Report (3rd Day)

Enterprise and Regulatory Reform Bill – in the House of Lords at 3:39 pm on 6th March 2013.

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Relevant documents: 9th, 10th, 11th, 12th and 14th Reports from the Delegated Powers Committee.

Amendment 80A

Moved by Lord McKenzie of Luton

80A: Clause 62, page 60, line 38, leave out subsection (3)

Photo of Baroness Anelay of St Johns Baroness Anelay of St Johns Captain of the Honourable Corps of Gentlemen-at-Arms (HM Household) (Chief Whip, House of Lords), Deputy Chairman of Committees, Deputy Speaker (Lords) 3:40 pm, 6th March 2013

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.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Communities and Local Government)

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.

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 by 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.

Photo of Lord Wigley Lord Wigley Plaid Cymru 3:45 pm, 6th March 2013

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 only introduced on Report in another place. By amending the Health and Safety at Work Act 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.

Photo of Baroness Turner of Camden Baroness Turner of Camden Labour

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 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.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

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.

Photo of Lord Hardie Lord Hardie Judge 4:00 pm, 6th March 2013

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.

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).

Photo of Lord Browne of Ladyton Lord Browne of Ladyton Labour 4:15 pm, 6th March 2013

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.

Photo of The Earl of Erroll The Earl of Erroll Crossbench

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.

Photo of Lord Pannick Lord Pannick Crossbench

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.

Photo of Lord Brown of Eaton-under-Heywood Lord Brown of Eaton-under-Heywood Judge 4:30 pm, 6th March 2013

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, in respect of whom employers are bound to take action.

Photo of The Earl of Erroll The Earl of Erroll Crossbench

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.

Photo of Lord Razzall Lord Razzall Liberal Democrat

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.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

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 Errol, 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.

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", and helping to,

"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.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat 4:45 pm, 6th March 2013

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?

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

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.

Photo of Lord Hardie Lord Hardie Judge

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?

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

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.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Communities and Local Government)

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.

Photo of The Earl of Erroll The Earl of Erroll Crossbench

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.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Communities and Local Government)

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.

Division on Amendment 80A

Contents 225; Not-Contents 223.

Amendment 80A agreed.

Division number 1 Enterprise and Regulatory Reform Bill — Report (3rd Day)

Aye: 223 Members of the House of Lords

No: 221 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Amendments 80B and 81 not moved.

Amendment 81A

Moved by Baroness Hayter of Kentish Town

81A: Before Clause 63, insert the following new Clause-

"Letting agents etc.

(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.""

Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Cabinet Office) 5:12 pm, 6th March 2013

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.

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.

Photo of Lord Sharkey Lord Sharkey Liberal Democrat 5:15 pm, 6th March 2013

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.

Photo of Baroness Howe of Idlicote Baroness Howe of Idlicote Crossbench

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.

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 show, 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.

Photo of Lord Borrie Lord Borrie Labour 5:30 pm, 6th March 2013

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.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

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"- with the catalogue.

"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 an 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.

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.

Photo of Baroness Brinton Baroness Brinton Liberal Democrat 5:45 pm, 6th March 2013

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. If 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 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.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

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.

Photo of Baroness Gardner of Parkes Baroness Gardner of Parkes Conservative

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 auction. 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.

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.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills 6:00 pm, 6th March 2013

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.

The Government are aware of the important and growing role played by private renting and residential leasehold. This is true particularly in London and the south-east, where the pressures of growth in housing demand and the challenges of increasing supply are intense. There are now around 3.8 million privately rented and 3 million leasehold properties across England, with the majority of the latter being flats. Obviously, not everyone living in those millions of properties is happy with their property in every respect, whether because of the costs they face in buying or renting it and then living in it, its condition or the quality of its management. Many of them are content, of course, and find that on balance private renting or leasehold meets their needs.

We have heard a number of contributions today, and previously in Grand Committee, describing unsatisfactory practices by letting agents in the private rented sector. This was highlighted today, notably by the noble Baronesses, Lady Howe and Lady Hayter, among others. Indeed, this sector has had a substantial amount of attention recently in the other place, in the media and in recent reports from Which? magazine, the Office of Fair Trading, the Property Ombudsman and others. The Government have been listening carefully to the views expressed on this subject, and recognise that there are issues. I am pleased that the noble Baroness, Lady Hayter, acknowledged this and highlighted it today.

While there are many agents who perform a good and honest service for their clients and serve an important role in the private rental market, there are too many agents who are not acting responsibly. My honourable friend in the other place, Mark Prisk, said in a debate in Westminster Hall last week that the Government consider many of the problems to be a consequence of years of undersupply in the housing market. The imbalance between supply and demand has put rents, the quality of accommodation and standards of service under pressure in some areas of the country. That has had consequences for the way lettings agents, as well as landlords, operate.

Expanding the supply of rented homes is therefore at the heart of the Government's strategy. We want a bigger and better private rented sector. That is why we established a debt guarantee scheme of up to £10 billion to encourage institutional investment and, alongside that, a £200 million Build to Rent fund. Boosting supply is not just about financial support, however. It also means avoiding excessive regulation that can deter investment and stifle supply. Excessive regulation, however well intentioned, can result in precisely the outcomes we want to avoid. That is why we did not proceed with the proposals of the previous Government, such as a national register of landlords and the full statutory regulation of letting agents.

Nonetheless, there is a role for regulation in preserving standards. We have heard a number of people express the view that the lettings market is totally unregulated. That is not in fact the case. There is a substantial body of consumer protection legislation that covers letting agents. The Consumer Protection from Unfair Trading Regulations 2008 protect tenants from letting agents who mislead or engage in aggressive business practices. Similarly, the Unfair Terms in Consumer Contracts Regulations 1999 protect tenants from unfair conditions, such as unfair restrictions on the ways in which they can use a property. We know that trading standards bodies use these powers to prosecute lettings agents. Some very substantial fines, and indeed prison sentences, have been handed down to agents who engage in serious misdemeanours, such as misrepresenting their membership of professional bodies, or indeed misappropriating clients' money.

However, my honourable friend in the other place, Mark Prisk, acknowledged that there is a problem with enforcement, and that action is needed on the less serious cases as well as the most serious ones. He stated his determination in Westminster Hall only last week to encourage national trading standards bodies to ensure that they tackle these issues across the marketplace. I am pleased to reassure my noble friend Lord Jenkin that recently my honourable friend indeed stated his case very clearly. I strongly support making better use of existing regulations before we create new ones.

The noble Baroness, Lady Howe, raised the question of bad letting agents harming the reputation of good ones, which is an extremely fair point. That is why we are clear in government guidance to landlords and tenants that they should ask which bodies letting agents belong to. The more that landlords and tenants ask these questions, the more pressure there will be on all letting agents to join such schemes.

The Office of Fair Trading has just produced its report on the lettings sector. It makes some suggestions for regulatory changes, but it makes other, non-regulatory proposals, too. The Government will study the report carefully, alongside the evidence to the Communities and Local Government Select Committee's inquiry on the private rented sector. Evidence and recommendations are being presented by bodies with extensive expertise. We owe it to them to study the committee's recommendations carefully.

The noble Baroness, Lady Hayter, referred to the fact that the OFT called for redress and enforcement. The OFT report on lettings agents recommends that the Government should consider whether it would be beneficial to require agents to sign up to a code of practice or to join a redress scheme. The Government will consider the OFT's recommendations carefully, but we need to see the recommendation to consider mandatory redress alongside other elements of the OFT's recommendations, some of which relate to making better use of existing laws and non-regulatory mechanisms.

Turning to residential leasehold, I believe that we have to be realistic and to recognise that living in a property where more than one party has significant financial and other interests, and where common parts of a property need to be maintained, is bound on occasion to lead to concerns and disputes. Although complaints procedures and a range of mediation and ombudsman services are already available-and, where those options fail, a number of legal options that can be pursued-we recognise that not all leaseholders are happy. The noble Baroness, Lady Hayter, asked why there is no client money protection in residential leasehold, but I reassure her-as she may know-that statutory protection already exists for leasehold service charges, which the law deems to be held in trust.

Our postbags, and those of Members of the other place, sometimes contain letters from leaseholders whose freeholder-or, more often, whose freeholder's managing agent-is not providing the service they deserve or expect, or is sending increasingly unaffordable bills. We also hear from elderly and sometimes vulnerable people whose freeholder, or their agent, is failing to follow good practice and, in some cases, may even be breaking the law. Where relationships over the management of people's homes break down and become adversarial, it can lead to real worry and distress and can in some cases, as we know, culminate in cases before tribunals and the courts.

The Government are aware of concerns among some leaseholders about a range of issues such as management standards and consultation, but remain unconvinced of the case for increasing government regulation at this time. Rather than create new leasehold regulation, the Government want, in the main, to see existing rights and protections on the statute book used to best effect. We therefore welcome current moves towards greater self-regulation by professionals in the sector and are interested in ideas for giving these more support and encouragement. The Government are aware that there are failings and even abuses in some parts of both sectors and will continue to address them. We have carefully considered the amendment of the noble Baroness, Lady Hayter, and her arguments for regulating letting and management in the private rented and leasehold sectors, and I can assure her that the Government take her concerns very seriously.

The amendment would amend the Estate Agents Act 1979, extending the definition of "estate agency work" to include those involved in letting and managing agency work. This is intended, as we understand it, to give the Office of Fair Trading powers to prevent letting and management agents conducting business and to require agents to have in place redress schemes, client money protection and to meet the other requirements of the Act. While we acknowledge that there are issues that need addressing, we do not believe that the answer is to regulate letting and managing agents in the way that the noble Baroness proposes. The regulatory burden could be substantial, adding to costs borne by landlords and, in turn, tenants.

In his report for the Property Ombudsman, Professor Michael Ball set out a range of costs that this would entail. The noble Baroness, Lady Hayter, and my noble friend Lord Sharkey both brought up the issue of the cost of compliance with a mandatory scheme, and both stated that there would a debit of only some £800. Indeed, there are costs to bear in mind, including of extra staffing and other administrative work, to ensure that the business is run according to the relevant codes of practice. Our own figures suggest that these are on top of costs of perhaps £170 per office per year for redress, £300 for client money protection and £300 or more for professional indemnity insurance.

Of course, many letting and managing agents already sign up to similar schemes, and government guidance encourages landlords and tenants to ask which bodies an agent belongs to. However, the approaches that are right for many agents are not necessarily appropriate for all. That is why the Government are in favour of nimbler and more tailored self-regulatory approaches wherever possible. For example, while client money protection is not mandatory for letting agents who are not members of professional bodies, the Government have endorsed the SAFE- safe agent fully endorsed-scheme, whose easy-to-recognise logo makes it easier for consumers to understand whether the agent offers client money protection. Legislation already sets down requirements on how service charge money in leasehold must be held.

