House of Lords
Wednesday, 6 March 2013.
3 pm
Prayers—read by the Lord Bishop of Leicester.
Taxation: Income Tax
Question
3.06 pm
To ask Her Majesty’s Government what measures they will take to ensure that wage-earners who are below the income tax threshold will benefit from any future increases in the personal allowance.
Lord Newby: My Lords, since 2010 the Government have announced successive increases in the personal allowance totalling £2,965. Taken together, these changes will ensure that more than 2.2 million low-income individuals will be removed from income tax altogether. The Government are also taking other measures that will benefit those who are below the income tax threshold, including the introduction of universal credit, support on childcare and the pupil premium.
Lord Greaves: My Lords, some 4,300,000 employees already earn too little to benefit from the increase in the personal allowance this year—which I fully support—and this will rise to nearly 5 million workers in 2013-14, about 17% of the labour force, of which two-thirds will be women. How can it be right or fair that a policy trumpeted as helping low-paid workers does nothing for the lowest-paid 5 million? Will the Government look seriously at new ways to end this unfair situation?
Lord Newby: My Lords, some of those 5 million were paying income tax until we took them out of income tax, so they have benefited significantly from the changes that we made. The vast bulk of those 5 million are people in work who are not working full time, so one of the key things that we have to try to ensure is that more people are working full time. One of the better statistics on the labour market—which had a good year in many respects last year—is that 32,000 people who were working part time and who wanted to work full time got full-time jobs in the last quarter of last year.
Lord Morris of Handsworth: My Lords, interesting as it is to be debating the tax and benefits system, is not the real answer here the rapid and vigorous promotion of the living wage? That will do more for the poor than the tax and benefits system as outlined by the Minister.
Lord Newby: My Lords, the living wage is one component in supporting the poor, and the Government have made it clear that they encourage people to use it.
However, for many people who are poor the key thing is to get into work and, having got into work, to work the number of hours that are compatible with the family circumstances in which they find themselves. Particularly via the universal credit, we are taking steps to make sure that work always pays and that people are indeed encouraged to take up the maximum number of hours that are appropriate for them.
Lord Forsyth of Drumlean: My Lords, while congratulating the Government on raising the threshold at which people pay income tax—an ideal which was first put forward by my noble friend Lord Saatchi—perhaps I may just ask whether they have any plans to raise the threshold at which people pay national insurance. Many of the people to whom the noble Lord, Lord Greaves, referred are still paying national insurance at very high rates, and national insurance is a tax. Would we not be wise to merge national insurance and income tax so that people realise just how much is being taken out of their pay packets?
Lord Newby: My Lords, the Government do not have any plans to raise the threshold for national insurance simply because—as noble Lords will be aware—to do so would be extremely expensive. The Government looked at merging national insurance and income tax but have decided that they will not take that consideration any further forward for the course of this Parliament.
Lord Brooke of Alverthorpe: My Lords, is it not true that the 5 million people who may have benefited from the changes have in fact had to pay extra VAT since this Government came to power? They are all paying 2.5% extra in VAT. Could we not look for a reduction in the VAT rate, which in turn would then be a great stimulus to the economy?
Lord Newby: My Lords, the Government do not think that a reduction in the VAT rate makes any sense at this point. A 1% reduction in the VAT rate costs about £12 billion. If we were to reduce the VAT rate, we would have to find that £12 billion from somewhere else—so we do not propose to reduce it.
Baroness Gardner of Parkes: Is any thought being given to rates of pay for the self-employed? We have heard about the living wage, which is great, and even the basic wage is something, but I meet so many people in caring jobs who are earning less than £2 an hour. How can they live on that? The employer, who is usually employing them directly, has no obligation whatever to pay any more than that. These people are often a bit intimidated but they continue to work for that sort of miserable amount because they really care about the person.
Lord Newby: My Lords, as the noble Baroness knows, we have minimum wage legislation. That is the route to ensuring that people are paid a decent minimum wage.
Baroness Farrington of Ribbleton: My Lords, will the Minister admit that some of the people to whom I think the noble Baroness, Lady Gardner, was referring are classified as self-employed and therefore are not protected under the national minimum wage legislation? Will he write to me with details of the reductions in benefit that will occur for those who earn too little to benefit from the subject matter in the Question asked by the noble Lord, Lord Greaves, and who will therefore be losing money twice?
Lord Newby: I am always happy to write to the noble Baroness. On the first point she raised, if one is self-employed, the only person you can look to to pay your salary is yourself. If you earn money yourself, you are able to pay yourself well. If you have a contract with somebody as a self-employed person, you should be looking to be paid at least the minimum wage under that contract. However, many self-employed people do consultancy work of various sorts for a fixed price or produce goods and the extent to which they earn an income depends on the extent to which they are able to sell what they produce.
Lord Davies of Oldham: My Lords, the noble Lord’s Answer to his noble friend Lord Greaves was pathetically thin against a background where, as he must surely appreciate, unfairness is perpetrated very heavily against the low-paid and the poor, for whom the Government have scant regard, having of course withdrawn significant numbers of benefits from them. When will the Government address the fact that the economy is so lacking in demand that we are in the worst depression for 80 years? Ministers are not matching up to the challenge presented.
Lord Newby: My Lords, for most people the most important factor in the economy is whether they have a job. Last year, an additional half a million people got a job and it was a major step forward in their personal circumstances. The labour market has performed well, and it continues to perform well, and all forward indicators in recent surveys suggest that, across all sectors, even more people are likely to be employed in the near future.
Health: Cardiology
Question
3.15 pm
To ask Her Majesty’s Government what measures they are taking to detect and prevent sudden cardiac death.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, as the Cardiovascular Disease Outcomes Strategy published yesterday made clear, the national clinical director for heart disease will continue to work with all relevant stakeholders to develop and spread good practice in this area. Alongside this, the UK National Screening Committee is reviewing the case for screening for sudden cardiac death, and will begin a public consultation on this soon.
Lord Storey: I thank my noble friend the Minister for that Answer. He will no doubt be aware that hundreds of young people die as a result of fatal premature cardiac conditions each year. He may also have heard of the Oliver King Foundation, established in memory of a 12 year-old Liverpool boy who sadly died of sudden death syndrome at his school in 2011. Does the Minister not agree that despite many ambulance trusts having some form of community resuscitation department, it should be policy to install automated external defibrillators in all public buildings? Furthermore, will the Minister agree to meet with the foundation and others to discuss the feasibility of a national screening programme to identify those at risk and prevent further loss of life, particularly among young people?
Earl Howe: My Lords, I pay tribute to the Oliver King Foundation for its work, as indeed I do to Cardiac Risk in the Young, which for many years has been campaigning very tellingly and successfully in this area. I think that my initial Answer should have satisfied my noble friend on the screening question, because that is now being reviewed by the screening committee. Regarding defibrillators, we have to look at the need to improve survival rates in the most effective way. I understand that the majority of these deaths—possibly as many as 80%—occur in the home. While we agree that the wider availability of defibrillators could save additional lives, CPR skills—cardiopulmonary resuscitation—should save more lives. To that end, the outcomes strategy says that my department will work with the Resuscitation Council, the British Heart Foundation and others to increase the number of people who are trained in CPR.
Lord Turnberg:My Lords, will the noble Earl encourage all schools to incorporate training in CPR for all schoolchildren? A skill learnt there will carry on through the rest of a child’s life.
Earl Howe: My Lords, the noble Lord makes a very good point. Again, as the CVD outcomes strategy sets out, basic life-support skills could be more widely taught as part of volunteering programmes; for example, in schools and the workplace. I am aware that bystander CPR doubles survival rates yet is attempted in only 20% to 30% of cases. There is scope for all emergency service personnel to be trained in CPR, and for basic life-support skills to be taught more widely.
Baroness Finlay of Llandaff: Are departmental advisers working with the new chief coroner, whose appointment has been widely welcomed, to ensure that there are minimum standards at post-mortem, so that when a young person has had a sudden cardiac death the risk to other family members can be appropriately identified? It is important that specimens from the heart of a deceased young person are not lost because the post-mortem has not been done to a high enough standard.
Earl Howe: The noble Baroness makes a very important point. My department supported the formation of the UK Cardiac Pathology Network in 2006 to provide local coroners with an expert cardiac pathology service
and to promote best pathological practice in sudden death cases. A national database on sudden arrhythmic death was launched in November 2008, allowing pathologists to record information on cases referred to them. In the longer term this could be very helpful in building a deeper understanding of the problem.
Lord Colwyn: My Lords, during 2011, 56 deaths were caused by fire in London. Legislation requires all public buildings to have fire extinguishers. In that same period in London, there were 9,657 out-of-hospital cardiac arrests. Why is there no similar legislation for public-access defibrillators?
Earl Howe: My Lords, as a general point, ambulance trusts are by far the best placed to understand the requirements of their local populations in terms of defibrillator distribution. However, I understand that the British Heart Foundation is looking into the need for more defibrillators in the community, so we will await that work with great interest.
Lord Glentoran: My Lords, can my noble friend tell us what effect in percentage terms obesity is having, particularly on the young? I read that a considerable percentage of deaths and heart problems are due to obesity. What programmes do we have running to reduce the level of obesity in the United Kingdom?
Earl Howe: My Lords, a variety of programmes is running, including Change4Life and the national screening programme. However, as my noble friend will be aware, the kind of sudden cardiac death mentioned in the Question is rather different from cardiovascular disease, which afflicts people in later life. We are talking in the Question about unexplained, very sudden cardiac death in the young, which we believe has little to do with lifestyles and much more to do with genetic susceptibility.
Lord Hunt of Kings Heath: My Lords—
Lord Patel: My Lords, will the Minister explain a little bit more about the proposed public consultation on screening? The evidence for the screening of families where a cardiac death has occurred, particularly in a young person—which is linked to a gene—is conclusive, so what is the public consultation about?
Earl Howe: The public consultation is reviewing the policy position on screening for hypertrophic cardiomyopathy, but the noble Lord is absolutely right that better identification of families who are at high risk of inherited cardiac conditions is vital. That is stressed in the cardiovascular strategy.
EU: Salaries
Question
3.22 pm
To ask Her Majesty’s Government how many people are employed by the European Union institutions; and what assessment they have made of how many of those individuals pay either no tax or reduced tax rates on their remuneration.
Lord Wallace of Saltaire: My Lords, the European Union institutions all together employ approximately 55,000 people. EU staff are exempt from national income tax, a similar situation to that found in other international bodies. As in other international bodies, the EU deducts a proportion of salary as a form of extranational taxation, proceeds from which are returned to the EU budget. This is applied progressively, rising from an initial 8% to a 45% marginal rate for the highest-paid. In addition, there is now a special or solidarity levy, which last month was increased from a top rate of 5.5% to 6%; most officials pay an average of 2%. I should declare an interest. My wife was for five years the director of the Robert Schuman Centre in Florence, whose staff regulations were those of the European institutions. We have examined her payslips and established that an average of 28% of her gross salary was deducted in community tax each month.
Lord Flight: My Lords, would it not be more sensible for civil servants working for the EU to be taxed on the same basis as civil servants working, for example, for the Foreign Office; namely, for them to pay the rates of income tax applicable to the country where they are otherwise normally resident?
Lord Wallace of Saltaire: My Lords, we are now into the whole question about residency, non-residency and international organisations. It has been a common rule for international organisations that you do not pay national taxes but are given a degree of exemption. If we were to reclassify the European Union as not an international organisation but as rather like going to work in Manchester or Leeds, different processes would apply. As a former international banker, the noble Lord will be well aware of the many complexities of international taxation, expatriate allowances and the like.
Lord Tomlinson: Is the Minister as surprised as I am by the low number of European Union institution employees? How does that figure—I think he said 55,000—compare with a large-scale local authority in the United Kingdom?
Lord Wallace of Saltaire: My Lords, the figures I have are that Paris employs 50,000 people and Birmingham employs 60,000 people, so it is a relatively modest number. I am sure the noble Lord will admit that the inefficiencies of the Commission—in particular, the rather inadequate personnel policies, the relatively generous allowances and an expatriate allowance which, unlike the NATO expatriate allowance, does not phase out after a number of years and is rather more generous—are things that we should be looking at, particularly when all national budgets within the European Union are being squeezed.
Lord Dobbs: Will my noble friend help a confused man who has trouble with numbers? We have one European Union which has two parliaments, three presidents and dozens of employees who earn more than our Prime Minister. I understand that the second parliament in Strasbourg, over the course of the parliamentary cycle, costs our taxpayers €1.5 billion. Do any of those statistics make any sense to him?
Lord Wallace of Saltaire: My Lords, there are a number of built-in inefficiencies in every international organisation to which we belong. It is not two parliaments, it is two parliament buildings. The British Government and British Members of the European Parliament have campaigned for several years for a single seat for the European Parliament. If I were to go into the enormous costs of the UN having a base in Geneva as well as New York, we would note that the EU is not the only international organisation that suffers from these inefficiencies.
Lord Anderson of Swansea: My Lords, lest the Question be viewed as in any way anti-European Union, which I am sure is not the noble Lord’s intention, will the Minister confirm that the tax regime he mentioned not only applies to the United Nations but also to a number of other organisations based within the European Union, such as the OSCE and NATO in Brussels? It is general and in no way a feature of the European Union.
Lord Wallace of Saltaire: I have already said that this applies to a large range of other European and global organisations, of which there are a great number. That does not mean, however, that Her Majesty’s Government and their allies in like-minded Governments in the EU are not entirely correct to say that we should be squeezing more efficiency out of the EU institutions and that the Commission has grown rather complacent over the years.
