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  • Helen Liddell – 1998 Speech on Money Laundering

    Helen Liddell – 1998 Speech on Money Laundering

    The speech made by Helen Liddell, the then Economic Secretary to the Treasury, on 1 June 1998.

    I welcome the opportunity to speak to such an important gathering, to welcome you to London and to wish you well in the difficult and important work you are tackling here over the next two days.

    Financial crime covers a multitude of sins ranging from advance fee fraud to market manipulation and insider dealing. Today I want to focus on one particular aspect of financial crime, the theme of this conference, money laundering.

    This gives me an excellent opportunity to emphasise the importance the UK places on the fight against money laundering. The Treasury – and indeed the whole Government – is committed to defending the integrity of our financial systems and building stable and sustainable economic growth.

    Money laundering is a threat to our democracies and our people. International organised crime, corruption, subversion, violence and misery inevitably thrives wherever criminal activities go unchecked. Estimates of the amount of money being laundered suggest that it is at least $500 billion per year. The risk that such flows of dirty money may destabilise our economies and corrupt our financial and legal institutions is apparent to all. And unless we can successfully tackle the proceeds of crime, we are not going to be effective in combatting the criminals themselves.

    The international nature of money laundering means we have to tackle the problem together. Through international cooperation we can meet the challenge of building an alliance against crime that respects our legal, political, cultural and economic differences. Organised crime thrives on international inertia so we must act soon to seek out and plug the gaps in our approach.

    The Commonwealth has always set high standards in this area and I am sure your work will add to that record of achievement.

    The problem

    Money laundering presents an ongoing challenge. The techniques and structures used by launderers are changing all the time as they try to circumvent the preventive measures we have introduced. Only ten years ago, in most of the world criminals could walk into a bank with the proverbial suitcase of ‘dirty money ‘ with little fear of challenge or detection. In many countries this has now changed – certainly the UK.

    But if the criminals cannot risk putting the cash directly into the financial system, they transport it abroad to countries where questions are not asked. So issues concerning the use and transportation of high denomination notes are still with us. Indeed, this is one area where we are working closely with our European partners, as we prepare for the launch of the Single Currency. However, criminals are using increasingly sophisticated and complex ways of managing their financial affairs to legitimise assets, obscure profits and hide identity. There is increasing use of securities, derivatives and insurance products as well as the services of accountants, lawyers and financial advisors to launder money.

    The Internet and electronic money also provide particular challenges, as they enable money to be moved around the world with relative ease and with little trace. So there is a need to constantly adapt and develop the fight against money launderers. Systems need to be flexible and experiences shared to ensure constant access to best practices.

    The Commonwealth

    The Commonwealth plays a crucial role in the fight against money laundering. Its role in the exchange of information is essential and I hope existing initiatives will be built on.

    I particularly welcome the multi-disciplinary approach you are taking. To succeed, the legal and financial aspects of laundering must be tackled together.

    We have worked together long enough to understand each other’s concerns. There is enough common ground to make us uniquely placed to contribute to raising the benchmark of international work on money laundering.

    Financial Action Task Force

    The leading international body concerned with developing policies to combat money laundering is the Financial Action Task Force – FATF. As many of you will know, the FATF has recently carried out a review of its future mission and strategy and the UK has played an active role in the agreement to extend the FATF’s mandate for a further five years.

    The FATF’s 40 Recommendations are now widely recognised as the international benchmark in this area. But the FATF is not becoming complacent. It acknowledges that, although standards have improved enormously in the past few years particularly within its own membership, the challenge is to make those standards truly global. The FATF’s strategy for the future therefore emphasises the importance of establishing and strengthening regional efforts in every part of the world.

    The great success and professionalism of the Caribbean Financial Action Task Force demonstrates how vital regional efforts are in moving forward. There are several reasons for the success of this regional approach. It encourages the use of mutual evaluation and peer group pressure. And crucially, it offers the flexibility to tackle local challenges with local solutions.

    The Deputy Chairman of the Caribbean Task Force will be addressing you later. I urge you all to consider what role you can play in establishing and building up your respective regional bodies. Success is important not only in the fight against crime but also in encouraging soundly-based and sustainable economic growth.

    Development and expansion of the regional Task Forces will be accompanied by the gradual expansion of the FATF itself. New members to Task Force are likely to be have key regional roles to play. The main Task Force should therefore to continue to grow in understanding and become more truly international in character.

    The twin track approach, of strengthening and widening both the regional and main Task Forces will ensure real progress is made in the coming years.

    G7

    Encouraging news on international action to tackle financial crime also emerged from the recent meeting of the Finance Ministers of the G7. Ministers agreed to review the laws and procedures on international cooperation and information exchange between financial regulators and law enforcement agencies. The review will identify ways of improving our systems and ways of implementing these measures as quickly as possible. The review will be completed by October.

    Finance Ministers also decided to take a number of practical steps to improve cooperation. A G7 reference guide to procedures and contact points on information exchange in our countries has been drawn up and we intend to expand this Guide to cover all major financial centre countries.

    The G7 also agreed a new initiative to improve the coverage of anti-money laundering systems and the effectiveness of tax authorities. The Initiative is designed to ensure that financial institutions report suspicions of tax related crime and that this information is shared both domestically and internationally.

    This work will begin to address the potential loophole which allows criminals to masquerade as tax-dodgers in order to avoid the reporting obligations of our anti money laundering systems.

    I think we all welcome these measures taken by the G7 and other international organisations to tackle financial crime more widely, money laundering in particular.

    UK

    However, it is not only on the international stage that we are doing much to tackle money laundering. Many of you have active domestic programs. We are very busy in the UK too.

    The anti-money laundering systems in place in the UK have, on the whole, been successful. There is, as indicated by the Financial Action Task Force’s mutual evaluation of the UK, some room for improvement.

    We are actively addressing these issues. As a result of the Task Force report and an internal Treasury review of the impact of our money laundering systems, a number of weaknesses were identified which are now working to remedy.

    Firstly, the Financial Services Authority, our new single regulator, will take a pro-active role in regulating compliance with money laundering requirements. This will be underpinned by a high level objective in primary legislation obliging the FSA to monitor, detect and prevent financial crime.

    The FSA will have the power to make rules in relation to money laundering and bring criminal prosecutions for breaches of the UK’s money laundering regulations that are applicable to internal systems and training.

    Secondly, we intend to introduce a system of civil penalties for behaviour which, though falling short of criminal, nevertheless damages, or has the potential to damage, financial markets. Again this power will be exercised by the Financial Services Authority.

    Finally, our approach to asset confiscation has not been as successful as we had hoped. We are actively considering the idea of a national confiscation agency, that would have the remit to confiscate not only cash but also all property that might be derived from the proceeds of crime. These views are still at a tentative stage but the Government is determined to do all it can to take the profit out of crime.

    Conclusion

    I am delighted to have had the opportunity to address you on some of the key areas of activity on money laundering both internationally, and here in the UK.

    I would also emphasise again my belief in the key role the Commonwealth can play in raising international standards in the struggle against financial crime. We have shown already how much we can achieve through working in partnership. We have to build on this success to ensure we tackle the ever more complex and dynamic challenges we face.

    1 June 1998 wish you well in your work over the next two days – and perhaps more importantly – in carrying this work forward on the ground in the coming years.

  • Alistair Darling – 1998 Speech to the FSA European Conference

    Alistair Darling – 1998 Speech to the FSA European Conference

    The speech made by Alistair Darling, the then Chief Secretary to the Treasury, to the FSA European Conference on 1 June 1998.

    Introduction

    1. The Financial Services industry is of immense importance, not just to the United Kingdom but throughout the world. It is a global industry with millions of people depending on it. It transcends political and geographical boundaries. It has brought immense benefits. And because of its nature, it brings new risks every day. That’s the nature of the industry. And that is why the way in which we regulate and supervise the Financial Services industry is so important. In a world where the markets are continually changing, we need a regulatory system that can develop with them.

    The Financial Services Industry

    2. Here in the UK, the industry accounts for 7% of our GDP. It employs over 1 million people. Many towns and cities depend on it for employment. Not just London, but throughout the country – Leeds and Manchester for example. And in terms of funds under management, Scotland ranks fourth in Europe. Edinburgh is the UK’s second financial centre. And of course millions of people rely on its services. The industry is an example of how the UK can compete on quality and excellence at home and throughout the world.

    3. Of course, at the heart of the UK’s financial services industry is the City of London, one of the world’s three leading financial centres. The London Stock Exchange is the largest trade centre for foreign equities in the world. The Foreign Exchange market here is the largest and most important in the world, with an average daily turnover of $464 billion. Net overseas earnings of the UK financial services industry amounted to 23 billion Pounds (in 1996) – equivalent to 3.5% of national income.

    4. The City has a critical mass of expertise. It is home to 520 foreign banks. It is a major insurance centre with Lloyd’s and the London Insurance Market. The Baltic Exchange is here, trading throughout the world.

    5. Their presence has built up a formidable range of expertise, attracting investment from all over the world. There are brokers, loss adjusters, risk managers, accountants, actuaries and of course lawyers. All of them providing quality employment and generating significant earnings. And supporting considerable expertise and skills.

    6. London’s success has been built on individual flair and innovation. No Government can do that – but it is for Government to complement that process. To create an environment where business can flourish. Where business can expand and where the public has confidence in the integrity of the system. That’s why getting the supervisory and regulatory regime right is so important. Not just in the UK – but in Europe and indeed throughout the world. Before I turn to our proposals here, I want to say a word about Europe, and its implications.

    Europe

    7. The introduction of the euro on 1 January next year will also have significant implications for the financial services industry.

    8. In October last year we became the first British Government to declare that in principle, a successful single currency, like the Single European Market, would be of benefit both to Europe and to the United Kingdom. We don’t believe there is any constitutional bar to membership: the test for us is what is in Britain’s best economic interest. That’s an important point. We are the first Government to declare in principle for support for the single currency.

    9. The fact is of course that it would not be in our economic interests to join next January as there is not the necessary convergence with the rest of Europe. To join now would be to accept a monetary policy which suited other European economies but not our own. Our official interest rate is 7.25% (base rate), while in Germany and France it is 3.3% (repo rate), reflecting the different stage of the economic cycle we are at compared with them.

    10. We need a period of stability and settled convergence before we can join, and our policies are designed to achieve that. And in order to ensure a genuine choice in the future, we must also make the necessary practical preparations now. We are working closely with business to do just that.

    11. The existence of the Euro will present a huge challenge to the Financial Markets. Not just in preparation but also because of increase competition for business.

    12. The industry and the City of London must maintain its competitive advantage. We cannot be complacent. There is a lot of business in Europe. There are plenty of people and institutions that would love to get some of the business now conducted in London. We need to anticipate that competition. Business comes to London because of our competitive advantage. But no one – no institution – can rest on its laurels. The Government is determined to do everything it can to enhance London’s reputation as one of the world’s foremost financial institutions.