Furthermore, it is not clear what the effect of the noble Baroness's amendment would be. In particular, it is not clear that it would succeed in bringing letting and managing agents into the scope of redress mechanisms within the Act. This is because the definition of a complaint within the Act relates to selling and buying "an interest in land", not letting and renting. On the other hand, because the amendment covers management activities in connection with land, it could, possibly unintentionally, bring some other activities such as property development and perhaps even agricultural land management into the scope of the Act, resulting in a far broader range of industries having to comply with the terms of the Act. That would not be right. Therefore, while I understand why the noble Baroness might like to see letting agents in the private rented sector, and managing agents in the leasehold sector, brought into the scope of the Estate Agents Act, in particular in terms of access to redress, I do not believe that this amendment is the best way to achieve that goal.

I very much appreciate the input and acknowledge the expertise of the noble Baroness, Lady Hayter, in raising these important issues, and I was pleased to be able to consult her on these matters after our debate in Grand Committee.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative 6:15 pm, 6th March 2013

Before my noble friend goes on to discuss auctions, will he give some indication of how long it will take for the Government to study the substantial report to which he referred, and how long he thinks it will take for the DCLG Select Committee at the other end to produce its report? I understand both his arguments-there is a substantial report from the OFT and there is also that Select Committee report-but we really do not want to have to wait for ever.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

My noble friend makes a very good point. I can reassure him that the Select Committee report is due out very soon. It is likely to be in May; it may even be as early as April. That is not a guarantee, but I hope that it gives a helpful indication as to what the timing might be.

None the less, I recognise that the issue of a lack of redress is a serious one, and I know that my honourable friend in the other place, the Housing Minister Mark Prisk, considers this a serious issue, too, and is giving it the most serious consideration. We will reflect very carefully on this and other recent debates, and I am sure that the Housing Minister will keep in touch with Peers who have spoken today.

I shall turn as fast as I can to Amendment 82. I thank the noble Lord, Lord Campbell-Savours, for having brought this issue to my attention and to that of the House. I have considered carefully the amendment and the arguments for introducing it. The Government are of course concerned to hear that buyers may be experiencing difficulties when trying to purchase a property at auction, especially if it involves first-time buyers. I am pleased to say that there is already legislation in place designed to address just this sort of unfair practice. Therefore, new legislation will not change the position regarding consumer protection in such matters. I will explain why.

Under the Consumer Protection from Unfair Trading Regulations 2008, auctioneers, like traders in all sectors of the economy, are required in their dealings with consumers to treat them fairly and not mislead them. Under the CPRs, there are also a number of business practices that are considered unfair in all circumstances and are prohibited. When marketing a property, it is prohibited to use bait tactics such as luring bidders to auctions using pricing techniques, which the noble Lord raised as an example. OFT guidance on the CPRs published last September, of which the industry should be fully aware, gives the specific example of guide prices not being distorted to attract potential buyers.

Where traders treat consumers unfairly, they may face criminal or civil enforcement action. Enforcement of the CPRs is by the OFT and local authority trading standards services. We are, of course, in the process of better equipping trading standards to take greater responsibility for consumer law enforcement, and will be transferring central government funding for national leadership and co-ordination of enforcement activity from the OFT to the National Trading Standards Board. In addition, the new Competition and Markets Authority will have consumer enforcement powers to address business practices that distort competition or impact on consumer choice in otherwise competitive markets.

Furthermore, I understand that the industry encourages fair practice in this area and offers guidance and training. For example, the Royal Institution of Chartered Surveyors provides best practice guidance for auctioneers selling real estate. Such guidance addresses price guides and states that these guides must not be misleading, advising that a price guide that is clearly below the figure that the seller will accept is misleading. As best practice it also says that auctioneers should clearly indicate in the catalogue that price guides may be subject to amendment during the period leading up to the day and time of the auction sale.

In the light of the consumer protection legislation already in place, and as we have not seen any evidence on which a change of legislation could be justified, we do not feel the necessity to change legislation in this area. The noble Lord may wish to write to the OFT, providing evidence of the experiences and findings in this matter that are causing him concern. I hope that he is reassured by my answer and that he will therefore not press his amendment. I note that this is a new issue that was not raised in Committee and I acknowledge his apology. However, I believe that he raised some interesting points that we will keep in our sights. I also ask the noble Baroness, Lady Hayter, to withdraw her amendment.

Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Cabinet Office)

My Lords, this amendment simply asks that letting agents should have to sign up to a redress scheme. We have checked it with the lawyers, and it does not apply to development land or anything else. If that was the case, and if the noble Lord had said he that accepted the need for redress, that it was just the wording that needed changing and that it was coming back at Third Reading, I would be happy to withdraw. Sadly, that is not what the Government have said.

The unfair trading regulations do not work. You cannot go to trading standards; it does not give redress. The Government have given no answers other than self-regulation or, "Wait for another committee". Consumers want this; Mark Prisk wanted this in 2007; Lib Dem policy is in favour; landlords and tenants want it; the OFT wants it; and so does the industry, despite the costs. I thank noble Lords who have all spoken in support-there has been nothing but support from all around this House. I believe that, in addition to that list, the House will support the amendment. I beg leave to test the opinion of the House.

Division on Amendment 81A

Contents 211; Not-Contents 206.

Amendment 81A agreed.

Division number 2 Enterprise and Regulatory Reform Bill — Report (3rd Day)

Aye: 209 Members of the House of Lords

No: 204 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Amendment 81B

Moved by Baroness Gardner of Parkes

81B: Before Clause 63, insert the following new Clause-

"Leasehold Valuation Tribunals: costs

At the end of paragraph 10 (costs) of Schedule 12 to the Commonhold and Leasehold Reform Act 2002 (leasehold valuation tribunals: procedure) insert-

"(5) A tenant of residential property shall not be required to pay costs incurred by a landlord or any other party with an interest in that property in connection with proceedings before a leasehold valuation tribunal except when their lease specifically permits such costs to be included as a legitimate management charge.""

Photo of Baroness Gardner of Parkes Baroness Gardner of Parkes Conservative 6:34 pm, 6th March 2013

My Lords, I shall speak to the group of amendments in my name, so that we do not have to keep coming back on different items. I have been asked to put them all together. I will start with Amendment 81F because that is the most important of them all. That has come about because of the court decision recently in the Phillips and Goddard v Francis case that any amount of work to be done per flat worth more than £250 in a year would require consultation. If, for example, it was a block of 10 flats and you had spent £2,500, after that, for everything, even if it was for £1, £10, or whatever, you would have to implement a consultation process.

In their answers tonight, the Government have told us that the one thing that they want to avoid is lots more paper, cost, expense and consultation. That is exactly what the amendment is designed to achieve. The Public Bill Office has now gone online and worked out that the sum of £250 should in today's prices be £330, so that is why there is a difference in the figures. We have gone through it carefully, and we think that certain things are particularly important or desperate, such as fire provisions, safety provisions and-one of which I have had personal experience-when the front door of a block of flats is damaged. What would happen if you had to wait for about two months to get consent for you to put on a new front door lock, although it was so urgent?

We do not wish to change the law at all. We wish to clarify the law as it is to make clear that the £250 is not an annual figure but a per item or per effective work figure. That amendment is straightforward and the Government should certainly consider it. I have heard them tonight and 50 million other times say that they want to reduce costs, difficulties and expenses. This is the opportunity to do it. Otherwise, every tenant will be burdened with so many consultation documents that they will get to a point where they barely look at the really important, serious one because they say, "Oh, that's another one from the agent and it is all out of my pocket". Amendment 81F is really simple.

Amendment 81B concerns leasehold valuation tribunal costs. I tabled the amendment because when I asked about the cost of leasehold valuation tribunals, which, at the moment, are limited to £500 for any applicant, I found that the practice, which is quite wrong, has arisen where the landlord, head lessee, or whoever is at the next stage above the leaseholder, is bringing in more and more expensive legal brains against the ordinary applicant. The worst thing about that is that, win or lose, the amount paid for that extremely major legal defence is charged back to the residents in the leasehold flats as a management expense. That was never the way that leasehold valuation was envisaged. In 1996, I was very involved when we passed the legislation. Those things were specifically against what we wanted. We wanted it to be approachable for anyone at £500. I received a letter from the noble Lord, Lord McNally, from which I understand that later in the year it will be swallowed up into a major tribunals review and the figure of £500 will probably rise. However, that is different from where the unlimited cost is being charged back to the leaseholders. That is the reason for that amendment.

Amendment 81C concerns a redress scheme. As we pretty well won the redress scheme with the previous amendment, which has just been passed, I do not think it is so important any more. However, when we had a round-table meeting at the department of all the interested people, they all said, from the most extravagant people down to the most careful, that the one thing that could save time, trouble, expense and simplify life for everyone would be a redress scheme. Therefore, no matter what happens with the previous amendment, I am hoping that at Third Reading the Government might bring forward some wording on a simple redress scheme.

That takes me on to Amendment 81D and protection schemes for service charge money. The noble Baroness, Lady Brinton, mentioned that university students had a problem regarding their deposits and so on for the premises they were letting. I pay full tribute to the Labour Government who as a response to that introduced protection for tenancy deposits. Tenancy deposits are well-protected now. No longer can an avaricious landlord grab every penny of your deposit money. Even if you are just an ordinary individual, letting property without an agent or anything like that, you have to place the deposit in a secure government scheme, which is very good and desirable. However, why is the same amount of protection not given to people who pay service charges, which are probably very much larger amounts?

Amendment 81E concerns the redress scheme. If I am satisfied with how the previous amendment, which has just been passed, is interpreted, I will not bring it back at Third Reading. However, if I find there is something that really could be clearer or better, I might bring it back. I beg to move.

Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Cabinet Office)

My Lords, not surprisingly we support these amendments. I have been working with ARMA on trying to get some of this done. There will be a voluntary scheme, but only the good ones will join. The advantage of these amendments is that they will make sure that everyone, not only the good, will have to meet those standards.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

My Lords, I am grateful to my noble friend Lady Gardner for the thought and effort that she has put into the preparation of the five amendments we are now considering. Her ideas and broad experience of the housing sector are an invaluable resource to this House. Her amendments, like those of the noble Baroness, Lady Hayter, address the private rented and residential leasehold sectors. I will not repeat what I have already said about those areas.

I have carefully considered my noble friend's Amendment 81B on the ability of freeholders to recover their legal costs from leaseholders and I take her concerns very seriously. This amendment aims to limit the circumstances in which costs of proceedings incurred by a landlord or other party with an interest in the property at a leasehold valuation tribunal could be charged back to leaseholders. I should point out that where a freeholder is able to recover costs in connection with proceedings from the leaseholders, this is contractual matter between them and will be set out in the lease. I am aware that leaseholders are increasingly concerned about the recovery of such costs as administration charges where the lease permits this and I understand that my honourable friend Mark Prisk is thinking about this issue. I am concerned that my noble friend's amendment would not achieve her goals and would not in fact provide any greater protection for leaseholders than already exists.

