House of Commons
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Oral Answers to Questions
(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Jim Cunningham (Coventry South) (Lab)
1. When he expects to publish the timetable for a referendum on the alternative vote system for general elections.
The Deputy Prime Minister (Mr Nick Clegg)
The Government have made clear their intention to introduce legislation providing for a national referendum on the alternative vote for future elections to the House of Commons. The appropriate timetable for that legislation and the subsequent referendum is currently being considered within Government. Further details will be announced to the House in due course.
Mr Cunningham
Given that answer, why has the Deputy Prime Minister prioritised boundary changes, as opposed to a date for a referendum on the electoral system? Can he answer that question, or has the Prime Minister leaned on him?
The Deputy Prime Minister
The coalition agreement is clear. We want to proceed with the preparations for a referendum, giving people the choice to choose a new electoral system—the alternative vote system—and, in parallel, to proceed with a review of boundaries. Reviewing boundaries in this country is not a new thing. If the hon. Gentleman would care to look back at the Parliamentary Constituencies Act 1986, which establishes the provisions for reviews of boundaries, he will see that the legislation imposes a requirement on us to keep the size of the House of Commons lower than it currently is, and to have greater equality between the sizes of constituencies. I do not think that anybody will quibble with the principle that people’s votes should count equally, wherever they so happen to live.
Mr Speaker
Order. From now on we must have timely progress, with short questions and short answers.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
Will my right hon. Friend give an undertaking that there will be no move to hold a referendum on voting reform on the same day as any other elections, after the ruling given by the House of Lords Select Committee on the Constitution, which said:
“we recommend there should be a presumption against holding referendums on the same day as elections”?
The Deputy Prime Minister
As I have said, we will shortly come forward—I hope to do so well before the summer recess—to set out our plans for a referendum to give people in this country the choice to choose, if they so wish, to change the electoral system to an alternative vote system.
Mr David Hanson (Delyn) (Lab)
May I welcome the right hon. Gentleman to his position and give thanks to him for implementing a Labour party manifesto commitment that was not in the Conservative or Liberal Democrat manifestos? Will he reflect on the fact that in February the Liberal Democrats in this House proposed that an additional question—on the single transferable vote—should be asked in any referendum? If that was proposed again by his colleagues on the Liberal Democrat Benches, would he vote for or against it?
The Deputy Prime Minister
This from a party that back in 1997 had a manifesto commitment to hold a referendum on a change to the electoral system. The previous Government had 13 years to do that, and they did absolutely nothing. I am delighted that the right hon. Gentleman, having sat on his hands for 13 years, is finally displaying some urgency about getting on with the political reforms that his Government failed to deliver. Our coalition agreement is absolutely clear: we are going to hold a referendum on whether people want to have a new electoral system—the alternative vote system.
Julian Sturdy (York Outer) (Con)
2. What steps he plans to take to establish fixed-term Parliaments.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
My right hon. Friend the Deputy Prime Minister and I have been working with colleagues across Government to develop our proposals, and we will announce them to the House shortly.
Julian Sturdy
I am grateful for that response, but does the Minister agree that it is vital to bring forward legislation as quickly as possible, if this new Parliament is indeed serious about restoring public trust and confidence in the House?
Mr Harper
I absolutely agree with my hon. Friend. My right hon. Friend the Prime Minister wants to bring forward those proposals—he will be the first Prime Minister who has given away the power to seek a Dissolution of this House at his choosing—and to give that power to this House, which is a promise that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) made but never delivered on.
Ian Lavery (Wansbeck) (Lab)
3. What recent representations he has received from hon. Members on Government policy on the Independent Parliamentary Standards Authority.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
A number of hon. Members have submitted a number of written questions, which I have answered, and I was also pleased to listen to their representations in the very full Westminster Hall debate last Wednesday.
Ian Lavery
Is the Minister aware that, as a result of the policy created by IPSA, many loyal and dedicated members of staff face the prospect of redundancy or, at the very least, of savage cuts in their wages, terms and conditions. Will the Minister tell us what plans he has to ensure that hon. Members’ staff are protected and not unfairly punished as a result of the expenses scandal?
Mr Harper
I am grateful to the hon. Gentleman for that question. He will know that Ministers have policy responsibility for IPSA, but are not responsible for its internal workings. He will also know that my right hon. Friend the Leader of the House has been making sure that, where the IPSA rules make it difficult for Members of Parliament to carry out their duties, information on those rules is made available. He will also know that, next week, the Speaker’s Committee on IPSA will have its first meeting. A motion on today’s Order Paper provides for the appointment of five Members to that Committee. At that meeting, they will consider how there can be accountability to this House.
Bob Russell (Colchester) (LD)
Since last Wednesday’s Westminster Hall debate, in which the right hon. Member for Tonbridge and Malling (Sir John Stanley) made it clear that IPSA was in breach of parliamentary privilege, what action has the Minister taken to ensure that IPSA is not in breach of parliamentary privilege?
Mr Harper
My right hon. Friend the Member for Tonbridge and Malling asked me whether I would advise the Standards and Privileges Committee, but that is not a matter for members of the Government. The hon. Member for Colchester (Bob Russell) himself will be appointed, if the House so desires it, to the Speaker’s Committee on IPSA, and I know he will use his undoubted skills to make sure that IPSA is given correct advice so that Members of this House can do their jobs to the standards our constituents require.
Chris Leslie (Nottingham East) (Lab/Co-op)
4. What criteria were used to decide on a 55% majority for a vote in the House to trigger a dissolution of Parliament.
Kevin Brennan (Cardiff West) (Lab)
6. What criteria were used to decide on a 55% majority for a vote in the House to trigger a dissolution of Parliament.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
rose—[Interruption.]
Mr Speaker
Order. I recognise the extreme disapproval on one side of the House, but we must conduct proceedings in an orderly manner.
Mr Harper
I am grateful, Mr Speaker. Labour Members clearly do not want to listen to answers to their questions. The answer is that we want to make sure that no single party in this House is able to seek a Dissolution for its own party political advantage. That is why the coalition agreement makes the provision that it does.
Chris Leslie
Is it not an outrage that the Deputy Prime Minister makes such a transparent attempt to rig the way in which this House of Commons holds the Government to account? What an outrage that he sold his soul to the Conservatives to ensure that he is in office, even when his own colleagues try to undo the mess.
Mr Harper
I was having trouble detecting a question in that rather intemperate rant, Mr Speaker. I have already made it clear that my right hon. Friend the Prime Minister, who chose to walk in at exactly that moment, was the first Prime Minister to give away the power to seek a Dissolution of this House. He has given away his own power and given it back to this House. The hon. Gentleman should be grateful for that move forward.
Kevin Brennan
If this proposal passes with the support of fewer than 55% of Members, will the Minister still attempt to impose it?
Mr Harper
The hon. Gentleman should know that our proposal is about improving the powers of this House; it does not change the rules for the confidence procedures—[Hon. Members: “Answer.”] If Opposition Members listen, I will. This will be taken through on the Floor of the House and the hon. Gentleman, along with all his hon. Friends, will have the opportunity to debate it in detail then.
Mr Andrew Turner (Isle of Wight) (Con)
5. What progress he has made on his proposals to create fewer and more equally-sized constituencies.
The Deputy Prime Minister
It is nice to get a welcome from time to time from the Opposition Benches.
The Government have announced that legislation will be introduced to provide for the creation of fewer and more equal-sized constituencies. Further details will be announced in due course, and Parliament will have the opportunity to debate the provisions in full.
The Deputy Prime Minister
Clearly, in line with existing legislation dating back to 1986, it is right for us to continue to provide for more equal constituencies in this country. [Interruption.] Here in London, for instance, Hackney South and Shoreditch has an electorate of just 57,204, while a few miles down the road, on the other side of London, Croydon North has 22,615 more voters. Its electorate is more than a third larger. That cannot be right.
Mr Speaker
Order. I recognise that there are people who are angry, but before we continue, let me appeal to the House to have some regard to the way in which we are viewed by the public whose support we were so recently seeking.
Mr Jack Straw (Blackburn) (Lab)
On 7 June, the right hon. Gentleman told the House that he accepted the case for smaller island and heavily rural constituencies in the north of Scotland, which happened to be Liberal Democrat. Does he also accept that in urban areas there is a very heavy case load of constituents, that it is growing, and that in every urban area there are tens of thousands of citizens who are not on the electoral register and who ought to be taken into account in these calculations?
The Deputy Prime Minister
I have a simple question. Why is the right hon. Gentleman so frightened of equal-sized seats? It is extraordinary. Why does he not go back to first principles? Why is it that all he wants to do is indulge in special pleading?
There are issues of principle at stake. It is right, as the 1986 Act sets out, that we should have more equal constituencies. It is right that we should bring the size of the House of Commons down. We have a more oversized lower Chamber than any other bicameral system in the developed world. It is right, of course, that the boundary review should be conducted independently, as it will be. I do not understand for the life of me what is wrong with that.
Mr Straw
Let me make it clear that on this side of the House there is no issue about ensuring that constituencies, as far as possible, are of equal size, and there never has been. The issue is about ensuring that that process is conducted in a fair way, and that full account is taken of the 3.5 million citizens who, according to what the Electoral Commission said in March, are not currently registered to vote. It is surely fair to ensure that those individuals are taken into account in the electoral calculations.
The Deputy Prime Minister
I am as concerned as the right hon. Gentleman about the fact that there are 3.5 million people—[Interruption.] Well, what did you do about it for 13 years? You created the problem in the first place, and now, within a few weeks, you are complaining about it.
Let me repeat that I hear what the right hon. Gentleman says, and I understand the strength of feeling. Of course the review should be conducted independently, and of course it should be conducted fairly. I think that it is fair to have constituencies in which people’s votes are equal regardless of where they live in the country. If the right hon. Gentleman wants to work co-operatively—[Interruption.] I know that it is extremely unpopular for any Labour Member, as was recently shown in the case of the former Secretary of State for Defence, to reach out a hand to work in co-operation with this coalition Government. Lord Prescott gets his ermine in a twist, and says that it is collaboration. What kind of new politics is that?
Mr Speaker
Order. We will now move on to topical questions, in which, I remind the House, we have always expected faster progress. That means short questions and short answers.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
T1. If he will make a statement on his ministerial responsibilities.
The Deputy Prime Minister
As Deputy Prime Minister, I support the Prime Minister in the oversight of the full range of Government policy and initiatives. I have taken particular responsibilities for co-ordinating the Government’s domestic policies through my chairmanship of the Cabinet Sub-Committee on home affairs. Within the Government, I am responsible for our ambitious programme of political and constitutional reform, supported in this House by my colleague the Parliamentary Secretary, Cabinet Office, the hon. Member for Forest of Dean (Mr Harper).
Alun Michael
In view of the Deputy Prime Minister’s reference to a supporting role, may I quote him directly? He has said:
“We need to invest in the kind of things… which create jobs for our young people”
and
“help manufacturing”.
Do not last week’s cuts in support for young people and for Sheffield Forgemasters demonstrate that the Deputy Prime Minister is powerless within Government?