    13. That is why we’re preparing Britain for the euro. Indeed, why we’re modernising the governance of London itself. Modernising the Underground system. And why we’re determined to put in place a regulatory environment fit for the 21st Century. London and the UK must be the market of choice for the global industry. All of us – Government and industry need to do what we can to achieve that goal.

    The Single Market in Financial Services

    14. I said that the Financial Services market was global. It needs to be. And the Government is committed to pursuing open markets in Europe and throughout the world. The European Single Market in financial services is not complete, but its evolution has been significant. Banks, investment firms and insurance companies now have a “passport” to sell across borders on the basis of their home state authorisation.

    15. But local rules, differences in implementation, and gaps in legislation mean that further action is needed to consolidate what has been achieved.

    16. Some new and amending legislation has been identified as necessary. For example, the Commission intends to update the UCITS directive and bring forward a new directive reducing the restrictions on investments by pension funds.

    17. The Prospectus Directive has been identified as a candidate for updating to enable firms to raise capital more easily and cheaply. Something that is particularly important for small firms.

    18. But legislation alone will not complete the single market. It has to be implemented in a consistent way across the Union if we are to benefit consumers and businesses that rely on financial markets to provide the dynamic which leads to higher growth and more employment.

    19. One of the most significant changes we have seen in recent years is the recognition that regulators need to exchange information with each other all the time. The industry is global. So must be the regulators.

    20. That cooperation will be key in completing the single market in financial services. We need to ask ourselves how we are facilitating the single market, breaking down barriers, and ensuring that the regulatory system complements this process, and that it doesn’t simply add another layer of bureaucracy.

    21. Within the UK, bringing together existing regulators will mean that rules and practices will be re-examined. In many areas the rules will be similar, in others they will be very different, but the objectives will be the same. There may be a logic to some rules being different to reflect sectoral or cultural differences but in many areas best practice can be identified and a common approach agreed. National legislation, including implementation of European legislation, will be updated. That process is going on here now.

    22. The same must apply in Europe. We have the bulk of the single market directives in place. The framework is in place but differences remain. We need to examine those differences, and ask ourselves how we can simplify the system and make it more effective.

    23. The Commission is well placed to facilitate consensus without the need for new legislation, although in examining implementation in member states and developments in financial markets it may identify areas where legislation needs to be updated through amending directives.

    24. The regulators will have to talk and exchange best practice, explain problems and accept change. Accepting change should be much easier when it is offered rather than imposed.

    25. Following the informal ECOFIN at York we are examining our implementation of the Prospectus Directive. The directive includes options which permit member states to review and update their implementation to meet tomorrows challenges. But that may not be enough and a new directive introducing the concept of a passport may be necessary.

    26. Over time we will need to examine other directives to ensure implementation keeps pace with developments in the markets and the demands of users of financial services. This is something all member states will need to do if their financial institutions are to prosper in the global marketplace.

    27. Global competition is intense but within Europe we are moving into a period of consolidation in the single market. But we must face up to the need to change and adapt if Europe as a whole is to remain competitive. It is in all our interests that the European as well as the UK market is as efficient as possible.

    The UK regulatory system – the case for reform

    28. Let me now turn to our approach here. We have in the front of our minds not just the global changes to the nature of the market I talked about but also the problems and failures of the regulatory system at home. We wanted to build a new modern regulatory system. One that would be designed for both our domestic and international needs. And we were determined that any reform would be managed efficiently and effectively.

    29. For some years now, a consensus has been developing for change. There is a recognition that change is necessary, both in terms of structure and, importantly, in terms of the nature of the regulatory system, at every level.

    30. Both the industry and the public have recognised that the present system, underpinned as it is by the somewhat misleading concept of “self regulation” could not continue. The system was not self-regulating in the proper sense. And serving two masters – the trade interest and the public interest – proved to be too difficult in many cases. The system pleased neither the industry or the consumer and general public.

    31. And reform is necessary not just because of the domestic needs of industry. As I have said, the need for international cooperation and a regulatory system that can deal with complex international dealings has become increasingly urgent.

    32. So, in the UK, it was clear that we needed a new system. One that had sufficient clout, and stature to command respect both in the domestic and international markets. One that enhanced the credibility of our financial services industry.

    33. There have been, of course, substantial changes in the structure of the industry here and elsewhere. The distinction between banks, insurance companies, building societies and other institutions is becoming so blurred that a regulatory system that is modelled on an old industrial structure that no longer exists is inappropriate.

    34. We have nine financial regulators at the moment. It isn’t uncommon for large institutions to find that they are regulated by many or most of them usually requiring several different systems to cope with their demands. The distinction between regulators, especially for consumers has become especially confusing. And the costs escalated.

    35. Many firms are currently subject to a range of statutory regimes, for insurance, investments and deposit taking. In many cases equivalent provisions relating to different kinds of business are subtly different – in some cases radically so. It is not in anyone’s interests for firms to have to consider in each case which regime they are operating under. Neither in theirs nor their customers.

    36. Also, the current system is riddled with many anomalies. Firms supervised by different regulators receive different disciplinary sanctions for similar offences. And perversely, punishment depends not on the offence but on the regulator. These anomalies are unfair and blatantly damage the credibility of the financial regulation.

    The case for a single regulator

    37. The case for a single regulator is clear. A single regulator will be able to provide effective and consistent regulation across the traditional financial services sectors. It can get away from outdated and increasingly irrelevant distinctions between business sectors.

    38. Firms will no longer be regulated by multiple bodies and have to deal with overlapping regulatory demands.

    39. A single regulator will be more effective because there will be no duplication of effort and no doubt about which body is responsible. There can be no passing the buck.

    40. Consumers will benefit because a single regulatory structure will be able to provide single points of access for the public for enquiries, complaints and compensation.

    41. Providers will benefit because bringing different regulators together should make regulation more cost effective.

    42. A single, efficient, transparent regulatory regime which commands the confidence of the industry and its customers will be of competitive advantage to the UK’s financial services industry in the global financial services market. The global market place is ever more sophisticated, changing ever more rapidly. Right regulatory structure will enhance prospects for growth in this global marketplace.

    43. But the new system will succeed only if it works in partnership with the financial services industry. And the new system of regulation must reflect the diverse nature of the industry.

    44. We promised reform at the election. And three weeks after the election we set out how we would deliver the radical overhaul to the regulatory system we promised.

    45. And in October the new Financial Services Authority was launched. It will take over the work of nine existing regulators – assuming responsibility for the supervision of banking, insurance (including Lloyd’s), investments and securities firms, investment exchanges and clearing houses, building societies and friendly societies.

    46. This is radical reform. The City of London and the UK market will be the only major financial centre in the world with a single supervisor.

    47. It will put the UK at the cutting edge of financial supervision. It will offer huge competitive advantages for us.

    48. I recognise that bringing together the supervision of banking, building and friendly societies, securities and insurance is a formidable challenge. The existing supervisors each have their own rules and culture.

    49. But the creation of a single body is the only answer to the challenge of supervising the modern financial services industry.

    The role of the regulator and the role of management

    50. It’s important to remember that regulation must be seen as a complement to business. It isn’t a substitute for individual judgement or good management. Far from it. It’s management that sets the ethos of a business. It’s management that should know the risks to which it is exposed.

    51. I have said many times before that it is not the Government’s job, nor it is the job of the regulators, to sit in the boardroom and try to run a business. Good regulation should be a complement to business and should create a climate where the industry and individuals can deal with each other with confidence and trust. That’s our objective.

    52. It’s also important to remember that the industry itself benefits from a decent regulatory system. It’s in the interests of the industry that investors, both domestically and internationally have confidence in the financial system to bring in their money.

    Flexibility

    53. It is important for the regulator to be flexible. Markets are changing rapidly and the statutory framework that underpins the regulatory system has to allow for continuous development and changes in the future. Development of over the counter products and derivatives, for example, have transformed the market. Selling to consumers has changed, with more telephone sales and direct selling.

    54. Regulation shouldn’t drive changes in the market. The market should provide what the consumer wants. And it is the job of the regulator to complement that and ensure that it doesn’t distort that process in harmful ways.

    55. One of the key functions of the regulator is to reconcile the balance of the cost of the regulatory regime and the perceived benefit. The cost of the regulatory system is borne by the industry, but ultimately of course, by the consumer. And the cost therefore must be clearly related to the benefit of the regulatory system.

    56. There is a balance between what is reasonable for the regulators to require and what becomes unreasonable because of the excessive cost compared to the gain.

    Single Regulator – what we’ve done so far

    57. For the first time ever, the regulator will have statutory objectives covering market confidence, consumer protection, consumer awareness and financial crime. The FSA will be required to pursue them in an efficient and economic way, which facilitates innovation and takes account of the international dimension.

    58. The Government is committed to strong consumer protection. But caveat emptor is an essential part of any regulatory system. It is no part of the regulator’s job to stand in the shoes of the consumer. But the regulatory system can ensure that the customer has sufficient information to make an informed decision. Customers should be aware of the risks attached to different products. And they should know what their investment will cost. And it is in the interests of the economy, the industry and the public that people have the confidence to buy the products they need.

    59. A vital part of the new single regulator’s job is to sustain confidence in the market, and assist in the detection and prevention of financial crime. We are determined to ensure that the financial markets remain open and clean places to do business.

    60. That is why we have announced a number of measures, including civil fines for market abuse and new prosecution powers, which will help ensure that those who abuse the markets, including insider dealers, do not get away with it.

    61. The powers of intervention and discipline given to the regulator will be tough and effective – and they will be exercised fairly. The Bill will create a new single Tribunal, which will be entirely independent of the FSA, to consider appeals against the exercise of its regulatory powers.

    62. Having a strong and effective regulator will further enhance the UK’s reputation as one of the best regulated and attractive financial markets in the world. We are determined to maintain the UK’s position as one of the world’s foremost centres. We value our reputation as a clean market to do business.

    Phase I – Bank of England

    63. Reform is being implemented in a manageable way. The first stage of reform, is already complete. The reforms to the Bank of England come into force today. The Bank of England Act which gave the Bank operational independence in monetary policy as well as moving banking supervision from the Bank to the FSA comes into force today. And as you know, the FSA has already started work – publishing a number of consultation documents following its launch last October. The progress that it has made and the ready acceptance of its very existence is due to a large extent to the work of Howard Davies and his colleagues not just in the FSA but in the existing SROs who are all working hard to make the new system work.

    Phase II – New Financial Services Legislation – moving on from here

    64. The next stage is the new Financial Services legislation which we will publish in draft in the summer. We will publish draft legislation in the summer. There is now consensus over the broad framework for financial regulation, but it is important to get the detail right. We are committed to reform and have set out our approach. But we are also committed to consulting as widely as possible. We want a system that will endure, and time listening is time well spent.

