my experience, the majority of officers work sympathetically and constructively with their members. However, a district councillor in Surrey has written in strong terms. Again, it relates to a planning application and let us remember that one of the reasons that we got rid of the previous standards regime was that a vast number of the complaints—something like 60%-plus—turned out to be essentially vexatious. I think that only about 28% of the complaints ever got taken forward properly and many of those related to things such as disputes on the parish council or the fact that someone was aggrieved that a planning application went a particular way; they were related to things that really had no foundation.

In the case in Surrey, there was a controversial planning application and clearly the member had expressed a view; I do not know which way they went, or did not go, and perhaps it does not matter for the purposes of this debate. Nevertheless, it caused the aggrieved applicant to make a complaint to the Standards Board. Essentially, what happened was that an investigator was appointed by the monitoring officer; the investigator questioned the councillor for 10 and a half hours in two meetings, as well as e-mailing the councillor a large number of

16 Jan 2013 : Column 297WH

questions; and on the second occasion, there were another 56 questions, almost as though everything that was being said by the complainant was being taken as read, without any attempt to apply any discretion about the merits of the case and whether it actually warranted that level of investigation.

The matter then dragged on for a number of months, the councillor rightly involved her MP and her conclusion was:

“The sword of Damocles is hanging above us and if someone says something the public don’t like, the sword will fall.”

It has never been the intention of Parliament that that should be the case or that any councillor should feel that way, regardless of their party and their views. The councillor in Surrey says that she has been a member for 16 years, having been returned about four times by her electorate, and for a member of that experience to feel like that indicates that something has gone wrong with the way in which the regime is being applied. The sad comment from the councillor is that:

“The Council were extremely bad with me throughout the entire investigation. They did not help or support. In fact the very opposite. The then CE—”

that is, the then chief executive—

“could not have been less kind or caring and made things worse.”

In fairness, she also says that the current chief executive adopted a different approach, and it is right to say that as well. However, the fact that an experienced councillor has to write in those terms indicates that there is a problem, and reinforces the point made by my hon. Friend the Member for South Dorset that public servants are feeling inhibited from doing the right thing by their communities.

Richard Drax: My hon. Friend is being very generous in giving way, and again I must say that his speech is quite excellent. I want to raise another issue with him that I have certainly found in my constituency—again, I suspect that colleagues have also found it in their own constituencies—regarding planning applications.

Planning really is the most contentious area. In my experience both as an MP and as a former journalist—I was a journalist for some 17 years, sitting in on these planning committees—many of the councillors had not even been to the sites that they were considering, because they claimed that they were not allowed to go to them. Yes, there is a drawing that shows what is intended, but that does not show what is around, the buildings nearby, the proximity of perhaps an ancient monument—I do not know, whatever is around the site—so councillors get a completely false perspective and potentially often make the wrong decisions. Is there anything that we can do to stop that happening and perhaps introduce more common sense?

Robert Neill: What we can do to help my hon. Friend in that regard is to promulgate the good practice and what is perfectly permissible. I know from my time as a member of a planning committee that it was perfectly standard practice in many authorities, and it should be perfectly open anywhere, for site visits to take place. It is probably best that members of the committee and the officers go together. That is what is usually and sensibly done, so that they all go in a group, and because the officer is present, there can be no suggestion of improper contact between the members of the committee and—let

16 Jan 2013 : Column 298WH

us say—the applicant or an objector. That can be sensibly done; many authorities do it; and those authorities that do not do it, and think that it cannot be done, should be told that it can and should be done.

Frankly, most of us would hope that with the new approach to empowering members, officers would look for ways to say, “Yes, we will enable a site visit to take place if members wish it, with the proper safeguards in place to make sure that there can be no accusation of impropriety.” It happens in many places, but the fact that it is not generally known that it happens is perhaps a real concern, as my hon. Friend suggests. Perhaps it is something that the Government need to think about doing, perhaps working with the Local Government Association and the local government community in general to ensure that that sensible good practice is rolled out.

It is interesting that my hon. Friend raises the issue of planning, because it comes back to the point about members being told not to meet developers. One of the few things on which I agreed with the former Mayor of London, Ken Livingstone—there was not much on which we agreed, as hon. Members will know—was that he had a very sensible and proportionate approach to dealing with planning applications that came before him. By their very nature, they were very often strategic applications, potentially involving large sums of money and important social impacts.

When he was Mayor, Ken Livingstone met applicants under those circumstances, he did so with an officer present and everything was properly minuted. Although I have accused the former Mayor of various things over the years, nobody would ever have questioned the total integrity with which that process took place, and indeed it continues under his successor, Mayor Johnson. It was a sensible and proportionate thing to do; Mayor Livingstone was right to do it and Mayor Johnson has been right to continue doing it. However, if they had listened to the sort of advice that my hon. Friend the Member for South Dorset referred to earlier—the advice given to his colleagues, or that we have seen in some of the documents that I have referred to—they would not have done it and those meetings would not have taken place.

Actually, very often the involvement of members in planning applications can be constructive, provided that it is done with total probity. There are plenty of examples of how the engagement of the ward members has enabled a scheme to be refined or adjusted in such a way that what was potentially unpalatable to a community can be made palatable, and actually the application can be improved by the involvement of the local members. Consequently, such involvement is not only something that should not be obstructed but something that ought to be positively encouraged as a matter of good practice. So I am grateful to my hon. Friend for raising that point about planning.

The other issue that seems to have arisen recently, and that I hope my hon. Friend the Minister will be able to deal with when he responds to the debate, relates to pecuniary interests. I was rather surprised to see advice that is being given to a number of councillors, that they should be regarded as having pecuniary interests in effect because they are council tax payers. Again, that advice is all set out in legal documents, which I could happily quote, but if that advice is not nonsense then I do not know what is. Once more, I must say with a sense

16 Jan 2013 : Column 299WH

of frustration that that sort of advice or idea is exactly what I spent two and a bit years of my life as a Minister trying to get rid of, and I feel that perhaps I have failed and that perhaps it is my fault, because I did not make that message clear enough. I hope that that is not the case, but what I have described today is happening in a number of local authorities. In addition, I regret to say that when I looked at some of the e-mails that I have received on this subject, I see that such practice seems to be based on a view taken collectively by a number of monitoring officers.

Like most professions, monitoring officers are not without their collective bodies. They are worthy people; I met some of them on a number of occasions when I was a Minister. However, that does not mean that they always get these ideas right, and the idea that simply because someone pays council tax they should be regarded as having a pecuniary interest is another idea that I hope the Minister will make clear today was never the intention of Parliament. Hopefully, this debate will give us an opportunity to send out a message—to officers that such advice is wrong, and to members that they should not feel constrained by such advice. The idea that someone would have to get a dispensation for every member of a council in effect, so that they could vote on the council tax in their area, is a nonsensical interpretation.

John Glen (Salisbury) (Con): Reluctantly, I have to point out the situation in Wiltshire. A local Labour councillor contacted me saying they had received an e-mail from the ethical governance officer. It said that the current legislation referred to councillors having

“a disclosable pecuniary interest in any matter to be considered”.

The reference to “any matter” was essentially used to justify people not voting on anything, which is utterly absurd. When I responded to the councillor, I said that common sense was required, and I do not think that my advice and input were welcome. However, it is ludicrous that the legislation has been interpreted in such an unhelpful way.

Robert Neill: My hon. Friend is absolutely right. It is a sad irony that Wiltshire, having got the structure right and achieved a sensible, light-touch, proportionate structure, seems none the less to have been giving out advice on a specific point that is clearly wide of the mark. That issue needs to be raised with monitoring officers generally.

Richard Drax: The mobile phone is a marvellous bit of kit: as my hon. Friend was talking, the leader of the Conservative group on Purbeck district council raised the same point with me. I asked him whether there were any points he wanted to raise, and he said that,

“under new rules we have to declare an interest to set the council tax.”

Funnily enough, that is the very point that my hon. Friend has just raised, and the comment I have read out reinforces it.

Robert Neill: I am immensely grateful for my hon. Friend’s presence, because he has allowed us to have a debate in real time, which is extremely useful. His point highlights the issue and takes well into double figures

16 Jan 2013 : Column 300WH

the number of instances I have come across of such advice being given out. As everybody in the room knows, that advice is clearly wrong.

That raises questions about the quality of advice monitoring officers sometimes give. We all know it is important to have a monitoring officer—something that goes back to the Local Government and Housing Act 1989. However, some of the mission creep that has come into the monitoring officer’s role raises questions. I hope the Minister will be able to comment on what the Government see as the proportionate and appropriate use of monitoring officers to ensure probity without creating an industry via the back door. One complaint about the previous standards regime was that whatever its intentions, which were good, it created an industry that was expensive for the public purse and that had the effect—probably unintentionally, but this was the reality—of being something of an inhibitor of open public debate. The whole objective subsequently has been to put an end to that.

All too often, there seems to have been pressure on members simply to recast the old regime but give it a localist badge. An extremely restrictive interpretation of the legislation, which goes well beyond case law or statute, persists all too frequently. My hon. Friend the Member for South Dorset has given clear examples in relation to planning matters and the key issue of council tax. District monitoring officers also sometimes give such advice to parish councils in their area. Whatever the intention, if that advice lands on a parish councillor, who might have just a part-time clerk or something of that kind, it will be extremely intimidatory. I have had a number of e-mails from members across the country saying, “I’m wondering whether it’s worth standing for my parish council again.”