I know that my noble friend, as she said, recently took part in a high-level round-table discussion on residential leasehold issues. I understand that a number of practical ideas for improving awareness of leaseholders' rights emerged from that event and that the Department for Communities and Local Government is committed to working with the Ministry of Justice and others to take those ideas forward. The issue of recovery of legal costs as an administration charge, rather than a service charge, requires detailed consideration. For this reason, I believe that the current Bill is not the best place to consider this complex issue.

My noble friend's Amendment 81C concerns an alternative form of dispute resolution for landlords and tenants in the private rented sector. The amendment would require the current deposit protection schemes to provide a dispute resolution service for all disputes between landlords and tenants whose deposits are protected under the scheme-for example, disputes about repairs or rent arrears. The tenancy deposit protection schemes are authorised by the Department for Communities and Local Government under concession agreements that require them to offer a free service to resolve disputes over tenants' deposits. The latest round of agreements has just been awarded and it would not be reasonable or appropriate to change them now.

To change these schemes would expose tenancy deposit schemes to a much broader range of activities than they have signed up for, or for which they are perhaps qualified. To expect those services to be free, as they are for resolving disputes on deposits, would also be unreasonable. This is not the best vehicle for introducing further dispute resolution mechanisms between landlords and tenants.

We should also remember that mechanisms besides resorting to the courts already exist for tenants who are dissatisfied with their landlords. They can complain to their local authority about hazardous conditions, for example, or may apply to the rent assessment committee about unfair rent increases.

I have looked carefully at my noble friend's Amendment 81D on the protection of service charge money in residential leasehold and I take her concerns on this matter very seriously. The Government are aware that the service charges paid by leaseholders are a key issue, particularly where these are high and increasing, and where they are regarded as unreasonable by those paying them. My noble friend's amendment attempts to provide similar protection for service charges in leasehold as that which has for some years applied to tenancy deposits in the private rented sector. I understand, however, that statutory protection already exists for leasehold service charges, which the law deems to be held in trust. To apply the deposit protection scheme, which has produced good results in private letting, to residential leasehold is unnecessary and may in practice be unworkable as deposits and service charges are for different purposes. Given that for many leaseholders what matters most is the level of their service charges, we also need to be very careful not to create additional burdens and compliance costs on freeholders and their managing agents, which would over time be passed on to the leaseholders.

My noble friend's Amendment 81E concerns arbitration and mediation services. In the private rented sector there is a range of consumer protection legislation that protects tenants and many landlords from poor practices by agents. Our goal should be to work with trading standards bodies to ensure more effective enforcement, and I note the intention of my honourable friend Mark Prisk to do just that.

In the residential leasehold sector I understand that a significant number of managing agents are already members of an ombudsman's scheme, often via their membership of a trade body. These bodies also have their own internal complaints systems. There are other routes through which the resolution of an issue in dispute can be sought, such as the leasehold valuation tribunal. An ombudsman does not, as I understand it, consider complaints that are within the jurisdiction of the leasehold valuation tribunal.

As I said in relation to the amendment tabled by the noble Baroness, Lady Hayter, I recognise that the issue of a lack of redress is a serious one. I, therefore, repeat that the Department for Communities and Local Government will be reflecting very carefully on this and other recent debates.

My noble friend's final amendment, Amendment 81F, concerns consultation about service charges. The Government take the issue of transparency and consultation on service charges in residential leasehold very seriously. I understand that this amendment has been tabled following a recent High Court judgment. It is not for me to comment on the decision of the court, but the Government are aware of the concerns that have been raised by those working in the sector. Very careful consideration of the new position is, however, needed. Introducing amendments to the current Bill before the sector has had time to reflect may not result in the outcome sought by my noble friend.

This amendment would increase the threshold above which landlords should consult with their service charge payers and it attempts to link future increases to the consumer prices index. Any such changes would, however, need to be properly scoped and consulted on in order to ensure that any increase and link to inflation was appropriate. It is not clear whether the amendment, as drafted, would fully achieve the noble Baroness's intention. Also, the proposed new exemptions from the need to consult might be welcome to the sector but could, without very thorough consideration, prove unworkable. I would expect the Department for Communities and Local Government, which is responsible for this area of law, to be open to considering with interested parties over the coming months how best to address concerns on this issue.

I am grateful to my noble friend for the thought and effort which she has put into the preparation of these five amendments. I hope I have been able to explain to the House why the Government are not convinced that her amendments will achieve her goals, or that this Bill is the best vehicle for addressing these issues. I know that my noble friend Lady Hanham and the Department for Communities and Local Government are thinking seriously about all these concerns. For all these reasons, I ask my noble friend Lady Gardner to withdraw her amendment.

Photo of Baroness Gardner of Parkes Baroness Gardner of Parkes Conservative 6:45 pm, 6th March 2013

My Lords, I listened to the explanations from the Minister, some of which are quite unsatisfactory. For example, he says that what people are really concerned about is the level of service charges and that we want to keep those down, and so on. We all understand that. But he then rejects Amendment 81F, which is so important and would clarify exactly what you can and cannot do in a block with or without permission and would tremendously reduce the paperwork and red tape, with its terrible waste of time and money, on the ground that it is perhaps too cheap and saves too much. I do not know on what ground he is rejecting it but I do not accept that it is fair to reject it.

The Minister says that they will look into it over the coming months, but the coming months are too long. Even this Bill is going to take quite some time before it goes through. The thought of having extra "coming months" on top of that is just too much, so I do not really accept his arguments. As I said, if the amendment tabled by the noble Baroness, Lady Hayter, covers a redress scheme that is mandatory for everyone, and if they would have to belong whether they are managing agents or whoever, then I am satisfied with that. I would not then want to pursue it further myself because if we have put a good scheme through, that might be the thing to run with and it would not need amplification.

If, on the other hand, after studying the noble Baroness's amendment, to see what it means and whether there are any loopholes in it, I think there is still a need for clarification on redress I would want to come back on that. In no way could I say that I have forgotten this matter. I warn the Minister to expect me to return at Third Reading, by which time I hope we will be a bit clearer on exactly what is good and bad in what we have decided tonight. Fortunately, there is the opportunity to return at Third Reading. I reserve my right to do that because nothing has been said today that really satisfies me completely on those amendments. I beg leave to withdraw the amendment.

Amendment 81B withdrawn.

Amendments 81C to 82 not moved.

Amendment 83

Moved by Viscount Younger of Leckie

83: After Clause 64, insert the following new Clause-

"Abolition of Agricultural Wages Board and related English bodies

(1) The Agricultural Wages Board for England and Wales is abolished.

(2) Every agricultural wages committee for an area in England is abolished.

(3) Every agricultural dwelling-house advisory committee for an area in England is abolished.

(4) Schedule (Abolition of Agricultural Wages Board and related English bodies: consequential provision) (abolition of Agricultural Wages Board and related English bodies: consequential provision) has effect."

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

My Lords, these amendments will simplify employment legislation for around 40,000 farm businesses in England and Wales. They will ensure the same levels of employment protection for agricultural workers as for workers in all other sectors of the economy. They will also abolish 31 public bodies whose functions are now used infrequently or have simply fallen into disuse. This is an important reform, which will contribute to the Government's key objective of encouraging economic growth as well as the programme of reducing the number of public bodies. We brought these provisions forward in Grand Committee but they were not accepted. We believe that the case for them is very strong and therefore we have reintroduced them.

The agricultural wages committees were set up in their current form nearly 65 years ago, just after the Second World War, although their origins go back even further. The Agricultural Wages Board is now the only remaining sector wage council; the 26 others were abolished 20 years ago, in 1993. Agricultural workers represent 0.5% of the total workforce. There is no reason why they should be treated differently from the other 99.5% of workers, who are all protected by the national minimum wage and other statutory employment provisions.

Agriculture today is very different from 65 years ago. It is a now a global, international business. Farmers compete against not just each other but farmers overseas to sell both here and in international markets. Technological developments and increased mechanisation mean that workers need to be highly skilled and qualified to operate complex machinery, and to be able to keep up to date with modern animal husbandry methods. The industry is also becoming increasingly diverse, particularly as businesses move away from mixed farming to specialise in specific sectors. Around a quarter of farms now also operate non-agricultural businesses; for example, a farm shop or bed and breakfast. This means that many farm businesses have to employ workers under both the agricultural minimum wage and the national minimum wage regimes. They therefore have to comply with two sets of employment legislation, which is an unnecessary cost to farm businesses in both time and resources.

Even within what are traditionally regarded as agricultural activities, there are grey areas where a farm business has to determine whether employees are employed in agriculture and entitled to the agricultural wages order terms and conditions as opposed to general employment terms. For example, livestock and poultry rearing would normally be considered agricultural activities and covered by the agricultural wages order, but this is not necessarily the case for on-farm slaughtering operations. Similarly, where there is a farm packing business, packing of produce grown on the farm would normally be covered by the agricultural wages order, whereas packing of bought-in produce is not.

The abolition of the agricultural minimum wage will remove the need for farm businesses to operate two employment regimes and end the confusion of whether activities fall within the national minimum wage regime or the agricultural minimum wage regime. It is widely accepted that the legislation which underpins the Agricultural Wages Board is outdated and hampers the ability of the industry to offer more modern, flexible employment packages. For example, it effectively dissuades employers from offering the payment of annual salaries, which is disadvantageous for workers as it hinders long-term financial planning-and thereby better security for farm workers and their families.

The abolition of the Agricultural Wages Board and the agricultural minimum wage regime will allow farmers to agree terms and conditions that take account of the requirements of the farming sector and suit the particular circumstances of both employers and workers. It will make it easier for employers to offer opportunities for workers to work the same number of weekly hours, but over a compressed period. This could be beneficial for businesses, who may want to provide for longer shifts, and for workers with family and domestic responsibilities.

Abolition will enable farm businesses to compete for workers on a level playing field with other local employers. It should encourage longer-term and more permanent employment of farm workers, which will boost growth and have wider benefits. For the avoidance of doubt, research suggests that there will continue to be considerable demand for farm workers in the years ahead, which will mean that employers will need to offer competitive pay rates to attract new workers. A majority of workers already receive terms and conditions above the agricultural minimum wage rates, and as contracts are already in place their wages should not be affected if the board were abolished.

The underlying market conditions suggest that there will be a sustained demand for agricultural workers. The 2011 survey from the UK Commission for Employment and Skills indicates a shortage of workers with relevant skills within the agricultural sector, and that this shortage is higher than comparable shortages in other areas of the economy. The agricultural workforce is also ageing: 55% of the sector's workforce is aged over 45, which again is higher than in other sectors of the economy. These factors mean that we can expect demand for both workers and skills in the sector to increase over the next 10 years and beyond, which means that market drivers will ensure that wages remain competitive. Farm businesses will be wise and prudent to provide career and development opportunities to encourage workers into agriculture and offer attractive terms and conditions to retain them.