    65. Getting the detail right is as important as getting the overall framework right. The period of consultation on the Bill will allow us to get the detail right.

    66. There remains much work to be done to ensure the single regulator works. The Government and the FSA are determined to put in place long overdue reform, and to get it right. The consultation period for the Bill is one way in which the industry can help us make it work.

    Conclusion

    67. I have covered a wide field. But that is inevitable. Regulation of the financial markets – and the pursuit of open markets are, by their very nature, objectives which are no longer domestic concerns.

    68. The rationale for change is clear. The first stage in our reforms is already complete, and we will be publishing the new financial services legislation in the summer. It is important to get this right. We are creating a new regulator for the new millennium. A single regulator to replace the outdated divisions of responsibility in the past. A regulator capable of adapting to change – adapting to a single market and a single currency in Europe and a rapidly changing global industry beyond. A regulator that is outward looking and as international in outlook as the markets themselves. And a regulator which commands the respect of the industry and enhances public confidence.

    69. There’s a lot of work to do in the meantime. But we’re making good progress. I am confident that the FSA will become a role model for the future.

  • Helen Liddell – 1997 Speech to the Association of Friendly Societies

    Helen Liddell – 1997 Speech to the Association of Friendly Societies

    The speech made by Helen Liddell, the then Economic Secretary to the Treasury, at the Association of Friendly Societies’ conference held in Leicester on 25 September 1997.

    It really is a genuine pleasure to be here today. Any politician given an invitation to a conference of Friendly Societies will seize it gratefully. Indeed, to refuse it would be unthinkable. Ours is a profession whose invitations are sometimes issued in the same spirit of tolerance as the manager of Glasgow Rangers might expect if asked to speak to the supporters of Glasgow Celtic. Or vice versa.

    But I have a particular personal reason for wanting to come here today – and not one, I suspect, shared by every Minister of the previous Government. Two of my grandparents were collectors for friendly societies. The community in which I grew up was typically working class, the kind of community where friendly societies always provided stability and security. Financial stability for many people not regarded as sound and profitable prospects for more commercial organisation; and financial security for the pre-NHS medical bills because we knew the “shilling a week” man always came good.

    Every Scottish politician is expected, at one time or another, to speak at a Burns’ Night Supper and we become experts at quoting him. Burns had the immeasurable advantage of saying something about almost every subject under the sun, including, though he little suspected it at the time, your conference today:

    “When first the human race began, “The social, friendly, honest man, “Whate’er he be, Tis he fulfils great Nature’s plan, And none but he.”

    Social, Friendly. Honest. That was the motivation of friendly societies. They were trusted by communities who needed to trust someone, someone to turn to when times were bad.

    Your societies were built on the principles of self-help and mutual support. I believe that many of the changes of recent times will work to your advantage. The Government elected on May 1 is a Government committed to community and equality, a Government which recognises what friendly societies have known since their creation – that encouraging thrift and providing protection and savings for those on modest incomes is not just good neighbourliness but sound economics.

    Alistair Darling told you at last year’s conference, almost a year ago to the day, that the promotion of the savings culture would be an important part of our economic strategy. Our manifesto was our prospectus. It recognised that the benefits of savings and planning for the future – having something behind you for when the bad times come – should be available to all.

    The Government is grateful for the help and advice which members of your Association are already giving to the Department of Social Security’s work on Welfare Reform. At the Treasury, I have already met representatives of the Association. I’ve learned from them. I look forward to many more meetings in the future.

    One of the things we’re looking at is the Individual Savings Accounts which will embody our shared belief that it isn’t only the well-off who are entitled to share the fruits of prudence. Indeed, prudence matters most to those whose incomes are the least.

    These Individual Savings Accounts are intended to encourage long-term savings, especially among those on low incomes, and to further the principles of existing savings schemes such as TESSAs and PEPs.

    Ours is a Government where Scots, to say the least, are prominent, including the Chancellor, Gordon Brown. The Rainy Day is something with which, literally and metaphorically, we grew up. Putting something aside for it in the metaphorical sense is in our bones, part of our nature.

    I know you are anxious to ensure that the spirit of mutual self-help which your individual societies represent can be made better use of and extended through the activities and functions which they are already authorised to carry out. We look forward to hearing what you may propose and to working with you to make those services, savings or insurances, even better to give comfort and confidence to those who want to provide for their future.

    These are not empty words; they are also a well-meant and well deserved compliment to your Association. That so much has been achieved in only two years demonstrates the value of a unified movement which acts as a focal point and clearing house for discussion and analysis of future developments and can act as a direct route to Government.

    I can assure you, with absolute confidence, that as the Government redraws the structure of Financial Services regulations in this country, your Association will have a key role in ensuring that the new structure will take into account the distinct needs of your unique contribution to the industry.

    Let me tell you, briefly, what our intentions are and how you can play your part.

    The 1980s saw a huge change in the nature of financial services, a change that outstripped the legislation. Financial products became increasingly sophisticated and complicated; the boundary lines between different kinds of financial institutions became blurred; the Financial Services Act, with its emphasis on self-regulation became out-dated and unable to meet the needs of the customers.

    There were great scandals, too, not least the huge scandal of the mis-selling of personal pensions and we have by no means heard the last of that. I promise you.

    Those scandals were the inspiration for the Chancellor’s statement on May 20 – less than three weeks after labour became the Government – that the entire regulatory structure would be reformed.

    There will be only one financial regulator, which will give the retail customer one point of contact; within the new structure, there will be varying levels of sophistication so that the man and woman in the street can have complete confidence that their best interests are being cared for. At the other end of the spectrum, the wholesales end of the business will have the freedom to be creative while the regulator keeps track of the risks sometimes associated with complex financial products being traded.

    Financial services are big business in Britain. To be world leaders, we must have a regulatory system which is also a world leader, one which will give our financial services industry a true, competitive advantage. Above all, the public must be certain that financial regulation is in the best possible hands.

    Work on the necessary legislation has already begun. In July, Sir Andrew Large produced a Report for the Chancellor which charts a way forward to integrate the existing self- regulatory organisations and the other financial services regulators into an enhanced Securities and Investment Board (NewRO) which will become operational within two years or shortly afterwards. New Millennium, new regulator, to coin a phrase.

    The Friendly Societies will fall within the ambit of the new regulator. It is important to you. Let me take a minute or two to explain why.

    The chaos of the 1980s taught us that we need a consistent and coherent approach to the regulation and supervision of financial institutions which give advice or services to the public. It would be illogical to have Friendly Societies outside NewRO. More than that, excluding them would have sent the wrong signal about the value we place upon the societies’ work. In effect, exclusion would have downgraded the work you do and the service you provide.

    What’s more, the benefits from bringing different regulators together, so that they can share best practice and learn from each other’s experience and expertise, are clear, apart from the financial and operational economies of scale which NewRO will create. If we are to breed public confidence in the new system, we need to demonstrate efficiency, and efficiency includes keeping a firm grasp upon cost. Placing friendly societies’ regulation at the heart of the financial services regulator will help us – Government and members here today – to create the kind of financial climate that will allow the members of your Association to prosper and grow. That’s where you come in. We need advice and guidance from you in creating this super-regulator and tailoring it to the needs of your societies and your members – and we want it now.

    We will publish the Bill for consultation next summer. It will be long and complex. It will bring together and rationalise regulatory structures at present and set out in five major statutes and hundreds of pages of ancillary legislation and regulations. It is a mammoth task. I ask you now to work towards our publication timetable so that you can seize the opportunity to influence these fundamental changes.

    The Prime Minister has made clear his ambition for a more modern Britain. A modern Britain is not compatible with closed, exclusive Government. We want those with knowledge and experience to help us in creating a framework for the future. The chance and the challenge I offer to you today is for you to help us create a financial services industry for the next century. One which we can together build on the crucial role friendly societies will have in providing a unique service to their members.

    There’s a lot to be done in which we need your help. Individual savings accounts. Work on Welfare Reform. The reform of financial regulation. I know that you, in turn, are anxious that we should take into account the need to make the industrial assurance business more efficient. The present legislation is out of date, framed in the 1920s and the late 1940s – if I may say so, before I was born. That increased efficiency must be balanced by consumer protection for policyholders. Officials in my department are currently working with the Friendly Societies Commission and the Association of British Insurers to find a solution which meets these twin – and inseparable – requirements.

    I think the future is exciting. There is the opportunity for fresh thoughts, new initiatives and modernised practices. But the principles on which they are to be based are already with us. They are timeless : mutual respect and assistance, the values of community. They are as valid today as they were when friendly societies were first created.

    Your contribution over the past two hundred years has too often been unsung and unrecognised, except by those like me and my family who have been past beneficiaries.

    You should raise the national profile of your work. Let a wider public know what you do. Friendly Societies are important institutions, with much to be proud of. They have a special role in our community. Of course, they are also big business. You collected 790 million Pounds in 1995, and your members benefitted from payments of 770 million Pounds. That is a great achievement. On that basis, you are well able to play your part by giving consumers an alternative to your more commercial competitors.

    As I said earlier, there’s a lot to be done. Today, I am offering you the prospect of working with a Government which shares your aims and principles. You are serious people and so are we. You now have a once in a lifetime opportunity to help meet the challenges of the 21st century. I’m sure you will respond in the spirit of your traditions and make your future even more valuable than your past.

  • Gordon Brown – 1997 Statement in the House of Commons on EMU (Economic and Monetary Union)

    Gordon Brown – 1997 Statement in the House of Commons on EMU (Economic and Monetary Union)

    The statement made by Gordon Brown, the then Chancellor of the Exchequer, in the House of Commons on 27 October 1997.

    With permission, Madam Speaker, I want to make a statement on Economic and Monetary Union.

    Since the end of the Second World War Britain has faced no question more important and more contentious than that of our relationship with Europe.

    Divisions within governments of both parties, and hence indecision, have made British policy towards Europe, over many years, inconsistent and unclear.

    The economic consequences of these weaknesses have been a loss of international initiative and influence, recurrent instability and continuing questioning of our long-term economic direction.

    To break with this legacy, and to establish clear national purpose, which has eluded us for decades, economic leadership is essential, and Britain must now make the difficult decisions on Europe, however hard.

    The decision on a single currency is probably the most important this country is likely to face in our generation. Yet until now, there has been no detailed examination by government of the practical economic issues of EMU. There has been no proper preparation for a decision, because no previous Government could agree on whether they supported it in principle, nor whether there was an overriding constitutional objection on grounds of sovereignty or not; nor whether, even if a single currency worked and worked well, the Government would wish to be part of it. Forms of words like ‘keeping the option open’ – while no preparations were ever made to render the option practicable – have similarly served as a pretext for postponing the hard choices

    Now is the time to make these hard choices and set a long-term direction for our economic future in Europe.

    So I will deal, in turn, with the question of principle, the constitutional implications of EMU, and the economic tests that have to be met. In each area, I will set down the Government’s policy.