Lord Pearson of Rannoch: My Lords, what is the average annual cost to the taxpayer of Members of your Lordships’ House and what is the average annual cost to the taxpayer of Members of the European Parliament, including all the latter’s special perks and allowances?
Lord Wallace of Saltaire: My Lords, it may surprise the noble Lord, but I do not have the exact figures to hand. Of course, any international parliament costs a great deal more because of the travel, dual residence and so on that are involved. Members of this House who also attend the Parliamentary Assembly of the Council of Europe or the NATO Assembly also cost rather more than the rest of us.
Lord Howell of Guildford: Does my noble friend have any figures on the European External Action Service? Has he noticed recent criticism that it is not performing very effectively? Does he have any measure of cost versus performance for that body?
Lord Wallace of Saltaire: My Lords, I do not have that. The European External Action Service is still very much in its early stages. It is now performing rather better than when it was originally established. Multinational operations take longer to get going than others—I am looking at various people here who have served in the European Commission—and have a level of built-in inefficiency.
Lord Foulkes of Cumnock: Is the Minister aware that the European Union Committee on which I have the honour to serve is about to produce a report on the European External Action Service? I am sure that the noble Lord, Lord Howell, will read it with the greatest of interest.
Lord Wallace of Saltaire: And so shall I.
Baroness Royall of Blaisdon: My Lords, I wish to place on record, and ask the noble Lord to accept, that although we on this side of the House are very pro-European, we, like the Government, seek reform of the institutions, including all the salary levels, and so on.
Lord Wallace of Saltaire: I thank the noble Baroness for that expression of consensus. She will know from her time working for EU institutions that the staff regulations and staff unions in Brussels have a certain element of the 1960s about them which requires a little modernisation.
Syria
Question
3.29 pm
Asked by Baroness Falkner of Margravine
To ask Her Majesty’s Government, in the light of the recent Friends of Syria conference in Rome, what assessment they have made of the political situation in Syria.
Lord Wallace of Saltaire: My Lords, the Foreign Secretary has stated that there must be a political solution to the conflict, which has already claimed more than 70,000 lives. The longer the conflict continues, the more radicalised and sectarian it will become, with an increasing risk of regional overspill. There is no sign that the Assad regime intends to enter into a genuine political process. We must, therefore, increase pressure on Assad and his regime to push them to the negotiating table.
Baroness Falkner of Margravine: My Lords, does my noble friend agree that the increase in pressure proposed today in the Foreign Secretary’s Statement may be too little, too late? Does he further agree that the West’s interests are now profoundly engaged, as a failed state in Syria will result in an expansion of international terrorism, increase the dangers from WMD, endanger the supply of energy and destabilise Jordan, Lebanon, Israel, Iraq and even Turkey? Therefore, will Her Majesty’s Government now work with the United States and France to arm the non-jihadi opposition forces, recognising that the use of force will be the only way to bring the Assad Government to the negotiating table or to bring about an eventual forced peace, should Assad not be available to bring about peace?
Lord Wallace of Saltaire: My Lords, we are balancing a number of extremely difficult choices all the way through. We are attempting to force the regime to negotiate. We do not have all the permanent members of the UN on our side. The Russians continue to support and, reportedly, to supply the Assad regime. The Iranians are of course supplying the Assad regime. We have taken what we regard as a carefully calibrated decision to upgrade the amount of support, including non-lethal armour, to the Opposition, but we are all conscious that once you start supplying high-end weapons to a civil war, you never quite know where they will end up, as the French discovered in Mali.
Lord Wright of Richmond: My Lords, I hope that I may be permitted to ask a few of the many questions which I would have tried to ask if the Foreign Secretary’s Statement had been repeated in this House today. First, does the Minister accept that even the supply of non-lethal assistance to the so-called Opposition represents a dangerous escalation of our involvement in what is now, and has been for a long time, effectively a Sunni-Shia war? What reason do the Government have for thinking that the Opposition, which HMG have now recognised as the legitimate Government of Syria, would be any more accountable or democratic than the present regime in Damascus?
Secondly, can the Minister confirm that we still support Ambassador Brahimi’s mission? Does he agree that, instead of rubbishing President Assad’s recent interview in the Sunday Times, we should encourage Ambassador Brahimi to follow up President Assad’s offer of unconditional negotiations with such parts of the Opposition as have also expressed their readiness to negotiate?
Finally, I welcome the decision of the United States Government and HMG to withhold lethal military assistance from the Opposition. Are we similarly encouraging our friends in the Gulf to do likewise?
Lord Wallace of Saltaire: My Lords, there were a large number of questions there. I say simply that my right honourable friend the Foreign Secretary is meeting Lakhdar Brahimi this afternoon. He is also meeting the Russian Deputy Foreign Minister. The Foreign Secretary and other Foreign Office Ministers are extremely actively engaged. It is not yet a Sunni-Shia conflict. We are all conscious of the danger that it will deteriorate into a Sunni-Shia conflict. Working with the Opposition, we are doing our best to encourage them to represent all the different communities within Syria. Our aim is to bring a negotiated end to the conflict and to prevent it from deteriorating further.
Baroness Uddin: My Lords, what assessment have the Minister and his department made of the impact of the Saudi Government’s leadership in regional discussions with regard to the ongoing disaster and destruction in Syria, where 1 million people are fleeing persecution and violence according to the UN High Commissioner for Refugees?
Lord Wallace of Saltaire: My Lords, we are working with the Saudis, the Qataris and a number of other states in the Middle East. We are very conscious that Lebanon and Jordan are particularly affected by the Syrian conflict. In Lebanon, the number of refugees is equivalent to 10% of its population. If we imagine the impact on British society of the arrival of 6 million refugees, that is what Lebanon is currently going through. We are very conscious of the potential for this conflict to spill over Syria’s borders.
Lord Eden of Winton: My Lords, will my noble friend return to one part of the question asked of him by the noble Lord, Lord Wright of Richmond? Can he give any assurance at all that if President Assad is removed, his replacement will not be more repressive?
Lord Wallace of Saltaire: My Lords, by its nature when a very localised civil war is under way, it is very difficult for any of us to control what the outcome will be. The only assurance that I, or any other international actor, can give is that Her Majesty’s Government are working with our allies and partners in the Middle East and attempting to persuade the Russian and Chinese Governments to work towards the achievement of a negotiated solution that would see a more inclusive Government replace the Assad regime.
Lord Hylton: My Lords, have the Government studied the recent proposal for transitional justice in Syria, put forward by the Syrian Support Group? If implemented, would it not have the effect of separating ordinary, innocent Alawis from the regime?
Lord Wallace of Saltaire: My Lords, there are a great many efforts under way to protect the Alawi minority, the Christian minority and the smaller number of Druze within Syria from what could easily deteriorate into a sectional jihad. We are all very worried about that possibility. A great deal of work is under way, quite a lot of it funded by DfID, to advise the Opposition about negotiated transition, rebuilding local communities and providing the basic services that people need to start the process of reconciliation.
Police and Fire Reform (Scotland) Act 2012 (Consequential Provisions and Modifications) Order 2013
Motion to Approve
3.37 pm
Moved By Lord Wallace of Tankerness
That the draft order laid before the House on 22 January be approved.
Relevant documents: 17th Report from the Joint Committee on Statutory Instruments, 27th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 26 February.
Health and Social Care Act 2012 (Consequential Amendments) Order 2013
Motion to Approve
3.38 pm
That the draft order laid before the House on 14 January be approved.
Relevant document: 18th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 February.
Renewable Transport Fuel Obligations (Amendment) Order 2013
Motion to Approve
3.38 pm
That the draft order laid before the House on 19 December 2012 be approved.
Relevant document: 15th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 February.
Guaranteed Minimum Pensions Increase Order 2013
Social Security Benefits Up-rating Order 2013
National Employment Savings Trust (Amendment) Order 2013
Motions to Approve
3.38 pm
Moved By Baroness Stowell of Beeston
That the draft order laid before the House on 28 January be approved.
Relevant documents: 15th and 18th Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 28 February.
Antarctic Bill
Third Reading
3.39 pm
Enterprise and Regulatory Reform Bill
Enterprise and Regulatory Reform Bill 9th, 10th, 11th, 12th and 14th Reports from the Delegated Powers Committee
Report (3rd Day)
3.40 pm
Relevant documents: 9th, 10th, 11th, 12th and 14th Reports from the Delegated Powers Committee.
The Deputy Chairman of Committees (Baroness Anelay of St Johns): My Lords, the noble Lord, Lord McKenzie, is very courteously taking a very short respite to give colleagues the opportunity to leave the Chamber, which I know they are trying to do quietly. Perhaps quickly might also be a watchword.
Lord McKenzie of Luton: My Lords, Amendment 80A stands also in the names of the noble and learned Lord, Lord Hardie, and the noble Lord, Lord Wigley. I shall speak to Amendment 80B, which also stands in the name of the noble Lord, Lord Wigley. I should also make it clear that we strongly support Amendment 81 and look forward to hearing from my noble friend Lady Turner and the other distinguished noble and noble and learned Lords who have put their names to that amendment.
Amendment 80A is an attempt to defeat the fundamental purpose of Clause 62; effectively, it is an alternative to removing that clause. Clause 62 seeks to remove civil liability from breaches of duty imposed by health and safety regulations, and our amendment would reinstate that right of action. I acknowledge here that it would require same consequential tidying at Third Reading.
We should be under no illusions about the serious consequences which will flow from Clause 62, should it be allowed to remain unamended. It will remove the existing right of an employee to rely on a breach of health and safety legislation in any claims for personal injury, so unless any exceptions are to be applied it will be possible to claim compensation for breaches of health and safety regulations only if it can be proved that the duty holder has been negligent. We are aware of just one exception. As the Explanatory Notes to the Bill state:
“This means that in future, for all relevant claims, duty-holders will only have to defend themselves against negligence”.
The Government have sought cover for their clause by citing the report of Professor Löfstedt, Reclaiming Health and Safety for All. A small section of that report focused on strict liability, where the professor recommended that there should be a review of such provisions and that they be either qualified with “reasonably practicable” or amended to prevent civil liability attaching to such provisions. In the event, of course, the Government have not undertaken a review and are going much further than the professor in seeking to remove civil liability from all breaches of health and safety regulations. The Government have focused on strict liability as being unfair because an employer could be found liable to pay damages to an employee, despite having taken all reasonable steps to protect them.
However, that does not give fair recognition to the fact that strict liability applies in very limited circumstances and where injured employees would otherwise face a near impossible evidential burden. Overwhelmingly, the duties are qualified by the phrase, “so far as is reasonably practicable”. Examples of strict liability would include injury caused by defective equipment where the employer controls the selection, purchase, installation and maintenance of equipment, where investigation can be very difficult and with the employer holding all the cards.
The commentary in the Government’s own impact assessment is that the number of compensation cases which rely on a breach of strict liability statutory duties will be small and despite their position, the Government have declined to undertake the review that Professor Löfstedt recommended to potentially restrict the number of situations in which strict liability is relevant. They now argue that it would be too complex a task and
would anyway have largely been done when consideration of the transposition of EU directives was considered. Rather than doing the work, they use the issue as an excuse to change the liability regime across the board, potentially to the disadvantage of tens of thousands of employees each year, who will find access to justice more difficult and expensive. For some, it will be denied altogether.
3.45 pm
Amendment 80B requires the appointment of an independent panel to carry out a review of health and safety duties to determine whether they should be actionable—a review requested by Professor Löfstedt. It requires this review to be completed within one year with a report to Parliament and with Clause 62 not brought into effect until this has been completed with the conclusions of the review reported to Parliament. It is the very least we should contemplate if the fundamental damage of the clause cannot be eliminated.
These issues are not just about legal nuances. Removing civil liability and leaving just one route via negligence represents a fundamental change in the position of duty holders and employees. It turns on its head a position which has pertained since 1898 and is a matter on which there has been broad political consensus during that time.
Other noble Lords more versed in the practicalities of the law will perhaps speak about why having to prove negligence will provide a more difficult route to getting redress. The issues are around the burden of proof shifting to employees, or indeed the family in the case of a fatality at work; requirements for more evidence gathering and investigation; and the incurring of greater costs. For employers this will not be a removal of regulatory burdens.
What is the justification for making it harder—in some cases impossible—for employees injured at work to claim compensation? Where is the evidence that unreasonable claims are being made and settled? Noble Lords will be aware that claims for compensation relating to employer liability have to be registered with the Compensation Recovery Unit. This shows that the number of successful claims has declined year on year over the past three years. The Government seek to pray in aid the perception of a compensation culture and anecdotal evidence that the threat of being sued is putting employers off recruiting. Surely the task is to focus on the reality and not to pander to myths and perceptions. In any event, anecdotal perceptions are no basis on which to change fundamental rights that have been settled for more than a century.
The Government are proposing to do all of this without consultation and, by their own admission, without consultation or reference to the EU. The Minister is aware from legal opinion that has been copied to him that the Government’s approach is potentially subject to challenge on a number of grounds—in particular, it fails to provide remedies sufficient to ensure effective legal protections in the fields covered by EU health and safety law.
We should be proud of the health and safety system that we have in the UK but, however good it is, we know that there are still deaths and accidents at work
and that many still die each year from diseases caused by prior working conditions. Compensation for them, or for their families, is not some bonus or reward.