The Deputy Prime Minister
As a Sheffield MP, I suspect that I know Sheffield Forgemasters a lot better than the right hon. Gentleman does, and I will be meeting the chairman and chief executive again this Friday in Sheffield. [Interruption.] Let us be clear: this is an outstanding company—it is a great company. [Interruption.] No, the new owners have been quite open about why they sought a Government loan—because, as they have publicly stated, they felt the terms they were receiving from banks were not good enough and because they did not want to dilute their own shareholdings in the company. Do I think it is the role of Government to help out owners of companies who do not want to dilute their own shareholdings? No, I do not. Every Member of this House could identify companies that are struggling more than Sheffield Forgemasters and that would also like to receive a Government loan. To support manufacturing, we must support skills, we must invest in infrastructure and we must get the banks lending. That is what we will do; that is what Labour failed to do.
James Morris (Halesowen and Rowley Regis) (Con)
T2. Does the Deputy Prime Minister agree that as part of his broader constitutional package, there is an opportunity to codify and formalise the relationship between central and local government in order to promote and solidify the coalition Government’s localist agenda?
The Deputy Prime Minister
I strongly agree with my hon. Friend. The push for greater decentralisation, after years and years of grotesque centralisation under a Labour Government, is one of the most important changes that this coalition Government will usher in in the years ahead.
Hazel Blears (Salford and Eccles) (Lab)
Four days before the general election the right hon. Gentleman asked in an interview in The Independent newspaper:
“What is this big society?”,
and then said it is
“a well-oiled PR machine, but basically it’s disguising fake change. It’s hollow. There’s nothing in it.”
Does he still hold that view about a fundamental philosophy of the Conservative party?
The Deputy Prime Minister
I hold the view, as I always have done—[Interruption.]
The Deputy Prime Minister
I hold that view that it is important to give people back their liberty where it has been taken away from them, that it is important to give them back privacy where that has been taken away from them, and that it is important to give back power to communities where that has been taken away from them. That is the kind of liberal society I believe in.
Mr Peter Bone (Wellingborough) (Con)
T3. The Liberal Democrat election manifesto, “Change that works for you”, says:“The European Union has evolved significantly since the last public vote on membership over thirty years ago. Liberal Democrats therefore remain committed to an in/out referendum.”I do not know whether that works for you, Mr Speaker, but it certainly works for me. Is that what we are going to do?
The Deputy Prime Minister
Unlikely alliances abound, Mr Speaker. I am grateful to my hon. Friend for that question. As he knows, the coalition agreement sets out very clearly that we will not agree to any further transfer of powers from this Parliament, and from London and Whitehall to Brussels and Strasbourg, and if there were any proposal to do so, we will introduce legislation this autumn—a referendum lock—that will guarantee that the British people finally have their say.
Mr David Lammy (Tottenham) (Lab)
What message does the Deputy Prime Minister think it sends out about a new politics to redraw the electoral map on the basis of a register that excludes a third of all black people and half of all young people?
The Deputy Prime Minister
As I said, we are all concerned, on both sides of this House, that 3.5 million people are not on the electoral register. I say again, however, that if the right hon. Gentleman is so concerned now, why did he not voice his concerns when he was in government? His Government legislated to introduce individual electoral registration, but they did it at a very leisurely pace that will not actually lead to compulsory electoral registration during this Parliament. [Hon. Members: “Answer the question.”] I am. That is why we are looking at whether we can accelerate individual electoral registration.
Mr Douglas Carswell (Clacton) (Con)
T4. My right hon. Friend rightly wants new steps to ensure that lobbying is legitimate advocacy, not undue influencing. Will he please extend the scope of his review to deal with the revolving door between top officials in Whitehall and big corporations? Will he consider restrictions beyond those already in place to ensure that public procurement rip-offs cannot be brought through the revolving door?
The Deputy Prime Minister
We will bring forward proposals on lobbying. Lobbying is a legitimate activity as long as it is out in the open, and we will ensure that there is a statutory register of all lobbyists so that that is completely above board and entirely transparent. My right hon. Friend the Prime Minister has introduced a new code for Ministers and for special advisers which will make sure that the period of time between special advisers in particular leaving Government and then seeking employment in lobbying companies is significantly lengthened.
Mr Nigel Dodds (Belfast North) (DUP)
Is the 55% Dissolution trigger for this Parliament or for every Parliament? If it is for every Parliament, how does the Deputy Prime Minister intend to make it stick given that he cannot bind successor Parliaments?
The Deputy Prime Minister
It is an important constitutional change—I recognise that. We believe that it is right to separate the power to pass a motion of no confidence in a Government from the power to pass a motion of Dissolution. Let us be clear about why we are doing this. We are doing it because we want to introduce fixed-term Parliaments. My right hon. Friend the Prime Minister is the first Prime Minister to give up his power to dissolve Parliament. I should have thought that the right hon. Gentleman and all Members of the House would welcome that change. However, we all understand that the proposed 55% figure is controversial. It is up for discussion and scrutiny, and if the case is made that another figure might be better, of course we are open to those arguments.
Robert Halfon (Harlow) (Con)
T5. Does the Deputy Prime Minister not find it astonishing that some Members of this House do not believe that every vote should have equal value? People in Harlow and the villages hope that their say at the ballot box will one day have as much weight as everyone else’s, with fairer and more equal-sized constituencies.
The Deputy Prime Minister
I agree with my hon. Friend. We have a general problem. The Labour party has leapt from being in government, where it created endless problems, to coming into opposition and airbrushing those problems from the record altogether. Labour Members used to talk about fairness, reform and constitutional change. They now talk about manufacturing, but manufacturing declined three times faster under Labour than it did under previous Conservative Administrations.
Ms Angela Eagle (Wallasey) (Lab)
Will the Deputy Prime Minister tell the House what the average size of a public sector pension in the civil service is as we speak, so that we can understand what he means by “gold-plated”?
The Deputy Prime Minister
That is a matter for the Budget. As the Chancellor of the Exchequer has already announced, a former Secretary of State for Defence will be providing a review of public sector pensions. I think it is right to look at the fundamental balance between pension entitlements in the private sector, which have been cut back and have changed very dramatically—many people in the private sector, too, have been working shorter hours and taking, in effect, pay cuts—and the pension entitlements due to those in the public sector. It is the fair thing to do to look at pensions in the round. That is what this Government will do and what the hon. Lady’s Government failed to do for more than a decade.
Miss Anne McIntosh (Thirsk and Malton) (Con)
T6. The Deputy Prime Minister will be aware that every time we change the voting system, such as the introduction of proportional representation to European Parliament elections, the turnout goes down. That is probably one of the biggest challenges he faces. What solution can we find to ensure that turnout remains high when we introduce new electoral systems?
The Deputy Prime Minister
I am not sure whether there is such an intimate link between electoral systems and turnout. Turnout seems to me to be dependent on whether the contest is close and whether there are issues being debated in the election contest that engage people. That is something that those on both sides of the House should always strive to do at election time.
Miss Anne Begg (Aberdeen South) (Lab)
T7. I have heard the Deputy Prime Minister say that he is concerned that 3.5 million people are missing from the register, including groups such as those with learning disabilities, but I have not heard what he is going to do about it, apart from individual registration, which might make the problem worse. What is he going to do to ensure that those numbers go up on the electoral register?
The Deputy Prime Minister
It is clearly a complex problem or, I assume, the hon. Lady and her Government would have done something about it in the past 13 years. I think that individual electoral registration is the absolute key, but as we said in the debate here on another occasion, it is crucial to make sure that individual electoral registration is properly resourced and is conducted with care. If it is done too quickly and is not resourced properly, she is right that there is a risk of making the problem worse. That is something that we must avoid at all costs.
Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)
T8. I welcome my right hon. Friend’s review of the workings of the upper House. Does he agree that perhaps the time has come to consider the fact that the hereditary principle is wrong on principle?
Grahame M. Morris (Easington) (Lab)
T9. May I draw the Deputy Prime Minister’s attention to the “Crimewatch” most wanted list? Second on the list is one Michael Brown, wanted for defrauding £8 million from former Manchester United chairman Martin Edwards. He also donated £2 million in cash to the Lib Dems in 2005. Does the Deputy Prime Minister have any information about his whereabouts and if so will he call the City of London police or Crimestoppers in confidence on 0800 555 111?
The Deputy Prime Minister
No, interestingly enough I do not have any information on his whereabouts. If I did, I should of course be sure to pass it on. It is clear—[Interruption.]
Mr Speaker
Order. This is very discourteous to the Deputy Prime Minister and I do not think that the public like it. Above all, I want to hear the answer from the Deputy Prime Minister.
The Deputy Prime Minister
Talk about the great disappeared—where is the former Prime Minister and where are all the leadership candidates? The contest for the Labour party leadership increasingly resembles a political version of “Big Brother”. They are just talking to themselves. The rest of the country lost interest ages ago and just wants it to finish.
Charlie Elphicke (Dover) (Con)
T10. Once claiming to be the political arm of the British people, now Labour are the defenders of rotten boroughs and pocket boroughs under trade union sponsorship. Will the Deputy Prime Minister bring forward a great reform Bill so that we can have a people’s Parliament fit for the new millennium?
The Deputy Prime Minister
I certainly agree with the zeal with which my hon. Friend wishes us to pursue political and constitutional reform. It remains extraordinary that a party that used to call itself progressive and a party of reform failed to do anything fundamentally to reform our politics. We will now do it because the Labour Government failed to do so.
Chris Ruane (Vale of Clwyd) (Lab)
The right hon. Gentleman made reference to the leisurely time scale for the introduction of individual registration, but it was a long time scale to ensure that the missing 3.5 million people were back on the register before the introduction of individual registration. If he is to speed up one—the introduction of individual registration—will he speed up the other and get those 3.5 million people back on the register?
The Deputy Prime Minister
As I said, we need to proceed with care and make sure that the system is properly resourced. As the hon. Gentleman rightly said, the present timetable is for voluntary individual registration to continue until, I think, 2015 before a compulsory phase is introduced. We are actively looking at whether that is feasible and justifiable and whether we can resource an acceleration of the timetable. We have not yet decided on that.
Greg Mulholland (Leeds North West) (LD)
The unfinished business of devolution is the situation England finds itself in. Will my right hon. Friend tell us what plans the coalition Government have to address that?
The Deputy Prime Minister
We will be establishing a commission—[Hon. Members: “Ooh!”] Does the jeer indicate impatience for action? Is that right—we want a bit of action? Well, that’s what we saw over the last decade and a bit.
We will be establishing a commission to examine the West Lothian question.
Mr Gary Streeter (South West Devon) (Con)
2. What recent assessment he has made of the performance of the Crown Prosecution Service in the south-west.
The Attorney-General (Mr Dominic Grieve)
May I first pay tribute to my predecessors Baroness Scotland and Vera Baird QC? The Solicitor-General and I both hope that we will be able to follow their tradition in our dealings with Parliament.
The last area performance inspection of the CPS Devon and Cornwall by Her Majesty’s Crown Prosecution Service inspectorate was in July 2007. Performance was rated as good, an improvement on the previous assessment in 2005, which rated the area as poor. There is a structure for monitoring area performance, including regular performance meetings between the chief operating officer of the CPS and the area chief Crown prosecutor. The performance of CPS Devon and Cornwall for 2009-10 was assessed as poor in one indicator—proceeds of crime—good in four of 11 indicators and excellent in another four of 11 indicators.