In a number of instances, the provisions on spouses’ or civil partners’ pecuniary interests have been misinterpreted. Initially, a flurry of advice seemed to suggest that council members would have to give the name and details of their spouse or civil partner. The Department sent out a letter—I may have written it myself—to all council leaders making it clear that that was not the case, and that the interests of the spouse or civil partner are regarded as the member’s interests. Therefore, if a member’s wife or partner owned a relevant property that should be declared, it was declared, but under the member’s name; it was not necessary to give details about their wife or civil partner. The fact that misleading advice was given, and still seems to be given, indicates that the message might not have been fully taken on board. Under certain circumstances, such advice could deter worthwhile and valuable candidates from coming forward for election. That is disproportionate, and it is important that we get a sense of proportion back into these matters.

That brings me back to the quality of the monitoring officer and what their proper role should be. There is flexibility at the local level, and that should of course be the case. However, one councillor who has raised serious concerns with me states at the end of his e-mail that he was one of the first monitoring officers to be appointed under the 1989 Act—he had obviously retired and, having been a local government officer, decided he had not had enough, so he became a member instead, which is absolutely admirable. He said that, when he was a monitoring officer, he had done about one and a half

16 Jan 2013 : Column 301WH

hours’ work a week as part of his other responsibilities. However, he said that the role in his district council had mushroomed and was becoming a full-time job, which was never the intention in a proportionate scheme. Obviously, the work load and the demands in a big authority will be greater, but all too often it seems to me and to many members who have contacted me that there has been an exponential growth in the monitoring officer role, which sometimes leads to advice that is not accurate or focused and to an attitude that can be intrusive. That is important, and I hope the Minister can give us some idea of the Government’s thinking on making sure that there is clarity on the issue, and that councils do not feel the need to over-engineer a solution.

I also hope the Minister will be able to comment, in so far as one can where matters are potentially sub judice, about the extremely concerning situation in Tower Hamlets, where there does not seem to be the independence and transparency that one would wish for in the operation and governance of the council and in the monitoring officer’s role within that. There is a risk of members being worn down by serial complaints against them that are not filtered out at an early stage.

Let me give just two more Tower Hamlets examples to conclude. One involves a complaint—I am glad to say that nothing came of it in the end, but it still took time and investigation—from Councillor Alibor Choudhury, the cabinet member for resources, who is a regular complainant, against the leader of the Conservative group, Councillor Golds. An interim chief executive had been appointed. In the council meeting, speeches were made welcoming that officer to their post. During the debate, Councillor Golds referred to the fact that he was looking forward to appointing a proper chief executive in due course. That was the subject of a complaint, on the basis that it showed disrespect to the acting chief executive, as well as bias. The acting chief executive actually wrote saying, “It does no such thing. I didn’t feel in the least bit offended by that.” It was pretty clear that Councillor Golds was referring to a substantive appointment being made in due course, which everybody would wish to see. The fact that the issue was dragged through the standards regime in Tower Hamlets suggests that not just old mindsets but questionable mindsets were being applied.

A further complaint was then raised—interestingly, three complaints were all made within about a month of each other, and the same cabinet member was a party in each case. In this case, the allegation related to the matter that is now working its way through the first-tier tribunal. A third complaint was then made, this time about a member’s suggestion—it was made by the same leader of the Conservative group, as it happens—that a ward be renamed. It is a sensitive issue locally whether the ward is called Spitalfields and Banglatown or Spitalfields, but the fact that it should trigger a complaint of racism is well beyond anything the provisions were intended to do. The complaint was ultimately taken no further, but a great deal of public money went into dealing with it. Any proportionate system of monitoring would surely have weeded it out at an early stage. As I say, the same council spent £18,000 investigating the two opposition party leaders. At the same time, the monitoring officer declined to investigate complaints against members of the party supporting the mayor.

16 Jan 2013 : Column 302WH

All those cases raise a specific matter in relation to Tower Hamlets. However, they also raise a specific, important point, which I hope the Minister will be able to clarify, about the use, or perhaps abuse, of the transitional provisions, which were intended essentially to enable members who might be involved in an outstanding complaint to clear their names by going to the first-tier tribunal. I do not know how many such instances, if any, we have on record of attempts to use the transitional provision in that rather extraordinary way, but it is clearly not what Parliament intended.

I hope that I have done enough to give a flavour of the areas of concern that I want to set before the House. I do that not in any spirit of criticism of the Government, because they have been doing the right thing and there was, broadly, a measure of consensus in the House about wanting to ensure that we have proper standards. Making sure that our public affairs at a local level are conducted honestly and transparently, having good quality candidates from all backgrounds coming forward for election, and enabling voters to believe that their members can do and say things that make a difference are critical to the health of local democracy. All of that was clearly the Government’s intention when we carried out the reforms and it was clearly Parliament’s intention when the new arrangements were put in place.

I hope that we will be able to use this debate to reinforce and clarify the message that the new regime is about empowering members, not inhibiting them, and that advice to the contrary is incorrect and should no longer be given out. The Department should use its good offices, working with the Local Government Association and the local government world generally, to ensure that members are not subject to the kind of unintended and inaccurate pressure that undermines our shared objectives.

3.21 pm

Helen Jones (Warrington North) (Lab): It is a great pleasure to be here under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Bromley and Chislehurst (Robert Neill) on securing the debate. He and I have often clashed across the Dispatch Box, but no one doubts his commitment to or interest in local government, in which he served with distinction for several years. I am sure that that experience is sadly missed at the Department for Communities and Local Government.

The hon. Gentleman raised some important issues this afternoon about how we maintain appropriate standards of conduct in local authorities without imposing a burdensome and costly regime that encourages frivolous complaints. We have seen that in local government—we occasionally see it in the House—and it is something that I deprecate, because it brings politics into disrepute. Dealing with serious wrongdoing is one thing, but making frivolous and politically motivated complaints is something else entirely.

The hon. Gentleman hit on several important issues about the operation of the current regime that are worth considering. He is absolutely right that the best safeguard against wrongdoing is transparency. If people know a member’s interests—just as in this House—and can then judge their vote accordingly, that is the best safeguard against anything going wrong. The hon. Gentleman is

16 Jan 2013 : Column 303WH

also right that members in local government are often given bad advice, and it is particularly difficult for those who are new or who do not have a legal background to challenge it. Part of the problem exists particularly in the planning system, where officers, especially monitoring officers, get frightened of big development firms and their lawyers. They sometimes seek to protect councillors from the effects of that, but they often go the wrong way about it. A firm in my constituency that wants to carry out a development that I oppose is, I think, working up attempts to try to intimidate me. I am not intimidatable. It is a waste of time. However, some councillors do find themselves in that position because of poor quality interpretation of the law.

We ought to say clearly that no standards regime should prevent an elected representative from talking to those who elect them or, as the hon. Member for Bromley and Chislehurst said, from talking to developers in an appropriate setting where an officer is present to minute what is said; and yet that often happens. The hon. Gentleman also mentioned complaints being made against whistleblowers, which is extraordinary and, again, not what the standards system was ever intended for. Although it is fair to say that none of us is nostalgic for the old regime, which he rightly said became an industry in its own right, we need to ensure that the current regime operates properly and that people are giving proper advice.

The hon. Gentleman discussed Tower Hamlets and the particular difficulty that arises when a monitoring officer wears two hats. If the Minister is able to comment on that, I am interested to hear what he says, because it is clear that the situation there is not conducive to good local government and to delivering the best service to those who elect us. The issue of monitoring officers going over the top on trivial complaints was also mentioned. I am not for one minute saying that they all do that, but the hon. Gentleman gave one example of a member being subjected to 10 and a half hours of questioning over something small and trivial. That is ridiculous. Any system must be proportionate.

The hon. Gentleman is quite right about wrong advice being given on the declaration of pecuniary interests. My local authority’s members have been told that if they are council tax payers, or if their spouse is a council tax payer, as it is their name on the bill they must all declare an interest when they set the budget, and then apply for an exemption. He is also right that it is not only in big authorities that that happens. My husband is the leader of Culcheth and Glazebury parish council. I try not to let it go to his head but, following a swing to Labour in our village, it is now a Labour-controlled parish council. Its members have been told that, before they set the parish precept, anyone who is a council tax payer or is the spouse or partner of a council tax payer must declare an interest and ask for an exemption. Of course they have an interest; they live within the parish. It is a parish council. People who are elected either come from within the parish or very near to it. Those are the rules. When people elect them, they know that. No one is suggesting that parish councils around the country are abusing their right to set the parish precept because they happen to pay it. Quite frankly, it is getting ludicrous and we need to look at how we can

16 Jan 2013 : Column 304WH

give councils proper advice and work with the Local Government Association to ensure that they get that advice.

I have one or two queries for the Minister about how the system is working in other ways at the moment. He will remember that the Government’s original proposal was not to have a requirement for local councils to maintain a code of conduct. Following amendments in the other place, common sense prevailed and local authorities were required to maintain a code of conduct based on the principles of the Committee on Standards in Public Life. Councils can now decide for themselves whether they want to amend or replace the existing code. It has not been mentioned, but how they fulfil the duty imposed on them by the Localism Act 2011 of promoting and maintaining standards is important. Work needs to be done to ensure that all councillors, particularly new ones, are familiar with what is required of them, are adequately trained and take a sensible view of such things.