On the basis of the flimsiest of evidence, the opportunities for those injured at work to obtain redress are being substantially impaired. We should be very clear about that. This is not “business as usual”. The beneficiaries, of course, will be the providers of employer’s liability insurance. The losers will include taxpayers because reduced compensation will mean reduced benefit recovery. Indeed, all of those many good employers who take their health and safety responsibility seriously could see their position undercut by those who will take advantage of what they see as an erosion of our health and safety culture. Tens of thousands of individuals who have worked to support themselves and their families will have their quality of life made worse.
This clause cannot be allowed to stand as it is. I beg to move.
Lord Wigley: I support Amendments 80A and 80B tabled by the noble Lord, Lord McKenzie, to which I have added my name, as I have to Amendment 81 tabled by the noble Baroness, Lady Turner. Each of these amendments seeks to overhaul the provisions contained in Clause 62, as we have heard, which threatens to turn the clock back to Victorian times for injured workers’ rights to compensation.
The clause has rightly been criticised in earlier stages of the Bill, and was introduced only on Report in another place. By amending the Health and Safety at Work Act etc. 1974, the clause will place the burden of proof on to the injured employee who in future will have to provide evidence that his or her injury has resulted from their employer’s negligence.
As the Association of Personal Injury Lawyers has made clear in its appeals to the Government, the clause, if passed, would be highly advantageous to negligent employers, who of course control the workplace and equipment, and are more familiar with the workings of the business. Moreover, it is completely unfair to put this extra burden on an employee who is injured, particularly in cases where the employee would have been rendered unconscious and hence possibly unable to remember details of the incident.
As I understand it, the clause would also impact on families of employees who have been killed in an accident, who would obviously be at a disadvantage in gathering evidence against the employer. If I have wrongly interpreted that, perhaps the Minister could correct me but, if I am right, how on earth can the Government justify that position?
Amendment 81 would delete the clause in its entirety, which would obviously be the most favoured option for those of us opposed to these provisions. Amendment 80A would negate the clause to all extents and purposes and so, if Amendment 81 is not passed, I urge noble Lords to support Amendment 80A. Finally, Amendment 80B would require the Government to conduct a review, before the provisions of the clause can come into effect, of all duties imposed by a statutory instrument containing health and safety regulations and to determine whether they should be actionable.
Clause 62 brings in sweeping and unnecessary changes to health and safety duties at work. The Government must surely pause before introducing such provisions, to ensure that any employer who breaks the law pays the correct penalty.
Baroness Turner of Camden: My Lords, Amendment 81 stands in my name. At Second Reading and in Committee, I opposed this clause. The Government have introduced some amendments to the original, but they do not alter the Bill substantially. It would still alter the Heath and Safety at Work etc. Act in a way that is not to the advantage of an injured worker. Section 47(2) of the Act says:
“Breach of a duty imposed by health and safety regulations shall, so far as it causes damage, be actionable except in so far as the regulations provide otherwise”.
In practice, I am advised by the Association of Personal Injury Lawyers, to which reference has already been made, that this means that if a worker is injured and can prove than an employer has breached a statutory duty, he is entitled to claim compensation. This is the basis upon which many workplace injury cases are usually brought.
The law is clear and well understood. It is the basis on which health and safety legislation has been drafted and passed by Parliament. This is the provision which the Government seek to alter. Without this provision, the injured person would be obliged to rely on the law of negligence, which would be much more difficult. Take the case where a worker has been fatally injured after working with faulty equipment. At present, the family need only prove that there had been breaches of statutory regulation in order to claim compensation. Under the provisions of the Bill, the family would have to go much further and prove that the employer knew that the equipment was faulty and did nothing about it. That would be much more difficult than proving that regulations in place to protect the worker had been breached.
According to the Government’s own figures, the provisions in this clause will affect 70,000 cases in England, Wales and Scotland. That is quite a number of injured workers. There are many industries—construction is one—which are inherently dangerous. I urge noble Lords to look at London: it has masses of construction sites, full of scaffolding and workers working on them. The workers who regularly endanger their safety on these sites deserve proper protection. If the Government are really concerned about safety, they should strengthen the HSE instead of cutting resources and thus cutting HSE inspections, which are so necessary to maintain health and safety at work.
This clause, if enacted, will encourage employers to abnegate their responsibilities and rogue employers will get away with it. What about insurance? Employers are expected to have employers’ liability cover. It is fairly clear that insurance premiums will increase as a result of this legislation. Do the Government really believe some of the assertions in the trade press that we are becoming a compensation culture with many unjustified claims? I do not think so.
I once worked in the claims department of a large insurance company. Injured workers then had quite a
tough time sometimes getting adequate compensation for their injuries. I thought at the time that they needed representation in order to get justice. Unions, of course, provide a skilled service for their members in such situations; my own union has a good and important legal department. However, not everyone is in a union. Even now, workers individually sometimes have difficulty in securing compensation. With this clause enacted in legislation, it will be much worse: the burden of health and safety will be transferred from the shoulders of well resourced employers to vulnerable workers, which is unjust and unfair. It takes the law on workplace safety back to Victorian times, beyond the landmark 1898 law, under which it became possible to claim compensation where employers had breached their statutory duty.
I oppose this clause; it is unfair and unjust and in the end will cost the taxpayer much more in support for injured workers unable to achieve compensation. I am opposing it because I want to send a message to the Government that they should not attempt to interfere with established procedures which have served people well and are respected. They should not attempt to do this, and therefore I oppose the clause completely.
Lord Phillips of Sudbury: My Lords, I suggest to the Minister that there is a lifeline to the Government in this group of amendments, particularly Amendment 80B in the names of the noble Lords, Lord McKenzie and Lord Wigley. It requires the Secretary of State to set up an independent panel to carry out a review of what will become Section 62. I agree with all that has been said so far in this debate; in particular, I think the Government would be very wise to accede to the proposal for the independent panel because there can be few provisions in our whole legislation that are more complex than Clause 62 and the multitudinous amendments that it makes to Section 57 of the Health and Safety at Work etc. Act.
I also draw to the Minister’s attention—if it needs drawing, and I am pretty sure it does not—that the litigation that could flow from Clause 62 as it stands could be formidable, not least in terms of European law. The impact of the law of the European Union in this area of life is very considerable indeed. Professor Löfstedt, in his 2011 review, reported that there were more than 200 health and safety regulations in this country that were affected by EU law. As we all know, where there is a clash, EU law will prevail over domestic law.
The impact on employees of this change in the law could be different from the one that the Government are currently arguing on. It is perfectly certain that if you take away absolute liability for breach of statutory duties and leave it with the common law of negligence, you are, as night follows day, encouraging irresponsible employers—and there are a few, I am afraid—to take risks that will redound to the disadvantage of their employees.
As has already been said this afternoon, suing in this area of law can be extraordinarily difficult. I should have first declared my interest as a solicitor. My firm, Bates Wells and Braithwaite, does a considerable amount of this type of work, as I also have in my professional life. It can be formidably difficult for an
injured employee to secure redress from an obdurate employer who is willing to string out the whole business, force the employee into court, and also force him or her into the hands of the no-win no-fee system, which itself has many drawbacks.
I sincerely hope, therefore that the Government will listen to what is being said this afternoon and will take a prudent and practical course that will not hold back this legislation for long, because Amendment 80B sets a time limit for the report of the panel. I hope they will also address to some extent the failing of the Professor Löfstedt review to engage in the sort of consultation that I believe in the view of any Member of this House should have been undertaken prior to the publication of the outcome of that review. I hope, for all those reasons and many others which I hope we will hear, the Government will take the proper course.
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Lord Hardie: My Lords, I have added my name to Amendments 80A and 81. I was unable to speak at the proceedings in Grand Committee because I had not by then resumed my place in this House following my retirement from the Bench.
If this clause remains part of the Bill, there is a serious risk of injustice for some people who will be deprived a remedy: the right of damages arising from a breach of their employer’s obligations towards them. The Minister himself recognised that in Grand Committee on 14 January, col. GC 176. However, the Minister suggested that there would only be a small number of cases. First, therefore, can the Minister tell the House what was meant by a small number of cases? Was the estimate of numbers based upon an analysis of cases which proceeded to proof, or did it include cases that were settled without litigation altogether? Whatever the number, it is impossible to understate the serious consequences for individuals and their families already alluded to by the noble Lord, Lord McKenzie of Luton.
If this clause remains part of the Bill, those who have suffered catastrophic injury, or the widows and families of employees who have been killed, will now have to depend upon state benefits for their maintenance. That was what the Minister said in the passage to which I referred. The financial burden will be transferred to widows, children, disabled people, and to the state, and it will be transferred to all of these people from insurance companies which will be the principal beneficiaries of this clause. Does the Minister consider that this is fair, or is it even compatible with Government policy to reduce the number of people who are dependent on state benefits?
Other noble Lords have referred to this right of action, which has existed since the 19th century. I do not wish to point out the error of the noble Lord, Lord McKenzie of Luton, by saying that it dates back to the case of Groves v Lord Wimborne in 1898. That case in the Court of Appeal certainly did decide that there was such a right. However, the law goes much further back. In Scotland and England there were cases before that dealing not with factories, which Groves v Lord Wimborne did, but with coal mines. There was a case in Scotland in 1871 of Edgar v Law
and Brand at the Inner House of the Court of Session—which is the equivalent of the Court of Appeal—which decided that the widow of a collier who had been killed because the mine owner breached the regulations had a right of action, just as the court in England decided 20 or so years later. In 1912, the Judicial Committee of this House ratified these decisions—in terms to Groves v Lord Wimborne—but emphasised that they were correctly decided. In doing so, Lord Kinnear observed that when a duty of protection is imposed on employers for the benefit of particular persons, there arises, at common law, a correlative right of action in those persons who may be injured by the contravention.
Clause 62 removes that common law right. We should not sanction such a radical change in our law unless there has been detailed consultation about the consequences of the change and there are overwhelming reasons justifying it. As the noble Lord, Lord Phillips, said, there was no consultation about this change and I will return to the reasons in a few minutes.
In the context of claims for damages arising from breach of statutory provisions, some people refer to strict liability and there is a risk of misunderstanding the scope of civil liability. Where regulations impose an unqualified obligation on employers, there is clearly an automatic criminal liability, so there could be a prosecution. However, that is not the case in civil actions. Mere breach of the regulation does not give rise to a right of action: one has to establish that the breach caused the damage. There is, therefore, a double issue: the question of the breach and also the fundamental question of causation. Unless one can bring home liability based on causation there is no right of action.
I will illustrate that point by reference to the Ionising Radiation Regulations 1999. Regulation 8 contains special provisions for pregnant women who have notified their employer of their pregnancy. In such cases, the employer must ensure that the equivalent dose of radiation to the foetus is unlikely to exceed one milliSievert for the remainder of the pregnancy. If a foetus were exposed to more than one milliSievert after the date of notification, the employer could certainly be prosecuted but there would be no civil liability unless the employee established a number of facts. First, she would have to prove that she is part of the class that is protected and that she notified the employer. Secondly, she would have to prove that after the notification she was exposed to more than one milliSievert. Thirdly, she would have to prove that the baby was injured. Fourthly, she would need to prove that the injury was caused by the overexposure. The question of causation is likely to be the most difficult challenge, as it is in most cases. The injury to the child might not manifest itself for some considerable time.
Having regard to the significant margin of safety which undoubtedly will exist in the regulations, there would be possible other causes for the child having the condition that it has. However, if the evidence is such that the court is convinced that it was overexposure as opposed to anything else which caused the damage to the child, the mother would be able to recover damages for the child. If this clause is enacted, that right of action by the mother will be removed.
It seems to me that the correct balance has been struck where there are certain standards that the employee has to achieve before he or she can have a right of action. The right balance has been struck and has been reflected in about 150 years of our common law. In considering the question of balancing the rights, passing reference has been made to a further issue: namely, the additional factor that many if not most of these regulations are not absolute but qualified by the phrase,
“so far as is reasonably practicable”.
Those regulations give the employer an additional defence that he can come in and show that what happened occurred in circumstances in which he had done everything that was reasonably practicable and that, therefore, he is not liable under the regulations.
The current system of civil liability balances the interests of the employer and the employee, and the correct balance has been struck. Clause 62 disturbs that balance. It deprives people of existing rights under current regulations. It is not possible to comprehend the nature and extent to which the current regulations protect the employee. The employee will no longer be entitled to a right of action. That could be identified only if the current regulations were examined and if the Government decided to exclude rights of action, which they can under Section 47(2) in certain cases. Of course, if the present clause remains, the Government would have to look at the regulations, if they are going to be fair and just about this, and decide which of them should include a right of action. As I understand it, that is not to be done.
I do not intend to repeat the overwhelming reasons that have been mentioned by noble Lords. However, in the context of justification, I will mention the briefing by the British Chambers of Commerce that the right of action deters entrepreneurialism and growth. That explanation or reason does not bear scrutiny. If that were truly the case, how can we explain the involvement of entrepreneurs over the past 150 years who have made a significant contribution to economic growth?
Another matter that has not been mentioned hitherto is a comment made by the noble Viscount, Lord Younger of Leckie, in Committee. He said:
“This measure is not about reducing the number of claims. It is about establishing the principle that an employer who has done nothing wrong should have the opportunity to defend themselves on the basis of having taken all reasonable precautions”.—[Official Report, 14/1/13; col. GC 176.]