Mr Streeter
I am grateful to my right hon. and learned Friend for his comprehensive response. Will he encourage the Crown Prosecution Service to leave behind its tick-box obsession with conviction rates, become more robust in prosecuting the perpetrators of low-level crime and antisocial behaviour and help to restore public confidence in the criminal justice system?
The Attorney-General
I am very much aware that my hon. Friend has taken a close personal interest in this issue in his area. He will understand that each case must be scrutinised by a prosecutor under the tests set out in the code for Crown prosecutors. There is a duty in each case to keep that under review, in accordance with the evidence available. In some cases, if the police provide more information, that can result in a charge having to be reduced and, in some cases, lesser pleas accepted. But I agree with my hon. Friend that errors can happen, and if a case is brought to his attention that troubles him in this respect, he should, of course, contact me or the Solicitor-General and we will ensure that it is inquired into.
Kerry McCarthy (Bristol East) (Lab)
Does the right hon. and learned Gentleman agree that the success of the CPS cannot always be judged by prosecution and, indeed, conviction rates? May I urge him to look at what has been done in Bristol to tackle the problem of on-street sex work? We are using conditional cautions, and the CPS is working with projects such as One25 to try to tackle the root cause of the problem, rather than just taking it through the courts over and again.
The Attorney-General
Yes, I entirely agree with the hon. Lady. Good work is being done by the CPS, in conjunction with the police, to try to ensure that crime of that nature is reduced without necessarily going through the courts. Equally, it is right to say—the CPS understands this very well—that the use of conditional cautions must not serve as a device to avoid proper convictions being recorded in court against people who ought to be brought before the courts.
Ian Mearns (Gateshead) (Lab)
3. If he will take steps to increase the rate of prosecution in cases of domestic violence.
The Solicitor-General (Mr Edward Garnier)
May I begin by congratulating the hon. Gentleman on his election?
The Government take domestic violence very seriously. The Law Officers support the work that the Crown Prosecution Service is undertaking to increase the rate of prosecution in such cases. The increase in the provision of specialist domestic violence courts, the training of all CPS prosecutors in domestic violence cases and improvements in support and safety for victims have all led to an increase in the rate of prosecutions leading to a conviction. The CPS works with other agencies to ensure that, where possible, the evidence is available to prosecute such cases effectively.
Ian Mearns
Has any additional consideration been given to making special provisions for children where cases of domestic violence occur in settings where children are present or where children are victims or witnesses to acts of violence in their own homes?
The Solicitor-General
It is estimated that about 750,000 children witness domestic violence during any given year. Clearly, a great deal needs to be done to ensure not only that those children are protected, but that, if appropriate, they can give evidence in courts in such a way that does not frighten them and that leads to proper convictions being arrived at. The hon. Gentleman makes a good point that will certainly be considered further.
Mrs Helen Grant (Maidstone and The Weald) (Con)
What plans does my hon. and learned Friend have for victims who have no recourse to public funds?
The Solicitor-General
It depends on what my hon. Friend means by the phrase “recourse to public funds”. A number of victims will be protected or assisted by independent domestic violence advisers. We now have 141 specialist domestic violence courts. As she will know from her private practice as a family lawyer, people can be assisted in a number of ways. The main thing is to ensure that they know what is available and that they can be assisted before, during and after the court hearing.
Jim Dobbin (Heywood and Middleton) (Lab/Co-op)
4. What recent discussions he has had with the Director of Public Prosecutions on policy on the prosecution of cases involving allegations of rape.
The Attorney-General
I have had discussions with the Director of Public Prosecutions on a range of criminal matters and will continue to do so as and when issues arise. Rape is one of the most serious and damaging of all crimes, and I support the current work that the Crown Prosecution Service is undertaking with other agencies to improve the way in which prosecutions are conducted and victims are treated in such cases. If there are to be any changes to the law or procedure in respect of rape trials—for example, the introduction of anonymity for defendants in such cases—as my right hon. and learned Friend the Lord Chancellor made clear last week, they will take place only after the issues involved have been fully researched and debated. The views of all those with relevant knowledge and expertise, including the Director of Public Prosecutions, will be fully taken into account.
Jim Dobbin
Victims of rape need to feel confident that those accused of rape will be treated as serious offenders. Does the Attorney-General agree that extending anonymity to those defendants will stop victims coming forward and send a signal that it will be difficult to accuse people?
The Attorney-General
I do not think that it will in any way lessen the seriousness of the matter; on the contrary, it will emphasise the seriousness. The hon. Gentleman should bear in mind that anonymity for defendants in rape cases existed between 1976 and 1988. Indeed, I defended rape cases over that period and saw that trials were conducted without difficulty and with no lessening of the gravity of the offence. However, such matters can and will be debated, and if they are debated with a proper emphasis on detail, I believe that we will reach the right solutions.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
If we go down the road of balancing victim anonymity with anonymity for the person accused, is not the important consideration that if the prosecution has good reason to believe that evidence will be brought to light if the identity is known, it should be possible to waive anonymity?
The Attorney-General
Yes; my right hon. Friend makes an important point. I have no doubt that that issue is one of those that can be examined. It is worth bearing in mind that the existing anonymity for complainants has the consequence, for example, that there are occasions when a history of false complaints made to someone other than the police does not come to light before a trial takes place. However, that has not been put forward as an argument for removing anonymity for complainant victims. He is correct, however, that such matters can all be looked at properly when we examine this area of the law.
Maria Eagle (Garston and Halewood) (Lab)
May I begin by welcoming the right hon. and learned Gentleman and the Solicitor-General to their posts—it must be like going back to chambers? I also thank the right hon. and learned Gentleman for the kind words about his predecessors that he set out at the beginning of Question Time, which were gratefully received by Labour Members.
There has been a lot of confusion about this area of policy. The right hon. and learned Gentleman has, like several of his colleagues, spoken about the matter as if we were conducting a debate, but I remind him that the coalition agreement states that anonymity will be extended to defendants in rape cases. Will he lead the Government from the front by admitting that they have got this wrong, accepting that they have made a mistake and dropping this disastrous and retrograde policy?
The Attorney-General
I am grateful for the hon. Lady’s welcome; indeed, I welcome her to her role of shadowing the Law Officers in the House. She will be aware that my role is to provide legal advice about policy decisions made by the Government, and she can be reassured that I will ensure that exactly that happens.
As for this policy, my right hon. and learned Friend the Lord Chancellor made it clear when answering questions last week that he wished to engage in a debate to examine this procedure and area of the law, which have caused concern. That is exactly what I invite the House to do, in the spirit in which such debate should be conducted.
Mr Philip Hollobone (Kettering) (Con)
5. How long on average it took for the Crown Prosecution Service to decide whether to prosecute in cases referred to it in (a) Northamptonshire and (b) England in the latest period for which figures are available.
The Solicitor-General
During the year ending May 2010, the Crown Prosecution Service took an average of 13.6 days to complete a pre-charge decision in Northamptonshire, and 8.1 days in England as a whole.
Mr Hollobone
What encouragement and advice can my hon. and learned Friend offer to Northamptonshire CPS so that it improves its performance and gets up to the national average?
The Solicitor-General
I have absolutely no doubt that my hon. Friend, who is my parliamentary neighbour, will give his own encouragement to his local CPS. A lot has been done, although a great deal more can be done, and I am sure that, between us, we will keep Northamptonshire CPS up to the mark.
Keith Vaz (Leicester East) (Lab)
I welcome the Solicitor-General, who is my near neighbour, to his new post.
When Members of Parliament write to the CPS to make representations on behalf of constituents about cases that it is considering, are there any guidelines on how long it should take the chief Crown prosecutor to write back to them?
The Solicitor-General
All letters from Members of Parliament, whether to the headquarters of the Crown Prosecution Service, or to the chief Crown prosecutor for a particular area should be answered speedily. Occasionally, work has to be done to provide a full answer, and I am sure that the right hon. Gentleman, whom I thank for his kind remarks, will understand that it is better to receive a thorough answer a few days late than a half answer on time.
Mr Robert Buckland (South Swindon) (Con)
6. If he will estimate the cost to the public purse of the use by the Crown Prosecution Service of in-house advocates in the Crown court in the latest period for which figures are available.
The Attorney-General
In 2009-10, the full cost incurred by the Crown Prosecution Service of in-house advocate deployment in the Crown court was £18,552,313. The CPS estimates that it would have cost £27,833,588, excluding VAT and fees, to use self-employed advocates for that work, representing a saving of £9,281,275, excluding VAT. I acknowledge that the methodology for calculating the cost of Crown advocate deployment has been disputed by the Bar Council. I understand that discussions are taking place between the CPS and the Bar Council to try to resolve the matter and to look more generally at sustaining the role of self-employed advocates in the Crown court.
Mr Buckland
Will my right hon. and learned Friend go further and accept that the best guarantee of cost-effectiveness and quality in the Crown court is the independent bar?
The Attorney-General
I can reassure my hon. Friend that there is widespread recognition, including by the CPS itself, that the referral bar has an important role to play in the prosecution of offences, and that that must be sustained. It is my intention, working with the head of the CPS, to ensure that that happens.
Kevin Brennan (Cardiff West) (Lab)
7. What recent discussions he has had with the Director of Public Prosecutions on the prosecution of cases involving allegations of rape.
The Attorney-General
I refer the hon. Gentleman to the answer that I gave to Question 4.
Kevin Brennan
Does the Attorney-General agree with the Lord Chancellor that there should be a free vote on this?
The Attorney-General
It will be for Government members who are introducing the policy to decide whether that matter should be subject to a free vote or not.
Karl Turner (Kingston upon Hull East) (Lab)
8. What recent representations the Crown Prosecution Service has received on steps to increase the rate of prosecution in cases of domestic violence.
The Solicitor-General
Again, I congratulate the hon. Gentleman on his election to the House. Records of representations received by local CPS offices are not kept centrally. I can tell him, however, that the Director of Public Prosecutions has not received any recent representations on steps to increase the rate of prosecutions in cases of domestic violence.
Karl Turner
May I ask the Solicitor-General what he proposes to do to build on the success of the Labour Government in tackling domestic violence?
The Solicitor-General
That is a wide question that I do not have time to answer, except in an Adjournment debate. As I said in my answers to the hon. Gentleman’s hon. Friends at the beginning of Question Time, the Government take domestic violence every bit as seriously as the previous Government. It is worth noting, however, that the Domestic Violence, Crime and Victims Act 2004 included a power to introduce restraining orders. Until I reminded the then Government during the course of debates on the Coroners and Justice Act 2009 of those powers, they did nothing about introducing restraining orders for four or five years. Their record was therefore rather patchy.
Mr David Hanson (Delyn) (Lab)
1. What discussions the Electoral Commission has had with Ministers on timing of the next parliamentary boundary review.
Mr Gary Streeter (South West Devon)
The Electoral Commission has no statutory responsibilities in relation to parliamentary constituency boundaries, which are the responsibility of the four boundary commissions for the United Kingdom. The Electoral Commission has therefore had no discussions with Ministers about the timing of the next parliamentary boundary review.
Mr Hanson
Will the hon. Gentleman make sure that the Electoral Commission makes representations to boundary commissioners and, indeed, to Ministers to ensure that before any boundary review takes place, registration in constituencies rises and that activity is under way to increase it so that the 3.5 million people who are missing are put back on the register, and that any future boundaries truly reflect those who live within constituency boundaries?