The 2011 Act also provided, as the hon. Gentleman said, for the registration of members’ interests and for the appointment of an independent person to advise the council before it considers an allegation against a member. Will the Minister tell us how that is proceeding? Quite often—we have done it in this House—we believe that we must get an independent person in to advise on this, that and the other. It is as if there is a pool of people out there just waiting to jump in and do that. It would be interesting to hear from the Minister whether he is aware of any problems with councils finding people to undertake the role, which is, after all, purely advisory.

Before the regime came into operation last June, the Committee on Standards in Public Life, with which we are all familiar, expressed concern that a large number of local authorities were unprepared for the new system. The committee said that nearly half of those who had replied to its inquiries had yet to adopt a new code, and that four fifths had yet to appoint this mythical independent person that we are all to find from somewhere. I wonder whether that lack of preparation on the ground has in fact led to some of the problems that the hon. Member for Bromley and Chislehurst outlined. Will the Minister update us? How many authorities, if any, still do not have a code of conduct in place? How many have yet to appoint an independent person to advise them on complaints? If there are any such authorities, will the Minister tell us what his Department is doing to ensure that the law is observed in that respect, and what advice it is giving to councils?

The Committee on Standards in Public Life also—wrongly, I think, in this case—had concerns about the robustness of the new arrangements, and argued that the codes needed to be supported by independent scrutiny. I am not convinced by that argument, because I believe that as long as complaints and any decisions about them are dealt with openly and are open to public scrutiny, that is all we need. Such committees as this tend to overlook the fact that members are ultimately accountable at the ballot box for their conduct. There is the famous Hillary Clinton quote about Bill: “If you don’t like it, don’t vote for him,” and it is as simple as that. Unfortunately, most of us do not have the charisma of ex-President Clinton, and we have to rely on other things to get us re-elected.

16 Jan 2013 : Column 305WH

It is important that members of the public understand the new regime and that steps are taken to inform them of how complaints are dealt with. I know, and I think that the hon. Member for Bromley and Chislehurst knows from his constituency, that there is often great confusion among members of the public about how to make a complaint against a councillor. It is members of the public that we are trying to cater for here; we are not dealing with cross-party allegations. A number of people have recently written to me because they are upset about a particular planning decision, in the belief that I can deal with complaints against local councillors and can somehow impose my will on them. I have had to explain that there is a separate electoral mandate for councillors, and that complaints against them are dealt with differently. If the scheme is to work well, we need to address that confusion.

The Committee on Standards in Public Life made an important point, which relates to what the hon. Gentleman said earlier about the need for guidance and training on the new system, and about the application of appropriate penalties if the system is breached. Will the Minister tell us how the need for training is being dealt with in local authorities, for those involved in the new standards regime? Does he know how many local authorities have provided such training for their members—not their monitoring officers—and does he have an indication of how well that is going?

I want also to mention sanctions. As the hon. Member for Bromley and Chislehurst rightly said, the 2011 Act makes it an offence for a member without reasonable excuse to fail to register or declare a pecuniary interest. That can be dealt with by a magistrates court and, in the most serious cases, a £5,000 level 5 fine can be imposed upon conviction. I do not believe that most of us would have a problem with that in really serious cases, but we all know that most cases are not like that, dealing, as they do, with less serious breaches of the code of conduct. Since suspension is not an option, is the Minister convinced that local authorities have enough sanctions available to them to deal with breaches of the code? If a member of the public makes a complaint and the complaint is upheld, that person needs to be satisfied that the complaint is being taken seriously and dealt with appropriately, and I am interested in hearing the Minister’s views on that.

I was recently told of an independent member of a local authority who refused to sign the code of conduct. The legal advice given to the authority was that it had no way of making the person sign. The argument was that if he did not sign he was not bound by it. It is different with political parties, because they can impose on their members the necessity of signing the code—someone cannot be a member of the group until they do that. This is an interesting case, and if the Minister cannot tell me today how it should be dealt with, perhaps he would be kind enough to write to me, in order that the case might be resolved.

I accept that it is very early days, because the new system has been in operation for only six months or so, but although none of us wants to encourage frivolous or politically motivated claims that are not based on fact, it is important that the public have faith in the system and believe that their complaints will be properly dealt with. The vast majority of councillors, of all parties I think, simply want to do a good job for their

16 Jan 2013 : Column 306WH

local community, and they give up a lot of time and contribute a lot of effort. They too, therefore, need the protection of an appropriate standards regime and the assurance that breaches of the code of conduct will be dealt with. That is right for the public, but it is right also for the vast majority of councillors in this country who are honest and hard-working. Will the Minister undertake to consider over the coming year how the system is working, look into the problems that I and the hon. Member for Bromley and Chislehurst have mentioned, and report back to the House if action is needed?

We cannot take issues such as this lightly, and the hon. Member for Bromley and Chislehurst has made that clear today. Local councils are an important part of our democratic structure. They can, and often do, produce enormous benefits for their local communities, and they deal with serious and important matters—things that affect people’s social and economic well-being—but it is precisely because of their importance that we need to ensure that the standards regime works properly, maintains public confidence and is not abused, and that councillors get the right advice to enable them to comply with what is required of them. That is extremely important, and I hope that the Minister is able to assure us on those issues when he replies.

3.38 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis): I am grateful to my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) for providing this opportunity to have what is, in the light of what is going on, a hugely important debate. The debate is also timely because the Localism Act 2011 received Royal Assent more than a year ago—I enjoyed several months on the Public Bill Committee with my hon. Friend, as Minister, taking the legislation through—and just over six months ago, on 1 July last year, the new standards regime came fully on stream.

I pay tribute to my hon. Friend for the central part he played in doing what I think most people in local government—perhaps not monitoring officers—will for ever be grateful for: abolishing the old Standards Board regime, thereby fulfilling an important coalition agreement commitment, and overseeing the establishment of a new regime, which should be opening the way for councils to put in place their own new localist standards arrangements. I will be clear with the House on this: I am a fan of old-fashioned democracy and I believe there is a strong case to be made, as it was in the debates on the 2011 Act, that the most effective sanction for wrong behaviour is found in transparency, particularly through to the ballot box. We need to bear that in mind when we consider what the Standards Board regime, which we are moving away from, was at risk of becoming.

Every council should aim to have a simple process that ensures high standards of conduct from all members without imposing bureaucratic burdens or providing a platform for vexatious and politically motivated complaints that not only waste taxpayers’ money but, as the hon. Member for Warrington North (Helen Jones) mentioned, damage the very fabric of both local democracy and democracy generally. That was the case with the old regime. As a councillor for a decade or so, I saw that regime develop. Since coming to the House and taking my current office, I have found it worrying that, despite

16 Jan 2013 : Column 307WH

the change in regime, monitoring officers are expanding and developing as an industry, and changing the regime seems only to have brought that industry further in-house, rather than getting rid of it.

The essence of the new regime is that, within a simple broad framework, the design of a council’s standards arrangements is put into its members’ hands. I stress that there is no detailed central prescription about conduct. Given what is happening, there is a temptation for us to start getting involved centrally, but I am wary of doing that because it would be a move away from local accountability. It is for individual councils to decide how best to promote and maintain high standards of conduct.

I will have a look the case and come back to the hon. Lady, but my instinctive response to the councillor who refused to sign a code of conduct is that if the council has adopted the code of conduct, it is, de facto, the council’s code of conduct. I am not sure why it is necessary for every member to sign the code of conduct for it to take force. It is the council’s code of conduct.

There is no central prescription for the process a council might follow. Beyond certain clear, basic, national rules—for example, that certain pecuniary interests must be disclosed, which I will return to, because I have seen far too many farcical cases of the type raised today—it is for each council to decide its own arrangements, to decide its code of conduct, to decide how to deal with allegations that that code has been breached and to decide how personal interests should be handled. That approach puts members in the driving seat and recognises the commitment of members across local government to serving their communities, to acting consistently in the interests of those they represent and to ensuring local taxpayers’ money is well spent.

The new regime recognises the central importance and value of members’ roles, which must be a priority, and their knowing what is right for their community and authority. Rightly, under the regime members can take ownership of all their council’s standards arrangements and be satisfied that the arrangements are proportionate and appropriate to the circumstances of their authority.

The first six months of the new arrangements have seen councils and their members take a wide range of approaches in responding to the opportunities provided by our new standards regime. The Government have taken a number of steps to help members make the most of those opportunities. To assist councils, in April 2012 my Department circulated an illustrative text of a simple and straightforward code of conduct, as envisaged by the new regime. In June, my hon. Friend the Member for Bromley and Chislehurst wrote to local authorities about simple arrangements for handling misconduct allegations. We followed that in August with a plain English guide to openness and transparency on personal interests.

All those measures graphically illustrate how simple and straightforward, yet wholly effective, standards arrangements can be adopted by councils under our new regime. It is therefore disappointing and, to an extent, worrying to hear that some local authorities have developed both a code and model arrangements for handling misconduct complaints that appear to be essentially a continuation at local level of the old Standards

16 Jan 2013 : Column 308WH

Board regime, and in some cases go further than the old regime. I have heard about too many cases of that in the past few months.