That can relate only to regulations where there is an unqualified duty. As I said earlier, most of the regulations contain such a qualification and afford the employer the opportunity to defend himself on the basis that he took all reasonable precautions. So this reason can be no justification for excluding a right of action in all those regulations where there is such a qualification. If this clause remains in the Bill, will the Minister give an undertaking to introduce at Third Reading an amendment to include a right of action in respect of all regulations where employers are given the opportunity to defend themselves, as desired by him? There is no sound basis for removing from citizens rights that they currently enjoy or for altering the proper balance to which I have referred.
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Before sitting down, I wish to pay tribute to the Minister. Last week I explained my concerns in detail to the noble and learned Lord the Advocate-General for Scotland because I was anxious that the Minister should have the opportunity in advance of this debate to contemplate what I have been saying. I am grateful to the noble and learned Lord the Advocate-General for Scotland for the time and consideration that he gave me. He undertook to convey my concerns to the noble Viscount and has confirmed today that he did so. I look forward to hearing the response from the Minister, and I urge him to withdraw this clause or withdraw subsection (3).
Lord Browne of Ladyton: My Lords, it is a privilege and a pleasure to follow the contribution of the noble and learned Lord, Lord Hardie, to your Lordships’ debate on these provisions this afternoon. He has done a great service to your Lordships’ House by his considered and detailed contribution. Watching the body language of Members of your Lordships’ House, I have the impression that he has alerted many noble Lords to consequences of this provision of which they were unaware, and that he has, perhaps, concentrated minds in a way that may be helpful both to noble Lords in their consideration and to the Government in determining the correct course of action.
I agree with all the arguments in favour of this group of amendments, and I wish to be associated with them all, but I will make a few additional points to reinforce some points that have already been made. As my noble friend Lord McKenzie of Luton said, the justification for Clause 62 is that there is a perception among some employers that a compensation culture exposes them to a risk of unjustified damages claims by employees, and—this is where the briefing that the noble and learned Lord referred to comes in—that this perception prevents employers from taking on new workers and is a barrier to growth. However, no such compensation culture exists. The Government’s own statistical evidence shows that claims arising from workplace accidents are going down. The Health and Safety Executive’s impact assessment of these provisions suggests that this is the case, too, as do the figures published by the Government’s Compensation Recovery Unit.
In Grand Committee, I asked the Minister to point me to the evidence that existed—even the evidence of a perception—and argued at the same time that legislating in response to a perception, which was in fact a misperception, was a poor basis for making law. The Minister was gracious enough at our meeting to confess that, try as they might, neither he nor his officials could find evidence even of the perception—although, to be fair to the Minister, he said in effect, “We know it is there but we cannot find it”.
This is supposed to be a deregulatory measure. Therefore, the test of whether it is a proper policy is whether it will result in any deregulation. Frankly, the evidence in relation to that suggests otherwise, too. It will not remove the complexity of the challenges faced by employers, particularly if they are concerned about possible civil claims by employees. Indeed, it will add to that uncertainty by making the law less clear than it
is presently. In particular, the issue of whether these reforms will leave the law incompatible with the European body of law that it has to be compatible with, will inevitably lead to complicated legal argument. I can hear the smacking of lawyers’ lips in anticipation of the cases that will come from this provision if it is enacted in its present form.
We on these Benches provided the Government with a detailed senior counsel’s opinion which set out just how complex the arguments will be. With respect to the noble Viscount, his reply to our correspondence, which was a short paragraph, suggested that his officials had not thought about the consequences that the senior counsel argued were inevitable. Perhaps they have now had the opportunity to do so and, in summing up this short debate, the noble Viscount will be able to give us a better and more considered answer than the one with which his officials provided him in response to the detailed arguments set out in the senior counsel’s opinion.
The Government’s plan is to require all those who wish to claim in the civil courts for compensation arising from workplace accidents to claim by way of a common-law negligence case. I am grateful to the noble and learned Lord, Lord Hardie, for setting out at least some of the potential complexity of such a claim. The component elements of a common-law negligence case will inevitably mean that cases will be prolonged. The health and safety regulations that the Government seek to skirt around will not become irrelevant to such claims, as the Government intend. They will add to their complexity because persons claiming will rely on them to show what a careful employer would have done—what was reasonable and feasible. So we have added an unnecessary layer of complexity to a set of claims that now proceed by way of reference only to the statutory regulations.
Neither will this reduce insurance premiums for employers. It will shift burdens but it will not reduce insurance premiums. Presently, the employers’ liability compulsory insurance regime is well settled and it works. It was in spasm in about 2004, but it has settled down again and it works. The law compels all employers to have insurance. Employers pool the risk of being employers through the employers’ liability compulsory insurance process. Everyone has to have insurance by law and the premiums are shared fairly and in a proportionate fashion across all employers.
Employers’ liability compulsory insurance represents a small percentage of the overall general insurance market and traditionally it is a loss leader for the industry, which does not make any money out of it. In fact, there is a suggestion that claims outstrip premiums. But that has been the case for a long time, and it has been absorbed into the general insurance market. If anyone believes that the consequence of a change in the law—even if it does shift the burden from the insurance market to the public sector—will result in reduced premiums, frankly, they are living in cloud-cuckoo-land. The premiums do not cover the payments.
Finally, the justification has been put forward that it will reduce necessary record keeping and paperwork. The noble Viscount defeated that argument himself in Grand Committee. In summing up the debate on this issue he reassured my noble friend Lord McKenzie of
Luton that employers would still have to keep the same records because the requirement of record keeping was related to obligations that are enforced by criminal law and nothing at all to do with civil liability. So record keeping will not go down.
The Government's measures go beyond what Professor Löfstedt recommended, and he has said so. They set the clock back 150 years in terms of health and safety, which is an area of public policy of which we in the United Kingdom are rightly proud. They have the flimsiest of justifications and even then the Government themselves cannot find any evidence even of the perception —perhaps because the perceived facts do not exist. Apart from all that, they do not even meet the Government’s own limited objective of being deregulatory. The Government should take them away and think again.
The Earl of Erroll: My Lords, I rise to put the opposite opinion. I live in the world of small and medium-sized businesses. The SMEs and the micros employ half the workforce out there. As one of them, I feel it is totally unfair that, even if you took all the precautions you could, if something happened that you could not foresee and could not know about, you are held to be guilty. This is wrong in natural justice. The fact is that you can then be put out of business. I hate to disagree with the noble Lord, Lord McKenzie, and the noble Baroness, Lady Turner, but they are not all well funded.
We talk about big businesses, big organisations and corporations, government, and things like that. They may be well funded, but a lot of small businesses out there are struggling and on a knife-edge. It only takes one of those things with the Health and Safety Executive cracking down and you have had it. I invite noble Lords to look at some of the cases—I will send you pointers to the websites that will detail them—where the Health and Safety Executive, for instance, gloats over how much it has managed to get out of someone at a tribunal. I know that is not the exact case here, but the perception is out there, I am afraid, and it does restrict people. My wife, who is a small employer, is very careful about taking on extra people because of these sorts of regulations.
Regulations also start to conflict because of their complexity. You may well find that you cannot comply with them all. If you are then held to be in breach of one of them, which you did not and could not know about because you could not know that the employer was breaching it without your knowledge and against your instructions, you are still going to be held liable, because it is an absolute offence. I think that is wrong. We should remember that it is not just big businesses out there. We will be bankrupting some small businesses and putting other people out of work—and when we put them out of work, there will be other unintended consequences and damage to other families.
Lord Pannick: My Lords, I added my name to Amendment 81 in the name of the noble Baroness, Lady Turner, which would leave out Clause 62. I did so because liability under Section 47 of the Health and Safety at Work Act operates fairly, effectively and efficiently and its amendment will cause substantial practical problems.
Your Lordships have heard comprehensive arguments on these subjects, so I will be brief. Section 47 works well because the claimant needs to prove a breach of health and safety legislation. The claimant needs to prove causation—that there has been a breach which has caused serious injury or death. In those circumstances, the law has long recognised, without controversy, that the victim should be compensated without also needing to prove facts and matters relevant to negligence, which are the responsibility of the employer. That is the answer to the noble Earl, Lord Erroll; the matters are within the knowledge of the employer. They are rarely matters within the knowledge of the employee.
To require employees to prove negligence—that is, a failure by the employer to take reasonable care—will inevitably result in very substantial delay in obtaining compensation for those who have been injured or killed by reason of the employer’s failure to comply with health and safety regulations. It will require the considerable expense and uncertainty of litigation for both employer and employee—these are expensive matters for both of them—at a time when legal aid is being reduced.
Clause 62 is unnecessary, unfair and—judging by the deafening silence from the Government Benches this afternoon—unsupported by any marked enthusiasm whatever. I hope your Lordships will support its removal.
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Lord Brown of Eaton-under-Heywood: My Lords, I, too, support these amendments. For a number of years before the passing of the 1974 Act, I enjoyed a reasonably successful practice at the Bar, often instructed on behalf of employers’ insurers defending negligence claims by injured workmen. Mostly these claims were settled, quite often for substantially less than their true value, because of course the insurers, for whom I acted, were altogether better able than the claimants were to risk losing them. A number of these claims were lost —I defeated them—because the claimants were not quite able to assemble all the evidence necessary to prove actual negligence.
The 1974 legislation, which Clause 62 is designed to overturn, introduced a sea change in the approach to damages claims for workplace injuries. No longer was it necessary to prove that the employers knew, or should reasonably have recognised, that their machinery, equipment, systems of work or workplaces were actually dangerous, it was sufficient to show that regulations designed to secure the workforce’s safety had been breached and that, in consequence, the employee had suffered often appalling injury. Thereafter most claims were settled early, at their true value and with very little in the way of litigation costs. Of course, we at the Bar suffered for this change, because our personal injury practices were greatly damaged, but almost everybody else benefited. Injured workmen obviously did but so too did the Exchequer, because benefits for their injuries thereafter were paid by the insurers out of the premium moneys they had received instead of the cost being put on the state. Safety conditions in the workplace were hugely improved. There is nothing like strict liability, or its civil equivalent, to induce employers to take proactive steps to ensure that the risks and
dangers are reduced to a minimum. Employers’ insurers therefore, since 1974, have had altogether fewer claims to meet and have certainly incurred far fewer legal costs in meeting them.
Nothing I have yet read from earlier debates, or heard, has suggested to me that any clear advantage is to be gained by this proposed change in the law. Which precisely, one asks, are the supposed undeserving claims that in future it is intended shall fail when presently they succeed? I confess I did not find the answer to that in the speech of the noble Earl, Lord Erroll, the substance of which seemed to be directed rather to unfair dismissal claims than to claims for injured workmen, essentially against insurers, because employers are bound to take action.
The Earl of Erroll: As a quick correction, it was nothing to do with unfair dismissal, it was about the health and safety issues which come up the whole time in certain industries, particularly agriculture and things like that. That is what I was thinking about mostly.
Lord Razzall: My Lords, if there is one lesson that your Lordships and the Government might draw from this debate, it is that it is a mistake to introduce a major change in the law so late in the process of a Bill going through the House of Commons. The noble Viscount’s department had a very good record of not changing the law without extensive consultation. It is quite clear from the debate today that even one or two noble and learned Lords did not quite understand what it is being proposed in the way that I understand it. That all would come out if there was appropriate consultation on the clause.
The Government’s intention is to try to find a balance between what the noble Earl said about protecting employers from unfair strict liability claims and protecting the rights of the sort of claimants that the noble Lord, Lord Pannick, is referring to. The Löfstedt report made various recommendations and, had we had proper consultation, that would have come out. The Government say that they are implementing what Löfstedt recommended but some would say “Up to a point, Lord Copper”. He did of course say that the strict liability issue needed to be looked at, but with a lot of reservations as well as to how strict liability could be amended. That would have come out in proper consultation. However, we are where we are. As I understand it, the Government wish to remove strict liability to protect the sort of company referred to by the noble Earl. They say that the complainant or the injured workman can rely on the law of negligence to protect them. There is of course criminal liability, and in extreme cases somebody’s offending will be prosecuted, but they are relying on the law of negligence.
I ask noble Lords to imagine the sort of scenario where these two principles would come up each against other. There could be a contractor who has employed a subcontractor to put up scaffolding and the subcontractor does so in a rather dodgy way. Somebody falls off the scaffolding and is seriously injured. Under the current law, the contractor will probably be strictly liable for that accident. The subcontractor, who is a man of straw, has disappeared, and therefore if the contractor is not liable then who is liable, and what
compensation is there for the individual? That seems to me in essence to sum up the dilemma produced by this clause.
I do not think that our job here on these Benches—certainly not when we are in coalition—is to defeat the Government; it is to win the argument. I hope that when the noble Viscount sums up he will try to find a way to meet what I think are genuine concerns from all sides of the House about whether this provision can be modified to deal with the problem I have referred to.
Viscount Younger of Leckie: My Lords, this has been an extensive and interesting debate. I think it would be helpful to set out the reasons the Government seek to make this change. The recent report by my noble friend Lord Young of Graffham, Common Sense, Common Safety, and Professor Löfstedt’s independent review, Reclaiming Health and Safety for All, confirm that the perception of a compensation culture generates a fear of being sued. This, together with the confusion created by myths about health and safety, drives businesses to overimplement the law in an effort to protect themselves.
My noble friend Lord Phillips and the noble and learned Lord, Lord Hardie, asked about consultation—or rather the lack of consultation. In preparing his report, my noble friend Lord Young consulted 132 wide-ranging organisations representing relevant professionals, including personal injury lawyers, businesses and associated organisations. He also spoke to more than 100 individuals, including health and safety professionals, Members of Parliament, councillors and leading academics in the field of law.