Mr Streeter
I will obviously pass on the right hon. Gentleman’s comments to the Electoral Commission but, as I said, it has no responsibility for the boundary review. It is, however, concerned about low voter registration, and it estimates that between 8% and 9% of the eligible population in England and Wales is not registered. It is working with electoral registration officers and others to try to improve the position.
Diana R. Johnson (Kingston upon Hull North) (Lab)
2. What progress the Church of England has made on proposals to enable women to be consecrated as bishops.
The Second Church Estates Commissioner (Tony Baldry)
Before I answer that question, may I pay tribute to my predecessor, the hon. Member for Middlesbrough (Sir Stuart Bell)? He has been the longest serving Second Church Estates Commissioner ever, and he did an excellent job. The legislation to enable women to become bishops reaches the General Synod’s equivalent of Report early next month in York. Depending on what is decided there, the legislation will then go to the 44 diocesan synods, and I understand that the earliest date that the General Synod can take a final decision, and when the matter can eventually come before the House, is 2012.
Diana R. Johnson
I welcome the hon. Gentleman to his new role. Does he not agree that the intervention of the two archbishops, with their proposal on the legislation to enable women to become bishops, will create a two-tier system of bishops? Women will no doubt be on the lower tier, and does that not send out completely the wrong message from the established Church of this country about the role of women bishops?
Tony Baldry
I thank the hon. Lady for her kind words at the beginning of her question. There are clear majorities in the General Synod in favour of women becoming bishops, but, as the proposals by the Archbishops of Canterbury and York yesterday demonstrated, there are still efforts to try to find ways to reconcile those who have deep-held opposition to the measure. Under legislation, it is important that the Church decides the way forward, and we should give it the space to do so. However, it is also very important that the Church hears the voices of this House about how we see those matters, because ultimately the issue will have to come back to this House.
Miss Anne McIntosh (Thirsk and Malton) (Con)
3. What recent representations the Church Commissioners have received on the rates of value added tax applicable to church repairs.
Tony Baldry
The General Synod at its February meeting made it clear how important it feels the listed places of worship scheme is. The scheme has managed to rebate some £12 million back to listed churches each year, and that is particularly important when a system has not yet been found for the European Union to remove VAT on repairs to listed places of worship.
Miss McIntosh
May I congratulate my hon. Friend on his appointment and pay tribute to his predecessor? Will my hon. Friend look at removing the anomaly between the high rate of VAT on church repairs and the zero rate of VAT on new buildings? Will he, indeed, campaign for a lower rate of VAT throughout the European Union—[Interruption.]
Mr Speaker
Order. Before the hon. Gentleman replies, I must say that there is still quite a hubbub from Government Back Benchers, and it is being contributed to by members of the Government. Surely they want to hear the answers from the Second Church Estates Commissioner.
Tony Baldry
I remind any colleagues interrupting that it was Gladstone who observed that the most important business of the House was Prayers at the start of the day.
My hon. Friend has been an assiduous campaigner in supporting repairs for church buildings, and the simple fact is that each year the Church of England spends £110 million on repairing and renovating listed churches. The vast majority of that money comes from church congregations and local communities, and, even in these straitened times, we have to come to a collective view on whether we are going to maintain that very important part of our national fabric and heritage.
Ann McKechin (Glasgow North) (Lab)
4. What discussions the Electoral Commission plans to hold with electoral registration officers in Scotland on the conclusions of its recent report on unregistered voters.
Mr Gary Streeter (South West Devon)
The Electoral Commission is concerned about the levels of voter registration in the United Kingdom, including Scotland, and it has met the electoral registration officers who took part in its recent research. It has met also all electoral registration officers in Scotland to discuss the recent findings and to seek improvements in Scotland’s registration levels.
Ann McKechin
I am grateful to the hon. Gentleman for his reply. He will be aware that the report revealed that more than 100,000 of Glasgow’s citizens were not registered. That is three times the entire electorate of Orkney and Shetland. Will the Electoral Commission request an urgent meeting with the Secretary of State for Scotland to ensure that proper resources are now provided as a matter of urgency in order to resolve that disgraceful position?
Mr Streeter
I shall certainly pass on the hon. Lady’s comments to the Electoral Commission, but it is already working with electoral registration officers in Glasgow. She is right to point out that the recent research demonstrated worrying levels of voter registration, and it seems that that has been going on for some time. Everyone is working hard to try to put that matter right, but the primary focus is on the electoral registration officers in Glasgow. However, I shall pass her comments on to the Electoral Commission.
Dr Alan Whitehead (Southampton, Test) (Lab)
5. What recent representations the Electoral Commission has received on whether ballot papers may be issued to those within the precincts of polling stations at 10 pm on polling day who signify their intention to vote.
Mr Streeter
The Electoral Commission informs me that it has received representations from voters, candidates, political parties, returning officers, Members of Parliament and professional bodies regarding queues at some polling stations on 6 May. In its urgent report, published two weeks after the general election, the commission identified a total of 27 polling stations in 16 constituencies where it was able to confirm that there were problems with queues at the close of poll. At least 1,200 people were affected. The commission has recommended that the law should be changed to make it clear that any elector who is entitled to vote and who is in the queue to enter the polling station at the close of poll will be allowed to vote. This will require primary legislation.
Dr Whitehead
I thank the hon. Gentleman for his answer. He is also aware that the Electoral Commission has indicated that legislation to ensure that voters within the precinct receive a ballot paper could take the form of a one-clause piece of legislation—an amendment to the Representation of the People Act 2000. Will he press the Government to ensure that time is made available for this urgent piece of legislation early in this Session to ensure that those who present themselves for voting at a polling station do indeed get their ballot papers?
Mr Streeter
It is not for me to press the Government on any issue, but I am sure that those who are sitting on the Front Bench today will have heard the hon. Gentleman’s representations. This is a matter of concern. The Electoral Commission is of the view that primary legislation is required; and certainly, in its discussions with the Government, it will be urging them to respond in an appropriate manner.
Jessica Morden (Newport East) (Lab)
6. What recent discussions the Church Commissioners have had with the Chancellor of the Exchequer on the operation of the listed places of worship scheme.
The Second Church Estates Commissioner (Tony Baldry)
Members of the Archbishops Council’s church buildings division have already had initial, very useful meetings with Ministers in the Department for Communities and Local Government and with Treasury Ministers, and we hope that those constructive meetings will continue.
Jessica Morden
I have had many representations from local churches whose congregations are struggling to meet the cost of repairs and are dependent on this scheme continuing. In his discussions with the Government, will the hon. Gentleman emphasise that the beauty of the scheme, which was brought in by the previous Government, is that it applies to all listed places of worship, not just those that are eligible for things such as the heritage lottery grant?
Tony Baldry
The hon. Lady makes a good point. As I said in my reply to my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), as a society we have to take a decision about how we maintain what is a very important part of our national built heritage. There are 16,000 parish churches throughout this country. English Heritage estimates that it would cost £800 million a year to maintain them properly; at present, we are spending only about £100 million, most of which comes from local communities and congregations.
Peter Bottomley (Worthing West) (Con)
7. When the responsibilities of the Second Church Estates Commissioner in respect of this House were last reviewed.
Tony Baldry
I am beginning to get to grips with the responsibilities of this post, which was established by the Ecclesiastical Commissioners Act 1850. I would say at this stage that I will try to have the same broad approach to answering questions on behalf of the Church as did my predecessor. I hope that I can be a helpful conduit between the Church and this House, and this House and the Church.
Peter Bottomley
My hon. Friend is admirably suited to following the hon. Member for Middlesbrough (Sir Stuart Bell) in this post. Will he pass back to the Synod the fact that we look forward in this House to having bishops chosen on merit, recognising that sex is not merit and that the Synod can throw out proposals that it does not like?
Tony Baldry
As I said in response to an earlier question, it is very important that the General Synod and the Church should hear the voices of this House, and I am sure that they will have heard, and will hear, the voice of my hon. Friend.
John Mann (Bassetlaw) (Lab)
8. What recent representations the Electoral Commission has received on the adequacy of its powers to investigate donations from overseas to political parties.
Mr Gary Streeter (South West Devon)
The Political Parties and Elections Act 2009 strengthens the commission’s investigatory powers, subject to the necessary secondary legislation, which is currently before Parliament. The commission has recently consulted on its proposed enforcement policy, which sets out how it intends to exercise those powers, and has received a number of representations in response to the consultation.
John Mann
Michael Ashcroft and his pals spent £250,000 trying to remove me from my seat. [Interruption.] I am pleased to report to the House that Labour increased its majority. Why is the Electoral Commission unable to find out how much of Ashcroft’s money comes from abroad, why does the Tory party refuse to help it, and why does the commission not have the powers to hold the Tory party accountable for its failure to reveal precisely where the Ashcroft money comes from?
Mr Streeter
In all the hubbub, I could not quite hear whether the hon. Gentleman was saying Lord Ashcroft or Lord Paul.
The hon. Gentleman knows that individual investigatory matters are not brought before the Speaker’s Committee. I am aware, however, that he has made a complaint, and the Electoral Commission will respond to it in due course.
Andrew George (St Ives) (LD)
9. What recent representations the Electoral Commission has received on proposals for the review of parliamentary constituency boundaries.
Mr Streeter
Sorry for the delay, Mr Speaker; I thought we had moved on to the Budget.
The Electoral Commission informs me that it has received a number of representations from the public, elected representatives and others about proposals for the review of parliamentary constituency boundaries. However, as the commission has no statutory responsibilities in relation to those boundaries, any representations that it has received on the proposals have been referred to the relevant parliamentary boundary commission.
Andrew George
I am grateful to the hon. Gentleman. Further to the point made earlier by the right hon. Member for Delyn (Mr Hanson), given the fact that there are variations in registration across the country, will the hon. Gentleman make representations to Ministers in view of the impact that those variations will have on future boundaries?
Simon Hughes (Bermondsey and Old Southwark) (LD)
10. What recent representations the Electoral Commission has received on issuing ballot papers to voters who arrive at polling stations before the time specified for the close of polls at a general election.
Mr Streeter
The Electoral Commission informs me that it has received representations from voters, candidates, political parties, returning officers, Members of Parliament and professional bodies regarding queues at some polling stations on 6 May. In its urgent report published two weeks ago after the general election, the commission identified a total of 27 polling stations in 16 constituencies where it was able to confirm that there were problems with queues at the close of the poll.
Simon Hughes
Will the hon. Gentleman ask his Committee to write urgently to the Ministers responsible, so that we can put right the legislation that currently prevents people who turn up to vote in time from being able to do so? That could and ought to be done this year, and with the Committee’s support it will be.
Mr Streeter
It is certainly the view of the Electoral Commission that the matter can in part be put right through a change in the law. The commission is encouraging the Government to introduce appropriate primary legislation.
Petition
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I have a petition from my constituent Erica MacDonald of the Isle of Lewis, who has raised her concerns about the effects of disproportionate petrol and diesel costs under successive Governments.