    When we came into Government I asked the Treasury to carry out an assessment of the economic tests that have to be met. Accompanying my statement is this comprehensive and detailed Treasury assessment which I am publishing today, copies of which are available in the Vote Office.

    ISSUES OF PRINCIPLE

    I start with the question of principle. The potential benefits for Britain of a successful single currency are obvious: in terms of trade, transparency of costs and currency stability. Of course, I stress it must be soundly based. It must succeed. But if it works economically, it is, in our view, worth doing.

    So in principle, a successful single currency within a single European market would be of benefit to Europe and to Britain.

    Secondly, it must be clearly recognised that to share a common monetary policy with other states does represent a major pooling of economic sovereignty.

    There are those who argue that this should be a constitutional bar to British participation in a single currency, regardless of the economic benefits it could bring to the people of this country.

    In other words, they would rule out a single currency in principle, even if it were in the best economic interests of the country.

    That is an understandable objection and one argued from principle. But in our view it is wrong. If a single currency would be good for British jobs, business and future prosperity, it is right, in principle, to join.

    The constitutional issue is a factor in the decision, but it is not an over-riding one. Rather it signifies that in order for monetary union to be right for Britain the economic benefit should be clear and unambiguous.

    So I conclude on this question of principle: if, in the end, a single currency is successful, and the economic case is clear and unambiguous, then the Government believes Britain should be part of it.

    There is a third issue of principle – the consent of the British people. Because of the magnitude of the decision, we believe – again, as a matter of principle – that whenever the decision to enter is taken by government, it should be put to a referendum of the British people. So whenever this issue arises, under this Government there will be a referendum. Government, Parliament and the people must all agree.

    So we conclude that the determining factor as to whether Britain joins a single currency is the national economic interest and whether the economic case for doing so is clear and unambiguous.

    THE FIVE ECONOMIC TESTS

    I now turn to the Treasury’s detailed assessment of the five economic tests that define whether a clear and unambiguous case can be made.

    These are:

    Whether there can be sustainable convergence between Britain and the economies of a single currency.

    Whether there is sufficient flexibility to cope with economic change.

    The effect on investment.

    The impact on our financial services industry.

    Whether it is good for employment.

    I. Economic Cycles

    Of these, the first and most critical is convergence: can we be confident that the UK business cycle has converged with that of other European countries so that the British economy can have stability and prosperity with a common European monetary policy? That convergence must be capable of being sustained and likely to be sustained – in other words, we must demonstrate a settled period of convergence.

    Currently Britain’s business cycle is out of line with our European partners. Interest rates here are 7 per cent. This is the level the Bank of England has set in order to achieve our inflation target. But in Germany and France interest rates are close to 3 per cent. Across the continent, because business cycles are more coincident, short-term interest rates have been converging for some time.

    This divergence of economic cycles is, in part, a reflection of historic structural differences between the UK and other European economies, in particular the pattern of our trade and North Sea oil. These differences are becoming less distinct as trade with the rest of Europe grows and the single market deepens.

    But divergence is also a legacy of Britain’s past susceptibility to boom and bust: the damaging boom of the late 1980s and the severe recession of the early 1990s.

    Since coming into office, the Government has introduced long-term measures to ensure that we are capable of maintaining stability by giving operational responsibility for interest rates to the Bank of England and by implementing our deficit reduction plan for public borrowing.

    We will need a period of stability with continuing toughness on inflation and public borrowing. The Treasury’s assessment is that, at present, the UK’s economic cycle is not convergent with our European partners and that this divergence could continue for some time. To demonstrate sustainable convergence will take a period of years.

    II. Flexibility

    To be successful in a monetary union, countries will need even more flexibility to adjust to change and to unexpected economic events once the ability of countries to vary their interest rates and exchange rates has gone and the Euro and a single European interest rate are in place. Flexibility may be particularly important for the UK if there is any risk that our business cycle has not fully converged with those of the other EMU members.

    The Treasury assessment of the second test is that, in Britain, persistent long-term unemployment and lack of skills – and in some areas lack of competition – point to the need for more flexibility to adapt to change and to meet the new challenges of adjustment. The Government has begun to implement a programme for investing in education and training, helping people from welfare into work and improving the workings of our markets.

    Of course, other European countries need to tackle unemployment and inflexibility to make sure Europe as a whole is able to withstand any shocks that arise. The government will continue to argue that employability, flexibility and stronger competition policies must be a top priority so that monetary union can be successful.

    III. Investment

    The third test is investment: whether joining EMU would create better conditions for businesses to make long-term decisions to invest in Britain. The Treasury assessment is that, above all, business needs long-term economic stability and a well-functioning European single market. It concludes that membership of a successful single currency would help us create the conditions for higher and more productive investment in Britain.

    But the worst case for investment would be for Britain to enter EMU without proper preparations and without sufficient convergence and with all the uncertainty that would entail.

    IV. Financial services

    The fourth test asks what impact membership of the single currency would have on our financial services industry. EMU will affect that industry more profoundly and more immediately than any other sectors of the economy.

    The Treasury’s assessment is that we can now be confident that the industry has the potential to thrive whether the UK is in or out of EMU, so long as it is properly prepared. But the benefits of new opportunities from a single currency could, however, be easier to tap from within the Euro zone. This could help the City of London strengthen its position as the leading financial centre in Europe.

    V. Employment

    For millions of people, the most practical question is whether membership of a successful single currency would be good for prosperity and jobs. The Treasury assessment is that our employment-creating measures, and welfare state reform, must accompany any move to a single currency. Ultimately, we conclude that whether a single currency is good for jobs in practice comes back to sustainable convergence. A successful single currency would provide far greater trade and business in the Europe.

    The Treasury assessment is that in vital areas the economy is not yet ready for entry and that much remains to be done. The previous policy of keeping options open, without actively making preparations, has left parts of the economy un-prepared.

    Our overall assessment is that Britain needs both a period for preparation and a settled period of sustainable convergence. Both require stability.

    THE GOVERNMENT’S CONCLUSIONS ON EMU

    Applying these five economic tests leads the Government to the following clear conclusions.

    British membership of a single currency in 1999 could not meet the tests and therefore is not in the country’s economic interests. There is no proper convergence between the British and the other European economies now. To try to join now would be to accept a monetary policy which would suit other European economies but not our own. We will therefore be notifying our European partners, in accordance with the Maastricht Treaty, that we will not seek membership of the single currency on 1 January 1999.

    The issue then arises as to the period after 1st January 1999. We could simply leave the options open, as before, but with no clear direction either way for the rest of the Parliament. That would be politically easy but wrong.

    There would be instability, perpetual speculation about “in or out”, “sooner or later”, which would cause difficulties in the financial markets and for business and industry.

    It would make it harder to prepare for the possibility of a single currency because every step in preparation, every time the issue was discussed, would feed fresh bouts of speculation.

    It must be in the country’s interest to have a stable framework within which to plan.

    And we are fortified in this because on the economic tests we have set out, the practical difficulties of joining a single currency in this Parliament all point to the same conclusion.

    There is no need, legally, formally or politically, to renounce our option to join for the period between 1st January 1999 and the end of the Parliament, nor would it be sensible to do so. There is no requirement under the Treaty for this. What is more, no government can ever predict every set of economic circumstances that might arise.

    What we can and should do is to state a clear view about the practicability of joining monetary union during this period. Applying our economic tests, two things are clear. There is no realistic prospect of our having demonstrated, before the end of this parliament, that we have achieved convergence which is sustainable and settled rather than transitory. And Government has only just begun to put in place the necessary preparations which would allow us to do so. Other countries have for some years been making detailed preparations for a single currency. For all the reasons given, we have not.

    Therefore, barring some fundamental and unforeseen change in economic circumstances, making a decision, during this Parliament, to join is not realistic. It is also therefore sensible for business and the country to plan on the basis that, in this Parliament, we do not propose to enter a single currency.

    There are those who urge us to seek consent, in principle, in a referendum now or soon, but with a view to entering sometime later. Any serious gap between the referendum and the actual entry date would undermine the conclusions of the referendum.

    Because the essential decision is economic, it can be taken only at a time when government and then the people can judge that sustainable convergence has been established.

    So in our view the interval between the decision to join and our joining must not be unduly protracted.

    PREPARATIONS

    I have said that if a single currency works and is successful Britain should join it. We should therefore begin now to prepare ourselves so that, should we meet the economic tests, we can make a decision to join a successful single currency early in the next Parliament. At present, with no preparation, it is not a practical option. We must put ourselves in the position for Britain to exercise genuine choice.

    The questions of preparation are immense – practical questions for business, as well as for government. Euro notes and coins will, for example, be circulating across Europe from January 1st 2002. Some companies, like Marks and Spencer, have already decided to prepare to accept Euros in Britain. Others, will want advice on what is best for them.

    Because both the Government and business must prepare intensively during the next years, we will:

    commence work on the detailed transition arrangements for the possible introduction of the Euro in Britain, including the introduction of notes and coins, should we wish to enter;

    step-up the work on what business should do now to prepare for the introduction of the Euro in 1999, whether we are in or out; work with business on what government must do to prepare for EMU, should we decide to join it in the next parliament.

    To help with essential preparations, I have invited the Governor of the Bank of England and Sir Colin Marshall, the President of the CBI, to join me and the President of the Board of Trade in leading a standing committee on Preparations for EMU. I am pleased to say that they have agreed. I am also inviting the President of the Association of British Chambers of Commerce to join us. I can also announce that, from January a series of regional and sectoral conferences on preparations for monetary union will be held.

    Also, the Prime Minister has today decided to extend Lord Simon’s Treasury responsibilities to include European Business Preparations in the government, covering the long-term planning of the new standing committee.

    In addition to these practical preparations, there are reforms we can take which are both right in themselves, in the national economic interest, and which will help us to meet the five economic tests.

    We will promote greater flexibility in the UK economy and in Europe through our “Getting Europe to Work” initiative;

    We will be introducing new competition legislation, which draws on the best of European and wider international policy and practice as well as continuing to negotiate to secure the best interests of our financial sector and for the opening up the single market in financial services.

    We will set as one of the key objectives of our EU Presidency completion of the European single market.

    In my Mansion House speech I said that if we succeed in strengthening the ability of the British economy to sustain growth with low inflation, and if international conditions permit, I would hope to lower the inflation target. So we will monitor our inflation target and do so in the light of the European Central Bank;

    And we will ensure that our fiscal rules, and our deficit reduction plan, continue to be consistent with the terms of the stability pact, thus underlining our commitment to avoid an excessive deficit under Article 104c of the Treaty, and supporting greater coordination in ECOFIN;

    In Britain’s interests, we need to keep inflation low and public borrowing firmly under control.

    The single currency will affect Britain, in or out of it. It is in the British national interest for it to work. Vital decisions will be made during our EU Presidency in the first half of next year. We will use our position constructively and supportively and we will play a full part in ensuring its launch is successful – something that is in Britain’s interests as well as Europe’s.