It is also important to remember that agricultural workers who have contractual rights reflecting the terms of the agricultural wages order at the time of the board's abolition will retain those rights until either their employment contract is varied by agreement or their employment comes to an end. New workers coming into the industry or workers who negotiate a new contract will have the same level of employment protection as workers in all other sectors of the economy. Furthermore, agricultural workers who are supplied by a labour provider and who may be at the lower end of the wage scale will continue to have the added protection of the gangmaster licensing legislation.

Turning to the 15 agricultural wages committees in England, most of their functions have now lapsed in practice or have been replaced by wider legislation. Their only remaining active function is to appoint members of the 16 agricultural dwelling house advisory committees in England-or, as they are more generally called, ADHACs.

ADHACs were established under the Rent (Agriculture) Act 1976 and their function is to give advice to local authorities on rehousing agricultural workers. As a result of changes in housing legislation during the 1980s, the number of requests for advice from ADHACs has declined significantly from 500 then to around 10 requests per year now. It is not a statutory requirement to consult an ADHAC, and while a local authority is required to take account of the advice of an ADHAC in making its assessment of an applicant's case, it is not obliged to follow that advice. We understand that many local authorities are very comfortable taking decisions on rehousing without the advice of an ADHAC.

Therefore, the 15 agricultural wages committees and 16 ADHACs in England are now effectively defunct bodies. It is difficult to justify their continued existence at public expense so the Government's view is that they should be abolished. With regard to abolition of the ADHACs in England, I want to assure noble Lords that there are no plans to change the provisions in the Rent (Agriculture) Act 1976 which give security of tenure to protected tenants. Therefore, the amendment will not in any way jeopardise the position of tenants with protected tenancies.

In summary, the Government firmly believe that these amendments will benefit the agricultural industry by removing regulatory burdens from farm businesses, allowing the industry to modernise and compete for labour on an equal basis with all other employers, while ensuring that agricultural workers have the same levels of protection as other workers. All this will encourage the development of a sustainable and prosperous industry for the future, which is good for businesses and workers, as well as consumers and the country as a whole. These amendments will also remove 31 obsolete public bodies, contributing to the Government's wider programme of public body reform.

I hope that, in the light of my remarks, noble Lords will accept these amendments. I will address the opposition amendments when we have heard from noble Lords. In the mean time, I beg to move Amendment 83.

Amendment 83A (to Amendment 83)

Moved by Lord Whitty

83A: After Clause 64, leave out lines 3 to 6 and insert-

"(1) Every agricultural wages committee for an area in England is abolished.

(2) Every agricultural dwelling-house advisory committee for an area in England is abolished and the services formerly provided by such a committee shall instead be provided by the Agricultural Wages Board for England and Wales.

(3) Without prejudice to section 3 of the Agricultural Wages Act 1948, any minimum rate of pay contained, or to be contained, in an Order of the Agricultural Wages Board may, where the Agricultural Wages Board considers it convenient to do so, be fixed by reference to any periods during the currency of employment."

Photo of Lord Whitty Lord Whitty Labour 7:00 pm, 6th March 2013

My Lords, my name is on this, as are the names of the noble Lord, Lord Greaves, the right reverend Prelate the Bishop of Hereford and the noble Baroness, Lady Trumpington. I regret to inform the House that the noble Baroness has suffered a fall and will not be with us tonight. I understand that there was no government Whip close to the incident so I am sure that we can pass unanimously our best wishes to the noble Baroness, Lady Trumpington, and wish her a speedy return.

Noble Lords:

Hear, hear!

Photo of Lord Whitty Lord Whitty Labour

My Lords, what the Minister failed to mention is that the Government's own best estimate, in the only document that they have produced on the effect of abolishing the Agricultural Wages Board, will be a direct cut of £240 million from the income of rural workers.

Our amendments would do some of the things that the Government are after: they would abolish the 31 bodies; they would allow for simplification and modernisation to the wages order; but, crucially, Amendment 83A keeps the legal underpinning of the terms and conditions of those who work in our agricultural sectors.

That figure of £240 million comes directly from Defra's impact assessment, and it is its best estimate-there is a range, but that is its best estimate. The House is in some difficulty here because it should have more information. We are in a slightly bizarre procedural position because on the face of it the Government had the right to abolish the Agricultural Wages Board under the Public Bodies Bill. But, of course, under that Bill, after long and rather testy debate in this House, there are some very detailed procedures for implementing that abolition. They require much greater information, much clearer arguments, much better figures and much more effective consultation than the Government have coming forward. The Government are trying to cut corners by inserting their amendment into a piece of legislation that had already passed all stages in the House of Commons and which was not accepted in Committee in this House.

There may be good reasons why the Government are trying to change tack. One is that they have problems with the Welsh Government-this is England and Wales legislation. The Welsh Government, like their counterparts in Scotland and Northern Ireland, want to maintain statutory minimum standards in the agriculture sector. Of course, it is also convenient for the Government that they have not been required to come forward with that kind of information. They have not presented us with any alternatives; they have simply come forward with a proposition for abolition. The House would be entitled to say to the Government that we are not prepared to consider this government amendment until the equivalent of Section 11 of the Public Bodies Act is before the House. Clearly, the Government are not prepared to go down that road.

I will say a few words about the nature of the agricultural workforce. Of course, the Minister is right that it has changed since 1917 and 1948, but we are left with an agricultural work structure of a lot of relatively small businesses that employ one, two, three, perhaps six, permanent staff and parts of a sector that employ large numbers of casual workers on a seasonal basis. There is no other sector in the whole of the economy that is like that. There is no other sector, therefore, that requires the kind of legal protection that until very recently all parties in the industry and all parties in the House recognised was important.

Moreover, the Government's analogy is quite wrong. The Agricultural Wages Board specifies a whole wages structure and a whole career structure for workers in the agricultural sector. It does not simply specify a minimum wage, like the national minimum wage; nor is it the same as most of the old wages councils, which simply specified a basic rate rather than the whole range of conditions required within the agricultural sector, which will be difficult to achieve without some legal underpinning by normal methods of collective bargaining either nationally or by agreements between individual farmers and their own workforce-something that would often be very difficult for both sides to accomplish.

The Minister claims that this is a great removal of burdens on small farm businesses, but the operation of the board has in many cases been of great benefit to small farmers. In the consultation-such as it was; it was only four weeks' consultation, whereas most people are required to go through three months, and it was only one week in Wales-a significant number of small famers said they wished to retain the Agricultural Wages Board because that meant that once a year they knew what they were going to pay their staff and they did not have to go into embarrassing and lengthy detailed negotiations with their own two or three employees. Therefore, the burden of administration on the farmers is actually less under the Agricultural Wages Board than it will be if the Minister gets his way and it is abolished. In the evidence, there are a large number of small famers saying precisely that, ranging from the West Country to Yorkshire to Norfolk.

The impact assessment also says that the effect on farmers' incomes will be a significant improvement. In fact, it has that down as the reciprocal of the cut in the agricultural workers' wages. But the reality is that a lot of those famers will never see that money, or will only see it temporarily. The wage cut for workers will almost certainly end up being of benefit to the supermarkets. It is very interesting that in the consultation nearly 40% of the replies are from the horticultural sector, which employs the mass amount of casual, unskilled labour and which deals directly with the supermarkets. Even more tellingly, the strongest supporters in the rest of the food chain are the Fresh Produce Consortium, whose dominant members happen to be Tesco, Morrisons, Asda and Marks & Spencer.

The reality is that once the supermarket buyers hear that the Agricultural Wages Board and the minimum rates have been abolished, they will go back to their farmers and suppliers and say, "We want a cut in the prices that we are giving you". The reality is that whatever burdens the Minister claims will be removed from small employers, many of whom do not accept that, the money will not come out of the pockets of farm workers and into the pockets of the farmers, it will go out of the rural community entirely and into the pockets of the supermarkets.

This is a very dangerous move and one that we certainly could not support. There is little in what the Minister said tonight with which I can agree. There is little in what his supporters in Committee, who were in the minority, brought to bear. They said, "In my area, on my own estate, on my own farm, people I know pay a lot more than the minimum wage". Of course they do. It is a wages structure. A lot of employers pay more than the minimum. But once you abolish the floor, the whole wages structure starts coming down. The impact assessment which the advisers of the department of the noble Lord, Lord De Mauley, Defra, and BIS had before them makes it quite clear that the best estimate is that this will be nearly £250 million out of the pockets of relatively low-paid agricultural workers. It is a disgrace, frankly, that the Government are proposing this. It is a disgrace, in some ways, that the NFU has changed what has historically been its position in support of the board to pressing for its abolition and, in so doing, does not represent the views of many small farmers.

Our amendment would allow simplification and modernisation. It would allow the abolition of the 31 quangos to which the Minister has referred, which would give Defra a few brownie points on the Cabinet Office's scorecard of the quango cull. The abolition of the wages board, however, is a different matter. It will bring distress to rural communities, a cut in income to rural workers and will do nothing for the farmers and the agricultural sector of this country. I beg to move our amendment to the Government's amendment.

Photo of The Bishop of Hereford The Bishop of Hereford Bishop

My Lords, I thank the noble Lord, Lord Whitty, for his clear and eloquent statement on why it is essential not to abolish the Agricultural Wages Board, and why it is therefore vital that as a House we support this amendment of the Government's amendment.

It is noteworthy that the wages councils were established by Winston Churchill in 1909, and he spoke of the need for them in these words:

"It is a serious national evil that any class of His Majesty's subjects should receive less than a living wage in return for their utmost exertions ... where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes the trade up as a second string ... where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration".-[Hansard, Commons, 28/4/1909; col. 388.]

That may not be quite the language that we would use today. It is language from 100 years ago, but they are still salient points. Indeed, these underlying principles and thinking have led to a minimum wage and then a living wage.

When other wages councils were abolished in the 1980s, the Government chose to keep the Agricultural Wages Board on the grounds that the industry required some central oversight to prevent wages being driven down unacceptably. In order to consolidate and build upon the progress achieved in terms and conditions during the past 30 years, we need to retain and further develop, and update, the Agricultural Wages Board, not abolish it.

The NFU has criticised the cost and provision of the AWB claiming that it is a,

"bureaucratic irrelevance since the advent of the Minimum Wage", and pointing out that the gap between the national minimum wage and the basic agricultural wages order minimum is only tuppence. However, the AWO also, of course, lists six different grades, to which we have heard reference made, with levels to be paid according to responsibilities, qualifications and the nature of the work in question: a salary structure.

The Low Pay Commission, in its review of the Agricultural Wages Board, highlights the impact on young people especially and says:

"Abolition of the Board enables potential exploitation of young workers aged under 16".