The petition states:
To the House of Commons, the petition of Erica MacDonald on behalf of the consumers of fuel in the Outer Hebrides,
Declares that the people of the Outer Hebrides are economically disadvantaged by the universal road fuel taxation programme and that taxing families and businesses in the rural economy of Na-h-Eileanan an Iar at the same rate as businesses and families in the urban economies of Edinburgh or London is economically unsound and damaging to the economy.
The Petitioners therefore request that the House of Commons urge the Government to introduce a fuel duty regulator—
a rural fuel duty derogation—
in the Emergency Budget with a view to reducing the tax burden on a fragile rural economy.
And the Petitioners remain, etc.
[P000837]
Speaker’s Statement
Mr Speaker
I will now announce the result of the ballot held today for the election of the Chair of the Backbench Business Committee. Natascha Engel received 202 votes; Sir Alan Haselhurst received 173 votes. Natascha Engel is elected Chair of the Committee, and I congratulate her upon her election.
Ways and Means
Financial Statement
(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Deputy Speaker (Mr Lindsay Hoyle)
Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that at the end of the Chancellor’s speech, copies of the Budget resolutions will be available to them in the Vote Office. For the benefit of new Members, I add that it is not appropriate, or allowed, to intervene on either the Chancellor or the Leader of the Opposition.
The Chancellor of the Exchequer (Mr George Osborne)
This emergency Budget deals decisively with our country’s record debts. It pays for the past, and it plans for the future. It supports a strong, enterprise-led recovery, it rewards work and it protects the most vulnerable in our society. Yes, it is tough, but it is also fair.
This is an emergency Budget, so let me speak plainly about the emergency that we face. The coalition Government have inherited from their predecessors the largest budget deficit of any economy in Europe, with the single exception of Ireland. One pound in every four we spend is being borrowed. What we have not inherited from our predecessors is a credible plan to reduce their record deficit—this at the very moment when fear about the sustainability of sovereign debt is the greatest risk to the recovery of European economies. Questions that were asked about the liquidity and solvency of banking systems are now being asked about the liquidity and solvency of some of the Governments who stand behind those banks. I do not want those questions ever to be asked of this country. That is why we have set a brisk pace since taking office.
In the past seven weeks, we have announced, conducted and completed a review of this year’s spending and identified £6 billion of savings. We have announced, established and received the report of the independent Office for Budget Responsibility. The power that the Chancellor has enjoyed for centuries to determine the growth and fiscal forecasts now resides with an independent body immune to the temptations of the political cycle. And we have examined, decided on and in some cases halted the mass of unfunded commitments, IOUs and overcommitted reserves that greeted us on entering office.
This is early, determined action, and it has earned us credibility in international markets. It has meant that our promise to deal decisively with the deficit has been listened to. Market interest rates for Britain have fallen over the past seven weeks, while those of many of our European neighbours have risen. Those lower market interest rates are already supporting our recovery.
But unless we now deliver on that promise of action with concrete measures, that credibility—so hard won in recent weeks—will be lost. The consequence for Britain would be severe: higher interest rates, more business failures, sharper rises in unemployment, and potentially even a catastrophic loss of confidence and the end of the recovery. We cannot let that happen. This Budget is needed to deal with our country’s debts. This Budget is needed to give confidence to our economy. This is the unavoidable Budget.
I am not going to hide hard choices from the British people or bury them in the small print of the Budget documents. The British public are going to hear them straight from me, here at this Dispatch Box. Our policy is to raise from the ruins of an economy built on debt a new, balanced economy, where we save, invest and export; an economy where the state does not take almost half of all our national income, crowding out private endeavour; an economy not overly reliant on the success of one industry, financial services—important as they are—but where all industries grow; an economy where prosperity is shared among all sections of society and all parts of the country. In this Budget, everyone will be asked to contribute. But in return, we make this commitment: everyone will share in the rewards when we succeed. When we say that we are all in this together, we mean it.
The first challenge for this Budget is to set the fiscal mandate—in other words, our overall objective for the public finances. The previous Government had two fiscal rules, one for debt and one for the current Budget. They were supposed to force Chancellors to set aside money in the good years so that they could borrow sustainably when the economy turned down. They completely failed in that task.
As this is the last Budget in which this golden rule will appear, I would like to be the last Chancellor to report on it. We are set to miss the golden rule in this cycle by £485 billion. We now know the intrinsic weakness in backward-looking fiscal rules: past prudence was an excuse for future irresponsibility; and the judge of the rules was the very same Chancellor they were supposed to be restraining. We propose a more credible approach.
Our fiscal mandate will be forward-looking, and the judge of whether we are on course to meet it will be not the Chancellor, but the independent Office for Budget Responsibility. On behalf of the House, I thank Sir Alan Budd and his fellow committee members, Geoffrey Dicks and Graham Parker, for their highly professional effort. In the space of just seven weeks, I believe we have established the Office for Budget Responsibility as a permanent improvement to economic policy making and the transparency of government. The legislation to put the office on a statutory footing will now be drawn up and I hope it will command all-party support.
I now turn to what that fiscal mandate will be. The view of the international community was clearly expressed at the latest G20 meeting, and we will be taking the same message to the G20 summit in Toronto this weekend. Surplus countries should do more to support global demand. So we welcome China’s announcement to come off the dollar peg. At the same time, the international community believes countries with high fiscal deficits need to accelerate the pace of fiscal consolidation. That is precisely what we now propose to do. The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget. This mandate is structural, to give us flexibility to respond to external shocks; current, to protect the most productive public investment; and credible, because the OBR, not the Chancellor, will decide on the output gap.
In order to place our fiscal credibility beyond doubt, this mandate will be supplemented by a fixed target for debt, which in this Parliament is to ensure that debt is falling as a percentage share of GDP by 2015-16. I can confirm that, on the basis of the measures to be announced in this Budget, the judgment of the OBR, which we published today, is that we are on track to meet those goals. Indeed, I can tell the House that, because we have taken a cautious approach, we are set to meet them one year earlier, in 2014-15. To put it another way, we are on track to have debt falling and a balanced structural current budget by the end of this Parliament.
At this point in the Budget speech, the Chancellor would normally read out their own set of economic and fiscal forecasts, and they normally tell the House more about the political cycle than the economic one. Those days have gone for good. Instead, I will give the House the latest forecasts from the independent OBR, taking into account the measures in the Budget.
Growth in the UK economy for the coming five years is estimated to be 1.2% this year and 2.3% next year; then 2.8% in 2012 followed by 2.9% in 2013; and then 2.7% in both 2014 and 2015. Consumer price inflation is expected to reach 2.7% by the end of the year before returning to target in the medium term, and let me take this opportunity to confirm that the inflation target remains at 2% as measured on the consumer prices index.
The unemployment rate is forecast by the OBR to peak this year at 8.1% and then fall for each of the next four years to reach 6.1% in 2015. Some have suggested that there is a choice between dealing with our debts and going for growth. That is a false choice. The crisis in the eurozone shows that unless we deal with our debts, there will be no growth. These forecasts demonstrate that a credible plan to cut our budget deficit goes hand in hand with a steady and sustained economic recovery, with low inflation and falling unemployment. What is more, the forecast shows a gradual rebalancing of the economy, with business investment and exports playing a greater role and Government spending and debt-fuelled consumption a smaller role—a sustainable private sector recovery built on a new model of economic growth, instead of pumping the debt bubble back up.
Part of the reason, as we have always argued, is that tighter fiscal policy can enable interest rates to stay lower for longer. As the Governor of the Bank of England confirmed this week at the Mansion House:
“If prospects for growth were to weaken, the outlook for inflation would probably be lower and monetary policy could then respond”.
The subject of interest rates brings me to say this about attempts to compare directly last week’s forecasts with this one. As the OBR notes in today’s Budget document, any such comparison would be “misleading”, because last week’s forecast included the lower interest rates that expectations of this week’s Budget have already brought about. So, as Sir Alan has written, actually to follow the fiscal path set out by the previous Government
“would lead to higher interest rates and…lower economic activity”
than his forecast showed.
Let me now turn to the measures in the Budget designed to deliver this accelerated reduction in the structural deficit. The coalition believes that the bulk of the reduction must come from lower spending rather than higher taxes. The country has overspent; it has not been under-taxed. Our approach is supported by the international evidence, compiled by the OECD, the International Monetary Fund and others, which found that consolidations delivered through lower spending are more effective at correcting deficits and boosting growth than consolidations delivered through tax increases.
That is the origin of our 80:20 rule of thumb—roughly, 80% through lower spending and 20% through higher taxes. This evidence has been available in the Treasury for some time, but was published only in a redacted form by the previous Government. We intend to follow international best practice and the Treasury’s own analysis. My measures today mean that 77% of the total consolidation will be achieved through spending reductions and 23% through tax increases. I believe this gets the balance right.
I now turn to the OBR’s fiscal forecasts. As a result of the measures I will announce today, public sector net borrowing will be £149 billion this year, falling to £116 billion next year, £89 billion in 2012-13 and £60 billion in 2013-14. By 2014-15, borrowing reaches £37 billion—exactly half the amount forecast in the March Budget—and in 2015-16, borrowing falls further to £20 billion. As a share of the economy, borrowing will fall from 10.1% of GDP this year to just 1.1% in 2015-16.
We now know, thanks to the OBR forecast, that the structural current deficit is significantly larger than we were told—0.8% of GDP or £12 billion higher next year. Thanks to my action today, the structural current balance will be minus 4.8% of GDP this year. That deficit will then be eliminated to plus 0.3% in 2014-15 and plus 0.8% in 2015-16. In other words, it will be in surplus.
Public sector net debt, as a share of GDP, will be 62% this year, before peaking at 70% in 2013-14. Because of our action today, it then begins to fall, to 69% in 2014-15 and then 67% in 2015-16, whereas under the plans we inherited, debt would have increased in every full year of this Parliament. The House will want to know that, as a result of our measures, debt interest payments will be £3 billion a year lower by the end of this Parliament than they would have been.
I have one further announcement to make regarding macro-economic policy. I can confirm that, as set out in the coalition agreement, the Government will not be joining the euro in this Parliament. I have therefore abolished the Treasury’s Euro Preparations Unit—yes, one does exist—and the official concerned has been redeployed to more productive activities.
Let me now turn to my other decisions on public spending. The state today accounts for almost half of all national income, which is completely unsustainable. All parties in the House now accept that spending needs to be cut, and we have made a start, but we need to go much further if we are to meet our fiscal mandate and see debt falling by the end of this Parliament. Today we are setting out the overall path of public spending that will achieve that.
Let me begin with current spending. Current expenditure will rise from £637 billion in 2010-11 to £711 billion in 2015-16. Although this is an increase, the House should remember that we inherit a rapidly rising bill for debt interest—a bill that will not start falling until the debt itself starts to fall. Debt interest payments alone will cost the taxpayer a quarter of a trillion pounds over this period. One of my predecessors used to call this spending the costs of social failure, but I say it is the price of economic failure. Compared with the plans set out by the previous Government, I am announcing today additional current expenditure reductions of £30 billion a year by 2014-15. The plans for public investment we inherit from our predecessors envisage a steep drop from £69 billion last year to £46 billion in 2014-15.