    CONCLUSIONS

    To sum up:

    we believe that, in principle, British membership of a successful single currency would be beneficial to Britain and to Europe; the key factor is whether the economic benefits of joining for business and industry are clear and unambiguous. If they are, there is no constitutional bar to British membership of EMU;

    applying the economic tests, it is not in this country’s interest to join in the first wave of EMU starting on Ist January 1999 and, barring some fundamental and unforeseen change in economic circumstances, making a decision, this parliament, to join is not realistic;

    but in order to give ourselves a genuine choice in the future, it is essential that the Government and business prepare intensively during this Parliament, so that Britain will be in a position to join a single currency, should we wish to, early in the next Parliament.

    On Europe, Madam Speaker, the time of indecision is over. The period for practical preparation has begun. Today we begin to build a new consensus – modern and outward looking – for a country that throughout its history has looked outward to the world.

    We are the first British government to declare for the principle of monetary union. The first to state that there is no over-riding constitutional bar to membership. The first to make clear and unambiguous economic benefit to the country the decisive test. And the first to offer its strong and constructive support to our European partners to create more employment and more prosperity.

    The policy I have outlined will bring stability to business, direction to our economy, and long term purpose to our country. It is the right policy for Britain in Europe. More important it is the right policy for the future of Britain and I commend it to the House.

  • Gordon Brown – 1997 Speech at the Launch of the Stock Exchange Electronic Order Book

    Gordon Brown – 1997 Speech at the Launch of the Stock Exchange Electronic Order Book

    The speech made by Gordon Brown, the Chancellor of the Exchequer, on 20 October 1997.

    Today’s launch is the most significant development that London markets have experienced since “Big Bang” 11 years ago.

    “Big Bang” brought electronic share price information which enabled telephones and computers to replace face-to-face trading. Today’s event is a further step, perhaps an even more significant step – a fully-automated way of trading shares, first for FTSE 100 companies, but destined to expand.

    It demonstrates the Stock Exchange’s commitment to the continuing technological evolution that is essential to maintaining London’s position as one of the world’s top three equity markets.

    Staying ahead in today’s financial markets means constantly harnessing and adapting the power of rapidly advancing technology.

    And today’s launch of the Stock Exchange’s electronic order book is about applying new technology.

    But it is about something much more than that – it is about City firms and institutions working together to remain competitive and to help ensure that the UK economy remains competitive.

    The City and the UK financial services industry require three other crucial ingredients:

    first, a skilled workforce at the forefront of technical know how, but also retaining the expertise amassed over many generations and for which this country has become renowned – in trading, investment management, banking, corporate finance, the law, and accountancy;

    second, a robust transparent and accountable framework of regulation that recognises the global reach of the modern financial services industry;

    third, a stable macro economic backdrop against which the UK financial services industry can plan and compete.

    Every measure we have set in place since May is designed to enhance the long term stability of the British economy so we can have sustainable levels of growth.

    First, our monetary framework which includes independent interest rate decision-making powers for the Bank of England.

    Second, our new fiscal framework at the centre of which is a five year deficit reduction plan which allows us to meet the golden rule in public finances.

    Third, our plan to modernise the welfare state to create flexible labour markets matched by investment in education and employment opportunity.

    Fourth, our European policy with our commitment to apply to Monetary Union the five British tests – the impact on jobs, investment and the City, ensuring flexibility and the convergence of the business cycles – to ensure the long term interests of Britain.

    The Review I set up into Monetary Union will report conclusively to Parliament on the five British economic tests and the following issues:

    the formal communication to our European partners, under the Treaty, about 1999;
    the Government’s approach to the working of the stability pact and the convergence criteria;
    the Government’s position on the future of ECOFIN and economic co-ordination in Europe;
    any action that the Government proposes on economic convergence;
    the action the Government proposes on ensuring greater flexibility in Europe to avoid any risks of potential shocks if there is a Monetary Union and progress it proposes to make the European economy more flexible and employment-friendly;
    the Government’s determination not only to have a successful Presidency and proper and orderly decisions about EMU under the Treaty – the way in which the Government’s business advisory task force will help business and the City to prepare in or out;
    the need for a period of stability.

    The Government is determined not to fall into the old trap of saying that we will join “When the time is right” and implying, in so doing, we could join the next day or the next month, allowing that possibility to dominate every waking hour and week of the Government and then eventually being forced to make the decision for short-term reasons – not, as it should be and should always be, the long-term national economic interest.

    I have said consistently that it is unlikely we will join the first wave – we have to ask questions about our levels of preparation, our flexibility and the economic cycle which has been out of line with our European partners – and that there are formidable obstacles throughout.

    If we do not join in 1999, then Britain will need a period of stability without continuing speculation while Britain endeavours to meet the five economic tests.

    At the heart of our policy will always be our determination to pursue policies of low inflation and to control public borrowing.

    In every decision therefore this Government rejects short-term pressures and will not be diverted from the long-term national economic interest.

    So this is the very best environment for the City to succeed.

    So, thank you again for inviting me to join you this morning.

    My congratulations to the Stock Exchange for leading this exciting development for the London Market.

    The whole country’s best wishes to the investment houses and trading firms as they acclimatise to a new method of trading, one which I am sure is going to bring huge benefits to the City, the financial services sector and investors.

    We all look forward to being back here at some point in the future to mark the next stage of the City of London’s continuing development and success.

    Thank you very much.

  • Gordon Brown – 1997 Speech to the CBI Conference

    Gordon Brown – 1997 Speech to the CBI Conference

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, to the CBI Conference held in London on 10 November 1997.

    I am grateful for the opportunity to address the CBI conference, to be able to thank you as business leaders of Britain for the contribution you and your companies make to the success of Britain at home and abroad, and to be able to agree with the CBI that to equip ourselves for the future, and to build the national economic purpose this country longs for, we need as our building blocks for prosperity:

    • first, stability with low inflation;
    • secondly, sustainable public finances;
    • third, high levels of investment, fourth higher levels of skill and productivity; and
    • fifth, not just open markets but a constructive engagement with Europe.

    Now when I spoke to you last year we were agreed on the need for a credible framework for monetary stability for the long term.

    Our decision on our first Tuesday of government to make the Bank of England independent, and to set in place a more open and accountable system of monetary decision-making, not only implemented one of the CBI’s own proposals, but it has in my view already given consistency confidence and credibility to monetary policy making.

    I believe we are agreed it is right to take these decisions out of politics, and to free them from short term political pressures. Our aim, business’ aim: in place of stop go long- term stability.

    When I spoke to you last year we were also agreed that responsible public finances are the cornerstone of stability. And our two year ceiling on public spending is not a one off measure but it is now part of a five year deficit reduction plan that will not only bring public borrowing down from an unacceptable 22 3/4 billion Pounds last year to 5 1/2 billion Pounds next year, but will also allow us to meet our priorities for education investment and health. Sustainable public finances: our aim, your aim, in place of taking risks with inflation, long-term fiscal stability.

    When I spoke to you last year we were – all of us -agreed that rising levels of investment were the key to future prosperity. The 2 per cent cut in corporation tax to its lowest level ever, the reduction to 21 per cent of small business corporation tax, and the new investment incentives for small and medium sized companies not only reflect a Government that listened to the CBI’s proposals, but are the first stage in raising from too low levels, the quality and quantity of investment in the future of Britain. In place of short termism, a practical set of commitments to the long term and I pledged that in future Budgets we will do more.

    At this point in every cycle in the past the British economy has been prone to inflation instability and to a return to stop go. My pre-Budget report later this month which will – I hope – be the start of a national debate about next year’s Budget will show that with disciplined action against inflation, with prudence and with responsible wage bargaining the British economy can be put back on track next year.

    Last year when I spoke we were agreed too on the importance of that fourth building block for success; a highly skilled and adaptable workforce for the future. To encourage work incentives we have promised not to raise basic and top tax rates for the period of a Parliament, a policy I reaffirm today.

    And this year we have begun the modernisation of the welfare state, rebuilding it around the work and learning ethics, and I am grateful to all the companies represented here today for signing up to what I have called a national crusade to solve, once and for all, our problems of youth and long-term unemployment. A fresh start for Britain.

    Stability, investment, responsible public finances, skills and employment – four basic building blocks for long-term economic success. And when the battle is not British workers against British managers but both British managers and workers working together against aggressive competitors overseas nothing – neither out of date attitudes, nor backward looking dogma,

    Neither vested interests nor restrictive practices – should stand in the way of Britain equipping ourselves for the challenges ahead.

    There is a final building block- strong and lasting trading relationships with the world.

    We are not only one of the most open economies in the world – trading 25 per cent of our GDP compared with America’s 10 per cent. But, in addition, nearly 60 percent of our exports are to mainland Europe and an astonishingly high level of international investment into Europe – 40 per cent of it – comes to the UK.

    Let us be clear about the immediate challenges we face.

    In less than fourteen months from now, a German business selling products to France or the Netherlands will be able to do so without exchange rate risk, with lower transaction costs and with more transparent prices, something that in itself will pose a big challenge to a British competitor hoping to supply the same order.

    So EMU will lead to fiercer competition for trade and for future investment across Europe.

    And the time to prepare is now long overdue.

    Indeed Siemens and Daimler-Benz are among the first of what will be a long list of companies to use the euro for all their transactions with all suppliers, including those in the UK. Others can be expected to follow suit.

    It is why two weeks ago Natwest corporate banking services announced they will train their staff to handle euro, and then last week announced a range of euro products and services will be available early next year.

    That is why Marks & Spencer has decided to put in place the capability to accept euro in the UK.

    The euro will radically transform the whole single market. So from now my message is: let’s get down together to the serious business of preparation.

    For five years since Maastricht while other countries were making preparations our country refused to prepare.

    But I believe it is now time in the national economic interest to set aside the divisions over Europe that have caused – over a long period of time – indecision, instability, a loss of influence abroad, and denied us a national economic consensus.

    I do not dwell on the past to criticise but to show that Britain -and British companies- cannot make practical progress without clear and unequivocal answers on the critical European questions that face us and without preparation to meet the challenges ahead.

    And these preparations on how we compete in a single currency Europe – of vital concern to each company in the country – are too important to leave to dogma or internal party politics, and too important to leave aside for years more of indecision and drift.

    I am sure the British way is not to retreat into a shell or, in any way, to cut ourselves off, but to be true to our outward looking and internationalist traditions and take, as we have normally done, a pragmatic rather than a dogmatic view of our relationship with Europe.

    That is why two weeks ago for the first time a British government made the position of Britain in Europe clear: that the vital test for a single currency was not one of dogma – but one of economics, Whether it is good for business, jobs and prosperity.

    That is why we said that if a successful single currency can meet our economic tests, then Britain should join. In other words, that we were in principle in favour of joining a successful single currency.