It also recognises the provision for guaranteed wage levels for those between the ages of 16 and 21, which are of course not covered by the national minimum wage. This relates to another vital area, namely that of attracting new entrants into the work of the agricultural sector; the Minister has referred to the average age of agricultural workers being high. It is crucial not only for the health of the industry but the health of the nation. Food security is, thankfully, slightly higher up the national agenda than it was, with our still only producing about 70% of the food we consume. Further, the "horseburger" scares are prompting retailers to examine their own supply chains and are further encouraging "Buy British" among consumers. The Low Pay Commission wrote:

"Should employers choose to move away from the minimum standards and grading and career path, outlined by the AWB, it could prove difficult to attract new workers to the sector in sufficient numbers".

We surely need to be joined up in this as in other areas. We need greater food security. We need to encourage "Buy British". We need more workers in the industry. This is not a time to make a decision such as abolishing the Agricultural Wages Board, which would make that more difficult to achieve.

The NFU draws attention to the fact that, in 2010, the average earnings of 58% of full-time farm workers were above the industry minimum. But that of course means that for 42% it was at the minimum or below. Furthermore, the minimum itself is well below, more than £1 below, the living wage. To make matters worse, the cost of living in the countryside is higher for a whole host of reasons, as we are aware, including fuel, transport and other services.

Defra's own equality impact assessment also identifies the detrimental effect that abolishing the AWB would have on women, as well as on workers under the age of 21. It is also worth pointing out that the agricultural wages order is a used as a benchmark for other rural workers and occupations, so that abolishing it would have a deleterious effect on them as well.

While there is, as the Minister said, clearly competition in the workplace for the workforce in agriculture in some parts of the country, it is not quite the same everywhere. Rather, agriculture is in many ways a highly fragmented industry, with a lack of real competition for labour in some large areas of the United Kingdom. This point is brought out very clearly in the Government's wretchedly short four-week consultation, to which reference has already been made. Let me quote from a farmer in Shropshire; our diocese in Hereford includes half of Shropshire. He wrote:

"Having an AWB helps the industry to minimise the wage disputes. Many rural workers on their own are not good negotiators and many will have more compassion for the animals they tend than for themselves!"

The citizens advice bureau in Crediton wrote:

"We have evidence of exploitation of agricultural workers, which, due to their isolation, lack of contact with other agricultural workers, they were not aware of the approximate £30,000 underpayment due to them over the last four years".

I quote these to stress the particular difficulties resulting from isolation. In the more sparsely populated parts of our nation, there is not the same labour mobility, and without the Agricultural Wages Board and enforced parity of pay, there would not be the knowledge of what rates are being paid on a neighbouring farm or one 10 miles away, nor the knowledge about overtime rates, pay for younger workers, accommodation allowances and the other things covered by the AWO.

The Farmers' Union of Wales favours retention of the board, stating that the majority of its members,

"still consider the Agricultural Wages Board to be the most effective body to determine the pay and conditions of service, which reflect the unique requirements of the agricultural industry in Wales. As many farms in Wales are run with relatively few staff, the AWB is considered an important means of avoiding potential conflict and lengthy negotiations with individual staff".

This comes close to the heart of the issue, namely that larger employers see the AWB arrangements as "cumbersome", to use the NFU's own word, while many smaller employers-such as those in much of Wales, the border areas of England and other more sparsely populated counties-value the Agricultural Wages Board because it protects them and their workforce from having to spend hours and hours of time learning to be human resources specialists and negotiating terms and conditions for just a few people.

The pressure to abolish the AWB is coming principally from, as we have been hearing, horticulturalists, large farm businesses and large estates-with the supermarkets behind them-seeking all the time to push down prices at the expense of wages and despite the realistic costs. I fully accept that there are some difficulties with the present agricultural wages order; I do not think anybody is likely to suggest that it is perfect. I also accept that there are difficulties with the definition of what is and what is not "agricultural work", giving rise to problems for employers whose employees, for example, work both on farms and in packing facilities. The answer to this, however, is not to scrap the whole system but rather to make it more fit for purpose.

If the complaint is that the AWB has not been properly modernised, then it should be modernised. You do not scrap a car or a tractor because a part of it is damaged: you mend it. The AWB was needed when Winston Churchill first set up the wages councils; it was needed in the 1980s when other wages councils were abolished and it is still needed now. Let the AWB be improved and updated, but not abolished.

Photo of Lord Greaves Lord Greaves Liberal Democrat 7:15 pm, 6th March 2013

My Lords, I was pleased to add my name to this amendment. I congratulate the two previous speakers who said quite a lot of what I might have said, and I will try not to repeat what they said. I agree with practically every word that both speakers said and I think we should be aware that the noble Lord, Lord Whitty, is probably the greatest expert on these matters in your Lordships' House. There are obviously others on different sides who have similar expertise.

This takes me back to the debates on the Public Bodies Bill some two years ago when I moved an amendment in Committee to remove the Agricultural Wages Board from the purview of that Bill. Noble Lords will be surprised to learn that I made a long speech on 1 December 2010, which is reported in Hansard, beginning in column 1513. I read it again just now and nothing seems to have changed, so I thought I would read it all out again. Then I looked around the House and saw at least half a dozen people whom I remember being present in that debate; it would be unfair to them to subject them to it again, although it might have done everybody else some good.

At the time, efforts were being made within what I might call coalition circles, led by my honourable friend Andrew George, who was co-chair, along with me, of the Liberal Democrat Defra committee at the time. We were trying to save the AWB, or at least find an alternative system which would preserve some of its best features. We thought we were going to achieve some success, but we failed; I very much regret that. One reason may have been that the Defra Ministers at that time did not include any Liberal Democrats, but I do not know.

When the then Secretary of State Caroline Spelman announced that she wanted to abolish the Agricultural Workers Board, there had been no consultation whatever. There has now been a consultation, but, as the noble Lord, Lord Whitty said, it was for a mere four weeks. That breached the standard of 12 weeks which is supposed to prevail for such consultations. It was obviously part and parcel of the effort to shunt this clause into the end of this Bill, pretty well at the end of the parliamentary process. It has resulted in my appearance for the first time in this Bill at the end of the process.

Why are the Government doing this? The Government's consultation and their report on it are thorough and very interesting. It is absolutely clear, as the right reverend Prelate said, that the people and organisations in favour of it include, in particular, the horticultural sector, with its very large number of seasonal workers. There are some very good horticultural firms, but there are also some where the conditions for the workers leave a lot to be desired. They are different from most other farms in this country. Those in favour of abolition also include the big farms, which are often prosperous, the supermarkets and the food processors. They are the people who want this and we have to ask ourselves why.

Then there are the people who do not support it, which is clear from the consultation. There are some quite harrowing comments from small and medium-sized farmers who believe that, far from it removing the regulatory burdens from farm business, as the Minister argued when he opened this debate, it will increase their administrative burdens. These are small businesses that rely very much on the help and support they get by having a firm structure and framework for employing their staff. If they have to do it all themselves, it is going to be much more difficult for them.

Two years ago, my honourable friend Mark Williams spoke in the Public Bill Committee in the House of Commons and quoted what I had said here; it is all a bit circular, but there is a good reason for this. He said:

"As we have heard, it is not totally acceptable to rest behind the national minimum wage legislation, because other concerns about terms and conditions need to be addressed. Lord Greaves said in that debate:

'Will there be a new national system set up? Will there be a bargaining system set up within the industry-an unofficial system...outside the purview of statutes and government, in which employers and representatives of agricultural workers negotiate? Or to what extent will it be left to individual farmers to negotiate with their own workers or just impose'- the word "impose" is critical-

'terms and conditions and wages...above the national minimum wage?'-[Hansard, House of Lords, 1 December 2010; Vol. 722, c. 1515.]

I am still looking for the elusive clarity on that matter, particularly about the issues that the hon. Lady mentioned on terms and conditions, people under 16 and so on".-[Official Report, Commons, Public Bodies Bill Committee, 8/9/2011; col. 54.]

As far as I can see, that remains the position. The NFU has answered this to a degree by saying that it would provide support, assistance, advice and help to its members, but first, not all small and medium farmers are members of the NFU by any means. That is a problem.

Secondly, the NFU, which sounds like a trade union, is in fact the employers' organisation in this context. It simply cannot give the sort of balanced and unbiased regulation that the AWB now provides. The AWB has an equal number of representatives from the NFU and from Unite, as well as five independent members on top. It provides a place in which negotiation can take place, but it also has to take an overall balanced view, which we would lose. The questions that Mark Williams put have not been answered; it will be interesting to hear how the Government think it will work.

The Government are saying, "Well, it's okay because this was in the Conservative manifesto". It was not in the Liberal Democrat manifesto or in the coalition agreement, and on that basis, those of us who sit here as Liberal Democrats ought to be able to have the freedom to look at this issue and make up our own minds up. I will certainly vote for the amendment to the government amendment in the name of the noble Lord, Lord Whitty, if it is put to the vote, as no doubt it will be.

I will add one further thing. I received a message from somebody local, adding to the list of objections to the abolition that came from so many farmers in the consultation. This is an issue where the NFU does not by any means speak for the whole of the farming industry. The letter was sent to me by an acquaintance of mine in Pendle, Charlie Clutterbuck. He sums up many of the problems when he states:

"On this occasion I wanted to raise the issue of the abolition of the Agricultural Wages Board. And the general disappointment that the Lib Dems are going along with it. It surprises some of us and it seems a most surprising turn around".

This is the point at which, like all my colleagues, I give people a lesson in coalition government-in trade-offs, compromises and all the rest, which I perfectly accept. There are times when an issue is not fundamental, and when we, as a party, should turn round and say no. Mr Clutterbuck continues:

"It is also odd that there are few farmers round here"- this is upland Pennine Lancashire-

"who really want this abolition. It won't help them with their many other problems, by adding the difficulties of employment complexities. I was Chair of the Governors at Myerscough Agricultural College, and know of nobody who thinks this move is going to bring rural prosperity to areas like ours".

He goes on to say, in his words, not mine:

"It is clearly motivated and being pushed by the 'Plantation owners' in the East who hire hundreds of migrant workers and want to pay them a penny or two less an hour. 'Rural' won't benefit, but 'retailers' will. And in smashing up the AWB, they smash up the whole skills structure, on which most permanent farm workers depend for their career. I am on the LANTRA England Council and know that 'growing' skills are going to be crucial in the future. Doing away with the AWB Skills scheme sends the wrong message to anybody wanting a career in farming and who doesn't own a few hundred acres of their own land".

I do not in any way condemn people who own land and farm it, whether they are small or big farmers. However, this particular proposal is misguided and unnecessary. It will save a minimal amount of money in the short term, and the only explanation we get is, "Well, in the long term wages will be driven up because of market conditions". In the long term that may or may not be true, but, as John Maynard Keynes famously said, in the long run we are all dead. I am concerned about the welfare of farm workers in the short and medium term. I support this amendment.

Photo of Lord Cavendish of Furness Lord Cavendish of Furness Conservative 7:30 pm, 6th March 2013

My Lords, I read carefully the recent debate on this subject in Grand Committee, and I am sorry that I was not there. I declare an interest in that I have beneficial interests in a landed estate based mainly in south Cumbria. The estate's activities include farming, forestry, leisure, minerals and housebuilding. As a family business we farm modestly on our own account, but the majority of the land is tenanted.