The problem lies not with the legislation but with the way it is interpreted and applied. Illustrating this, in response to Professor Löfstedt’s review, the Engineering Employers’ Federation said:
“The current compensation system is serving the needs of neither employees nor employers and is the source of many of the media stories and public concern about excessive health and safety. It is slow, expensive and places far too much emphasis on record keeping rather than practical action to control risk.”
I am very grateful for the anecdotal evidence raised today by the noble Earl, Lord Erroll, in this respect.
The noble Lord, Lord Browne, raised the issue of record-keeping. I believe he stated that record-keeping will not change, and still does what the law requires, so I think that he was asking what the problem is. I reiterate that there is clear evidence that business overimplements, going well beyond what the law actually requires.
Overimplementation does not lead, therefore, to better protection of employees. It means that employers are spending significant time and effort on activities which are not necessary or far in excess of legal requirements, resulting in significant additional unnecessary costs. Concern about the consequences of “getting it wrong” and confusion about what the law actually requires discourage businesses from exploring new opportunities to expand and diversify and consequently from taking on new employees, a point that I made in Grand Committee.
The Federation of Small Businesses stated in its response to Professor Löfstedt:
“A wider problem for small businesses is that many do not feel confident that they are compliant owing to confusion about what is absolutely necessary, and so feel the need to gold-plate the law to protect them”.
Examples of such gold-plating, according to a recent Better Regulation Executive survey, include a hairdresser unnecessarily paying £1,000 a year for portable electrical appliance testing, a micro-business paying £3,800 for a specialist health and safety consultant to do its basic risk assessment, and an electrical contractor paying £1,000 a month to a health and safety adviser. The impact therefore falls disproportionately on smaller businesses, often run by owner-managers who have less time and resources. This impact is significant for growth because such micro-businesses with fewer than 10 employees account for 96% of UK businesses and around 7 million jobs.
Some noble Lords have suggested that we should not introduce legislation merely to tackle a perception—a matter raised by the noble Lord, Lord Browne—but, as I have explained, the perception causes real problems which we believe require positive action. Clause 62 is one of a range of government reforms to tackle this perception of a compensation culture and to restore a common-sense approach to health and safety.
Amending the Health and Safety at Work etc. Act so that it will be possible to bring claims only for negligence is designed to ensure that responsible employers who have taken all reasonable steps to protect their employees will not be held liable to pay compensation for an accident that they could not reasonably have done anything about. Claims are a burden on employers not just because of the financial costs but due to the time and resources required to deal with them and, importantly, their negative impact on the wider reputation of a business.
This measure will not lower standards. Let me be clear: every death and serious injury at work is a tragedy for the individual, their family and friends. Happily, our record in the UK is a good one. In the 10 years from 2000 to 2010, the rate of fatal injuries fell by 38% and major injuries by an estimated 22%, and our overall performance is better than that of many other European countries. However, there is no room for complacency and we are committed to continuing to improve health and safety standards.
The Government do not accept the argument that this measure sends the wrong signal about the importance of complying with health and safety legislation; in fact, quite the opposite. This is about giving employers the reassurance to focus their attention on the things that have a real practical effect on controlling risks. In Grand Committee and again today, concerns have been expressed that this change represents a backward step by placing the burden of proof on employees and will make cases more difficult and costly to prove—the noble Baroness, Lady Turner, emphasised her views on this.
To be clear, the fact that someone has been injured at work does not and should not mean they are automatically entitled to compensation. Many health and safety duties require the injured employee to show fault on the part of their employer. Currently, claimants do not recover compensation in about 30% of claims. The cases that will be most significantly affected by this change are those which would have previously relied on an absolute or strict statutory duty, a point raised by some noble Lords today. In claims for negligence,
the claimant will have to show that the employer failed to take reasonable steps to avoid reasonably foreseeable risks to their health and safety, which led to the injury.
However, unlike in the days before the Health and Safety at Work etc. Act, there is now a codified framework for health and safety at work and a great deal of evidence and guidance in the public domain about hazards in the workplace. Employers are expected to take account of this in carrying out their risk assessments, and this body of information will form an important part of the evidence in this aspect of a claim. This means that injured employees are in a very different and much better position to obtain information about their employer’s actions than they were when the right to sue for breach of statutory duty was first established in the 19th century. I hope that this answers the question raised by my noble friend Lord Phillips in this respect.
The noble Lord, Lord Wigley, and the noble Baroness, Lady Turner of Camden, both raised the important point of whether the provision covers fatal and serious injury. The Health and Safety Executive will continue to investigate fatal and serious injuries. The existing statutory requirements will still be relevant as evidence in claims for negligence to help determine whether the employer’s approach was reasonable. The Health and Safety Executive will also continue to take a range of enforcement action in accordance with its enforcement policy statement, including serving notices of contravention and prosecution against employers who seriously breach the requirements of the criminal law.
4.45 pm
The noble Lord, Lord McKenzie, stated that we have not conducted a proper review, as did my noble friend Lord Phillips. The review proposed in Amendment 80B is similar to that suggested by Professor Löfstedt. This review would require detailed analysis across more than 200 health and safety regulations and would be complex to achieve as health and safety duties are variously expressed in the extent to which they are qualified. The likely result would be different approaches to civil liability being applied across the regulatory framework. This would add a layer of complexity to the existing system, leading to greater uncertainty for not only employers but employees about the duties that apply in respect of compensation claims.
The approach adopted to make a single change to the Health and Safety at Work etc. Act avoids these difficulties and provides a consistent approach to civil litigation across all health and safety legislation. This will be simpler for all to understand and is therefore likely to have more impact in tackling the perception of a compensation culture. On that note, extensive work has been done to update and simplify health and safety guidance to help employers, particularly in small firms, to better understand what the law requires and the practical steps they need to take to comply. For the reasons I have set out, the Government do not accept that the conduct of such a review would be beneficial and it would simply delay an important part of the Government’s wider package of reforms to the civil litigation system.
However, I should also remind the House that the clause contains the power to make exceptions. It is already planned to use this power to make an exception for pregnant workers. In the light of comments made today, I can confirm that we would be prepared to look at the possibility of other exceptions to deal with cases that noble Lords consider may present particular difficulties. This may give some comfort to the noble and learned Lord, Lord Hardie, who raised a question in this respect.
This measure is not about reducing the number of claims or reducing standards of protection. It is about establishing the principle that employers who have done nothing wrong should have the opportunity to defend themselves on the basis of having taken all reasonable precautions. We believe this is an important and necessary reassurance for employers that will help them manage health and safety risks in a sensible and proportionate way, while giving them confidence to develop their businesses into new areas and take on new employees.
The Engineering Employers’ Federation last week supported the reform as,
“a step in the right direction to help reverse the current civil litigation compensation culture”,
“reduce the perceived health and safety regulatory burden on business”.
In these challenging times it is important that we restore a common-sense approach to health and safety to support business growth without compromising the necessary protections for employees.
A number of other questions were raised by noble Lords. The noble Lords, Lord McKenzie and Lord Browne, raised the issue of potential challenges concerning European Union law. A number of legal points have been raised about this in debate, both in Grand Committee and today. I can reassure the House that the Government take these issues very seriously and that the legal position has been carefully considered. The Government’s view is that this amendment is consistent with our obligations under EU law. I reiterate that I wrote an extensive letter to the noble Lord, Lord Stevenson, on this matter. A copy of the letter is in the Library.
Under European law specifically, member states can generally decide what sanctions and remedies to put in place to enforce EU obligations, subject to certain rules. In Great Britain, health and safety obligations are backed by various enforcement powers and criminal sanctions, as well as the opportunity to claim for compensation in the civil courts, which will remain through the right to sue for negligence.
The noble Lord, Lord Wigley, raised the issue of negligent companies that may try to avoid their responsibilities. He may have some anecdotal evidence of companies that he would judge to be negligent. It is true that we do not have information about how many cases arise where employers have attempted to avoid their responsibilities when an accident occurs, but, depending on the circumstances, employees would be able to seek assistance from their trade union or make a complaint to the relevant enforcing authority. Allegations relating to breaches of health and safety legislation made to the Health and Safety Executive are investigated
in accordance with the HSE’s published complaints handling procedure. In some cases, the Advisory, Conciliation and Arbitration Service—ACAS—may also have a role.
The noble and learned Lord, Lord Hardie, tackled me on the numbers involved and the impact. I reiterate, as I did in Grand Committee, that there is indeed considerable uncertainty about the financial impact of this change and it has not been possible to quantify it. That directly addresses the question raised by the noble Lord, Lord Browne. This is due to the unavailability of relevant data, for example on the number of claims made that rely on strict duties and the level of damages awarded. In addition, a wide range of factors influence whether a claim is pursued, whether it is settled at an early stage—or, indeed, out of court—or defended, and the actions employers take to comply with the law. However, a small reduction in the number of claims made is anticipated.
The noble and learned Lord, Lord Hardie, raised an important question about the impact that that might have on the value of benefits that could be recovered with a view to those people who fall between two stools, if I may put it that way. It is true that I have said that those numbers would be very small, but we cannot precisely quantify that. Because the number of cases anticipated is small and many claims are low in value, the impact on the amount of benefits that can be recovered is also expected to be limited. It is not possible to disaggregate the amount because the benefits paid that would be subject to recovery on a compensation payment being made will depend upon the individual circumstances of the injured person.
Benefits paid as a result of an injury or disease for which compensation was paid are recovered for a period of five years or until a final settlement of the claim, whichever is sooner. NHS care costs can also be recovered and are subject to a tariff according to the amount of treatment. The amount that can be recovered is subject to a cap, currently £45,153. NHS charges are not recoverable in disease claims.
I thought it was important to address those important and direct questions directly. Having covered all the points, it is for those reasons that I hope that the noble Lord will withdraw the amendment.
Lord Phillips of Sudbury: My Lords, the Minister twice said that where companies had done nothing wrong, they could still be caught and made liable under the absolute liabilities of health and safety legislation. Surely, if it is indeed the case that the legislation is so drafted that a company that had done nothing wrong is liable, the answer is to introduce a qualification to that legislation, along the lines mentioned by, among others, the noble and learned Lord, Lord Hardie, so that the situation does not recur. Would that not be a better way of proceeding, as Professor Löfstedt suggests and as the panel would enable, than to take a step into the deep unknown, with consequences that many of us fear?
Viscount Younger of Leckie: I thank my noble friend for that point, which is simply noted. It does not change the views that I have expressed about where we are with the clause, but it was valuable to hear what he had to say.
Lord Hardie: Before the noble Viscount sits down, may I clarify what is being offered? I hope that I have not misunderstood him, but he seemed to suggest that noble Lords would go through all the regulations and identify which ones should include a right of action, then come to the Government and persuade them. Is that what is envisaged, or will the Government undertake the review of existing regulations to decide which should include the right of action?
Viscount Younger of Leckie: All I am saying at this stage is that we are open to ideas so we can hear where further exclusions, above and beyond pregnant workers, might appear.
Lord McKenzie of Luton: My Lords, I am bound to say that I found the Minister’s response profoundly disappointing. It was his noble friend Lord Razzall who said that it was a mistake to introduce laws without extensive consultation and who urged the Minister to find a balance. Indeed, the same point was made by the noble Lord, Lord Phillips. Yet I do not see any balance in the Minister’s response.
With this power to make exceptions, the Minister is asking us to do the job of the Government. Frankly, that is not the way round that it should be. The Minister always goes back to focusing on strict liability and extrapolates what is perceived to be the issue around that to all other circumstances where people might be injured at work, then causes there to be a restriction on their ability to get justice.
There seems to be an incredible disconnect between an analysis of the health and safety system and the extent to which there is overcompliance with it, with the solution being to restrict the right of people to claim justice when they are injured at work. For a long time there has been a problem of overcompliance, and now there is undercompliance with the health and safety system as well. That is why, as I know, the HSE is engaged in improving guidance, not helped by the Government having restricted proactive inspections so that inspectors can no longer go out and visit as many premises as they did in the past. There is a huge disconnect there, which does not seem to have any justification.
We have had a very impressive array of contributions to this debate today, from very experienced legal minds, all of whom, with the exception of the noble Earl, Lord Erroll, argued in one direction. I would say to the noble Earl, who mentioned agriculture, that this industry is proportionately the most dangerous in the country. There are more fatalities in agriculture than in any other industry. It is absolutely right that there should be a concentration of health and safety regulations in those circumstances.
The Earl of Erroll: I am not arguing that one should not have health and safety regulations and that one should not do one’s best. However, it is just wrong when someone has done everything they can but something is done behind their back that they have no knowledge of or power over and they are made liable and possibly locked up. I object to the strict liability part.
Lord McKenzie of Luton: The noble Earl, like the Minister, has effectively conflated issues around strict liability with the overwhelming number of regulations where it is “so far as reasonably practical” that applies. The noble and learned Lord, Lord Hardie, went through this in some detail. My noble friend Lady Turner was very clear that this clause had to go in its entirety, and on the basis of what we have heard today that is absolutely the right way forward. The noble Lord, Lord Wigley, said that this clause was turning back the clock to Victorian times, and the noble and learned Lord, Lord Hardie, corrected me to say that it is not just a century that it goes back, but further than that. It has been a settled position and the Government seek to unsettle it, all because of perceptions.
We know that the data show that there is not a compensation culture. There has not been an increase in the number of claims for compensation. The Government’s own statistics show that, and their own impact assessment shows that there are a small number of cases that proceed via the strict liability route, as opposed to the generality that go down an alternative route. The noble and learned Lord, Lord Brown of Eaton-under-Heywood, asked, “Which are the undeserving claims at the moment? Which sort of claims proceed at present that will be restricted by the Government’s change, and why is that?” We heard no answer from the Government.