We have heard examples today, and I will respond to a few specific points. My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) described a situation that simply should not be happening. The Localism Act makes it clear that a member can go to meetings, and even campaign on an issue, and still take part in the formal decision-taking process, provided they approach that decision with an open mind, as I am sure members do. There is no basis in law for a monitoring officer to give the type of advice about which we have heard.

Richard Drax: My hon. Friend is making an excellent speech. He says that a councillor may campaign, as long as he or she maintains a neutral state of mind, but if someone is campaigning, they are clearly campaigning either for or against something. For clarification, is the Minister saying that councillors can campaign for something? If councillors state that they are for or against something at a council meeting, they might be accused of not having a clear mind. Does he follow my argument? I may have misunderstood him.

Brandon Lewis: Bear in mind that that is a decision for the individual member, as it is when we declare an interest in the House. Councillors must decide whether, at the point of a decision, they have an open mind, having heard all the evidence. If someone has been campaigning heavily against something, they may come to a meeting, hear all the evidence both for and against and then make a judgment about whether they have an open mind on the evidence. That is a matter for them. The key point is that the advice being given to councillors that they cannot do that is wrong. They can do it and, actually, that is how we represent our residents. That was one of the problems with the old regime.

On the point raised by my hon. Friend the Member for Bromley and Chislehurst, since 1 July 2012, when the new regime came into force, councils have had no power to suspend a member—absolutely none. A member convicted by a court for failing to disclose a disclosable pecuniary interest may be disqualified for up to five years by the court in its sentence. In addition, the law remains that any person sentenced to three months or more in prison is disqualified from holding the office of councillor for five years.

Robert Neill: I am grateful for the Minister’s clarification. Were there to be any growth in litigation based on an erroneous interpretation of the transitional provisions, would he consider what steps the Department and the Government might take to assist the courts in ensuring that a tribunal has access to the correct interpretation before coming to a decision?

Brandon Lewis: I will address the transitional arrangements in a moment, but, yes, we do have to consider that.

The advice in the Wiltshire case makes little sense. The advice refers to a pecuniary interest in any matter, but it focuses on the word “any,” which is completely the wrong end of the stick, to use a colloquial phrase. The advice fails to define a disclosable pecuniary interest,

16 Jan 2013 : Column 309WH

which is the key point. The simple fact is that one cannot identify a disclosable pecuniary interest that relates to the setting of council tax. A beneficial interest in land is probably the nearest to that, but that interest is clearly not materially affected by the setting of council tax.

I have learned something today, and I am hugely impressed: I have never before heard of an “ethical governance officer,” which is a fantastic new title. I am sure the title will be cropping up across the country, no doubt with people asking for pay rises. One of the things of which I have seen far too much, particularly in parish councils, is organisations advising that, in setting precepts, all members have to declare a pecuniary interest, which implies that every councillor has such an interest, be they district councillors, county councillors or unitary councillors. Indeed, it could be argued that that goes all the way to us when we set the Budget. That is farcical. That is not what the guidance sets out. We must make it clear to parish councillors that that is bad advice. It is wrong. That was not the intention.

Another example I have heard is how councils feel the need, under the transitional arrangements, to continue to investigate a complaint under the old regime, whatever its merits. That is absolutely not what the transitional arrangements require. Briefly, if a council considers a complaint unworthy of investigation and the resources that that would entail, it can bin the complaint. I stress again that that is a decision for the council—the members. Neither the monitoring officer nor any other officer has the power to make a decision and force or tell councillors to do something. The decision is in the hands of the democratically elected councillors.

Why is all this happening? Why is there an attraction to continue a Standards Board-type regime—a regime that was widely loathed in local government and ill served citizens, taxpayers and councillors? As I hope I have stressed clearly, our new regime puts members firmly in the driving seat when it comes to deciding what a council’s standards arrangements should be. They are for local councils to decide. In that role, it is right that members look to their officers for advice, as that is what officers are for, but I have to say that much of the advice being given to members is far from satisfactory. There are some very good monitoring officers out there, but far too much poor advice is being given, leading members to feel that they are being bullied by officers.

What I have seen often shows that, for whatever reason, officers have simply failed to grasp what the reform is about. It is about having arrangements that maintain high standards while avoiding bureaucratic burdens and doing away with all the petty, vexatious complaints that bedevilled the operation of the old regime. Whether because of excessive caution, bureaucrats’ love of bureaucracy for its own sake, or a misplaced belief that they and not members should be in the driving seat on standards, officers often advise that something more or less akin to the old Standards Board regime should be continued.

One of the most worrying examples is the Public Law Partnership that provides legal advice to a number of councils, including Essex county council and, I believe, Brentwood borough council, where I was once a member. The partnership has prepared a model code and model arrangements for handling misconduct complaints that seem essentially to be a form of the old Standards

16 Jan 2013 : Column 310WH

Board regime. I see no need for a local authority to adopt a code of conduct based on such a model, or to put in place complaint-handling arrangements based upon the Standards Board regime. I see no need for a heavy, bureaucratic, gold-plated approach that has no place in the new localist standards arrangements, which should be driven by and for members.

I send a clear message to council leaders and members that where they receive such advice, they should simply tell their officers to think again. They must challenge their officers to get it right. They should tell the officers that what they are saying is wholly out of step with the new regime and its aims as approved by Parliament, and instruct them to come forward with something different—something that is proportionate and that meets the needs of members under the new regime.

I know that members are trying to do the right thing and want to make the right decisions, and that the officers giving advice sound well informed and very much in control. It is easy for members to believe, “We must do this.” I hope that today I have sent a clear message to councillors that the power is in their hands; they should exercise it and challenge their officers to come up with a light-touch scheme and approach. I know that leaders and members have the strength and capacity to do that. They should do it now, if they have not done so already. They should get on with it, using the comments made by all Members in this debate, including me, to challenge their officers. My message to monitoring officers and others who give that advice is to be professional and proportionate and to cut out the gold-plating. Let us see some common sense.

I have heard of law firms offering advice—at a price rather than pro bono, I imagine—on the standards regime and how to operate it. It is, of course, for councils to decide what advice they need. Again, I suggest that members should consider carefully whether they need outside, paid legal advice when they have their own officers. I find it hard to envisage circumstances in which seeking such advice can be genuinely justified. The new standards regime is about empowering councillors to deliver high standards of conduct; it is not about creating a new legal industry, whatever attractions that might have for some. My message to council members is at the very least to consider matters very carefully before deciding that it is necessary to involve a legal firm in the conduct of their council’s standards arrangements.

Monitoring officers are there to provide professional advice, not to decide what is to happen or judge whether a member has a disclosable pecuniary interest. I hope that I have made that clear. It is the responsibility of the member concerned to make that judgment. Members need to have confidence in the expertise, professionalism and independence of their officers and to trust that they do not have an agenda or aim that might put their advice into a particular context. Again, I encourage members to challenge their officers appropriately and robustly.

The public expect high standards of conduct from local authority members, and the vast majority of local authority members conduct themselves in an entirely appropriate manner. Across our country, they work fantastically hard for their communities. There is simply no point in a local authority needlessly imposing a burden of bureaucracy on itself. Councils now have the opportunity to free themselves of the Standards Board

16 Jan 2013 : Column 311WH

regime and make a fresh start free of complicated codes of conduct and resource-intensive arrangements for complaint handling. This opportunity is too important to miss, and I hope that they will take advantage of it, guided particularly by the comments made in this debate. I congratulate my hon. Friend the Member for Bromley and Chislehurst again on securing the debate, which is welcome and, I hope, helpful for local authorities and councillors across this country.

Mr Philip Hollobone (in the Chair): I thank all Members who have taken part in this most interesting debate, and I congratulate Mr Neill on securing it. I am afraid that we will have to contain our anticipation of hearing Mr Bellingham until the Minister arrives at 4 o’clock.

3.55 pm

Sitting suspended.

On resuming—

4.1 pm

Sitting suspended for a Division in the House.

16 Jan 2013 : Column 312WH

King’s Lynn Incinerator

4.16 pm

Mr Henry Bellingham (North West Norfolk) (Con): Although there is overwhelming consensus in favour of diverting waste from landfill, support for incineration is rapidly diminishing around the world. Increasingly, it is seen as yesterday’s technology—old technology that is going out of fashion. In spite of that, Norfolk county council has opted for incineration to sort out Norfolk’s waste, in the face of massive public opposition, which I will come back to in a moment, and the opposition of the local borough council of King’s Lynn and West Norfolk and all of Norfolk’s MPs.

In March 2011, the county council awarded a contract to Cory Wheelabrator to build a huge 268,000-tonne plant at Saddlebow, near King’s Lynn in my constituency. In spite of opposition from so many quarters, the council tried to give itself permission at a planning committee in June 2012. I am pleased, however, that my right hon. Friend the Secretary of State for Communities and Local Government issued a holding notice and called in the application, for which I and Norfolk’s other MPs are grateful. The hearing before Norfolk county council’s planning committee was a total farce, and no one received a fair hearing. I am confident that at the public inquiry, though, we will be treated with great respect; I have every confidence in the inspector.

The Saddlebow site, which is to the west of King’s Lynn, is totally unsuitable for a county-wide facility. If we are to put such a facility in Norfolk, we should not put it in the far west of the county, not least because of the number of vehicle movements necessary along already stretched roads. Furthermore, the site is upwind of Norfolk’s third largest community—I will come back to the health risks—and of the internationally renowned Wash, famous for its shellfishery and as a breeding ground for many other species. It is upwind of numerous sites of special scientific interest and areas of outstanding natural beauty, including Roydon common and the Dersingham bog on the Sandringham estate. It is also on a floodplain so, frankly, the county council could not have picked a more unsuitable site.