It is not my intention to pretend that the Agricultural Wages Board and its satellite committees represent one of the great evils of our time, but the Government deserve support on this issue, and I am happy to give them mine. I will resist repeating the arguments that the Minister made beyond saying that all of them carry weight. I am not sure that there is much disagreement; some want abolition while others want reform, but all seem to be fairly clear that we need to change.

Stirred by the apparent passions that came through in the Official Report on Grand Committee, I have been to some lengths to canvass opinion in my native Cumbria and a little bit in Lancashire, and have also sought to inform myself better of the facts. On the basis of my findings it is very hard to find any justification whatever for the continued existence of this body. The AWB may not be a great evil but the very best that can be said of it is that it is an obsolete irrelevance and symbolic of the way small businesses continue to be fettered in a way that disadvantages business and inhibits growth.

My canvass extended to farmers on small, medium and large farms, to those who had diversified and those who had not, to tenants and to owner occupiers. Much to my surprise, unlike my noble friend Lord Greaves, I had to go quite far down my list before I found anyone who had even heard of the AWB. It simply did not appear on their radar. One of the local NFU representatives said that he had never had any call to understand the workings of the board, adding wryly that he expected that the sort of committee I was talking about would indeed be a very nice thing to belong to.

I drew a complete blank when it came to finding any evidence to support the claim that the noble Lord, Lord Whitty, appeared to make in Grand Committee, that the handful of workers on smaller farms would be exposed to exploitation in the event of abolition. Not one person I spoke to could bring themselves to say that the board was a force for good. The noble Lord, Lord Whitty, went on to say:

"The abolition of the Agricultural Wages Board is a direct attack on the living standards of 150,000 rural workers".-[Official Report, 16/1/13; col. GC 258.]

Let us have a look at that claim. In the decade to 2011 the consumer prices index rose by 28% and the retail prices index by 38%. Over the same period, the national minimum wage-almost identically mirrored by the lowest grade of AWB-rose by 64%.

Alternatively, we could approach this from a different angle. The Institute for Public Policy Research confirmed that just 12.3% of agricultural workers earn below two-thirds of median hourly pay. By comparison, hotels and restaurants are nearly 70% below; the wholesale and retail sectors are over 40% below; the situation is much the same in administration; and the arts are about 37% below. The figures for education and health, where the state is predominantly the paymaster, are 18.3% and 14.6% respectively below two-thirds of median hourly pay. Even those workers are paid less than workers in the agricultural sector. I understand that 90% of farm workers are paid at or above grade 2 on the board scale.

Surely the noble Lord, Lord Whitty, and others, understand that all but a tiny minority of employers these days have long since grasped the fact that bad pay always produces bad results. Can he not see that this is especially true in this sector, which has become so much more specialist in recent years? Will he accept that there is now far more legal protection for those who are vulnerable to exploitation?

Low pay among agricultural workers is manifestly a myth, but more important for today's debate is the demonstrable absurdity of the notion that the AWB is the appropriate vehicle to address rural poverty. I should perhaps stress that I mind very much about rural poverty-it exists and is worthy of debate. However, it is simply not related to the issue under discussion. If, as I have heard suggested, the objection to abolition is to do with terms and conditions of work, I can only say that I found a dearth of convincing arguments that this sector alone should be picked out for special treatment.

The noble Lord, Lord Whitty, said that administration costs would be lower. I do not agree. In this House there is no dearth of people prepared to talk about wages but rather fewer pay them. I speak from experience in this matter. When the Labour Government was introducing the national minimum wage in June 1998, the noble and learned Lord, Lord Falconer, said:

"As I have indicated, the Government do not believe that a multitude of regional, sectoral or other minimum wages is the right approach. It is neither sensible nor justifiable intellectually".-[Official Report, 11/6/98; col. 1240.]

I do not understand what has changed to invalidate that sensible opinion then held by the party opposite. There is something unattractively patronising about these discriminatory attitudes. They come close to suggesting that people involved with the farmyard must be so primitive as to need their hand held by agencies of the state.

In his opening remarks, the Minister most pertinently pointed out that farmers compete globally these days, not just one with another. It is possible to imagine a future world without the common agricultural policy. It is possible to envisage a future where farmers are vastly more exposed to the marketplace and with many fewer subsidies. Subsidies, after all, are not just handouts by the taxpayer; they disguise all kinds of market distortions on the one hand and, on the other, fund environmental initiatives prescribed by Parliament or the European Union. Nor is it entirely fanciful that, as the right reverend Prelate said, the day might come when we have to take the question of fuel security seriously. These considerations are not necessarily matters to be dreaded; rather they are challenges to be faced. Whatever the future, we must be prepared for change.

As I have said before in your Lordships' House, SMEs stand ready to lead growth in our economy if only they are allowed to. It is time agriculture was unshackled and allowed to prosper as it is capable of doing. It is time we were treated as a well established, modern industry. Above all, it is time we were treated like everybody else. Our farmers have a huge amount to offer. The abolition of the AWB is a welcome and long overdue measure and the Government must be congratulated on introducing it. It deserves support in your Lordships' House.

Photo of Lord Curry of Kirkharle Lord Curry of Kirkharle Crossbench

My Lords, I fully support the Government's desire to abolish the Agricultural Wages Board. I declare an interest as a tenant farmer in Northumberland. I started my business in 1971, employed two young people who had left school, and built up the business until I employed six. Though I no longer employ staff, I have done so for most of my professional life. As a contrast, I also chair the Leckford estate for Waitrose, where we employ 170 staff. My key interest in this debate, however, is as chair of the Better Regulation Executive-and this is an important deregulation measure. I consider myself to be firmly embedded in the agricultural community. I know lots of farmers and I know no farmer who rewards their staff at Agricultural Wages Board rates. The NFU has 70% farmer membership and most of those who are not members do not employ staff.

The Agricultural Wages Board is a relic of the past. In 2002, in a report for which I was responsible, commissioned by the previous Administration, I recommended that its future be reconsidered. The noble Lord, Lord Whitty, and I had interesting conversations about the wages board at the time. No other industrial sector has a wages board. We do not have one in construction or in transport: why in agriculture? The perception seems to be of a sector stuck in a Lark Rise to Candleford era where employees are exploited by unscrupulous employers who resemble the mill owners of the 19th century. Nothing could be further from the truth. The agricultural sector is now a highly professional industry. Today's employees have to be skilled to cope with the technological changes that are taking place at an unparalleled rate. The cab of a modern tractor is now like the cockpit of an aircraft.

Like other Peers, I have been lobbied strongly to retain the board because of the fear that wages will plummet if the board is abolished and "families will face destitution". This is complete nonsense and scare tactics. The impact assessment had to consider the possibility, in the extreme, that wages would decline over time to national minimum wage levels, but that is such a remote possibility that it should be disregarded. A debate on what the level of a living wage in the countryside should be would be extremely helpful.

The board has been in existence for 65 years. Has the world not changed a lot in that time? The parties concerned meet for their annual sport and confront each other. Eventually the smoke comes out of the chimney and the world continues as before. In the past, most employees were stuck in tied cottages. Now, however, they are far more mobile than they have ever been. If they wish to move, they can. Recruiting and retaining good people is a real challenge. If attractive reward packages are not offered it is impossible to recruit workers. The agricultural industry is mature and professional.

The market has moved on and the wages board is stuck in a time warp. It is reflected in some of the responses to the consultation that, as long as the wages board exists, many farmers will continue to abdicate their responsibilities for negotiating terms with their employees and simply adjust their salary levels annually when the wages board pronounces its decision. It is time for that to stop and for employers to properly take on the responsibility-as I am convinced they will-to reward their employees for the skilled and responsible work they do in a world where their role is becoming ever more important with climate change, environmental management and food security so high on the global agenda. The wages board could be a drag on progress, and reward packages will improve without it.

With others, I am spending a considerable amount of time promoting agriculture as a career. Like the noble Baroness, Lady Byford, I am a patron of Lantra, the association of colleges, and I must inform the House that, in promoting agriculture to students, the wages board does not feature at all. It is obsolete, irrelevant and should be abolished.

Photo of The Duke of Montrose The Duke of Montrose Conservative 7:45 pm, 6th March 2013

My Lords, I was most grateful to hear what the noble Lord, Lord Curry of Kirkharle, has been telling us. A particular difficulty for the House has been the shortened consultation period, which left a number of questions not fully answered in our minds.

The noble Lord, Lord Whitty, and agricultural workers who came to brief us this morning are obviously very worried at the Government's assessment of a loss of £259 million. The noble Lord, Lord Curry, has given us some indication as to how that was achieved. Can the Minister tell us whether that figure includes savings or reductions in monies other than purely wages, where the figure was derived from and on whom is it likely to impact? The agricultural representatives took it that overtime rates will be totally abolished. The question of working hours is well defined, for all workers, by the EU working time directive, so everyone knows how many hours are required in any employment in excess of this figure. Under what guidance or legislation will the rates of payment for these hours be determined?

The noble Lord, Lord Whitty, said that the floor was being removed. As the right reverend Prelate said, that is not quite the picture. The floor is not being removed. At the present rate, it is very slightly diminished by 2p. One of the other factors that the representatives are keen to emphasise is that currently there is a graded system in the rates of remuneration. However, the grades currently in place are built on a system of certified qualifications and experience. Is it not possible for the agricultural workers' union to produce its own guide to a graded wage structure, which would give its members an indication of what the level should be when they are entering into a new contract? These things could be done by responsible people in their own way and would not necessarily require the retention of the wages board.

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench

My Lords, first, I declare an interest as a farmer. We have all received much evidence, both for and against, on this amendment. It seemed right to consider all the evidence and facts afresh, including my own knowledge of the industry, and to re-examine the case for and against abolition.

I think everyone acknowledges that agriculture is very different from 60 to 65 years ago when the current Agricultural Wages Board was introduced. I know that some of the work can still be very tedious and repetitive, such as riddling potatoes for hour after hour or even driving up and down a field all day, albeit in an air-conditioned or heated cab, either with or without sat-nav assisted steering. Of course, now no weights are lifted because instead of bags coming in at 1 hundredweight or even 2 hundredweight as they used to, they come in weights of 1 tonne. So you automatically jump into the forklift truck, do things much quicker and save yourself from exposure to the weather.

I admit that some of the work with livestock can be pretty full-time. You are always on call, particularly at certain times of the year, such as during lambing or calving and, even more importantly, when quietly walking up and down your dairy buildings at night to check which cows might be on heat in order to maintain or to avoid your calving index slipping. I also know that work with livestock can sometimes take place in fairly fresh and rugged conditions, both wet and cold. It has always seemed to me that shepherds and dairymen really should be flock or herd managers and paid an annual salary with bonuses paid on targets achieved. As I understand it, that is not specifically allowed under the current rules of the AWB-or at least it does not count.