    And that is why we said , again for the first time for a British government, That while joining does involve a pooling of economic sovereignty – as in the single market – that if the economic benefits were proven then they should outweigh any constitutional bar.

    If the Government recommended it, it would then be up to the people to decide in a referendum.

    And for the first time again, a fortnight ago, the British Government also stated that it was committed to real preparations for the euro.

    Britain, we said, needs a time of preparation before a time of decision, early in the next Parliament.

    The strategy must be to prepare and then decide.

    And I firmly believe that it is now possible to build a broad consensus – stretching across the country and in particular the world of business – a new consensus that sets the old arguments behind us.

    To those who say that we need not answer the question of principle and that we can even postpone consideration without loss of influence for another 10 years, and who say that even if the economic arguments are compelling they would not necessarily want us to join and that we need not prepare, I reply:

    – that it is practical common sense that the long period of indecision and loss of influence should be brought to an end;

    – it is practical commonsense that, after almost 18 years of debate, we should be able to resolve the question of principle and agree that the economic benefits will mark the decisive test;

    • it is practical common sense to say that if the economic case is compelling we should be prepared to join; and
    • it is practical sense that when other countries have been preparing seriously for five years since 1992 we should begin real preparations now.

    And these preparations should not only include creating the flexibility – the skills, the adaptability and the employability – necessary for a successful single currency, but also business preparations that enable us to be ready for every challenge ahead.

    And I am determined that, even though making a decision this Parliament, to join EMU is not realistic, we will play our part in shaping it, so that, if we wish to, we can join a single currency early in the next Parliament:

    • first by the practical and constructive role we will play at the centre of the creation of the euro in our UK presidency next year;
    • second by preparing for membership of the European Central Bank as soon as we join the euro;
    • and thirdly by leading the debate about the competitiveness of the European economy and especially, as we are doing in Luxembourg, about the flexibility needed to make the euro work. So I say to this conference today:
    • as a matter of practical commonsense, let’s get down together to the serious business of preparation;
    • let us together start building a national consensus stretching across the country about making this period of preparation work for Britain.

    And let us agree that this period of preparation means that companies should first of all have the information to respond as others trade in euros.

    Second companies need the information to trade and compete in euros themselves.

    Third companies need to know what they have to do to compete when the single currency starts in 1999.

    And fourth companies need to know what they will need to do if and when Britain decides to join the euro.

    It is so as to be prepared that, before the summer break, the Government published a practical guide on EMU for business, and it is why we then we set up a Business Advisory Group comprising business, trade union, and consumers groups to look at the crucial practical questions.

    The Group will report to me in December and I will publish their findings in the New Year.

    But it is time to go further to ensure business has the necessary information on which to prepare and that government and business work well to iron out any possible problems.

    I am delighted that Sir Colin Marshall will sit on the new standing committee which the Government is now setting up to oversee and to coordinate preparatory work across the economy, in public and private sectors.

    And I am pleased that David Simon who has joined the Government from BP has agreed to be Minister responsible for the long-term planning work.

    Together we will draw up an agenda for preparations, as we did for decimalisation, which sets out all the practical steps government and business will need to take before a final decision to join the single currency. And we will hold a series of conferences in the new year to ensure that all regions and sectors of the economy are aware of the need to prepare.

    In providing information and guidance, and in removing obstacles to using the euro in the UK, we will draw on the experience and expertise of private sector firms at the vanguard of preparations and our partners in other European countries.

    Let me just explain the scale of the task: from its introduction, businesses in the UK will be able to use the euro as they can the dollar today. From 1999 they will be able to:

    • file company accounts in euro;
    • issue shares in euro;
    • have bank accounts in euro;
    • pay taxes in euro;

    But unlike the dollar or the dm today the British banking system will have the capability to process payments in euro domestically.

    This should make it much easier and cheaper for banks to offer euro services to their UK customers.

    And the Government will do as much as we can to facilitate the use of the euro in the UK from its introduction in 1999:

    • the DTI will consult business on the possibility of amending the companies act to make it easier for British firms to issue shares in euro, and to convert existing shares into euro. And following the advisory groups advice – we will look at any other legislative steps the Government should take to make the euro easier for firms to use;
    • we will work with banks to introduce an official “seal of approval” so that firms and individuals can identify which banks offer reliable information about the euro, and allow customers to bank in euro without paying high charges;
    • we will work not only with the banks, but with accountancy firms, trade associations, and others to make sure their clients are getting the consistent and accurate information they need. We will make available to them treasury information and advice for inclusion in their company literature;
    • and today, I have sent the top 1000 British firms an information pack “business preparations for the euro” containing the most up to date information we can offer. There are copies available for conference delegates here today.
    • And in future we will publish six monthly reports for business on preparations.

    And can I add also that during our Presidency we will apply for community funding for an information service, and we will produce packs for schools, just as we will make all our information available on-line through the links to libraries and information centres across the UK.

    There is one further question we will address: how to put the euro bank notes and coins into circulation in Britain, if we wish to join a single currency – the timescale, the amount – the practical details.

    So following the report of the Advisory Group we will also be publishing guidance for firms on changes they need to make to their computer systems.

    The strategy I said was to prepare and then decide.

    This is a Government that having declared for the principle will make sure that the preparations are made.

    And I believe that with information, and preparation, the national consensus embracing people business and their government – the very consensus that has eluded us for years – is now possible as we plan for the future.

    Just as business has a right to expect, we have moved from the ideological to the practical.

    We have moved from talking about preparations to making them in practice.

    We have set in motion preparations, by both government and business, that will allow the people to make a clear choice and a final decision.

    We will work with you to promote the British national economic interest in Europe.

    Work with you to ensure that British business is equipped for the challenges in the year ahead.

    Work with you to be certain that Britain gets the best out of its position with Europe.

    And to work with you to ensure that Britain, once again, can lead in Europe.

    I believe that we have a unique opportunity – Government and business working together to make this happen.

    So, from this conference, I make the promise that Government will do everything it can to create the conditions in which you can succeed.

    And let me say by way of conclusion that our policies for stability, investment, education and employment -just like our policies for Europe- are designed to nurture those qualities that are best in Britain and British industry:

    • our creativity and adaptability;
    • our belief in hard work and in team work;
    • our openness and outward looking traditions.

    Qualities that made Britain great in the first industrial revolution, qualities we should call the British genius, qualities that we must encourage more resolutely today if we are to master the unprecedented challenges ahead.

    Nothing should stand in the way of the practical task of equipping ourselves for the future, of making the next century a century of British prosperity, a Britain top of the league in Europe, and I believe here, from Birmingham, we can continue to work practically and constructively together so that this prosperity at home and in Europe is our achievement in the years ahead.

  • Stuart Andrew – 2022 Speech on Government Support for Leisure Centres

    Stuart Andrew – 2022 Speech on Government Support for Leisure Centres

    The speech made by Stuart Andrew, the Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport, in the House of Commons on 15 December 2022.

    I am pleased to respond to this debate and I am very grateful to the hon. Member for Warrington North (Charlotte Nichols) for securing it. The contributions that we have heard across the Chamber show the importance that this House places on the provision of good-quality public leisure facilities, and I think all hon. Members will agree that those spaces are vital to allowing people, wherever they may be in the country, to participate in sport and to lead an active lifestyle.

    Hon. Members have spoken in this debate of the challenges faced by their own local leisure centres, gyms and swimming pools. The most significant challenge is the rises in energy costs, further to the abhorrent Russian invasion of Ukraine, but there are other challenges with inflation, as the hon. Lady mentioned, the ability to keep qualified and dedicated staff and shortages of pool-cleaning chemicals. While a number of facilities are facing similar problems, no two are exactly the same—just as no two constituencies are the same, I guess.

    The leisure sector as a whole has a wide range of stakeholders and operating models, encompassing providers from across the public, private and civil society sectors such as the community interest company in the hon. Lady’s constituency. Local authorities will choose the model that works best for them as part of their consideration of how they can best deliver their services for local communities.

    In times such as these, I recognise that local authorities are having to make difficult decisions about which services to protect. I remind the House that leisure provision is not a statutory service for local authorities and, as such, may be deprioritised when it comes to setting budgets for the next year. However, I urge my colleagues in local government to consider the essential services that those facilities provide for their communities, because I firmly believe that public leisure facilities provide so much in the way of positive opportunities and benefits to those communities.

    Charlotte Nichols

    In my own area in Warrington, the funding available from central Government has been cut by about 60% over the last 10 years, which means that approximately 70% of the council’s spending is on statutory services, particularly things such as adult social care. Clearly ,those cannot be cut back on, and we expect the proportion of council spending spent on statutory services will only rise, as an ageing population will have more complex health needs. While I appreciate what the Minister says, that leisure facilities cannot be prioritised since they are not a statutory service but that he encourages councils to do all they can to support them, does he not agree that councils are being put in a difficult position, and that without additional public support and finance, they are fundamentally not able to do that?

    Stuart Andrew

    I recognise those challenges. That is why my right hon. Friend the Chancellor announced the additional support for local authorities in the recent autumn statement, and I hope that will help in these challenging circumstances.

    I was referring to the positive opportunities and the benefits that leisure centres provide. I am sure hon. Members are aware that we have very high levels of inactivity in this country, as the hon. Lady mentioned, with almost one third of adults—more than 12 million people—classed as inactive. On top of that, 2.2 million, or 30%, of children are inactive.

    While the figures show some signs of improvement post pandemic, we know that more work needs to be done to target the long-term inactive and make sure everyone can receive the benefits that being active brings. We will be publishing our sporting strategy, which will outline how we intend to do that, in the new year. A key part of that strategy will be making sure that people throughout the country, from Carlisle to Cornwall and west London to Warrington, have access to the right facilities for them to get active and feel part of their community.

    That is why public leisure centres and facilities are so important: they provide a wide range of opportunities to be physically active—badminton, swimming or even Zumba— at low cost, and in doing so they become hubs for the community, places to meet and to make new friends and new social connections. They also offer jobs and volunteering opportunities to the communities they are in, and the hon. Lady gave a good example of the benefits those centres bring.

    Why is this access to sport and physical activity so important? It is proven that regular activity genuinely helps to avoid a range of health issues, whether physical or mental, and that eases the pressure on our NHS. It helps to bring communities closer together, and gives young people essential leadership and teamwork skills. We know that sport works. I know from my own personal experience, when I do get the chance to go to the gym, that it is a great opportunity to reset and refresh, and hopefully that helps me to do my job in a better way.

    Speaking to staff at my local facilities, and through conversations with people across the sector, I know that the sport and fitness sector has endured challenging times over the past few years. During the pandemic, the Government prioritised access to sport. We encouraged people to get out once a day for a walk. We worked with gyms to make sure they could reopen safely. In addition, we provided the £100 million national leisure recovery fund, which was part of more than £1 billion of support to the sport sector to ensure its survival.