The noble Lord, Lord Pannick, said that the change in the process to prove negligence would be expensive and bring uncertainty and delays to the process—a point reiterated by my noble friend Lord Browne. We heard a very powerful treatise from the noble and learned Lord, Lord Hardie, about why it would be wrong to disturb the current positions, and I entirely agree with that.
Basing these things on perception seems a very flimsy structure on which to make such a fundamental change to the law. We have a number of propositions before us. I believe that the first and the third amendments in the group have the same effect, which is to delete the clause, and I certainly wish to test the opinion of the House on that proposition.
5 pm
Contents 225; Not-Contents 223.
CONTENTS
Adams of Craigielea, B.
Adonis, L.
Ahmed, L.
Allenby of Megiddo, V.
Anderson of Swansea, L.
Andrews, B.
Armstrong of Hill Top, B.
Bach, L.
Barnett, L.
Bassam of Brighton, L. [Teller]
Berkeley, L.
Best, L.
Bilston, L.
Birt, L.
Blackstone, B.
Borrie, L.
Bradley, L.
Bragg, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Brown of Eaton-under-Heywood, L.
Browne of Ladyton, L.
Campbell-Savours, L.
Chandos, V.
Christopher, L.
Clancarty, E.
Clark of Windermere, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Collins of Highbury, L.
Corston, B.
Coussins, B.
Cox, B.
Crawley, B.
Davies of Coity, L.
Davies of Oldham, L.
Dean of Thornton-le-Fylde, B.
Donaghy, B.
Donoughue, L.
Drake, B.
Dubs, L.
Eames, L.
Elder, L.
Elystan-Morgan, L.
Emerton, B.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Falkland, V.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Fellowes, L.
Filkin, L.
Finlay of Llandaff, B.
Ford, B.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Golding, B.
Gould of Potternewton, B.
Graham of Edmonton, L.
Grantchester, L.
Grenfell, L.
Griffiths of Burry Port, L.
Grocott, L.
Hanworth, V.
Hardie, L.
Harries of Pentregarth, L.
Harris of Haringey, L.
Hart of Chilton, L.
Haskel, L.
Hattersley, L.
Haworth, L.
Hayman, B.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Henig, B.
Hereford, Bp.
Hilton of Eggardon, B.
Hollick, L.
Hollis of Heigham, B.
Howarth of Newport, L.
Howe of Idlicote, B.
Howells of St Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L.
Janner of Braunstone, L.
Jay of Ewelme, L.
Jay of Paddington, B.
Joffe, L.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Judd, L.
Kakkar, L.
Kennedy of Southwark, L.
Kennedy of The Shaws, B.
Kerr of Kinlochard, L.
Kidron, B.
King of Bow, B.
Kingsmill, B.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Laming, L.
Layard, L.
Lea of Crondall, L.
Leitch, L.
Liddell of Coatdyke, B.
Liddle, L.
Lipsey, L.
Lister of Burtersett, B.
Low of Dalston, L.
McAvoy, L.
McConnell of Glenscorrodale, L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Mallalieu, B.
Mandelson, L.
Mar, C.
Martin of Springburn, L.
Masham of Ilton, B.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Mitchell, L.
Monks, L.
Morgan, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Yardley, B.
Noon, L.
Norwich, Bp.
Nye, B.
O'Loan, B.
O'Neill of Clackmannan, L.
Oxburgh, L.
Pannick, L.
Parekh, L.
Patel, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Paul, L.
Pendry, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prescott, L.
Prosser, B.
Quin, B.
Quirk, L.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Rees of Ludlow, L.
Reid of Cardowan, L.
Rendell of Babergh, B.
Richard, L.
Rosser, L.
Rowe-Beddoe, L.
Rowlands, L.
Royall of Blaisdon, B.
St John of Bletso, L.
Sandwich, E.
Sawyer, L.
Scotland of Asthal, B.
Scott of Foscote, L.
Sherlock, B.
Simon, V.
Singh of Wimbledon, L.
Smith of Basildon, B.
Smith of Finsbury, L.
Smith of Gilmorehill, B.
Snape, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Sutherland of Houndwood, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Tomlinson, L.
Tonge, B.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turnberg, L.
Turner of Camden, B.
Uddin, B.
Wall of New Barnet, B.
Walpole, L.
Walton of Detchant, L.
Warner, L.
Warnock, B.
Watson of Invergowrie, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Wigley, L.
Wilkins, B.
Williams of Elvel, L.
Wills, L.
Winston, L.
Wood of Anfield, L.
Woolmer of Leeds, L.
Worthington, B.
Young of Hornsey, B.
Young of Norwood Green, L.
Young of Old Scone, B.
NOT CONTENTS
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Allan of Hallam, L.
Anelay of St Johns, B. [Teller]
Armstrong of Ilminster, L.
Arran, E.
Ashdown of Norton-sub-Hamdon, L.
Ashton of Hyde, L.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Ballyedmond, L.
Barker, B.
Bates, L.
Benjamin, B.
Berridge, B.
Black of Brentwood, L.
Blencathra, L.
Bonham-Carter of Yarnbury, B.
Bottomley of Nettlestone, B.
Bowness, L.
Brabazon of Tara, L.
Bradshaw, L.
Brinton, B.
Brittan of Spennithorne, L.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Browne of Belmont, L.
Browning, B.
Burnett, L.
Buscombe, B.
Byford, B.
Carlile of Berriew, L.
Cathcart, E.
Cavendish of Furness, L.
Chadlington, L.
Chidgey, L.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L.
Cormack, L.
Cotter, L.
Courtown, E.
Craig of Radley, L.
Craigavon, V.
Crickhowell, L.
Curry of Kirkharle, L.
De Mauley, L.
Deech, B.
Deighton, L.
Denham, L.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Dykes, L.
Eaton, B.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Edmiston, L.
Elton, L.
Empey, L.
Erroll, E.
Falkner of Margravine, B.
Fellowes of West Stafford, L.
Flight, L.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Framlingham, L.
Fraser of Carmyllie, L.
Freeman, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
German, L.
Glasgow, E.
Glenarthur, L.
Glentoran, L.
Gold, L.
Goodhart, L.
Goodlad, L.
Goschen, V.
Grade of Yarmouth, L.
Greenway, L.
Griffiths of Fforestfach, L.
Hamilton of Epsom, L.
Hamwee, B.
Hanham, B.
Harris of Richmond, B.
Henley, L.
Heyhoe Flint, B.
Hill of Oareford, L.
Hodgson of Astley Abbotts, L.
Hooper, B.
Howard of Lympne, L.
Howard of Rising, L.
Howe, E.
Howe of Aberavon, L.
Howell of Guildford, L.
Hunt of Wirral, L.
Hussain, L.
Hussein-Ece, B.
James of Blackheath, L.
Jenkin of Roding, L.
Jolly, B.
Jones of Cheltenham, L.
Jopling, L.
King of Bridgwater, L.
Kirkham, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Kramer, B.
Lang of Monkton, L.
Lawson of Blaby, L.
Lexden, L.
Lingfield, L.
Liverpool, E.
Loomba, L.
Lothian, M.
Lucas, L.
Luce, L.
Luke, L.
Lyell, L.
McColl of Dulwich, L.
Macfarlane of Bearsden, L.
MacGregor of Pulham Market, L.
Maclennan of Rogart, L.
McNally, L.
Maddock, B.
Maginnis of Drumglass, L.
Mancroft, L.
Mar and Kellie, E.
Marks of Henley-on-Thames, L.
Marland, L.
Marlesford, L.
Mayhew of Twysden, L.
Montrose, D.
Morris of Bolton, B.
Naseby, L.
Nash, L.
Neville-Jones, B.
Newby, L. [Teller]
Newlove, B.
Nicholson of Winterbourne, B.
Northbrook, L.
Northover, B.
Norton of Louth, L.
O'Cathain, B.
Oppenheim-Barnes, B.
Palmer of Childs Hill, L.
Palumbo, L.
Parminter, B.
Patten, L.
Perry of Southwark, B.
Popat, L.
Randerson, B.
Rawlings, B.
Razzall, L.
Redesdale, L.
Ribeiro, L.
Risby, L.
Roberts of Llandudno, L.
Rodgers of Quarry Bank, L.
Rogan, L.
Ryder of Wensum, L.
Sanderson of Bowden, L.
Seccombe, B.
Selborne, E.
Selkirk of Douglas, L.
Selsdon, L.
Shackleton of Belgravia, B.
Sharkey, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shephard of Northwold, B.
Shipley, L.
Shrewsbury, E.
Shutt of Greetland, L.
Skelmersdale, L.
Smith of Clifton, L.
Spicer, L.
Stedman-Scott, B.
Stephen, L.
Stevens of Ludgate, L.
Stewartby, L.
Stirrup, L.
Stoneham of Droxford, L.
Storey, L.
Stowell of Beeston, B.
Strasburger, L.
Strathclyde, L.
Taylor of Holbeach, L.
Teverson, L.
Thomas of Gresford, L.
Thomas of Swynnerton, L.
Thomas of Winchester, B.
Tope, L.
Tordoff, L.
Trefgarne, L.
Trimble, L.
True, L.
Tugendhat, L.
Tyler, L.
Ullswater, V.
Verma, B.
Vinson, L.
Wade of Chorlton, L.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Wasserman, L.
Wheatcroft, B.
Wilcox, B.
Williams of Crosby, B.
Wolfson of Aspley Guise, L.
Younger of Leckie, V.
5.12 pm
Amendments 80B and 81 not moved.
(1) Section 1 of the Estate Agents Act 1979 (estate agency work) is amended as follows.
(2) In subsection (1) for the words “to which this Act applies” substitute “and in subsection (1A) below to which this Act applies.
(1A) This Act also applies, subject to subsections (2) to (4) below, to—
(a) things done by any person in the course of a business (including a business in which he is employed) pursuant to instructions received from another person (in this section referred to as “the client”) who wishes to let or have the letting of an interest in land managed (for example, the collection of rents on his behalf)—
(i) for the purpose of, or with a view to, effecting the introduction to the client of a third person who wishes to let an interest in land; or
(ii) after such introduction has been effected in the course of that business, for the purpose of securing the letting of the interest in land; or
(iii) for the purpose of, or with a view to, managing the letting of the interest in land on behalf of the client; or
(iv) for the purpose of, or with a view to, block management of interests in land; and
(b) management activities undertaken by any person in the course of a business (including a business in which he is employed) in connection with land or interests in land.””
Baroness Hayter of Kentish Town: My Lords, this simple amendment in my name and that of the noble Baroness, Lady Howe, would make letting and block managing agents have to belong to a redress scheme. Estate agents must belong to a redress—that is, an ombudsman—scheme. That is good for users, having an independent arbitrator to sort out disputes. Also, if an estate agent repeatedly cheats consumers, or does so particularly badly, it can then be banned by the OFT. However, letting agents, which handle client money and have slightly younger, poorer and less confident users, are completely unregulated. This means that an estate agent banned by the OFT can reopen the next day as a letting agent. Neither the landlord nor a tenant can take a complaint about a letting agent to an ombudsman, unless that particular agent chooses to join.
There are 4.5 million people who rent privately, two-thirds through letting agents. Given that tenants move quite often, they resort to letting agents with some frequency. Half of them stay in their property for less than two years, as opposed to 6% of owner-occupiers. There are, I fear, a lot of bad—indeed, some very dubious —letting agents. Just today, we have had a major ASA ruling against a letting agent who was breaking the ASA code by not disclosing compulsory charges.
5.15 pm
Why is there no ombudsman to deal with such things and award compensation? Just yesterday, the mystery shopping undertaken by Which?showed that only one tenant was given information about fees when they went to a letting agent to arrange a viewing. No prospective tenant was given a list of charges. This failure to disclose fees up front probably breaches the unfair trading regulations, but tenants have no one to complain to. I hope that the Government will not expect them to take action themselves or through trading standards, which cannot award redress. Is it any wonder that one in five tenants and almost the
same proportion of landlords are dissatisfied with their letting agent? Indeed, landlords rate letting agents sixth from the bottom for customer satisfaction across 50 markets. Sadly, only a third of landlords check whether their agent is even a member of a professional body, despite over a million of them also using letting agents to manage their property.
It is no surprise, therefore, that landlords are completely behind this amendment. It is not simply that tenants and landlords have nowhere to go with a complaint: it is also that letting and management agents cannot be banned for bad practice; they do not need to provide indemnity insurance; they do not need to have a complaints procedure and there are no client money protection rules. This is a big business for such a lack of standards. It takes some £175 million a year just from tenants, so it is no wonder that everyone wants letting and block managing agents to be subject to the same requirements as estate agents.
The two residential ombudsmen, who have to refuse a quarter of the complaints they receive because the letting agents had refused to join the scheme, described the problems with unregulated firms. They included: no protection of client money if the firm fails or if funds are misappropriated; no code of conduct and no minimum standards. These ombudsman, Shelter, Crisis, Which?, the mayors of Newham and of London and the Chartered Institute of Housing all support this amendment. It is perhaps as interesting that the industry itself is absolutely behind it. Lucy Morton, described by the Telegraphas the “Queen of London’s rental market for 30 years” said:
“It is shocking that so many letting agents remain unregulated.”