On our farm, including in our dairy, we do not pay much attention to that or to any Agricultural Wages Board rates. We pay much more than the AWB rate. We would not keep staff very long if we did not. As I have said before, why would one pay a minimum wage to people responsible for operating machinery costing up to £500,000 or more, and whose skill at operating it can sometimes be the difference between profit and loss on the farm?

However, the Agricultural Wages Board is-everyone has mentioned this and I have admitted it before-a very convenient benchmark to use in the annual wage adjustments. On our farm, all wages across the farm go up by the 2%, 3% or whatever the AWB rate is. In addition, we usually round it up. Incidentally, in the consultation evidence I received from Unite, I noted that by far the most common reason-again, it has been repeated in the debate today-from farmers for opposing the abolition was the helpful benchmarking service that the AWB provides. However, as I have also said previously, this is a service quite easily replaced, and indeed promised, by the NFU and others on a non-statutory basis. Therefore, I am afraid that I have to discount all that evidence. I do not think that it is relevant to the debate.

The question really is: why should we get rid of the safety net? If most farmers pay no attention to it, does it really matter whether we have it or not? After all, it is only a small cost to the taxpayer in the general scheme of things. It is the last of many wages boards and councils, and therefore has a historic role, if nothing else-the last vestige of post-war socialism. I admit that I have only limited knowledge of the horticultural industry, where it is claimed that the national minimum wage-a full 2p per hour less-would apply if the AWB was not there. Furthermore, the rightly generous overtime rates of the AWB would no longer apply in that industry, which I believe is a valid point. But perhaps that is a fault of the national minimum wage rules rather than a plus point for the AWB.

I paused in my thought processes here. What harm is the AWB doing? After all, agriculture is no longer a poorly paid industry, so it must be being successful. The hourly average pay in agriculture is higher than in hotels, restaurants, shops and even local authority administration. Why dispense with all that gain? I like to think that I care about farming families, both employers and employees. I have spent most of my life trying to promote wider businesses and jobs in the countryside outside farming, because agriculture represents less than 4% of rural employment. Therefore, one of the reasons for my passionate promotion of the wider economy is that many farming families, both employers and employees, depend on having a non-agricultural wage earner in their family to maintain their lifestyle or, if they are the employers, their presence on the land.

I asked myself whether it is helpful to overall employment in agriculture that there should be a state-controlled wage structure over and above the minimum wage which the other 96% of the rural workforce does not enjoy. I asked myself whether the rest of the rural economy was ruined by the abolition of the other 100 or so wage councils. Or is it spoilt now by having a free market in wages, subject of course to the national minimum wage?

Are lorry drivers disadvantaged by not having a lorry drivers' wages board? I take that as a good equivalent because they, too, spend long hours in cabs, driving up and down-not fields but roads. I thought that they were not disadvantaged. The rural economy is flourishing better than ever before, including lorry drivers. As an aside, obviously any reform of the CAP should put more money into Pillar 2 and less into Pillar 1 but that is not the subject we are debating today.

My next question to myself was whether UK agriculture can adapt and grow better, including providing more overall employment up and down the whole food chain, with or without its own centrally controlled, state-run wage order. All my experience over the past 50 years suggests that state interference in an industry is not very helpful to any of the participants in that industry, apart from the need for a national minimum wage structure and having a strong Health and Safety Executive, in which agriculture is not its finest field.

While I understand the safety net argument, I fear that the AWB is at best somewhat of an irrelevance in this day and age, and at worst is preventing new practices of salaries and well targeted bonuses that could reignite our farming industry as a career path for those who love the countryside and the healthy working life associated with it. I do not always support the Government but on this issue I fear that I must.

Photo of Baroness Byford Baroness Byford Conservative

My Lords, in Committee we had a long discussion about whether the Agricultural Wages Board should be continued. Although the noble Lord, Lord Whitty, implied that a majority was in favour of retaining it, that is not quite a true reflection of those of us who took part.

Tonight, we have had the extra bonus of looking at Amendment 83A in the name of the noble Lord, Lord Whitty. It is within that context that I want to pose one or two questions. Amendment 83A proposes that,

"every agricultural wages committee ... in England is abolished".

However, it adds the requirement that "the services formerly provided" should be transferred to,

"the Agricultural Wages Board for England and Wales".

I hope that the noble Lord will explain to the House what is involved and what he expects the board to do. Perhaps he might also tell us what caused so many of those committees to cease to function. Were they no longer needed or were they being dealt with in a different way? His amendment requires detailed examination.

Subsection (3) of Amendment 83A proposes that,

"any minimum rate of pay contained, or to be contained, in an Order of the Agricultural Wages Board may"-

I repeat, "may"-

"where the Agricultural Wages Board considers it convenient to do so, be fixed by reference to any periods during the currency of employment".

Therefore my question to the noble Lord is: will he please tell us what "convenient" means, or how it is defined, or how it would work? It seems a very unusual way for an amendment to be expressed.

In Committee, the Minister clearly stated that agricultural workers who are in contractual rights at the time of the abolition board will retain those rights, and I am pleased to repeat it tonight. Also, the agricultural workers would be protected by the national minimum wage and wider employment legislation, and the Gangmasters Licensing Authority will continue to provide protection for workers, particularly those at the lower end of the scale, many of whom would be in that pay scale range.

It was suggested to me that the Gangmasters Licensing Authority arrangements do not protect workers in the way that they should. I found that very worrying because it is a newly formed authority. If it is not doing the job that it should be doing, the question has to be: why? What is it within that authority that is not doing the work that it should? If that legislation is not working properly, I suggest that it needs to be reviewed and strengthened.

The right reverend Prelate the Bishop of Hereford said that he would like the board to be looked at to be repaired rather than repealed. There seems to be a lot of confusion around what is and is not working within the Agricultural Wages Board. I think that other noble Lords have received the briefing from Steve Leniec, the union representative, and will find the 10-page submission, headed "Subsidies for wealthy landowners but pay cuts for land workers", unhelpful and not strictly true, since the majority of farm workers are paid considerably more than the lowest level set. The union also claims that there is no such thing as a free market within agriculture. I think those of us who work within it will find that very surprising. Clearly, it is a free market in which we work; we compete against other farmers and within a global market.

I also received a briefing from the NFU. I remind the House that we have a family farm, although we are now contracted out and therefore do not pay anybody a wage directly. The NFU recognises that the Agricultural Wages Act was old-fashioned. Indeed, as the noble Lord, Lord Curry, said, things have moved on tremendously. It was needed then; it is not needed now. Times have moved on. Indeed, average earnings for 2010 for full-time workers were 31% above the industry minimum set by the board. I also understand that 45% of farm workers are already paid by salary rather than by the hour. Additionally, some 90% of workers already receive pay rates above the minimum rate. The question is: why keep the board? What does it do that the other two bits of legislation that have been brought in do not do in a much better way?

As other noble Lords have said, this is the last remaining wages council. I do not think that it is necessary in this day and age. Farming businesses have moved on. It is an extra expense and responsibility that those who employ people have to juggle. Those who have people working on a farm but working in the farm packing business have two different views to take on those whom they employ.

Agriculture has seen tremendous changes since 1948. From innovation in plant and animal breeding through the incredible advance of scientific knowledge, it has developed into a modern, high-tech industry. Work on farms has changed dramatically. Today's workers need to be highly skilled and properly paid. I believe that Amendment 83A does nothing further in this development, and I beg and urge other noble Lords to support the Government's amendment.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills 8:00 pm, 6th March 2013

My Lords, this has been an interesting and lively debate. I am very grateful to all noble Lords for their contributions.

I turn to some of the points raised by noble Lords during this debate. First, the noble Lord, Lord Whitty, raised the issue of the impact assessment, and the noble Lord, Lord Curry, referred to this as well. The noble Lord, Lord Whitty, pointed out that the Government's best estimate is a cost to the rural workers of £236 million over the next decade. Abolishing the Agricultural Wages Board would bring agriculture into line with all other sectors in the economy. Allowing farmers to compete fairly in the labour market and allowing agricultural wages to follow market levels will enhance the competitiveness of the sector and may increase employment. This would in turn encourage long-term prosperity in rural areas.

The impact assessment itself gives a range of impacts and makes it clear that there is considerable uncertainty, with a potential £238 million impact for workers being at the upper end of the range. The impact assessment also makes clear that there may be, in fact, no reduction in wages or worker benefits. I would like to give a little more information than was asked for in terms of how we arrived at these figures. I stress that the figures are the upper estimate, based on empirical research comparing wages in fisheries and the agricultural sector over an 11-year period up to 2010. The figures are based on two particular issues. First they are based on existing workers. With the abolition of the Agricultural Wages Board, one assumes that existing workers on contracts would not receive a pay rise over 10 years. Therefore there would be a definition of wage slippage, allowing for inflation. Secondly, it allows for new workers who may be taken on at the national minimum wage rate, not the old agricultural wages rate, if the Agricultural Wages Board was abolished. So it assumes the very worst scenario, with no increase at all on what there was before, and it assumes, in effect, that farmers would be sitting on their hands. I would argue that this would be highly unrealistic.

As I mentioned earlier, the reality on wages will depend on demand, and evidence shows that demand is increasing. Farmers will want to be more flexible and will be able to be more flexible with the abolition of the Agricultural Wages Board.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Shadow Spokesperson (Health), Shadow Deputy Leader of the House of Lords

What impact has the Minister's department assessed there will be as a result of supermarkets forcing down costs on farmers, and what will be the impact of that on wages?

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I am glad that the noble Lord has brought up this point because I was about to move on to the issue of supermarkets which was raised by the right reverend Prelate the Bishop of Hereford and, indeed, by the noble Lord, Lord Whitty. From our perspective, we do not have any evidence at all that supermarkets-some names were mentioned by the noble Lord, Lord Whitty-would put pressure on farm workers' wages.

Noble Lords:

Oh!

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

If I may be allowed to finish, prices paid to producers are determined by international markets, not just supermarkets. Supermarkets now recognise that they have their reputations to protect. Since February 2010, all contracts between major food retailers and their direct grocery suppliers must comply with the groceries supply code of practice, the aim of which is to ensure that those who directly supply the large grocery retailers do not have unexpected costs or risks transferred on to them. I finish by saying that the horticultural sector similarly operates in international markets, with imports representing nearly 40% of fresh vegetables and over 90% of fresh fruit sold in the UK.

The right reverend Prelate the Bishop of Hereford also raised the issue of workers who worked in the farming sector who were below the school leaving age, if I understood him correctly. He argued that they would be disadvantaged by the abolition of the Agricultural Wages Board. I would like to reassure him that the National Minimum Wage Act 1998 does not apply to children below compulsory school leaving age. Therefore, following the abolition of the Agricultural Wages Board, no minimum rate would be set for young workers in agriculture in this age group. However, this would leave them in a similar position to children who work in other sectors such as shops, hotels and hairdressing salons. They will continue to be protected by general employment law and by health and safety legislation. Children of school age should be in full-time education and it is not the Government's policy to encourage them to seek work.