The figures in the contract signed by Norfolk county council with Cory Wheelabrator are huge, amounting to £596.9 million over 25 years. I understand that the runner-up was AmeyCespa, which had a bid total £46 million more favourable than Cory Wheelabrator’s. Norfolk county council must explain why it went for the more expensive solution. We must see some transparency and the evaluation results made public. Furthermore, why did it switch to Cory Wheelabrator at the last moment? The council also negotiated a £20 million penalty clause and an agreement to pay Cory Wheelabrator’s legal fees beyond a figure of £100,000, which I find staggering. The contract surely represents an abject and total failure by the county council to protect Norfolk’s hard-pressed council tax payers. As my colleagues are aware, the Department for Environment, Food and Rural Affairs issued private finance initiative waste credits about a year ago. At the time, our view was that those waste credits were not a good use of money and that DEFRA’s own criteria, which demand a broad public consensus, were not met. The contract, however, was signed, and the PFI credits signed off.

16 Jan 2013 : Column 313WH

Palm Paper has a large paper-mill near the proposed site and, at the time of the planning application, Cory Wheelabrator claimed that it was in detailed, advanced and ongoing negotiations with the mill for the offtake of heat. That claim was repeated in DEFRA’s waste infrastructure delivery programme report that was issued in October 2011. The WIDP report is the transactor monthly report, which is more of a technical document, and one was published the other day—again, there was talk of links with Palm Paper and the offtake of heat. Palm Paper, however, has denied that talks were taking place or that they were at an advanced stage, so we need to know what was going on. What was happening? Can the county council and Cory Wheelabrator clarify things?

What do the public think of all this? During the consultation process I chaired some public meetings, and both sides of the argument were made vehemently and strongly. Nearly 2,000 people voted, having attended those meetings, and 99% voted against the incinerator. The borough council then carried out a borough-wide referendum covering all my constituency and most of the constituency of my hon. Friend the Member for South West Norfolk (Elizabeth Truss). It was run by King’s Lynn and West Norfolk borough council under Electoral Commission rules, and the result was remarkable—65,516 people voted no on a turnout of 61.3%, so a total of 92.68% voted no. Compared with the recent police and crime commissioner elections, when the turnout was around 12%, that must be one of the most decisive, if not the most decisive result in British electoral history.

Neither Norfolk county council nor Cory Wheelabrator took part in the referendum. They could have done, but they refused to do so on so-called legal grounds. They could have accepted the result and looked for a compromise, or at least held discussions, but they did not. Cory Wheelabrator’s advisers, PPS, an independent communications consultancy, said in a document at the time that,

“we need to suggest that our absence from the referendum undermines the moral value of it and that it carries no legal value in any event,”

That was cynical and shabby.

George Freeman (Mid Norfolk) (Con): I congratulate and commend my hon. Friend on his work in standing up for his constituents, which is the cornerstone of our democracy. Does he agree that whatever the whys and wherefores of the issue—some of the arguments are complex—localism often requires difficult and tough decisions from the locality, but democracy is ill served if, at any level of government, consultation takes place but its findings are ignored, particularly when they are as overwhelming as in this case? When difficult decisions require leadership, they should be done without consultation that is ignored.

Mr Bellingham: I am grateful for my hon. Friend’s excellent support. My hon. Friend the Minister wrote to me about the Government’s planning policy and said, “Our policy is to put power into the hands of local communities to shape the plans and places where they live.” Does the Minister agree that it is wrong for any council, particularly a strategic tier council, to ride roughshod over local people when they have made their views so crystal clear?

16 Jan 2013 : Column 314WH

I want to say a word or two about incineration. Is it efficient, does it encourage recycling and how green is it? First, it has low energy efficiency. It produces more CO2 than oil and gas, and even coal. On the plus side, it generates electricity, but in doing so the process of combustion creates new waste streams and new hazards. I will elaborate on that in a moment. Incineration now flies in the face of the whole philosophy championed in DEFRA’s 2011 waste review, which referred to “reduction, reuse and recycling”. Recycling crowds out the three R’s.

Norfolk’s current recycling rate is a pitiful 38%, one of the lowest in the country. The county council’s figures show that it will increase to 55.4% by 2020, which is still a very low rate. I suggest that incineration discourages recycling. The revolution that is taking place is about educating people, and encouraging young people and the older generation—people like my mother who had never recycled anything, but now separates her waste and follows the recycling rules. There is a recycling revolution.

Norfolk county council committed itself under the contract to supply 170,000 tonnes of waste to the incinerator. The beast will need feeding, and the council has a choice of either keeping recycling rates low, or importing waste from around the whole region, or perhaps both, which would be the worst of all worlds. A disincentive to recycle is built into incineration, which is why in the DEFRA waste hierarchy incineration is falling down the list. The whole world is turning way from incineration, including the EU and the US.

The Massachusetts state government’s waste master plan 2010-20 refers to “A Pathway to Zero Waste”, and calls

“for keeping the state’s current moratorium on new incinerators; expanding reuse, recycling and composting; ensuring greater producer responsibility for materials; and promoting recycling businesses and jobs.”

It continues:

“on a per-ton basis, recycling sustains 10 times the number of jobs that burning does.”

That is a strong argument, and it is going on around the world.

Is incineration safe and healthy? Although the filters remove most of the larger particles, those under 10 microns are not filtered out. Those nano or microparticles escape into the atmosphere and can be blown on the wind for up to 15 miles. Even if industry removed the nanoparticles down to 2.5 microns, some would still escape, and they contain CO2 obviously, nitrogen oxides, mercury, lead and dioxins. An additional problem is that a significant percentage of the waste from the incineration process is left behind as toxic fly ash that must be treated and dealt with. There is an issue with that because the site is in a flood zone.

Many of those chemicals are both toxic and biocumulative, so they may have an impact on people’s health if they are subjected to them over a prolonged period. Many of the studies are only just reaching conclusions and producing results. The situation is evolving, and the lead-in time is often long and slow. However, a recent report from the British Society for Ecological Medicine is headed, “The Health Effects of Waste Incinerators” second edition, June 2008, and the authors are Dr Jeremy Thompson and Dr Honor Anthony.

16 Jan 2013 : Column 315WH

They focus on people such as the very young and the very old who might have a pre-existing respiratory condition, and say that some of the dioxins, particularly PAHs—polycyclic aromatic hydrocarbons—may have an effect on people with pre-existing conditions. They say that

“it has been estimated that these increase the lung cancer risk by 7.8 times”,

which I find very, very worrying.

What does that mean? It means that if the incinerator is located upwind of King’s Lynn, it could have an impact on people’s health. We do not know for sure, but I suggest that on the precautionary principle alone, one would not put it in the proposed location. Furthermore, substances such as mercury and lead do not biodegrade. They remain in ecosystems and they can have a long-term impact on food chains through a build-up, for example, in farming, horticulture and shellfish. We would be mad to locate the facility upwind of a population centre and upwind of very valuable agriculture and horticulture. All I say to the county council is, have a look at the potential damage. Look at the precautionary principle, and do not put a blight on our homes, on our habitats, and on my constituency and those of my hon. Friends nearby. I have a vision of west Norfolk attracting new waves of dynamic IT and life science businesses, but all that could be put at risk by the project.

I want to talk about the company itself, because Cory Wheelabrator is a partnership between Cory Environmental Ltd, which is a well-known, well-established UK company, and Wheelabrator Technologies, which is a subsidiary of the US credit company Waste Management Inc., or WMX Technologies. The parent company in America has a truly awful record of performance. There is absolutely no doubt about that. I have a long list of examples of where it has either been heavily fined or severely reprimanded. Most recently, Wheelabrator Technologies, which operates three waste incinerators in Massachusetts, agreed to pay a staggering $7.5 million sum to settle a state lawsuit. The alleged violations included emitting ash through holes in the plant’s roof and walls; failure to properly treat and dispose of ash; and dumping waste water in the surrounding wetlands.

Another payout, again in 2011, was $77,500, in agreement with the Maryland Department of the Environment to resolve violations of the state’s air pollution control laws in two separate incidents, both of which stemmed from a failure to control mercury emissions released from its south Baltimore incinerator. If we go back further, there are other examples—I have a long list, and I will quote two more. In 1991, the sheriff of Ventura county, California, issued a report describing 225 different criminal and civil actions over 13 years against WMI and subsidiaries. That, again, is a staggering figure. In 1992, a report in San Diego found that

“the company’s history requires extreme caution by the San Diego County Board of Supervisors or any other governmental entity contemplating any contractual or business relationship with Waste Management.”

It also stated that

“it is clear that Waste Management engages in practices designed to gain undue influence over government officials.”

16 Jan 2013 : Column 316WH

I would also like to mention one other event, from 1996, when WMX was found guilty of cheating, fraud, misrepresentation, greed and other crimes in respect of hazardous waste. A federal judge ordered an award of damages of $76 million, plus punitive damages of $15 million. Among other things, the judge said:

“What is troubling about this case is that fraud, misrepresentation and dishonesty apparently became part of the operating culture of the Defendant corporation.”