There are many other groups that support this amendment: the British Property Federation, RICS, the Federation of Private Residents’ Associations, the Association of Residential Letting Agents, the National Association of Estate Agents, Knight Frank, the Southern Landlords Association, the Institute of Residential Property Management, the Electricity Safety Council and the Association of Residential Managing Agents. All of those groups support this amendment because, at present, there is only limited protection for the consumer, with about 40% of letting agents unregulated by any professional body. As these groups say, this costs businesses money, hitting micro-businesses and sole practitioners particularly hard.
This amendment will provide consumers with clarity and protection,
“raising standards across the rental sector, without adding unnecessarily to business costs”.
Those were the industry’s words, not mine. Furthermore, on 14 February, the OFT itself called for a general redress mechanism, together with an enforcement strategy.
What about the governing parties? The Liberal Democrats, in Decent Homes for All, describe how bad letting agents bring the private rented sector into disrepute. They therefore support regulation to ensure that people are protected from unscrupulous or incompetent agents. They promise to set up a mechanism whereby bad agents may be removed and prevented from practising. Amendment 81A is that mechanism.
As for the Conservatives, in 2007 the then Opposition MP Mark Prisk tabled virtually the same amendment as my Amendment 81A. As he said, it would have amended,
“the Estate Agents Act 1979 to extend the definition of estate agency work to include residential lettings and management. Some of the scams … in this market include … charging both landlords and tenants for the same service; charging for simple procedures that are already covered by a landlord’s management fee, and charging exorbitant fees for basic functions”.
He went on, quite rightly, to say:
“As a Conservative, I am instinctively cautious about arguing for more regulation. However, as a chartered surveyor and a constituency Member of Parliament, I know that we need to put lettings on the same regulatory footing as sales”.
The fact that the industry agrees,
“shows that the measure is long overdue”.—[
Official Report
, Commons, Consumers, Estate Agents and Redress Bill Committee, 24/4/07; cols. 191-192.]
This year, now as Minister, Mark Prisk has acknowledged that some letting agents let down tenants and landlords, and he claimed that the Government are determined to raise standards. However, he seems to be afraid of the costs to landlords and/or the tenant, despite the willingness of the industry to fund these.
The cost of meeting this amendment is estimated at £770 for an agent, including insurance. Given that letting agents often charge a single tenant up to £600 in fees, this is hardly substantial. Furthermore, the 60% of letting agents who voluntarily sign up seem to manage that cost, and according to the impact assessment undertaken by RICS, almost half the agents surveyed said that they could absorb the costs. Sixteen per cent said that they would find efficiencies, and only 23% said that they would pass the cost on to landlords. However, the landlords would, of course, receive a better service, and probably lower overall costs.
Industry, the consumer groups, the OFT and three political parties want this. The amendment simply requires membership of a redress scheme, and empowering the OFT to remove letting agents in the same way as they can remove estate agents. In a recent meeting I heard Mark Prisk say that he was open to reason. I hope, therefore, that the Minister will be able to indicate that he has listened to reason, and that the Government are willing to require such a system of mandatory redress and help us rid ourselves of unscrupulous letting agents. I beg to move.
Lord Sharkey: My Lords, when we discussed this issue in Committee the Government gave four reasons for rejecting the proposal made by the noble Baroness, Lady Hayter. These reasons were as follows. First, bringing letting agents under regulation would increase costs for consumers and reduce the choice and availability of accommodation on offer to tenants. Secondly, letting agents are already subject to consumer protection legislation. Thirdly, consumers who are charged unreasonable fees can seek help from trading standards officers. Fourthly, around half of all agents belong to a voluntary scheme that sets standards and offers redress. None of these reasons stands up well to any kind of examination. The fact that half of all agents belong to a voluntary scheme is not a reason for failing to address the fact that half do not.
The fact that consumers who are charged unreasonable fees can seek help from trading standards officers is one of those facts that are true in theory but of no help in practice. Even if consumers knew about this recourse—and I am sure that they do not—it is well known that trading standards officers are overstretched and underresourced. This is an illusory comfort to ripped-off or abused consumers. That letting agents are already subject to consumer protection is another true, but comfortless, fact that relies, again, on action by trading standards officers—action that is unlikely to bring significant relief, if any at all.
However, the first reason the Minister gave in Committee for rejecting the amendment in the name of the noble Baroness, Lady Hayter, is the one on which the Government seemed then to rely most, and which at first glance appeared to have some merit—that is, that the amendment before us again would increase costs to consumers and reduce the choice and availability of accommodation on offer to tenants. This argument was challenged by the noble Lord, Lord Lucas, and the Minister subsequently wrote to the noble Lord to set out the evidence—or, rather, grounds—for this argument.
These grounds amounted to an estimate, as the noble Baroness, Lady Hayter, has already mentioned, of an additional annual cost to a letting agent of around £800. It is very hard to see that an additional cost of £800 would drive any letting agent out of business. The Government have produced no evidence of their assertion that it might do so. Even if it did—which is not only unproven but unlikely to be provable—it does not follow that rental properties would be taken off the market or that costs would be passed directly on to the tenant. The Government have produced no evidence to show that letting agents who are members of the voluntary scheme charge more than those who are not. In many cases, the reverse is likely to be the case.
Even if all the Government’s assertions in this area were true and evidenced, their position would amount to saying that they were content to have serious abuses in the marketplace because the abusers could not afford to pay to become non-abusers. This is not an attractive or coherent proposition and it is especially unattractive when one considers the analysis of cost benefit produced by RICS, among others, which gave evidence of a beneficial financial outcome for implementing the proposals. All in all, and exactly as in Committee, it is hard to understand why on earth the Government have opposed this measure. It stops significant abuse, it is easy to do, it has almost universal industry support and it has long-term financial benefits.
I strongly support the amendment in the name of the noble Baroness, Lady Hayter, and very much hope that the Government will be able to give it the sympathetic consideration it deserves.
Baroness Howe of Idlicote: My Lords, I too congratulate the noble Baroness, Lady Hayter, on her determination to pursue these important changes and am delighted to have added my name to the amendment.
The proposals provide for basic consumer protection measures for the lettings market, already governing estate agents. These days, many property businesses
operate both as estate agents and letting agents. The divide between the two is, in many ways, artificial. We have, at present, the ludicrous situation whereby a member of the public who walks through the door of such a business wishing to buy a house will have access to accountability if they suffer poor practice. However, if they rent a house from the same business they will not. There is access to independent redress and client money protection for those buying a house but not for those renting one. This is quite illogical and is untenable at a time when more and more young families with children are renting privately, most of them through a letting agent. We cannot have letting agents leaving boilers unfixed, properties in a state of disrepair or running off with people’s money and facing no repercussions. When people do not get the service they pay for there should be consequences for the businesses involved. That is a simple consumer right. This is not an issue of party politics but of basic common sense, which is why this amendment enjoys cross-party support, as was clear in Grand Committee.
Letting agents themselves are asking Government for the measures that this amendment provides for. They know that much of the estimated 40% of the market that operates outside existing voluntary registration schemes is damaging the reputation of the entire profession. A survey by Shelter showed that only 20% of renters trust their letting agent, with 84% disagreeing that letting agents work in the interests of their tenants. It is vital for everybody—tenants, letting agents and landlords alike—that standards are raised. I have yet to hear a convincing argument against these proposals. The Government have claimed that requiring letting agents to meet certain professional standards will push up costs. However, research by the Royal Institution of Chartered Surveyors shows that this is not true. While there is a one-off cost, that figure is quickly recouped and there is a net benefit to the economy from these changes of £21 million over 10 years.
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It is also argued that existing regulations provide for redress in the event of poor practice. As far as I can see, that is also not the case. Existing regulations can stop only malpractice. CPRs do not empower consumers or provide them with a route to redress. In addition, a lack of trading standards resources means that these regulations are inconsistently applied, if they are at all. Only a tiny number of prosecutions have been taken against letting agents using existing CPRs. This is despite a significant upsurge of dissatisfaction with poor practice in the lettings industry. Complaints to the Property Ombudsman have increased by 123% over the past five years. Therefore, existing legislation is simply not fit for purpose.
As to the argument that these proposals amount to extra red tape, this is not red tape. Businesses do not like red tape and businesses are asking for these changes. This is simpler regulation; it is not more regulation. It has not strangled estate agents and it will not strangle letting agents. It is worth noting that landlords complain as much as tenants when the agent belongs to the ombudsman scheme. Landlords would be greatly helped by this measure.
In the mean time, consumers want change. As polling for RICS and Shelter shows, the vast majority of those renting want basic standards to which letting agents should adhere and the right to appeal to an independent complaints scheme in the event of poor practice. Who can blame them? There is simply no good reason to deny them that. These changes are not a panacea for all the problems in the letting agents’ profession but they are a vital first step towards a market which works fairly. This amendment closes a loophole that should, in truth, have been closed quite some time ago. Doing so has long enjoyed wide support, including at one time from the current Housing Minister when he was in opposition. Back then, Labour Ministers opposed it and the noble Baroness, Lady Hayter, eloquently expressed her frustration with that in Grand Committee.
We now have Conservative Ministers, but the continued growth of the private rented sector means that this issue will not go away. It will only increase in importance and urgency. Almost everyone knows that this is the right thing to do but no Government have got around to implementing it. It is high time for this Government to break that cycle, prove that they are not bound to repeat the mistakes of their predecessors and give those who rent their homes the basic consumer protection that they deserve.
Lord Borrie: The noble Baroness, Lady Howe of Idlicote, has indicated that at the present time there is an increasing desire, among young people particularly, to rent rather than buy. When I say “desire”, it is of course a desire that is impelled upon them because of the difficulty of getting mortgages and actually purchasing a house. Whatever the reason, they are having to rent rather than buy.
As so many noble Lords said in Grand Committee, which, unfortunately, I was unable to attend, there is a very strong argument that letting agents and management agents employed by landlords to look after their property should be covered by the Estate Agents Act 1979 and by an ombudsman scheme, as estate agents have been for some time. In Grand Committee, my Front Bench spokesman, the noble Baroness, Lady Hayter, made a powerful speech, as she has today, in favour of extending the power of the Office of Fair Trading to ban estate agents for misconduct to those who engage in the letting and the management of property and to make available an ombudsman scheme for complaints. In Grand Committee she put forward a number of very strong arguments—for example, the size of the market, running to a couple of million letting and management agents. On the number of complaints, she quoted from the Property Ombudsman, for whose council I had the honour to serve as chairman a few years ago. It has shown how the number of complaints has increased. All of the speakers so far in this debate today have mentioned that almost all British Property Federation bodies connected with this field are in favour of the scheme being proposed in this amendment.
The ombudsman scheme is very familiar to us now in all sorts of private industries, as it was already in public concerns—for example, the Parliamentary Ombudsman, which in 1967 started the ball rolling in this country, and the Local Government Ombudsman. I found very puzzling the response of the noble Viscount
the Minister in Grand Committee when he said that there would be a reduction in choice if the amendment were carried. When government departments were made subject to the Parliamentary Ombudsman, individual departments were not given the choice as to whether they should be subject to the Parliamentary Ombudsman; they are all subject to it. As new departments and, indeed, quasi-departments, if I may put it that way, have come into being, they, too, have been particularly mentioned as being subject to the Parliamentary Commissioner or Parliamentary Ombudsman.
I thought that the Minister’s answers, as I understood them, were quite inadequate. They seemed to bring in the subject of competition. I am all in favour of competition, and part of this Bill is concerned with improving competition. Competition and choice are very important. Nevertheless, where does the benefit to the consumer come to choose between estate agents, estate management or letting agents, or whatever, which belong to an ombudsman scheme and those which do not? If there is a choice, surely no sensible consumer would wish to go to somebody who does not belong. It seems to me that a mandatory scheme is most desirable in this field.
Finally, I mention in passing the banning of estate agents when they engage in misconduct. This dates, as we all know, from the Estate Agents Act 1979. The Office of Fair Trading has probably not used it as much as it might to deal with bad estate agents. In my day at the Office of Fair Trading we tended to ban only estate agents who were in prison. In other words, they were imprisoned for fraudulent activities and we received evidence that they were coming out of prison shortly. We decided that they must not come out and engage in estate agency so we would ban them. There are not that many estate agents who have been banned who were not at the time in jail.
It is a pity if the Office of Fair Trading has, whether under my guidance or later, not been a little bolder, but it needs adequate evidence of course. Whatever it is, surely letting and management agents should be subject to the same rules.
Lord Campbell-Savours: My Amendment 82 is in this group. I apologise to the House for not being able to raise these matters in Committee due to my engagements in other proceedings.
I want to make it clear that I am not criticising in any way the actions of any particular property auction company in the United Kingdom. I also want to make it clear that my amendment is not lobby-driven: it is based on my own experience at property auctions.
Whereas most people’s measure of confidence in the national economy is based on news reports, share prices, unemployment and growth statistics, surveys of business confidence and a number of general indicators, my personal approach has been to measure confidence in what happens in the property market and, in particular, in property auctions. For almost every year over the past 20 years, I have watched the movement in regional property prices in London auction rooms, which I have attended—never as a vendor, never as a purchaser, but only as an observer. In my view, regional price movements excluding London are a real-world barometer of confidence in the economy.
However, there is one particular practice in the management of bidding processes that concerns me. I know that it causes a lot of upset among inexperienced bidders and particularly for young people buying their first home. Catalogues invariably show a guide price against the property description and lot number. I have a catalogue in my hand that shows the lot number of a property in Birmingham and the guide price.