    On top of that, we continue to invest heavily in sport and physical activity through our arm’s-length body, Sport England, which receives over £100 million a year in Exchequer funding, along with over £200 million from the players of the National Lottery. We are continuing to support the sector now as we face the challenges of increased energy costs. Our energy bill relief scheme has limited energy costs for swimming pools, leisure centres, gyms and sports clubs throughout the country to half of what they could have been with wholesale prices as they are. That support will continue over the winter until March next year.

    Charlotte Nichols

    On a point of clarification, I asked what support would be available beyond March 2023, because a lot of leisure centres look as if they will not be able to survive after that cliff edge. I know the Minister will not be able to make a financial commitment today, but is he having conversations with the Treasury about the continuance of a scheme of that kind, in the hope that that support might continue beyond March 2023?

    Stuart Andrew

    The hon. Lady rightly predicts that I cannot make a financial statement here—my colleagues in the Treasury would be extremely angry with me if I did—but I will come on in a moment to some of the work we are doing.

    We have also provided business rates relief for those providing these essential services in the private sector, which will remain in place until March 2024. Throughout the implementation of the energy bill relief scheme, officials in my Department and I have been working closely with partners in the sector, such as ukactive, and with colleagues in local government, such as the Local Government Association, to monitor the scheme’s impact and make sure that we are fully aware of the situation facing the leisure sector. Their feedback and the insights they have been providing and sharing with us are so important for ensuring that support can be continued where it is needed most. I take this opportunity to thank them all, as well as the staff at Sport England who have supported us with the review.

    The energy bill relief scheme has been under review over the last months, and officials in my Department have engaged with colleagues in Treasury to make sure we have made the strongest case possible for further support. Outside of that energy review, the Department is continuing to review how best we can support the provisions of leisure centres across the country. That includes ongoing engagement with our partners in the public, private and civil society sectors, and across Government, and we will continue to make sure that we support those essential services every way we can. As I have said throughout my speech, I recognise the huge benefit that those services provide to our communities, to the health of the nation and, ultimately, to many of the services that Government provide. I thank the hon. Lady again for bringing this important matter to the Floor of the House.

  • Charlotte Nichols – 2022 Speech on Government Support for Leisure Centres

    Charlotte Nichols – 2022 Speech on Government Support for Leisure Centres

    The speech made by Charlotte Nichols, the Labour MP for Warrington North, in the House of Commons on 15 December 2022.

    I am grateful to have the opportunity to speak about the important issue of leisure centre provision. As we consider all the sectors struggling with increased bills and financial pressures, we must not forget leisure centres. In many ways, they are something of a Cinderella service even in good times—they are not glamorous and they are taken for granted as spaces where people can meet, socialise, rehabilitate, exercise and, in this bitter weather, keep warm —and, as we all know, we are in anything but good times.

    I will speak about my local leisure centres in Warrington, but I first want to set out the national picture, and I am grateful to the Local Government Association for many of the figures that I will use. Councils in England are currently the biggest funder of sport and leisure services and facilities. If we include parks and green spaces, councils currently spend over £1.1 billion a year and are responsible for 2,727 leisure centres, a majority of the UK’s 27,000 parks, 31% of grass pitches, 33% of all swimming pools—the majority of publicly accessible pools—20% of health and fitness facilities and 13% of sports halls.

    Our councils cannot prioritise leisure centre provision because these centres are not statutory services, and while we all understand the pressures from more acute needs, the swimming pools, sports facilities and community halls that are provided by local authorities are treasured by the public like few other council facilities. Up to and including the past decade of austerity, councils have broadly managed to be self-sustaining for day-to-day leisure spending through fees and other charges, while seeking to subsidise poorer users—in some cases even being able to raise revenues for other council services. They have not, however, had the scope to afford capital expenditure to upgrade buildings, make repairs or improve insulation. As an aside, I say that 68% of sports halls and swimming pools are more than 20 years old, and so are used less by the public than newer facilities.

    And then came covid. Despite the Government’s support through the national leisure recovery fund, this did not match the significant maintenance and staffing costs that leisure facilities incurred even without the footfall and income that they would usually have. Many councils used their own funds to save facilities from closure and provided £159 million of emergency funding in total, while leisure providers contributed £144 million from their reserves. Following this emergency funding, operators were already financially vulnerable going into the current energy crisis. They now face bills up to 200% higher this year compared with 2019—the last normal operating year—with costs set to grow by up to 240% next year.

    Tonia Antoniazzi (Gower) (Lab)

    In my constituency, Freedom Leisure works alongside the local authority to deliver services, and it was able to upgrade as a result. It was really tough during covid. I met Jeremy Rowe, its operations director, and he told me that in Wales alone there is a £3.3 million uplift in energy costs. The figure for Swansea is £1.4 million. Does my hon. Friend agree that the loss of these vital community assets could devastate our local communities?

    Charlotte Nichols

    Absolutely. My hon. Friend makes an important point. As I will come on to, we cannot put a pounds-and-pence figure on the value of leisure centre provision locally and what it means to our communities, and particularly our most vulnerable residents. That is why this debate is so important, and I am grateful that she has come to support it.

    In October, ukactive research found that 40% of council areas are at risk of losing their leisure centres or seeing reduced services at their leisure centres before 31 March 2023. Three quarters—74%—of council areas are classified as “unsecure”, which means there is a risk of leisure centres closing and/or reducing services before 31 March 2024.

    The LGA believes that, without Government intervention, large numbers of public sector leisure facilities are unlikely to make it through to next spring, with service restrictions and facility closures already growing. As the voice of local government, the Local Government Association has called for discussion of a number of measures to address the immediate financial pressures: an in-year grant with an increase to the local government settlement from 2023-24 to ringfence and protect public leisure facilities; an immediate review of sector taxation and regulation that minimises other outgoing costs, with longer-term business tax reform to collectively support the sustainability and growth of the sector; and support for a move to non-carbon-intensive heating methods, including opening up existing capital funding programmes to ensure that new build facilities are eligible for support, improving energy efficiency for the future, while also ensuring that they meet the needs and expectations of future communities, encouraging them to be active. I hope that the Minister will take all those on board, and confirm that he is engaging with the LGA on these specific points to save our leisure centres.

    I want to turn now to our leisure services in Warrington, provided by LiveWire. At this point, I should declare an interest, in that I rent my constituency office from Warrington Leisure and Library Trust at commercial rates—I am not sure whether that is strictly declarable, but I wanted to flag it up. The building my office is in, the Orford Jubilee Neighbourhood Hub, also houses our local gym, pool, library and other services, such as the pharmacy, Macmillan Cancer Support and even a Subway—which I spend far too much of my money in on the days I am in my office, but I digress

    LiveWire is an employer of more than 352 people in Warrington, delivering leisure, library and lifestyles services that attract more than 422,000 visits from local residents per quarter and make a vital contribution to the health and wellbeing of the community. LiveWire operates three neighbourhood hubs, two leisure centres, one community hub and 13 libraries. It is important to note here that it has been managing those services in Warrington since May 2012 as a community interest company. That means that it is designed to re-invest in services and facilities; it is not a private business, it does not have shareholders and it does not own any assets that it can leverage bank loans against. It is therefore specifically vulnerable to the economic storm that we face.

    As LiveWire has noted in a letter to me:

    “Our income-generating activities underpin discounted access to many health programmes—such as rehabilitation, prehabilitation and preventative services—to some of the poorest and most in need of support. Services that would not be operated in a market driven solely on a for-profit basis.”

    Now, due to increased energy costs, higher than budgeted pay awards for staff, a lack of customers returning post covid, customer cancellations because they have less disposable income due to the massively increased cost of living, and increased prices for raw materials and services, LiveWire tells me that its expenditure has increased by £2.3 million compared with 2021, which is not sustainable. It is at serious risk of being unable to operate after March 2023 without financial support, despite increased demand for swimming and aquatics activity, for example.

    I have already written to the Chancellor about this situation, and would like to repeat LiveWire’s plea to this Minister today. First, charitable trusts and community interest companies should be named as a vulnerable sector in January’s energy review, with support offered beyond March 2023. Secondly, any future cap should be more generous than the current cap, which still resulted in significant losses for CICs such as LiveWire.

    I am very aware of the demands on the public purse, but I also note the role that this sector plays in keeping the public healthy. We all know that preventive healthcare is far cheaper than later interventions, and these facilities in the heart of our communities, which subsidise getting fit and keeping healthy for people who need it most, are truly vital. Swim England states that swimming alone saves the NHS more than £357 million every year, and the contribution to the nation’s mental health will be enormous.

    We have a chronic lack of long-course pools across the country, and it is tragic to think that access even to our short-course pools could be even further curtailed. Swimming is a vital life skill, especially in communities such as mine, which have rivers and canals running through them—it saves lives. It is also a vital skill for participation in other sports, especially rowing, which we are trying to make more inclusive and accessible in Warrington, through the incredible work of Warrington Youth Rowing and the Warrington Rowing Club.

    When we consider all the sports and activities that our leisure sector supports, including things such as self-defence classes for women and classes catered specifically towards our more elderly residents, we see how much of a loss it would be to our communities if these became less accessible to, or priced out, those who benefit from them the most. Public participation in public leisure fell by 35% between April 2021 and January 2022. It would be a false economy to let this sector flounder and close. I want to hear from the Minister and the Government what they will be doing to help it through this most difficult time, for all our sakes.

  • Dan Poulter – 2022 Article on Increasing Pay for Nurses

    Dan Poulter – 2022 Article on Increasing Pay for Nurses

    A section of the article written by Dan Poulter, the Conservative MP for Central Suffolk and North Ipswich, with the full article in the Guardian on 16 December 2022.

    The government’s decision to squeeze nursing pay will push more nurses to vote with their feet, to leave the NHS and earn more money by either working for temporary NHS staffing agencies or to work for private healthcare providers. This could even result in the perverse situation where reductions in real-terms pay mean that the same nurse could leave their NHS job and return to work for the NHS, perhaps even in the same hospital department, as an agency nurse. The NHS will foot the bill for the agency costs and the increased salary paid to the nurse.

    This is poor healthcare economics. Pay needs to be set at a level that helps to recruit and retain the NHS workforce and the time has come for some joined-up thinking from government. Investing in better pay for nurses and other NHS staff would help improve staff retention and reduce the ever-growing temporary staff bill.

  • Huw Merriman – 2022 Speech on West Coast Main Line Services

    Huw Merriman – 2022 Speech on West Coast Main Line Services

    The speech made by Huw Merriman, the Minister of State at the Department for Transport, in the House of Commons on 15 December 2022.

    I thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie) for securing this important debate on rail transport services to the communities served by the west coast main line. She is a doughty campaigner and advocate for train services in her area. In my short tenure, we have spoken many times, and I know that we will speak more.