The company has serious questions to answer. I ask Cory Environmental Ltd whether it has carried out full due diligence. I also ask the Environment Agency whether it looked at Wheelabrator’s associated companies’ and parent companies’ records in America. Surely that would have some influence on the decision about whether it is a fit and proper company to be doing business in Norfolk, and furthermore, is this really a company that Norfolk’s council tax payers should be funding?

If there were no alternatives to incineration, I would be saying that perhaps we have to go along with it as the only solution available, but it is not the only solution available. Earlier, I mentioned the three R’s, the recycling revolution that is taking place that all of us want to encourage, and the change in culture across families and communities regarding people who want not only to recycle, but to add value to waste. A number of exciting technologies are now emerging, and one in particular involves anaerobic digestion plus plastics extrusion and manufacturing.

There is a company called Material Works, with which the borough council of King’s Lynn and West Norfolk has signed a memorandum of understanding and a conditional contract to treat all of its 30,000 tonnes of waste. The company’s process entails, first of all, methane extraction from anaerobic digestion, and then adding fibres and digesters from the anaerobic digestion into an extrusion process, adding plastics and polymers, and ending up with a substance called Omnicite, from which plastic products such as fencing, pallets and roofing material can be manufactured. There is a conditional contract and a pilot plant is about to be opened. If it works, and there is a very strong chance that it will, given what has been proved on the continent, Norfolk county council’s waste strategy would be in complete tatters, because it would be losing out on a key waste management partner in the waste partnership, because if the waste is not obtained from west Norfolk, I do not see how the strategy could survive.

My approach—I want to make this clear to the Minister—is constructive and pragmatic. As I say, if there were no alternative to incineration, I would not be questioning the plant so vehemently, but I believe that there are cheaper, better, more modern and more exciting alternatives that would command public support. I have lived in Norfolk all my life, bar four years, and I have spent all that time in west Norfolk, which has a truly remarkable environment. We have some world-class habitats, world-class biodiversity, and an amazing tourism industry. We have some really impressive light industry and IT companies. We have a great deal going for us, with a growing community and a great historic town, in King’s Lynn. We have some of the best farming in the country and a horticultural industry that is second to none. We have a shellfish industry in the Wash that is also incredibly important and a number of SSSIs and areas of outstanding beauty. We have a community that

16 Jan 2013 : Column 317WH

is very proud of itself, and what concerns me a great deal is that there could be a blight on this community, and the impact would be very significant. It would be an absolute scandal if all those things I have spoken of were put at risk.

What I am saying to the Norfolk county council is, please think again. I know it has the penalty clause and that it has made commitments. I know that civil servants, officials and councillors, having made their mind up, do not like to change track, because they see it a sign of weakness. What I am saying is, why not sit down and talk to local MPs—talk to all of Norfolk’s MPs—and to the borough council of King’s Lynn and West Norfolk, and look for an alternative solution that could command public support? There is an opportunity to do that, and would that not be far better than slugging it out in a public inquiry at huge public expense? There is a better way to go, and I urge it on Norfolk county council and on Cory Wheelabrator.

Mr Philip Hollobone (in the Chair): The Minister has until 4.46 pm to respond.

4.37 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles): It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for North West Norfolk (Mr Bellingham) on securing this debate on a subject that is of such importance to his constituents. I am always in awe of him, particularly when he arrives here at the head of an army of men and women from Norfolk who have turned out, in numbers that any of us in this place would envy in an election, in support of the cause for which he argues so eloquently.

I know my hon. Friend will understand that with the application having been called in by the Secretary of State, which he was keen to see happen, it is now not possible for me to discuss the details of the application, for fear of prejudicing that process of inquiry and call-in. However, it may be helpful if I set out briefly the general national policy background for waste policy against which the decision will be made and talk a little how about the process of public inquiry will work, so that his constituents can understand how they can engage and ensure that their opinions are taken into account in that process.

My hon. Friend recognised, and indeed saluted, the Government’s commitment to a zero-waste economy. In preparing for this debate, I came across a phrase that I thought was horrific: the waste hierarchy. When we dig behind the phrase, however, we discover a very intelligent and simple concept, which is that the first priority should be to reduce our use of any material; the second priority, if we cannot reduce our use of the material, should be to reuse it; the third priority, if we cannot reduce our use of it or reuse it, should be to recycle it; if we cannot do any of those things, we should think about energy recovery from burning it; and only as the last resort should we consider disposing of it. My hon. Friend is right to point out that energy recovery comes way down the list. To the extent that it is possible to push stuff higher up, into one of the other categories of reduction, reuse or recycling, that is better.

The Government require every area to have a plan for waste management. I recognise that Norfolk county council has such a plan and congratulate the council on

16 Jan 2013 : Column 318WH

that, because that is the key basis for the decisions it makes. As a Government who genuinely would like to see as many local decisions as possible, we would prefer local authorities to make decisions on waste, as on other matters, for themselves, having put in place the right policies through a plan on which they have consulted widely with local people. Our default position therefore is that we would prefer a local authority in Norfolk to take this decision. Sometimes, however, issues are so controversial or their impact will be so widespread that the Secretary of State has the right to call in the decisions. To be clear, the criteria suggest that if an application might conflict with a national policy on an important matter, have a long-term impact on economic growth, have significant effects beyond the immediate locality, or give rise to substantial controversy, there is a case for the Secretary of State to call it in to make the decision at national level.

After my hon. Friend and all the other Norfolk MPs, plus others—a total of 20 MPs, I believe—and many other people suggested that the Secretary of State should call in the application, the Secretary of State took the decision to do so. What we now start on is the process of public inquiry by an inspector. Let me briefly set out how that will work.

Mr Bellingham: I am indebted to the Minister for making those important points. On the point about Norfolk’s waste strategy, does he agree with me that it would be much better if Norfolk county council had got the full support of all the districts, including Norwich city council and King’s Lynn and West Norfolk borough council, for incineration? Those other councils support the waste strategy in broad terms, but not incineration specifically, so there is a glaring fault in the waste strategy.

Nick Boles: I certainly agree with my hon. Friend that it would be preferable to have that support. We do need to recognise—this is not unique to incineration—that certain facilities that are required in every area of the country will never be popular among their neighbours. This facility may well be one of them, but what is absolutely the case is that there needs to be a thorough process to gain an understanding of the answers to the following questions. Is this is the right facility? Is it the right technology? Is it a necessary facility? Is it of the right scale and, critically, is it in the right place? Is the operator, as my hon. Friend has asked, a fit and proper operator? All those questions will be explored—should be explored—by the county council in putting together its plans and will be explored, to the extent that they are planning issues, in the planning inquiry.

The timetable for the public inquiry procedure is designed to enable the application to proceed quickly and fairly. I understand that the inquiry will commence on 26 February and it is envisaged that it will run until 19 April. My hon. Friend has made clear the extent and the strength of local feeling in his constituency and beyond its borders about the application. He has set out some compelling arguments about the particular facility and the people running it, as well as the alternatives that he and his constituents believe could do the job that is required for Norfolk’s waste, without bringing the impact on communities that he so fears. That public inquiry will give him and the people he represents so capably

16 Jan 2013 : Column 319WH

every opportunity to develop those views, to put their arguments and to have them tested by a planning inspector. That is what will inform a decision that the Secretary of State will ultimately make. I cannot promise my hon. Friend, of course, that the decision will be one that he will welcome, but I can promise him that the process of arriving at that decision will be thorough and open and will give his constituents and him every opportunity to make their case.

Mr Philip Hollobone (in the Chair): We now come to the last debate of the day, which will conclude no later than 5.16 pm.

16 Jan 2013 : Column 320WH

Payroll Companies

4.45 pm

John Cryer (Leyton and Wanstead) (Lab): It is a pleasure to speak under your chairmanship, Mr Hollobone. I thank Mr Speaker for allowing this debate to go ahead. It essentially comes down to a simple issue—the division between people who are employed and people who are self-employed. That division traditionally was quite firm; there was a definite line between the two, but in recent years it has become blurred. Certain disreputable employers have had a very strong interest in blurring that line, on the basis that they can divest themselves of responsibilities if they transfer their work force into self-employment. For instance, they do not have to pay employers’ national insurance, holiday pay, sick pay and redundancy pay. They do not have to pay into a pension scheme. Also, the workers are relieved of many if not all of the rights that people have at work.

What we have seen in the recent past—this is a comparatively recent development—is the advent of what are now called payroll companies. Those companies will say to employers, “You give us the responsibility for your payroll and the responsibility for the relationship with the work force, and we will make sure that you don’t have to pay tax, national insurance”—and all the other things that I have mentioned. In some cases, they also say, “Do a deal with us and we’ll get Her Majesty’s Revenue and Customs off your back for good.” I will say more about that later.

Payroll companies seem to be active in all industries, and trade unions and other bodies have long raised objections to their activities. However, the building union UCATT—the Union of Construction, Allied Trades and Technicians—recently commissioned a report by Jamie Elliott, a freelance investigative journalist, which has brought some extremely interesting and worrying developments to light. To launch the investigation, UCATT set up a fake building company called Fairbrother Builders. Jamie Elliott then approached a number of payroll companies. The biggest of these was Hudson Contract.