After the initial in-year reductions, the question we have been faced with is how much further to go on capital spending. Well-judged capital spending by Government can help provide the new infrastructure our economy needs to compete in the modern world. It supports the transport links we need to trade our goods, the equipment we need to defend our country and the facilities we need to provide quality public services. I think an error was made in the early 1990s when the then Government cut capital spending too much—perhaps because it is easier to stop new things being built than to cut the budgets of existing programmes.
We have faced many tough choices about the areas in which we should make additional savings, but I have decided that capital spending should not be one of them. There will be no further reductions in capital spending totals in this Budget, but we will make careful choices about how that capital is spent. The absolute priority will be projects with a significant economic return to the country. Assessing what those projects are will be an important part of the autumn spending review.
The Government can also dispose of assets that should rightly be in private ownership. Yesterday, we launched the sale of High Speed 1. We will look at how to dispose of our shareholding of NATS, the air traffic control services. We will aim to sell the student loan book and look at options around early repayment for individuals, and we will resolve the future of the Tote—at last. My right hon. Friend the Secretary of State for Business, Innovation and Skills will also facilitate a private capital injection into the Royal Mail Group, something that has been long overdue.
Before I turn to discuss departmental budgets, I need to say something first about another area of spending—the civil list. The civil list is the Government’s support for Her Majesty the Queen in her duties as Head of State, and I am sure that everyone in this House will want to join me in recognising the Queen’s loyal service and immense contribution to public life. The amount provided by the civil list has remained unchanged over the past 20 years, at £7.9 million. This has required careful management. Because of inflation, the annual payment is today worth only a quarter of what it was 20 years ago. I can announce that, with the full agreement of the Queen, the civil list will remain frozen at £7.9 million for the coming year, and I will propose a new means of consolidated support for Her Majesty for the future at a later date.
In addition, the royal household has agreed that, in future, civil list expenditure will be subject to the same audit scrutiny as other Government expenditure, through the National Audit Office and the Public Accounts Committee of this House of Commons. I believe that this will mean clear accountability in this House and that it will strengthen public confidence.
Let me turn now to my decisions on departmental expenditure limits. In recent years, Chancellors have been reluctant to explain what their total spending projections will mean for Whitehall Departments, and that is entirely self-defeating. It normally takes people at the Institute for Fiscal Studies less than 24 hours to work it out for themselves and let the public know the truth. I will save them the effort.
We have inherited from the previous Government spending plans to cut departmental budgets by £44 billion a year by 2014-15. This implies an average real reduction for unprotected Departments of 20%—not that this was ever said, or a single pound of cuts to programmes even identified. Because the structural deficit is worse than we were told, my Budget today implies further reductions in departmental spending of £17 billion by 2014-15. We have committed to providing the NHS with real increases throughout the Parliament, and we will honour our international aid obligations to the poorest in the world. Once these are taken into account, the Budget figures imply that other Departments will face an average real cut of around 25% over four years. Clearly, if we can find any additional savings to social security and welfare beyond those that I will outline shortly, then that will greatly relieve the pressure on these Departments and that 25% figure.
Of course, not all Departments will receive the same settlement. I recognise, for example, the particular pressures on our education system and on defence. Final departmental settlements, and the final split between departmental expenditure and annually managed expenditure on welfare, will be set in the spending review. Rather than follow the usual practice of keeping the date of that review a secret until a few weeks before it happens, let me tell the House that it will be presented on Wednesday 20 October.
A further way that we can ease the pressure on public services is to agree that we need to restrain public sector pay in these difficult times, and we need to do something about the spiralling costs of public sector pensions. Many millions of people in the private sector have in the past couple of years seen their pay frozen, their hours reduced and their pension benefits restricted. They have accepted that, because they knew that the alternative in many cases was further job losses. The public sector was insulated from those pressures but now faces a similar trade-off. I know that there are many dedicated public sector workers who work very hard and did not cause this recession, but they must share the burden as we pay to clean it up. The truth is that the country was living beyond its means when the recession came, and if we do not tackle pay and pensions, more jobs will be lost.
That is why the Government are asking the public sector to accept a two-year pay freeze, but we will protect the lowest paid. In the past, I have said that we would be able to exclude the 1 million public sector workers earning less than £18,000 from a one-year pay freeze. Today, because we have had to ask for a two-year pay freeze, I extend the protection to cover the 1.7 million public servants who earn less than £21,000 a year. Together, they make up 28% of the public sector work force. They will each receive a flat pay rise worth £250 in both years, so that those on the very lowest salaries will get a proportionately larger rise. In recognition of our armed services who are risking their lives for us all in Afghanistan, we have also doubled the operational allowance to £4,800. We have asked Will Hutton to draw up plans for fairer pay across the public sector without increasing the overall pay bill, so that those at the top of organisations are paid no more than 20 times the salaries of those at the bottom. The culture of excessive pay at the very top of the public sector simply has to end.
We also need to deal with the cost of public service pensions. This is one of the greatest long-term pressures facing our nation’s finances. The OBR today publishes figures showing that by 2015-16 we will be spending over £10 billion a year simply to meet the gap between pension contributions and payments to the unfunded pensions that they support. That is why I have asked John Hutton to carry out an investigation. As the Work and Pensions Secretary in the previous Government, he brings experience and an unbiased approach. He will provide an interim report in September this year to help inform any decisions required for the spending review, and a full report in time for next year’s Budget.
The Government will also accelerate the increase in the state pension age to 66. A call for evidence will be launched later this week, and we will consult on whether to phase out the default retirement age.
Let me now address the largest bill in Government—the welfare bill. It is simply not possible to deal with a budget deficit of this size without undertaking lasting reform of welfare. It has been a key component of most successful fiscal consolidations elsewhere in the world and, around Europe, countries are now tackling their benefits bill. Germany has already announced €30 billion-worth of cuts to welfare spending, and others are taking similar steps.
Here in Britain, the explosion in welfare costs contributed to the growing structural budget deficit in the middle part of this decade. Total welfare spending has increased from £132 billion 10 years ago to £192 billion today. That represents a real-terms increase of a staggering 45%, and it is one of the reasons why there is no money left. It has also left an increasing number of our fellow citizens trapped on out-of-work benefits for the whole of their lives. A greater proportion of our children grow up in workless households than any other country in Europe. We are wasting the talents of millions, and spending billions on it in the process, so we will increase the incentives to work, and reduce the incentives to stay out of work. We will focus our benefits more towards those in need, and we will end some one-off payments that the country cannot afford any more.
First, we need to put the whole welfare system on a more sustainable and affordable footing. So from next year, with the exception of the state pension and pension credit, we will switch to a system where we uprate benefits, tax credits and public service pensions in line with consumer prices rather than retail prices. The consumer prices index not only reflects everyday prices better, but it is of course now the inflation measure targeted by the Bank of England. This will save over £6 billion a year by the end of the Parliament. I believe that this is a fairer approach than a benefits freeze. In time for the next Budget, we will also publish proposals to move the indexation in the tax system from RPI to CPI in a way that protects revenues.
Tackling spiralling welfare costs means also addressing the bill for tax credits. Spending on tax credits has increased from £18 billion in 2003 to £30 billion this year, and that is an unsustainable rise. There are over 150,000 families with incomes over £50,000 receiving tax credits. Taking into account the various disregards means that families earning up to £83,000 are eligible for this means-tested benefit. The country simply cannot afford this any more.
We need to target tax credits on those who need the help most, so we will reduce payments to families earning over £40,000 next year and then align the thresholds for the child and family element. We will increase the taper rate at which awards are reduced, and remove the baby element for new children from April 2011. We will remove the one-off payment to new workers over 50 from April 2012, and reduce the income disregard from £25,000 to £10,000, and then to £5,000. We will introduce an income disregard for income falls, reduce backdating from three months to one month, and we will not introduce the pre-election promise of a new tax credit element for infants.
Sadly, there are further benefits that this country cannot afford. We will abolish the poorly targeted health in pregnancy grant from April 2011. At the same time, we will restrict the Sure Start maternity grant to the first child only, and we will expect lone parents to look for work when their youngest child goes to school. We have decided that we simply cannot afford to extend the saving gateway, and we have also had to take a difficult decision about child benefit. I have received many proposals about this benefit. Some have suggested that we means-test it; others that we tax it. All these proposals involve issues of fairness.
The benefit is usually claimed by the mother. To tax it would mean that working mothers received less than the non-working partner of higher earners. To means-test it, we would have to create a massively complex new system to assess household incomes. I do not propose to do those things. I know that many working people feel that their child benefit is the one thing that they get without asking from the state. So instead, to control costs, we have decided to freeze child benefit for the next three years. This is a tough decision, but I believe that it strikes the right balance between keeping intact this popular universal benefit, while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.
That brings me to another universal benefit: disability living allowance. It is right that people who are disabled are helped to lead a life of dignity. We will continue to support them, and we will not reduce the rate at which this benefit is paid. However, three times as many people claim it today than when it was introduced 18 years ago, and the costs have quadrupled in real terms to more than £11 billion a year, making it one of the largest items of Government spending. We will introduce a medical assessment for DLA from 2013, which will be applied to new and existing claimants. For people with disabilities, that will be a simpler process than the complex forms that they have to fill out at present. That way, we can continue to afford paying this important benefit to those with the greatest needs, while significantly improving incentives to work for others.
Spending on housing benefit has risen from £14 billion 10 years ago to £21 billion today. That is close to a 50% increase over and above inflation. The costs are completely out of control. We now spend more on housing benefit than we do on the police and on universities combined. Among these enormous numbers for total spending, there are some equally enormous individual claims. Today there are some families receiving £104,000 a year in housing benefit. The cost of that single award is equivalent to the total income tax and national insurance paid by 16 working people on median incomes. It is clear that the system of housing benefit is in dire need of reform.
We will introduce that reform by resetting and restricting local housing allowances; uprating deductions; reducing certain awards; re-adjusting support for mortgage interest payments; and limiting social tenants’ entitlement to appropriately sized homes. Lastly, we will for the first time introduce maximum limits on housing benefit, from £280 a week for a one-bedroom property to £400 a week for a four-bedroom property or larger. Our package today will reduce the costs of housing benefit by £1.8 billion a year by the end of the Parliament—or by just 7% of the total budget—but it will improve incentives to work. At the same time, we will target more resources at those who need them most by increasing the budget for discretionary housing payments to deal with hardship cases by £40 million, and from now we will cover the cost of an additional room for those claimants with a disability who need a carer.
Taken together, all those measures to control the costs of welfare will save the country £11 billion by 2014-15. Governments in the past have said that they were going to get to grips with welfare and to reward work. We are delivering. My right hon. Friend the Secretary of State for Work and Pensions will bring forward proposals to further reform the benefits system as a tool to support work and encourage aspiration in time for the autumn spending review.
But as I said right at the start of this speech, this Budget is not just about paying for the bills of the past; it is also about planning for the future. It is my deeply held belief that a genuine and long-lasting economic recovery must have its foundations in the private sector. That is where the jobs will come from, and we will do absolutely everything to support their creation. We argued that imposing a jobs tax was the last thing that Britain needed in a recovery, and the businesses of the country agreed with us, so we will adopt a different approach. We will make it cheaper for companies to employ people. From April 2011, the threshold at which employers start to pay national insurance will rise by £21 a week above indexation. The cost of hiring people on incomes lower than £20,000 will be less than it is today; and in one move we will have lifted 650,000 employees out of this tax altogether.