As Barnard Marcus, a reputable company, says in its catalogue:
“The Guide Prices listed must not be relied upon by prospective purchasers as a valuation or assessment of value of the properties. They are intended to provide purchasers with an indication of the region at which the reserve may be set at the time of going to press”—
“Guide prices may be subject to variation … Prospective purchasers should be aware that eventual sale prices may be above or below guide levels dependent on the competition”.
That is the background against which people often judge whether they intend to attend a public auction.
Noble Lords should remember that I said,
“the eventual sale price may be above or below guide levels dependent on the competition”.
With that in mind, bidders often take time off work and travel great distances to attend property auctions. But what happens when they arrive and bid often comes as a shock. They presume, as per the quote that I read out from the Barnard Marcus catalogue, that the guide is an indication of the reserve. That is often not the case. The reserve is often substantially higher. The bidders are unaware that the guide is no guide at all as the reserve is not known to the bidder. As Countrywide Property Auctions states in its catalogue under the heading “Reserve Price”:
“Each property will be sold subject to a reserve price. This is a confidential figure agreed between the Auctioneer and the seller prior to auction and is a figure below which the Auctioneer cannot sell the property”.
In other words, the reserve price is unknown to the bidder.
What the bidder is witnessing is effectively a trade misdescription. The guide is no guide at all. Bidders are being attracted to property auctions on the basis of a guide that may or may not be exceeded dependent on bids received—the competition referred to in the Barnard Marcus quote. But the property is being sold on the basis of a reserve price known only to the auctioneer and unknown to the bidder.
Let us take an example. Property A has a guide price of £100,000. Bids received are £95,000, £100,000, £105,000, £110,000 and £115,000. The bidding stops at £115,000, £15,000 above the guide, at which point the auctioneer abruptly intervenes with the statement: “I am sorry but the property is withdrawn under instructions from the vendor because the reserve has not been met”. That reserve is £15,000 above the guide price.
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I have witnessed some pretty ugly and angry scenes on the floor of public auctions. What sometimes happens is that a bidder is drawn into a telephone discussion after the bidding is over, via the auctioneer, with the vendor on a price near the reserve.
On other occasions, bidders leave the auction room in disgust at the waste of time involved. What is really worrying is that it is possible for a vendor to welcome a low guide in the catalogue, in the knowledge that it will attract prospective bidders, and then spring a high reserve on the property on the day of the auction.
In one particular catalogue you will find the following reference: “The sale is subject to a reserve price for each of the properties and the vendor reserves the right to bid both up to the reserve price through the auctioneer at auction”. In other words, set a low guide and then bid your own property up to the reserve price at the auction. In those circumstances, if the guide is set lower than the reserve, we are experiencing nothing less than a deliberate deception of prospective purchasers.
That is the background to my amendment. I believe that reform is needed in this area. I am not expecting the Minister to give way at the Dispatch Box today, but I hope, following my conversation with civil servants last week on these matters, that we can have some legislative change in this area at Third Reading. I beg to move.
Baroness Brinton: My Lords, I spoke on this in Grand Committee and I do not want to repeat either the points I made then or the many comments that have been made by noble Lords this afternoon. I want to make two or three additional points.
I have noticed in my home town of Watford a proliferation of letting agents, a constant change in their brand and marketing or moving address. Certainly, for the tenant, there is no clarity in the difference between an estate agent and a letting agent. The Government have argued that accepting this amendment complicates the landscape in this area. I think the exact opposite is true. I have two examples of tenants suffering problems with letting agents and one of landlords.
A typical prospective tenant might be a single mum who has found her way back into work. I happen to have a friend who was in this situation last year. The letting agency decided that it was going to demand of all single mothers with children, regardless of whether they had work and were able to show they had continuous employment, four months’ rent and, in addition, a guarantee from a male whose work they also wanted guaranteed. These are most extraordinary conditions.
One of the major problems is that many people who are desperately seeking rented accommodation would not know where to go. If you are struggling to find accommodation in your home town, to be able to go to Citizens Advice means that in reality you will lose the property. Certainly, in the south-east, lower cost rented property is at an absolute premium. This sort of behaviour, when there is no ombudsman and no code of conduct, is very difficult to police. I only know about this because of a personal contact.
More familiar to your Lordships’ House will be the example of students in a university town trying to find accommodation. Unless they have been lucky enough to have a year in halls, they often end up trying to find accommodation elsewhere. One of my children’s universities used to say: “Please find your accommodation through the university accommodation syndicate. If you
go outside, we cannot guarantee that you will not be ripped off by letting agents. In particular, many letting agents have a reputation for finding every reason under the sun not to return your deposit”. The fact that you have to warn students of this before they have even entered into a contract tells me that there is something wrong with the letting agency business.
Many landlords pay extra money for their agent to manage the day-to-day business, perhaps if they are away. I have had, again, anecdotal evidence from two landlords who have been away from their town—which is why they pay the extra percentage charge—and discovered the letting agent ringing them to ask them to clean the house between lets and to arrange for the plumber to call and all the other things that they had thought were included in the extra percentage charge that they were paying. The noble Baroness, Lady Hayter, referred to the Liberal Democrat paper that was passed by conference, Decent Homes for All, and my honourable friend Annette Brooke MP has also been fighting with EDMs and other comments in another place on this important issue. My party certainly believes that we need to regulate the letting area.
I will add one final point. The coalition agreement, rightly, seeks to reduce red tape. Not accepting this amendment allows the continuation of a red tape for a consumer and a tenant, simply because, at the moment, a tenant has to understand the difference between being with an estate agent and a letting agent and to understand that if they are with an unlicensed letting agent, instead of going to the ombudsman and taking redress through the code of practice, they may have to go to Citizens Advice, a small claims court or trading standards. My 19 year-old son in his first foray at university would not have known where to start with that. If we can do what his university rightly tries to do in guiding the students and say, “You need to be assured that the people you are dealing with actually follow a code of conduct and there is an ombudsman to whom you can turn”, then we would have a much simpler system, which is free of red tape.
I am very grateful to the Minister for the meetings that have been held over the past few days and hope that we will be able to hear some progress when he informs the House of any further consideration.
Lord Jenkin of Roding: My Lords, I hope that the noble Lord, Lord Campbell-Savours, will forgive me if I do not follow him in his very interesting description of what may happen in auctions, but I look forward to hearing the reply from my noble friend on the Front Bench.
Coming back to the amendment that was moved by the noble Baroness, Lady Hayter of Kentish Town, I will just raise one or two points. Members of my family have been both lessors and tenants in the present market and, apart from one case, have on the whole had good experiences. I was approached by the Association of Residential Letting Agents, ARLA, and have been quite impressed by what it has told me. Its primary function, as it puts it, is to professionalise the profession and to make sure that it has high standards and that those who enter the profession understand what the standards should be. It operates a voluntary scheme of
registration and its anxiety is that a number of letting agents do not register for whatever reason, one of which may be that they do not want to comply with the standards.
Can my noble friend refer to one particular point when he replies? The noble Baroness, Lady Hayter, reminded us that, in opposition, my honourable friend Mark Prisk moved very similar amendments to legislation before the House produced by the then Government. In the debate in Grand Committee on 16 January—I apologise, again, that I was not able to be there—after referring to the speech that I have read from my noble friend Lord Deben, who gave the clear impression that he supported the amendment of the noble Baroness, Lady Hayter, my noble friend Lord Younger said:
“I note and respect the intervention of my noble friend Lord Deben in this respect as well. I know that the Housing Minister is aware of these concerns but I will raise them with him for further consideration. It is clear from the speech from the noble Baroness, Lady Hayter, that he—Mark Prisk, my honourable friend in another place—is aware of the issues that she has mentioned”.—[Official Report, 16/1/13; col. GC 250]
At this stage, all I need to ask is whether my noble friend Lord Younger approached Mark Prisk and what his response was. What was his reaction when reminded that he had in fact moved a very similar amendment himself when in opposition?
One is tempted to say, “Let us return this clause, with this amendment, to another place so that my honourable friend Mark Prisk may have an opportunity to say why he has changed his mind”. I am not sure that that would necessarily be the right thing to do but I will be impressed and influenced by the answer that my noble friend on the Front Bench gives me to this point. I find it difficult to accept that you can hold one very clear opinion in opposition and then find yourself responsible in the same field and hold a completely different one. It is often, as my noble friend Lord Deben said quite firmly in Committee, because it is a departmental attitude, which in this case may stem from the Treasury. As a former Treasury Minister, all I can say is that I understand that does in fact happen from time to time. However, whatever the reason, it does not seem to be a very satisfactory position and I look forward to hearing my noble friend on the Front Bench explain it.
Baroness Gardner of Parkes: I will start at the back and deal first with Amendment 82, in the name of the noble Lord, Lord Campbell-Savours. You might think that auctions are bad here but you should see them in Australia. I bought my flat at auction out there and what they do is start the auction and when they reach a certain point they stop and say, “We’ll have a break”. In the break, they get hold of the vendor and say, “Why don’t you come down on your reserve?”, and get hold of the purchaser and say, “Why don’t you go up on what you are going to buy?”. They might do that two or three times within the auction. Fortunately I had someone helping me, who made clear to the auctioneer that if they went on and broke more than once, we were out. We got the property and I have had it a very long time.
There are good and bad things about auctions. I accept the point the noble Lord made about deceiving people about how cheaply they are going to get something,
but of course it is unpredictable and properties sometimes really do not sell, while in other cases they do. At least with an auction all the documentation about the property is provided in advance of the auction so people are not kept in the dark the way they are with lettings and by managers. People launch into a property they are going to rent or buy leasehold, and they find that there are all sorts of hidden clauses that no one ever drew their attention to and that no real documentation is available. It is quite different; each system might have its faults but they are different faults and it is hard to know whether you will ever get them right.
However, I have a certain sympathy with the point the noble Lord, Lord Campbell-Savours, made. If you have gone a long way it is very difficult—you have gone to the trouble, you think the place is going to be within your range but it is not. It is really very hard to resolve that one. Do people wake up to the fact that it is just a selling technique, which happens all the time, or are people genuinely taken in by these deliberate ploys? It is complicated but he has got a very interesting point that requires further investigation.
I strongly support the amendment of the noble Baroness, Lady Hayter. Talking about letting agents, I was quite stunned to see on television people letting these sheds in some parts of London. They had no windows or anything in them; a family of 10 living there and sometimes no running water or electric light. It was just unbelievable. The people who were renting them produced leaflets from the agent who was offering them to let. When the BBC—I think it was the BBC although it could have been another broadcaster—went to say to these people, “How could you be letting this when it has no planning permission and does not conform with any health standards of any sort?”, the answer was, “Oh, no, we were never letting it”. Yet they had proof in front of them of the printed leaflet about it being available to let from that particular agent. That is the absolute bottom of the scale but between that and the really desirable letting agent, there are all sorts of gradients.
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All the conflicting interests in property, or most of them, seemed to be present at the round-table meeting at the department. Every one of them—including ARMA and ARLA, which represent managing and letting agents—wanted to see regulation of these businesses. They were not just pushing for a redress scheme; the redress scheme was the one common denominator that came out. Those represented included LEASE and Peverel. Everyone was present and every one of them favoured a redress scheme. Every one of them thought that the group you had to worry about—say, with ARMA or ARLA—was not the 50% who voluntarily paid their £150 membership but the others who did not join. The ones who did not join did so because they did not want to conform to certain standards, so it is very important to have that scheme.
The noble Lord, Lord Borrie, was a very distinguished president of the Trading Standards Institute. Fair trading is good, but people do not tend to associate it mentally with property. Everybody knows what a property ombudsman is. If we had—at the very least and only as a first step—a redress scheme that was not voluntary
but obligatory, we would have made huge progress, even though it might only be a first step. There is a need for legislation, and that legislation really needs to bring in regulation of both letting and managing. The noble Baroness, Lady Hayter, will correct me if I am wrong, but I think her amendment covers managing agents as well as letting agents. That is a very important point. As has already been said tonight, at the round-table meeting the British Property Federation wanted to make it perfectly clear—because it was misquoted so often—that it supports a regulatory system. This must be repeated again and again; we have heard so often that it opposes it, but that is not true at all.
People say we should not have any more regulations. We are all for less regulation, but not where it is necessary. Regulations should be brought in where they are required. This complete lack of transparency, this failure to disclose things, takes place all the time; for example, in the management of blocks people have no idea what they have to pay for and what they do not have to pay for, and no idea what the money is spent on. There have been cases in the past where it was found that someone who claimed insurance money was getting a 50% kickback from it, all due to a lack of transparency. Until we get some regulatory standards we are not really going to get that.
Going back to the original point, a redress scheme is the very minimum we could expect from the Government, and I hope they will be forthcoming in this. We must have a redress scheme. We have heard that the awards made are small. Every case that was dealt with at the redress point—the early point—would have saved huge amounts of money and huge amounts of work. People are even threatened with the loss of their own homes. That would all be avoided if these things were resolved early and simply. I strongly support the amendment of the noble Baroness, Lady Hayter, and I hope the Government will look on it favourably.
Viscount Younger of Leckie: My Lords, Amendment 82, spoken to by the noble Lord, Lord Campbell-Savours, concerns sales of property through auctions. I shall turn to that shortly. Amendment 81A and the next group of amendments are aimed at two different types of activity. One is the letting and management of privately rented homes. The other is the management of residential leasehold properties. It is important to make that distinction because, while some agents engage in both these activities, they are different activities, with different clients, contractual relationships and issues. However, a number of the amendments we are debating cover both sectors, so I shall make some remarks about each sector in turn before turning to the amendments.