I should point out that the report makes it very clear that the majority of the payroll companies agreed to help to shift workers from being employed to what I would regard as bogus self-employment. Some did not, but the majority did. The biggest one, and the biggest one in the country, is called Hudson Contract. It made no attempt to conceal what it wanted to offer. It wrote in an introductory letter to Fairbrother Builders:

“We can save you money, 20% of your labour costs, by reclassifying PAYE staff, paying them through CIS.”

For hon. Members who do not know what the CIS is, it is the self-employed scheme in the construction industry; it stands for Construction Industry Scheme. The letter continued:

“Self Employed operatives, paid under CIS deduction through Hudson are not entitled to holiday pay, redundancy or notice. We are helping companies to move their PAYE labour over to CIS…Last year this saved our clients over £25M in Employers NIC, placing tax and employment law liabilities with us.”

That seems pretty disreputable to me, but what then happens, if the employer decides to go down the route of using a payroll company to transfer the work force into self-employment, is that the work force are asked to sign a contract with the payroll company. That is often sweetened slightly by a small rise in pay, but that will never compensate for all the other benefits and

16 Jan 2013 : Column 321WH

rights at work that in the meantime have been lost. It is particularly the pension rights that spring to mind, because pensions are so crucial in all industries, but particularly in the construction industry.

Once the contract is signed, the former employee no longer has a relationship with the original company but only with the payroll company. But of course on the ground, in the workplace, the payroll company has absolutely nothing to do with the direction of operations —in this case, in construction. The client company—by that I mean the building firm—issues directions and engages with the work force, who in all practical ways remain employed but technically are not. That is a perverse situation. The contract used by Hudson states that the worker

“has no contract of any type whatsoever with the client”

and

“he neither has nor shall make any contractual claim of any type against the client”.

Yet the contract also makes it clear that the new relationship between the freelance operative—I am using its words—and the client has little to do with the way that work is agreed on the ground. In practice, it has nothing to do with the way the work is carried out and agreed on the ground. The contract continues:

“The terms upon which that labour shall be supplied shall be negotiated directly between the freelance operative and the client...upon the conclusion of those negotiations, Hudson will step into the shoes of the client and contract with the freelance operative on the terms negotiated.”

Reading that, I have just noticed that Hudson do not know the difference between a verb and a noun, but that is by the by.

The Hudson website also makes very bold claims as to Her Majesty’s Revenue and Customs:

“Say goodbye to HMRC status issues and employment tribunal challenges.”

It is a bold statement, but to a large extent, Hudson is justified in making that claim. HMRC challenged Hudson in 2007—when I say challenge, I mean a legal challenge—and took the case to the High Court. HMRC argued that, despite what the contract stated, there was an implied relationship between the construction company and the freelance operative because of the reality of the relationship between the company and the operative, which is denied by the contract and the services offered by Hudson and other such companies. It makes perfect sense; there is an employer, which employs people to do a certain job, and that job and that relationship do not change, and yet people are told, “You are now self-employed. Despite the fact that you work for the same people and despite the fact that you do the same job, you are now technically self-employed.”

Incredibly, the High Court rejected the argument, and on top of that rejection, the past three years have seen the number of employer compliance reviews conducted by HMRC fall dramatically. The cumulative effect is that firms in all industries, not only construction—this has spread to other industries as well—have little to fear from Government agencies, because HMRC is powerless to do anything.

Bill Esterson (Sefton Central) (Lab): I congratulate my hon. Friend on securing an important debate for all Members’ constituents affected by the worrying trend

16 Jan 2013 : Column 322WH

of payroll companies in many sectors. Does he agree that it is about time the Government looked at the practice, certainly to benefit the workers who are losing out, but also because it affects workers’ confidence to spend money and therefore the wider economy? That is why the Government need to look at this in detail.

John Cryer: I thank my hon. Friend for that intervention. He makes an important point. Creating economic uncertainty—and there is enough of that about anyway—and payroll companies spreading it around by making people self-employed so that they do not have rights at work or confidence in the future, is hardly an incentive to spend money. If people are not spending money, there will be even less economic confidence or confidence in other areas.

Steve Rotheram (Liverpool, Walton) (Lab): I congratulate my hon. Friend on developing some interesting arguments about this largely unknown and certainly unexplored and ignored issue. May I pay tribute to my union, UCATT, which I joined as a young teenager in 1979? Members will say that that year does not sound right, but—

Rachel Reeves (Leeds West) (Lab): Child labour.

Steve Rotheram: Yes, child labour.

I pay tribute to the work that UCATT has carried out in bringing the issue to the attention of a much wider audience. Can my hon. Friend the Member for Leyton and Wanstead (John Cryer) say why, at a time when Liverpool city council, for example, is having 52% of its discretionary budget cut—up to £300 million—the Government are turning a blind eye to payroll companies, which are avoiding paying up to £2 billion into Treasury coffers?

John Cryer: I thank my hon. Friend. He makes a good point. The council that largely covers my constituency, Waltham Forest, faces some savage cuts, while we see billions—it is billions, by the way—disappearing down the Swanee, because HMRC is powerless to stop it. HMRC itself is facing cuts and has been for quite some time. It will face more and more cuts; its staff numbers are being reduced, so it is unable to police this behaviour.

I should point out that not all payroll companies behave as Hudson does. When Jamie Elliott began his report, he found companies that said, “We are not going to help you do this. This is inappropriate. We think that you are engaging in bogus self-employment, so we will not help you.” The majority, however, did not say that. The majority said, “Yes, we are more than happy to help you transfer people to”—using my words—“bogus self-employment.”

I have mentioned the more respectable payroll firms, but at the dodgy end of the market things can be even worse. There are cases of workers turning up for work and being told, “Although you have not signed or agreed anything, you are now self-employed. You are not employed by the company.” They are transferred without their knowledge. That may technically be illegal, but under the current circumstances and in such an uncertain industry as construction, many employees will not be keen to complain about an employer, which clearly does not think that much of them if they want to transfer them to being self-employed.

16 Jan 2013 : Column 323WH

I have described a fairly straightforward sort of scam— I use the word advisedly—but another scam is the use of umbrella companies, which is rather more complicated. Workers remain employed, but by an umbrella company, which is in turn set up by the payroll company. The cost saving is made by a tax dodge that allows tax relief on employees’ travel and subsistence to be used to pay employers’ national insurance. Since employers’ NI runs at 13.8%, we are talking about a considerable saving. That is the incentive that payroll companies have to set up the umbrella companies that allow the dodge to take place.

A final example of the sorts of practice being engaged in is the use of offshore status. For example, International Subcontracting Solutions Ltd employs 24,000 supply teachers across the UK. Because it is based in the Channel Islands and is a payroll company, ISS is not liable to pay employers’ NI, although it does technically employ the teachers. At the same time, the recruitment agencies in the UK that actually find the jobs for the teachers are also not liable to pay employers’ NI. On all the fronts I describe, the Treasury is losing out in a big way—to the tune of billions of pounds.

My final point is in line with the intervention that my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) made. The Elliott report puts the amount of money lost to the Treasury at £1.9 billion, but that only covers construction. It is an estimate, but it is pretty accurate. There have been no detailed reports, which is why I have concentrated on the Elliott report, but from what I can gather, such practices are spreading to other industries. I have received e-mails describing how they are spreading into the hospitality, catering and retail industries.

If we take all those industries together, my suspicion is that billions of pounds are being lost to the Treasury at a time when we are seeing savage cuts to public services left, right and centre. Every Member can cite cuts to services in their constituencies and local authorities used by the people who they represent, and yet all this money seems to be disappearing down the Swanee.

Thousands, certainly tens of thousands, and possibly millions of workers in the long term, will be deprived of basic rights at work, their holiday and sick pay, and their pension and redundancy entitlements. That will do only one thing: fuel a lack of confidence in the economic future of this country.

Ian Murray (Edinburgh South) (Lab): I thank my hon. Friend for giving way just before he concludes his remarks. He has made a powerful speech. It is important to remember that self-employment and freelancing are good, but we are looking to tackle bogus self-employment. Is it incumbent on the Government to launch a full inquiry, through the Department for Business, Innovation and Skills, into this, not only for the sake of the employees and the Treasury, but because of issues in the construction sector such as blacklisting? People who work in the construction sector deserve an awful lot more from this Government. They deserve a full investigation of all the facts around their employment and future.

John Cryer: My hon. Friend makes a very good point. It would be a sensible solution for the Department to conduct an inquiry into the various tax dodges,

16 Jan 2013 : Column 324WH

particularly in construction, but in other industries as well; into blacklisting and all those slightly shadowy practices, some of which are straightforwardly illegal, some of which verge on illegality and some of which are straightforwardly legal; and into how it affects people and business and economic confidence.

Jim Sheridan (Paisley and Renfrewshire North) (Lab): Apart from the impact on employees, such an inquiry might cover how much damage is being done to small and medium-sized enterprises in the construction industry, which are suffering seriously during this recession only because they treat their employees fairly and are undermined by such people.

John Cryer: That is a very good point. I have met many employers, including in my constituency—I represent two boroughs, Redbridge and Waltham Forest, because it crosses borough boundaries—who have told me exactly that: “We are a legitimate employer. We want to do our best by our employees. We want to protect them. We want to give them decent wages, holiday pay, sick pay, pension entitlements and all that. Sadly, however, we are being undercut by people who are frankly cowboys.”