The right reverend Prelate the Bishop of Hereford, in quoting Winston Churchill's words "sweated workers", raised the question of protection. There is now a raft of protections for all workers under general employment legislation including the national minimum wage, working time regulations, the Employment Rights Act, equal pay and equality legislation and legislation for fixed-term employees, part-time employees and agency workers. If the Agricultural Wages Board were abolished, agricultural workers would enjoy the same protection as workers in all other sectors of the economy. That emphasises how far we have come since 65 years ago. It is interesting that there is quite a long list there.

To conclude on the issues that the right reverend Prelate the Bishop of Hereford raised, he made the point that there should be a defined living wage. I support that and in fact the Government support the concept of a living wage and encourage employers to take it up where possible. But the decision on what wages to set is one for employers and workers.

My noble friend Lord Greaves raised the issue of the consultation and much discussion was had in Grand Committee on that. The noble Lord, Lord Whitty, also raised this matter concerning Wales. I believe that I wrote quite a long letter to the noble Lord, Lord Stevenson, and copied it to a number of other noble Lords to address this matter.

The policy of the abolition of the Agricultural Wages Board and related committees was first announced in July 2010 so stakeholder and interested parties have had plenty of time to consider the matter. During this time, key stakeholders also had the opportunity to make their views known to Defra during meetings of the Agricultural Wages Board and agricultural wages committees. The department felt that a four-week consultation period was proportionate and realistic given the length of time that the policy had already been in the public domain.

The noble Lord, Lord Whitty, raised the issue-which, again, I believe was raised in Grand Committee-over the lack of use of the Public Bodies Act. To address this directly, the Public Bodies Act was only one method by which the Agricultural Wages Board could have been abolished. The Government are perfectly free to bring forward primary legislation to abolish the board.

The removal of the board will provide simplification and greater flexibility and allow the agricultural sector to compete on a level playing field with all other sectors of the economy, encouraging employment and competitiveness which will benefit all those in the industry. The noble Lord's amendments would retain the Agricultural Wages Board and the separate employment regime for agriculture. This would continue the dual regulatory burden for farm businesses. The proposal that the board should be able to fix minimum pay rates by reference to any periods of the employment is intended, we presume, to make it easier for the board to provide for annual salaries. We are not convinced that the amendment would serve its purpose.

The provisions on the enforcement of the agricultural minimum wage are derived from the National Minimum Wage Act, which dissuades farm businesses from offering annual salaries. Moreover, the introduction of salaries would not be enough in itself to bring employment in agriculture into the 21st century. If the amendment were accepted, the opportunity for the agricultural industry to move forward and modernise would be lost. Instead, agriculture would be stuck in the past with an antiquated system of statutory wage fixing and prescriptive regulation of employment practices.

Photo of The Duke of Montrose The Duke of Montrose Conservative

My Lords, I wonder whether my noble friend could also answer the point that I raised earlier. Does he know of any form, format or regulation that will deal with the question of what payment rates should be for work over and above the minimum hourly rate?

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank my noble friend the Duke of Montrose for that question. It is best that I get back to him in writing after the debate.

While I welcome that the amendment acknowledges the need to abolish the 15 agricultural wages committees and 16 agricultural dwelling house advisory committees in England, we do not consider that there is a need to retain any of the functions. The amendment tabled by the noble Lord provides the Agricultural Wages Board itself to take over the functions of the ADHACs in England. The Government are committed to growing the rural economy. A key part of that would be to ensure a dynamic and prosperous future for the agriculture industry.

We are already taking forward the recommendations of the Farming Regulation Task Force which will remove a range of unnecessary regulatory burdens from farm businesses. We are improving access to superfast broadband and the mobile network coverage in rural areas, which will make it easier for farm and rural businesses to operate. We have provided almost £57 million to the Welsh Government to ensure that broadband access is available to homes and businesses including the hardest to reach areas in Wales.

Some £100 million is being invested from the Rural Development Programme for England, which will help small rural businesses to improve their skills, facilities and competitiveness. We have also introduced a pilot of rural growth networks to share lessons learnt to stimulate sustainable economic rural growth.

This whole package of measures, together with the ending of a separate agricultural minimum wage, will support the agriculture industry in having a successful and competitive future, which will benefit all those who work in agriculture and the rural economy.

The abolition of the Agricultural Wages Board is supported by industry bodies, including the National Farmers' Union, the Country Land and Business Association, the Tenant Farmers Association and the Association of Labour Providers. It is supported by independent professional advisers, such as the Central Association of Agricultural Valuers and the Agricultural Law Association. In view of the above, I hope that the noble Lord will feel able to withdraw his amendment and I commend the government amendments to the House.

Photo of Lord Greaves Lord Greaves Liberal Democrat

On the question of dairy prices, is the Minister aware that for many dairy farmers, many of whom have been forced out of business, the farm gate price which has been forced on them by the market power of supermarkets and milk processors has been around or even below the cost of producing the milk? The supermarkets and milk processors have been able to use their market power to force down prices. The fact that there may be cheap milk imports means that the supermarkets can do that. But it is the supermarkets themselves who are responsible.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills 8:15 pm, 6th March 2013

I thank my noble friend for his comment. I understand that the code adjudicator is called in in this particular case. But I owe my noble friend a full answer to his question and I will follow up after this debate.

Photo of Lord Whitty Lord Whitty Labour

My Lords, I thank the Minister and everyone who has participated in the debate, particularly those who supported my amendments. Those who objected to my amendments, including the Minister, seem to have two points-that we have to get rid of archaic bureaucracy and that this will not have any effect because wages will be paid well above the rate and that farmers as employers will not notice the disappearance of the Agricultural Wages Board.

As for bureaucracy, most of us are on the same page. We are happy to see the abolition of the 31 bodies. Our amendments would allow significant modernisation and simplification of the procedures and substance of the Agricultural Wages Board. To answer the noble Baroness, Lady Byford, that is why that form of phrasing is there-to move to annual salaries and so forth.

Indeed, when I was Minister, as the noble Lord, Lord Curry, will recall, I tried to get a lot of modernisation through on the Agricultural Wages Board but to retain essentially the legal underpinning which is needed in this unique industry for an isolated, sometimes exploited workforce. We have had a benign picture of the way that farming operates, but actually we know that in large parts of farming and probably most obviously within horticulture, there is still some serious exploitation of workers in all their terms and conditions including their minimum wage. The Government have not answered my points regarding amendment and reform of the Agricultural Wages Board rather than abolition.

On the point about wages, we are facing a serious dilemma. By abandoning the Public Bodies Act route, the Government have not presented to the House detailed information. The impact assessment to which we have all referred is an authoritative document. It says that the Government's best estimate-not the most extreme case, not the worst case, not the lowest case, and not the highest case either-is that in aggregate £240 million will be taken out of the pockets of current and future workers within the agricultural sector. That is the view and best estimate, not of the Minister's department, but of the department of the noble Lord, Lord de Mauley, of what is going to happen. Obviously, there is a range of probabilities, but the Government's best estimate is that this measure will lead to a reduction in wages in the agricultural sector by £250 million. That is the bare fact of this.

No doubt, in many of the enterprises of the noble Lords, Lord Cavendish, Lord Cameron and Lord Curry-I am sorry to fall out with him, but at least we are both being consistent on this issue-there will be better pay and little impact. But all the Government's statisticians, agronomists and economists are looking at the total situation and saying, "The net effect of all this in aggregate across the whole of the agricultural and horticultural sector will be a loss of wages of that order". That is their best estimate and that is at odds with the noble Lord, Lord Cavendish, and the circle of farmers in which he moves. Although clearly they are in the same geographical area, they are a different lot from those among whom the noble Lord, Lord Greaves, moves. But, even if he is right for all those farmers, the Government's view is that is not the total effect on the sector. Either the Government's impact assessment is utterly wrong, or the anecdotal evidence from those who are close to land-owning interests in this House is not accurate.

Photo of Lord Cavendish of Furness Lord Cavendish of Furness Conservative

My Lords, I gave statistics showing that the way farm workers were paid was overwhelmingly higher. Those are the statistics that matter. I am not in a position to defend an impact assessment with its huge range, which seems to me entirely meaningless, but I gave the statistics that are irrefutable.

Photo of Lord Whitty Lord Whitty Labour

My Lords, nobody is disputing that, at present, after years of operation of the Agricultural Wages Board and the economics of the industry, a lot of agricultural workers are paid above the minimum rate and above rates in some other industries. To that extent, I agree with him. My point is that the Government have refused to do what the House asked them to do under the Public Bodies Bill and present us with a full explanatory memorandum with arguments for the abolition and arguments against any other alternatives. They have tried to cut corners on this, but their own experts tell them that the net effect of this will be a substantial cut in rural workers' incomes.

If the House votes for the Government's amendment and defeats my amendment to that amendment, that is what they are voting for tonight and they had better recognise it. That is the message they will be sending out to rural areas. I am looking perhaps particularly to people on the Liberal Democrat Benches who were not committed by their manifesto to this abolition, as the noble Lord, Lord Greaves, said. I do believe that the Government have got this wrong. We could have had a more coherent debate had we gone down the route of the Public Bodies Bill and the Government had produced their range of statistics and we could have had a sensible argument. Instead, we have a minimalist consultation, minimalist information and the Government sticking to an ideological position, supported by some elements of the farming industry but by no means all, and prepared to try and push through something which has an impact on the incomes of a lot of rural workers and their families. My amendment would allow a better way forward, a modernising way forward, and a reduction of bureaucracy, but it would retain the central protection that those agricultural workers have had and which they deserve to retain.

Photo of Baroness Byford Baroness Byford Conservative

My Lords. I will be very brief. Three times the noble Lord, Lord Whitty, has referred to the rural workforce. This is nothing to do with the rural workforce; it is to do with the Agricultural Wages Board and he is misleading colleagues if he keeps using that phrase.

Photo of Lord Whitty Lord Whitty Labour

My Lords, the right reverend Prelate said two things. First, the agriculture workforce is a smaller proportion of the rural workforce than it used to be, but also the Agricultural Wages Board is taken, either in its substance or in the rate of increase, to a lot of other rural workers, so it does affect a wider range than those who are legally entitled to Agricultural Wages Board rates. It is not the whole of the rural workforce, but it is nevertheless taking £250 million out of the rural economy, ostensibly giving it to the farmers, but actually giving it to the supermarkets. If that is what the House wishes to vote for tonight, they had better be clear that that is what they are doing.

Division on Amendment 83A

Contents 163; Not-Contents 192.

Amendment 83A disagreed.

Division number 3 Enterprise and Regulatory Reform Bill — Report (3rd Day)

Aye: 161 Members of the House of Lords

No: 190 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Amendment 83 agreed.

Consideration on Report adjourned until not before 9.34 pm.