But if we are to have a sustained, job-creating recovery, we need more than that. We need to see growth not just in one corner of our country, nor in just one sector, for we live in a world where the competition for business is growing ever more intense. I want a sign to go up over the British economy that says “Open for business”, and this is how I propose to do it. Corporation tax rates are compared around the world, and low rates act as adverts for the countries that introduce them. Our current rate of 28p is looking less and less competitive, so we will do something about it. Next year we will cut corporation tax by 1%, to 27p in the pound, the year after we will cut it again by 1%, and again the year after, and again the year after that—four annual reductions in the rate of corporation tax that will take it down to just 24%. That will give us the lowest rate of any major Western economy, one of the lowest rates in the G20 and the lowest rate that this country has ever known.
At the same time, we will agree with businesses a long-term approach to the taxation of foreign profits, the treatment of intellectual property and the proposals from James Dyson on research and development. We will also reduce the small companies tax rate. The previous Government were planning to increase that tax rate next year to 22%, at the very time when we should be encouraging small businesses to grow. Instead, we will cut the rate to 20%, which will benefit some 850,000 companies. And because small businesses are struggling to obtain credit at the moment, I will extend the enterprise finance guarantee scheme, which supports small and medium-sized businesses’ access to lending. Those changes will benefit at least 2,000 small businesses.
My right hon. Friend the Secretary of State for Business, Innovation and Skills will come forward in the summer with further proposals on expanding the availability of credit, to ensure that the economic recovery is properly financed. Also, there are many small businesses in the tourism industry today. To help them, I am reinstating the favourable tax rules for furnished holiday lettings, which our predecessors had planned to repeal. I can also announce that there will be measures to cancel certain backdated business rates bills, including for many businesses in ports.
In the current climate, with the deficit the size that it is, all those reductions in tax must be more than paid for by other changes to business taxation, so we will not go ahead with the poorly targeted tax relief for the video games industry. There will be a small reduction in the rates for capital allowances, which will remain broadly in line with economic depreciation. For the majority of plant and machinery assets, the rate of the allowance will fall from 20% to 18%, while the allowance for longer-lived assets will fall from 10% to 8%. In other words, businesses will still receive full tax relief on their qualifying expenditure, but over a longer time frame.
I have also decided to reduce the annual investment allowance to £25,000 a year, to ensure that support is focused on investment by smaller firms. Over 95% of businesses will continue to have all their qualifying plant and machinery expenditure fully covered by this relief. Manufacturing as a whole will pay less tax. I have listened to the argument that changing those crucial allowances during the early stages of the economic recovery could be disruptive, so I will delay the reductions in capital and investment allowances to April 2012. That will give businesses the extra early advantage of the tax cuts, which will start to come in from next year.
Our reforms today will also mean a greater contribution from the banking sector—one that far outweighs any benefit that it will receive from the lower tax rates that I have just announced. In putting the nation’s finances in order, we must remember that this was a crisis that started in the banking sector. The failures of the banks imposed a huge cost on the rest of society, so I believe that it is fair and right that in future banks should make a more appropriate contribution, reflecting the many risks that they generate. Such an approach has already been recommended by the International Monetary Fund. We are exploring the costs and benefits of a financial activities tax on profits and remuneration, and we will work with international partners to secure agreement, but today the British Government take the initiative in this global debate about the appropriate risks and rewards in international banking.
From January 2011, we will introduce a bank levy. It will apply to the balance sheets of UK banks and building societies, and to the UK operations of banks from abroad. There will be deductions for tier 1 capital and insured retail deposits, and a lower rate for longer maturity funding. Smaller banks with liabilities below a certain level will not be liable for the levy. Once fully in place, we expect the levy to generate over £2 billion of annual revenues.
There are those who have argued whether we should wait until every country in the G20 introduces a bank levy. I believe that is not reasonable or fair. Indeed, I can tell the House that the French and Germans have joined the UK today in committing to introduce a bank balance sheet levy. In a joint statement, our three Governments have pledged to ensure our banks make a fair contribution to reflect the risks they pose.
The message I hear from those in the business community is unequivocal: they want certainty and stability from Government so that they can start the long process of rebuilding their businesses. Today, I am offering them just that—a five-year plan to reform the corporation tax system, with lower rates, simpler rules and greater certainty. It provides the most fundamental and far-reaching reform of our corporate tax regime in generations. It offers a stable and consistent platform for a private sector recovery. It is a balanced package, which will send a clear signal that Britain is open for business. It will help companies invest, attract foreign investment and boost growth. Above all, it will help create jobs. By increasing the amount of business investment by an additional £13 billion between now and 2016, these reforms will help rebalance the economy away from household debt and Government consumption.
We will also take forward our plans to create a green investment bank, bringing forward private investment in clean energy and green technologies; and we will also need investment in our digital infrastructure. But the previous Government’s landline duty is an archaic way of achieving this, hitting 30 million households who happen to have a fixed telephone line. I am happy to be able to abolish this new duty before it is even introduced. Instead, we will support private broadband investment, including to rural areas, in part with funding from the digital switchover underspend within the television licence fee.
Over the past decade, the British economy has become deeply unbalanced, and nowhere are those disparities as marked as between the different regions of Britain. Between 1998 and 2008, for every private sector job generated in the north and the midlands, 10 were created in London and the south. We need a new approach—one that empowers local leadership, generates local economic growth and promotes job creation in all parts of the country, including Wales and Scotland. We will publish a White Paper on how we intend to deal with these issues later in the summer, followed by a consultation paper on rebalancing the economy of Northern Ireland.
As a step towards rebalancing our economy, we are today announcing the support for those regions more dependent on the public sector. First, even when money is so short, we will commit to the following important regional transport projects: the upgrade of the Tyne and Wear metro; the extension of the Manchester Metrolink; the redevelopment of Birmingham New Street station; and improvements to the rail lines to Sheffield and between Liverpool and Leeds.
Secondly, we will create a large regional growth fund to provide finance for regional capital projects over the next two years. We will announce the details shortly, but priority will be given to projects that have the greatest impact on improving innovation and creating jobs.
Thirdly, we will shortly announce a new tax scheme to help create new businesses in those regions where the private sector is not nearly strong enough. For the next three years, anyone who sets up a new business outside London, the south-east and the eastern region will be exempt from up to £5,000 of employer national insurance payments for each of the first 10 employees hired. We aim to have the scheme up and running by September, but any qualifying new business set up from today will also receive help. The Treasury estimates that some 400,000 new businesses will benefit, ensuring all parts of our country contribute to a more balanced and sustainable economic future.
Let me turn now to some further decisions we have made on taxation. I am someone who believes in the virtues of lower taxation, but the only sustainable route to lower taxes is by first achieving sound public finances. The sovereign debt crisis means we need to the reduce the deficit even more quickly in order to protect our economy. The Office for Budget Responsibility has revealed the size of the structural deficit to be even larger than we feared—£12 billion larger next year.
As a result, this Budget announces a further fiscal tightening of £40 billion a year by the end of this Parliament, including welfare and spending measures, over and above the previous Government’s plans. To achieve that additional tightening while maintaining the right “four-to-one” balance between spending and taxation means that I have to announce further tax rises today.
On 4 January next year, the main rate of VAT will rise from 17.5% to 20%. [Interruption.] The years of debt and spending make this unavoidable. This single tax—[Interruption.]
Mr Deputy Speaker
Order. Will hon. Members calm down? It is important to Members on all sides of the House that they can hear, but more important, the country takes this Budget very seriously, so I call for more calm and a little more restraint.
Mr Osborne
The years of debt and spending made this unavoidable. This single tax measure will by the end of this Parliament generate over £13 billion a year of extra revenues. That is £13 billion that we do not have to find from extra spending cuts or income tax rises. I can also give this House a commitment that we will keep everyday essentials such as food and children’s clothing, as well as other zero-rated items like newspapers and printed books, exempt from VAT over the course of this Parliament. In line with the increase in the main rate of VAT, the higher rate of insurance premium will also rise from 17.5% to 20%, while the standard rate will increase from 5% to 6%.
Let me turn to my decisions on duties. The March Budget included substantial increases in those, and I can tell the House that my Budget includes no new increases in duties on alcohol, tobacco or fuel. We will report back in the autumn on the scope for targeting alcohol duty at the products most associated with binge drinking and under-age consumption. We will explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty, and consult on major changes. This will help us to reduce our carbon emissions. We are examining the impact of sharp fluctuations in the price of oil on the public finances to see if pump prices can be stabilised, and we will also look at whether a rebate for remote rural areas could work.
I have one final announcement on duties. We have decided to reverse the previous Government’s plans to increase the duty on cider by 10% above inflation and the reduction will come into effect at the end of this month—just in time to celebrate England’s progress to the quarter finals, or else to drown our sorrows.
That brings me to council tax. At times like this when money is short, we think all parts of government should work hard to keep costs down, and we want to give councils every incentive to do just that. So we will offer a deal to local authorities in England: if they can keep their cost increases low, then we will help them to freeze council tax for one year from next April. That will mean that the average family will be some £35 better off next year, and every year thereafter. It will be one less rising bill for families to worry about, and it will drive value for money throughout all levels of government.
One of the most chaotic areas of tax that the new Government inherited from their predecessor is the capital gains tax regime. Some of the richest people in this country have been able to pay less tax than the people who clean for them. That is not fair, and it stems from the avoidance activity that has exploited the wider gap between the rate of capital gains tax and the top rates of income tax. Those practices are costing other taxpayers more than £1 billion every year.
It is therefore right, as set out in the coalition agreement, that capital gains tax should increase in order to help create a fairer tax system. I have listened carefully to everyone’s views and considered all the options. My concern has been to balance the competing demands of fairness, simplicity and competitiveness—and I believe my decision gets that balance right. Low and middle-income savers who pay income tax at the basic rate make up over half of all capital gains taxpayers. They will continue to pay tax on their capital gains at 18%. From midnight, taxpayers on higher rates will pay 28% on their capital gains. I have also decided that the annual exempt amount for capital gains tax will remain at £10,100 this year, and will continue to rise with inflation in future years.
I am acutely aware of how important it is to protect the incentives to succeed in business and to innovate, so to promote enterprise, the 10% capital gains tax rate for entrepreneurs, which currently applies to the first £2 million of qualifying gains made over a lifetime, will be extended to the first £5 million of lifetime gains. I asked the Treasury to examine what would have happened if we had increased the rate much further beyond 28%, and its dynamic analysis showed that that would have resulted in smaller total revenues. I also considered in great detail the options presented to me for introducing tapers or indexation allowances, and concluded that the complexity and administration involved would have been self-defeating.
The changes that I have made mean that the capital gains of the majority of taxpayers are protected; that we have a top rate that is in line with those of our international competitors; that we keep the system simple and easy for any taxpayer to understand; and that we reduce the incentives to convert income to capital gains. It is revealing that the great majority of the almost £1 billion of extra receipts that we expect to see as a result of this change will come from additional income tax payments. I believe that that is the right way in which to reform the taxation of capital gains.
Let me say something about the previous Government’s policy to reduce pension tax relief for people on high incomes, due to come in next year. Many businesses are alarmed at the complexity that it will introduce. I have listened to those concerns; however, I must also protect the £3.5 billion of revenues that the policy was set to raise from high-income people. I will therefore work with industry on alternative ways of raising the same amount of revenue, potentially by reducing the annual allowance.