    I also thank all right hon. and hon. Members who contributed to the debate, who were my right hon. Friends the Members for Tatton (Esther McVey) and for Clwyd West (Mr Jones), my hon. Friends the Members for Milton Keynes North (Ben Everitt), for Aberconwy (Robin Millar) and for Delyn (Rob Roberts), and not forgetting the hon. Member for Stockport (Navendu Mishra) and my shadow colleagues the hon. Members for Paisley and Renfrewshire North (Gavin Newlands) and for Slough (Mr Dhesi). I think that I have remembered everybody.

    May I start by empathising with all my colleagues and their constituents for the challenges they have all faced on the west coast main line service? I am very sorry about the situation and am determined to see it turned around. I will explain how we will do that, but I owe it to those who have taken part in the debate to explain why the service levels have deteriorated so sharply.

    Colleagues whom I have spoken to about this matter in recent weeks have told me that, prior to the summer, the service had been holding up relatively well. Indeed, between 9 January and 1 May, 3% of cancellations were attributed to Avanti. After the end of July, the figure rose to 25%, which is clearly unacceptable. The reason for such a dramatic deterioration can be traced back to the decision on 30 July by many drivers not to work beyond their contracted hours. Let me put that into context and perhaps explain why that may have happened.

    A two-year qualified Avanti train driver is paid almost £67,500 and typically works 35 hours over three to four days. To ensure that the railways can operate over a seven-day period, the industry has relied on drivers working additional hours during their rest days. That, in my view—it would also appear to be the view of my right hon. Friend the Member for Clwyd West—has never been a satisfactory means to run our railway, as it relies on good will and means that a train operator cannot put its roster together without drivers volunteering.

    On 30 July, as I said, things changed. Avanti experienced an immediate and near total cessation of drivers volunteering to work passenger trains on rest days. More than 90% of drivers who had previously volunteered to work overtime informed Avanti that they would no longer do so, which would not occur without some level of union organisation. That left Avanti unable to resource its timetable and, in the immediate term, resulted in the significant short-notice cancellations that right hon. and hon. Members have described. Avanti therefore reduced its timetable in response to the withdrawal of rest-day working. Although highly disruptive, it gave passengers a chance to try to make alternative plans. That approach reduced cancellations from about 25% of the service in late-July and August to about 5% this month.

    May I now look more towards the future and be more positive as to what we are seeking to deliver? Indeed, my hon. Friend the Member for Ynys Môn touched on this in her speech. The Department has been working with Avanti to overcome the operational issues. Agreed steps include almost 100 additional drivers entering service, extra trains on its key routes and extended booking options. Avanti is now operating a seven trains per hour timetable amounting to 264 daily train services on weekdays, which is a significant step up from the 180 daily services previously offered during the last six-month period, and more than those offered before the cessation of drivers volunteering to work rest days. Importantly—this is the really important part—the services are not dependent on rest-day working. That is good for Avanti, because it allows the company to put a roster together seven days a week, and it is seemingly good for the 90% of drivers who decided over the summer that they did not wish to work beyond their contracted hours. This timetable change represents an opportunity to put in place a long-term timetable base and to return to the extended booking horizons that passengers rightly expect.

    I will touch on one point from the hon. Member for Stockport about catering services. I do not recognise those exact figures, but I will write to him. I have heard many stories where the catering services and the on-board service have just not been good enough, and within that we look to turn it around. He also touched on route knowledge and transferring between operators—a point with which the SNP spokesperson, the hon. Member for Paisley and Renfrewshire North agreed. We completely concur; it takes months of route knowledge to get a driver to be able to travel a route safely.

    The Office of Rail and Road and Network Rail have reviewed Avanti’s plan and are supportive of the proposition, noting that its full and successful delivery requires agreement with trade unions. The Department is monitoring Avanti’s delivery and holding the company to account as appropriate. The new timetable started on Sunday 11 December—Sunday just gone. Alas, as highlighted by my hon. Friend the Member for Aberconwy, we are now in a further period of national industrial action, so it may take time to assess fully the performance of the new timetable. I put on record that I am grateful to all the staff at Avanti who have allowed us to introduce this new timetable.

    Many hon. and right hon. Members have inquired about Avanti’s contract extension. On 7 October this year, a short-term contract was entered into with the incumbent operator. The contract extends the delivery of the West Coast Partnership and Avanti West Coast business for six months until 1 April 2023. This gives Avanti a clear opportunity to improve its services to the standards that we and the public expect. The Government will then consider Avanti’s performance while finalising a national rail contract for consideration in relation to the route, alongside preparations by the operator of last resort, should it become necessary for the operator to step in at the end of the extension period.

    Mr David Jones

    Can the Minister say in percentage terms what his expectation is for Avanti being able to deliver a full timetable by the end of March?

    Huw Merriman

    I cannot, unfortunately, because as things stand we have industrial action. I would be unable to determine even what the service will be like into the first week of January, because there is an expectation when national industrial action takes place that only 20% of services can run, and the day after—a day like today—only 65% can run. Until that industrial action comes down, which I will touch on, I cannot give my right hon. Friend that assurance at all. I call on all parties in this House to call for industrial action to come down.

    Mr Jones

    I fully understand that we have national rail strikes, but putting that to one side, and focusing on the efforts that Avanti is making and the work that the Minister’s Department is doing, what is his expectation in percentage terms that Avanti will deliver a full timetable?

    Huw Merriman

    My right hon. Friend is experienced in this place, and he will perhaps be aware that I cannot give a percentage. All I can say is that the rail regulator and Network Rail’s project management office have reviewed the recovery plan, and they are content, while recognising the challenges that the operator faces, that matters within Avanti’s control look to be within its control, and therefore it should be able to roll the timetable out. Indeed, with 100 extra staff and not working on rest-day working practices, Avanti should be confident, and I am confident as well, but I cannot give him a percentage figure, I am afraid; I can just give him my optimism.

    Navendu Mishra

    Will the Minister give way?

    Huw Merriman

    I will not, because I want to make some progress, if the hon. Gentleman does not mind.

    My hon. Friends the Members for Milton Keynes North and for Delyn called for the decision to award a short contract to have a “keep options open” status, and they are right to say that. An extension to the contract at this stage will not preclude transferring the contract to the operator of last resort at the end of the extension term.

    I will respond to what the hon. Member for Stockport said in exchanges with the hon. Member for Slough, who then brought up the TransPennine Express franchise. I was asked specifically why the Secretary of State was blocking an offer to resolve issues at TPE. I am happy to tell the hon. Member for Stockport that the Secretary of State signed off an offer for rest-day working to be put back to ASLEF on TPE, because that rest-day working agreement was not extended at ASLEF’s request at the end of last year. That offer was made, so he will be pleased by the Secretary of State’s input, but it was rejected by ASLEF despite being equally the most generous at time and a half. I will work on the basis that he will call for ASLEF to take a refreshed view on that situation.

    That leads me nicely on to workforce reform; my right hon. Friend the Member for Tatton and my hon. Friend the Member for Aberconwy both touched on industrial action. The way that passengers use the railway has changed. With more people working at home, we need to ensure that rail is put on a sustainable footing. The railway is losing up to £175 million of revenue each month as a result of fewer passengers post pandemic. That cannot continue. Passengers rightly expect a regular, reliable service seven days a week, but as we have found with Avanti, current shift patterns and voluntary weekend working for railway staff make that vision almost impossible.

    Getting stuck in endless disputes will not solve any of that, or bring back the passengers that the railway so badly needs. The only solution is for everyone to come together and agree a new way forward. Contrary to what has been said, the Secretary of State and I have met the trade unions and heard their concerns. We helped to facilitate a fair offer that delivers a pay increase more generous than those in the private sector are gaining and that guarantees no compulsory redundancies. More than a third of RMT members voted to accept Network Rail’s proposal, despite being instructed not to. There is clearly an appetite among workers to strike a deal and I welcome today’s decision by the Transport Salaried Staffs Association—the second-largest union—to do just that. We urge the RMT to reconsider and to return to the negotiating table with the employers.

    We have a once-in-a-generation opportunity to rebuild a world-leading network. The result will be a thriving rail industry that continues to support Britain’s economy and society for generations to come. The hon. Member for Stockport urged me, through the hon. Member for Slough, to get involved. I can tell him that after this debate, I will be sitting down with Mick Lynch from the RMT and the employers to try to facilitate some form of agreement.

    Navendu Mishra

    The Minister is being generous in giving way. On his point about the workforce, I encourage him to comment on low pay, zero hours and the treatment of cleaning contractors who work on the railway. Inflation is at almost 11% and they deserve fair pay and a decent pension.

    Huw Merriman

    I will look into that and get back to the hon. Gentleman, because the stories that he shared need investigating. My constituent, who is also on a zero-hours contract, is concerned because every day that the trade unions go on strike on the railways, she loses her wages. She contrasted her wages with some of those taking strike action. I hope that we can work together in that spirit of compromise.

    It is vital that we invest in infrastructure in the long term. The Department is investing £54 million to improve the power supply on the west coast main line at Bushey near Watford, which will create additional reliability and support the introduction of new bi-mode rolling stock for use on partially non-electrified routes, such as those in north Wales. In control period 7 between 2024 and 2029, we will invest more than £44 billion in the existing rail network to support Network Rail’s operations, maintenance and renewal activity. Network Rail’s business planning processes for control period 7 will focus on how the railway can contribute to long-term economic growth; support levelling up and connectivity; meet customers’ needs; and deliver financial sustainability.

    As all right hon. and hon. Members have said, the west coast main line is critical to the national network today, but it is also important to the future of the railways. For example, on completion of High Speed 2 phase 2a, new HS2 trains will join the existing west coast main line to create direct services to places including Liverpool, Manchester, Preston, Carlisle and Glasgow.

    Turning to the name change, my hon. Friend the Member for Aberconwy has made his pitch. All I can say is that, with a name such as mine, I am very much attracted to the idea, although I am sorry to say that my family came from south Wales rather than north Wales. However, that will not hold back the appetite for work.

    Robin Millar

    Will the Minister give way?

    Huw Merriman

    I was about to conclude, but I will.

    Robin Millar

    I thank the Minister; he is being very generous with his time, and I shall be brief. The reason for the name change is not simply to change the name; it is to reflect the strategic importance of north Wales to the integration of the United Kingdom and everything that flows from that. Does he accept that?

    Huw Merriman

    I do, and I accept that we are not talking gimmicks here; we are talking about detailed descriptions of what the line actually does, but also about what it can do to enhance the north Wales economy and community. I absolutely do get that.

    To conclude, I thank my hon. Friend the Member for Ynys Môn and all right hon. and hon. Members for contributing to this important debate. Passengers on the west coast main line have had a torrid time, and we owe it to them to deliver a vastly improved service. The additional drivers, the move away from voluntary working and the new timetable afford the opportunity to turn matters around. I am determined to play my part. I expect Avanti, the unions and everyone connected with this to join me and ensure that this line delivers once again.