It would be an excellent idea for BIS, perhaps under the leadership of the Minister, to look into such practices and see exactly what is going on. Those practices are not often brought into public light, partly because people who suffer under them are very nervous about reporting them. People have come to my surgery, as they probably have done to those of many other hon. Members, to tell me about such practices, but as soon as I ask them whether they will go on the record, they say, “Well, no. I can’t go on the record, because I will never work again, at least not in the industry”—for instance, construction—“as I will effectively be blacklisted.”

In conclusion, the two elements—the loss of money to the Treasury, which is very significant, and the loss of rights and pay, the resulting loss of economic confidence and the basic unfairness of some of the practices—should be brought to light and be ended, which is why I am interested to hear the Minister’s response.

5.2 pm

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): As always, it is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Leyton and Wanstead (John Cryer) for securing and introducing this debate, and for outlining the range of issues about which he and his colleagues are concerned. Towards the end of his speech, he rightly spoke about how it can be a challenge for people who are worried or vulnerable within the employment market to speak up on things that are not right. That is one reason why it is important that they can bring such matters in confidence to their Member of Parliament, so that MPs can take the opportunity to raise issues in the House and question Ministers through such vehicles as Westminster Hall debates. It is right and fitting that he has done so today.

It is worth putting on the record that the problem we are discussing is not the existing model for payroll companies per se. As the hon. Member for Edinburgh South (Ian Murray) pointed out, there is a range of different employment statuses and ways of working. We enjoy having the kind of labour market that has flexibility,

16 Jan 2013 : Column 325WH

which has many benefits for our economy. At the same time, however, that does not mean that we should not be concerned when vulnerable people are subject to practices that should not be going on.

It is worth noting that, even in the investigation that was carried out, not all the companies approached acted in any way improperly, as has been mentioned. Many payroll companies provide a valuable role, not least in small and medium-sized enterprises up and down the land that may not be able to have their own full human resources departments. Outsourcing that service can be essential, but of course we want to ensure that that service is not being used as a front for tax avoidance or to deny people rights to which they should absolutely have access.

The practice that the hon. Member for Leyton and Wanstead described, from that investigation, of a company basically wanting to shift people from PAYE to self-employment, without changing anything else about their work, management structures and so on is absolutely unacceptable. He is right to highlight that that type of behaviour is fake self-employment. HMRC has powers to investigate and clamp down, and those companies will then be liable for tax and national insurance contributions and issues such as holiday pay, when an individual was effectively an employee rather than self-employed. The company, not the individual worker, would be liable for those costs.

Steve Rotheram: Will the Minister give way?

Jo Swinson: I will certainly give way to the hon. Gentleman, who I am shocked to learn was a teenager in the late 1970s—some appalling kind of child labour must have been going on.

Steve Rotheram: I was exploited at a young age. If money is demonstrably not being collected by HM Treasury, has the Minister queried why? Why is a blind eye being turned to the construction sector? Is that perhaps because the casualisation of our industry that results from payroll companies’ practices is a price worth paying?

Jo Swinson: I do not agree, and I do not accept that a blind eye is being turned, because HMRC is able to investigate. One of the concerns that has been mentioned is the reduction in the number of investigations opened. I can understand why, at first glance, those figures are of concern, but it is worth bearing in mind the context. Basically, there is much greater use of intermediaries and employment businesses in the recruitment of people into the industry, so the smaller number of cases opened by HMRC does not necessarily reflect a smaller number of individuals covered. A case may be opened now that would have involved many individual cases some years ago, and therefore I do not draw the same conclusion as the hon. Gentleman.

It is important that HMRC investigates, because none of us wants to see tax avoidance. We may disagree on the figures and estimates. The hon. Member for Leyton and Wanstead suggested that the figure was £1.9 billion. The Government’s estimate—it is based on the previous Labour Government’s estimate, which is very much in line—is about £350 million a year. We therefore disagree on the scale, but whether it is

16 Jan 2013 : Column 326WH

£1.9 billion or £350 million, we can all agree that tax avoidance is not welcome or acceptable if the practice is deliberate and people are actually employed rather than self-employed. The Government are, of course, taking significant steps to clamp down on tax avoidance.

The hon. Gentleman also raised the worrying issue of companies suddenly trying to transfer to self-employed status people who had previously had full employee status. Of course, as he acknowledged, that would be illegal, because companies cannot unilaterally change employment contracts.

It is worth recognising that more can be done to improve the information available to individuals about their rights. The Government website, which is a good source of information, is being revamped under the gov.uk banner. We in the Department for Business, Innovation and Skills will look at the information about different employment statuses that we provide through that website and at how best to get across that information. In doing so, we will consider some of the issues that the hon. Gentleman raised in his speech.

There is also the pay and work rights helpline, which is a free service. It is confidential, which is important, given the fear that vulnerable employees might sometimes face. There is somewhere that is free for them to go for advice in confidence. The number is 0800 917 2368, which I encourage MPs to be aware of and to pass it on their constituents.

We have a flexible labour market in this country, which is valuable in itself. The challenge is to distinguish between false and genuine self-employment. Of course, not everyone who is self-employed and works in the construction industry is falsely self-employed; it is an entirely legitimate path for individuals to choose. Equally, we should not assume that everyone who works in that way in the construction industry is in some way cheating the system.

We have a range of different employment statuses—employee, worker, fixed term, part time, temporary—and it is right for employees and companies to be able to choose between those options, so that they can find the approach that works best for them. It would not be helpful to suggest that any type of employment status is better than the others, because people value different elements. Flexibility is often appreciated in both directions, as is the extra control that workers often have on how they undertake their contracted work, rather than being directed as an employee would be.

Steve Rotheram: I do not think that anyone is suggesting that every self-employed person is dodgy or that they are going through an organisation that is in some way dodgy. Like many people, my hon. Friend the Member for Leyton and Wanstead (John Cryer) and I were self-employed in the construction industry. The issue here is about the practices that are demonstrably called into question by the report that was referred to earlier. If nothing else, will the Minister agree to meet the Union of Construction, Allied Trades and Technicians and perhaps other unions to discuss the matter in detail?

Jo Swinson: The debate today gives us an opportunity to discuss a range of related issues and for the Department for Business, Innovation and Skills to look at what it can do. HMRC plays a significant role in the matter, so

16 Jan 2013 : Column 327WH

it would be worth engaging with Treasury Ministers. I will undertake to contact my counterparts in the Treasury after the debate to express the concerns that have been raised, particularly those in the UCATT report. I will make sure that they have a copy of that report and are aware of the issues. Anyone who likes can report any concerns about tax evasion directly to HMRC. The authors of the report and, indeed, hon. Members may want to do so on 0845 915 3296.

The resourcing of HMRC was mentioned, and we are investing more than £900 million in HMRC to tackle tax evasion, criminality, unpaid tax debt and avoidance. We announced on 3 December an additional £77 million by the end of 2014-15 to expand the anti-avoidance and evasion activity, because it is important. Some issues have been mentioned today not only in the construction sector but through false self-employment, which we recognise is a problem. More widely, there have been well publicised cases of tax avoidance, and we want to ensure that they are dealt with.

Jim Sheridan (Paisley and Renfrewshire North) (Lab): It is estimated that some 300,000 people are falsely registered as self-employed. I do not know whether that figure is correct. Perhaps the Minister has the correct figure. If she does not, will she write to my hon. Friend the Member for Leyton and Wanstead (John Cryer) with her Department’s estimate of the number of people who are falsely registered?

Jo Swinson: I do not have the estimate of the number of people who are falsely registered, but the Government’s estimate of the cost of false self-employment in this area is £350 million. I will certainly see whether HMRC has additional estimates of the number of people who are falsely registered. I would be surprised if it were as high as 380,000, given HMRC’s estimate of the cost. I will endeavour to find out and to write to the hon. Member for Leyton and Wanstead.

16 Jan 2013 : Column 328WH

The construction industry scheme was mentioned, and it has an important role to play in tackling tax evasion. We do not want to fall into the trap of thinking that many people are trying not to pay tax. Most people pay what is due and pay it on time, and that is as true in the construction sector as anywhere else. We are aware, however, that because of the flexible contracts in construction, where itinerant labour is often used, there can be challenges. That is why the construction industry scheme was set up, so that a deduction or withholding payment of 20% can be made from the payments to a subcontractor if their track record indicates that that is necessary. The scheme secures £3.2 billion a year that might otherwise be at risk. In cases of genuine self-employment, at the end of the year appropriate reports and returns are sent in and a refund is paid.

Ian Murray: Does the Minister not realise that the reason why the Government have to deal with this problem is that workers in the construction industry are, given the state of the industry, simply glad to be in a job, so they will not raise concerns themselves? It is important that the Government take hold of the issues and deal with them on behalf of the workers. Workers fear for their jobs at the moment, which is why they are not bringing forward concerns themselves.

Jo Swinson: I recognise that at a time when unemployment is certainly higher than we would like—thank goodness, it is starting to come down, but we all want it to be much lower—that has a knock-on effect on the confidence of people in the labour market to challenge behaviour. That is why the Government, and, I would argue, hon. Members, have an important role to play in ensuring that people have information about their rights. Helplines offer free and confidential advice. Employers’ responsibilities are often highlighted, and public pressure can be applied, particularly to large household name companies, to ensure that good practice is followed.

5.16 pm

Sitting adjourned without Question put (Standing Order No. 10(13)).