Let me now turn to income tax. A responsible society is one that rewards the efforts of those who choose to work. The income tax system—in particular, the abolition of the 10% rate of income tax—has meant that many people on lower incomes face higher average tax rates. I believe that it is important to lift people out of the income tax system and allow them to keep more of their hard-earned money. It is especially important to make progress in this Budget, in which we are asking so much of so many, and this demonstrates that the coalition Government put fairness first.
In the current system, everyone under the age of 65 is eligible for a tax-free personal allowance of £6,475. That means that many thousands of people have their income taken away from them in tax, only to have to apply to get it back in benefits. That does not reward work. So today I can announce that we will increase the personal allowance by £1,000 in April. People will be able to earn £7,475 before they have to start paying income tax, 23 million people who are basic-rate taxpayers will each gain by up to £170 a year, and 880,000 of the lowest-income taxpayers will be taken out of tax altogether. Higher-rate taxpayers will not benefit from the change, and the higher-rate income tax threshold will have to remain frozen until 2013-14. Our long-term objective remains to increase the personal allowance to £10,000, as set out in the coalition agreement, and we will take real steps towards achieving that objective during the rest of this Parliament.
I do not disguise from the House that the combined impact of the tax and benefit changes that we make today are tough for people. That is unavoidable, given the scale of the debts that our country faces and the catastrophe that would ensue if we failed to deal with them. My priority in putting together this Budget has been to make sure that the measures are fair: that all sections of society contribute, but that the richest pay more than the poorest, not just in terms of cash but as a proportion of income as well. That is far from straightforward when the deficit is this high, and when the burden of reduction must rightly fall on Government spending.
Too often, when countries undertake major consolidations of this kind, it is the poorest—those who had least to do with the cause of the economic misfortunes—who are hit hardest. Perhaps that is a mistake that our country has made in the past. This coalition Government will be different. We are a progressive alliance governing in the national interest, and that requires us to make two final decisions.
First, we will provide lasting help for pensioners. The earnings link was broken by the last Conservative Government, and was never restored through 13 years of a Labour Government. That meant that each year more and more pensioners were drawn into the means test, which punished those who had done the right thing and saved for their retirement. I can announce today that from April next year we will re-link the basic state pension to earnings. Now pensioners can save with confidence. They will also be protected by our new triple lock, which will guarantee each and every year a rise in the basic state pension in line with earnings or prices or a 2.5% increase, whichever is the greater. There will be no more 75p increases in the basic state pension. With this coalition Government, pensioners will have the income to live with dignity in retirement.
Secondly, we will provide additional support for families in poverty. They are among the most vulnerable people in our society, and they need our help. I have decided to increase the child element of the child tax credit by £150 above indexation next year. That is a £2 billion a year commitment to low-income families, and we make it even now, in these difficult times. I can tell the House that the policies in this Budget, taken together, will not increase measured child poverty over the next two years. Overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top. It is a progressive Budget.
Today we take decisive action to deal with the debts that we inherited, and confront the greatest economic risk facing our country. We have been tough, but we have also been fair. We have set the course for a balanced budget and falling national debt by the end of this Parliament. We have insisted that four pounds of every five needed to reduce our deficit will be found from Government spending. We have protected capital investment from additional cuts, and have got to grips with the soaring costs of welfare. We have provided the foundations for economic recovery in all parts of our nation, and have given our country some of the most competitive business taxes in the world. We have taken almost a million people out of income tax and half a million people out of national insurance, and we have done all that without increasing child poverty.
Sadly, in this unavoidable Budget we have had to increase taxes. We have had to pay the bills of past irresponsibility. We have had to relearn the virtue of financial prudence. But in doing so, we have ensured that the burden is fairly shared. Today we have paid the debts of a failed past and laid the foundations for a more prosperous future. The richest paying the most and the vulnerable protected: that is our approach. Prosperity for all: that is our goal.
I commend this Budget to the House.
Mr Deputy Speaker
I now call on the Chancellor of the Exchequer to move the motion entitled “Capital Gains Tax (Rates)”. It is on that motion that the debate will take place today and on succeeding days. The questions on the remaining motions will be put at the end of the Budget debate on Monday 28 June.
Budget Resolutions and Economic Situation
(14 years, 5 months ago)
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Ms Harriet Harman (Camberwell and Peckham) (Lab)
The Chancellor of the Exchequer has delivered his Budget. It is his first Budget, but we have seen it all before. This is a Tory Budget that will throw people out of work, will hold back economic growth—[Interruption.] Read the book! This Budget will hold back economic growth, and will harm vital public services. Yes, it is the Chancellor’s first Budget, but it is the same old Tories, hitting hardest at those who can least afford it and breaking their promises. This is true to form for the Tories, but it includes things that the Liberal Democrats have always fought against. Surely they cannot vote for this.
The Chancellor says his top priority is to cut the deficit. In order to get the deficit down, we need to keep economic growth up and we need to keep unemployment down. Today’s Budget—[Interruption.] Read the book! Today’s Budget is bad for growth, and that will make it harder to cut the deficit.
The new Office for Budget Responsibility has said in its report today that because of this Budget, growth next year will be lower than it would have been under our policies to support the economy through difficult times. It has revised growth for next year down from 2.6% to 2.3% because of the harm that the Chancellor’s Budget does. He said he was going to tell it straight, but the Chancellor has not told it straight today on jobs. Today’s Budget is bad for jobs and that, too, will make it harder to cut the deficit. The OBR forecasts on page 84 of its report that the price of the plans he has set out today in his Budget is tens of thousands of people out of work. [Interruption.] I say to hon. Members, look at the OBR report last week and compare it, on the International Labour Organisation unemployment and claimant count, with the forecast as a result of this Budget: tens of thousands more people out of work, and unemployment higher next year and every year of this Parliament. For people affected, this is a high price to pay, and it is equivalent in scale to putting every working man and woman in the city of Coventry out of work; that is the scale of the changes on jobs. And it is counter-productive. Private sector jobs will not spontaneously emerge as we see fewer people employed in public services. This Budget will hit private sector jobs as well as public sector jobs.
The reality is we do not get borrowing down by pulling the plug on support for businesses. We do not get borrowing down by throwing people out of work and on to the dole. [Interruption.] Look at the forecasts! We do not get borrowing down by stifling economic growth. This reckless Budget’s short-sighted approach will jeopardise the recovery and make the deficit worse, and when we do that, we end up with more tax rises further down the track, and it is unfair.
It is unfair on young people who need help to get work and get a decent start in life. The Government have scrapped the future jobs fund before it has even been formally evaluated, but every young person helped into work shows its value. It is unfair on the regions, whose manufacturing industries will suffer. They have cancelled the loan to Sheffield Forgemasters; they have snatched away the chance of new jobs. It is unfair on families: cuts to the value of child benefit; cuts to the disability living allowance; cuts to help for the jobless; ending the health in pregnancy grant; cutting the Sure Start maternity grant; ending free swimming; and cutting back free school meals. It is also unfair to older people, who will have to pay higher VAT and will have less money to spend in their local shops.
The Chancellor tells us that his plans are fair: that the rich will pay most. That is not true. As the Prime Minister himself said of VAT:
“it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you”,
and as the hon. Member for Bermondsey and Old Southwark (Simon Hughes) rightly pointed out last week, VAT “penalises the poor”.
It is unfair when cuts in public spending hit those people and those areas where public services and benefits matter most. The impact of the Chancellor’s changes to benefits and tax will be greatest in the poorest areas. We agree that borrowing must be brought down, but look at whom he has chosen to bear the brunt of cutting the deficit. The area most affected by his austerity policy, where people will see the biggest fall in average incomes, is Merseyside; the area least affected by his austerity policy—least affected by the fall in income—will be Cheshire. Yes, that includes his own constituency. This is not a fair Budget; it will entrench unfairness for the future.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Please wait until after the right hon. and learned Lady has spoken.
Ms Harman
And the VAT rise makes this a Budget of broken promises. Before the election the Prime Minister said he had no plans to put up VAT, and now, in his first Budget, he puts up VAT. During the election campaign the Liberal Democrats attacked what they called the Tory secret VAT bombshell. Little did we know that the Lib Dems had their own secret bombshell to drop on us: that they would vote for it.
The Tories present this Budget but they try to evade responsibility for it. They try to justify their broken promises, saying that things have changed—that things are worse than they realised—but what is this new information? The OBR forecasts are better than we predicted at the time of the March Budget: less borrowing than expected, and lower unemployment than expected, because of our actions.
The Government like to cite new information from abroad: the problems of Greece. Greece is in a completely different position from us: it is still in recession; it does not control its interest rates; and its debt is over 115% of its GDP. Greece is no alibi for this Tory Budget.
Nor should they pray in aid the story of Canada’s Budget cuts. Canada’s deficit reduction was taking place as Canada’s economy was boosted by strong growth in its neighbouring economy and main export market, the United States. Our export market is mainly the EU and growth there is sluggish. That is why President Obama wrote to his fellow G20 leaders this week urging them to turn away from the rush to austerity. Yes, deficits must be reduced, but we must not risk undermining the fragile global recovery. This is a Budget based on rewritten history and false excuses.
They say there is no alternative, but the truth is this is what they want. This Budget is not driven by economics; it is driven by ideology—their commitment to a smaller state. The Chancellor claims he has no alternative, but the OBR last week clearly stated that our plans would have more than halved the deficit over four years. No, this austerity Budget is their choice, and right now it is exactly the wrong choice.
This reckless Tory Budget would not be possible without the Lib Dems. The Lib Dems denounced early cuts; now they are backing them. They denounced VAT increases; now they are voting for them. How could they support everything they fought against? How could they let down everyone who voted for them? How could they let the Tories so exploit them? Do they not see that they are just a fig leaf? The Liberal Democrat Chief Secretary is just the Chancellor’s fig leaf. The Deputy Prime Minister is just the Prime Minister’s fig leaf. The Lib Dems’ leaders have sacrificed everything they ever stood for to ride in ministerial cars and to ride on the coat tails of the Tory Government. Twenty-two Liberal Democrat ministerial jobs have been bought at the cost of tens of thousands of other people’s. The Liberal Democrats used to stand up for people’s jobs, but now they only stand up for their own.
Look at the Business Secretary, the right hon. Member for Twickenham (Vince Cable). The House has noticed his remarkable transformation in the past few weeks from national treasure to Treasury poodle. They have no mandate for this Budget; this Budget has no legitimacy. Even if the Lib Dems will not speak up for jobs, we will. Even if they will not fight for fairness, we will, and even if they will not protest against Tory broken promises, we will.
We will support measures that are fair and that will help the economy. We will support the increase in capital gains tax. As the Chancellor said, it will help to stop people avoiding income tax by getting payment in capital. Such avoidance of tax is even more objectionable when we need to cut borrowing. We welcome the retention of the 50p tax rate. The Labour party was the first to call for a levy on the banks and the Government are going ahead with it. We will support that move, although I note that the banks will get a corporation tax cut to compensate them. We will support the increase in personal allowance, but the public, who will be hit by a rise in VAT, will feel short-changed.
In the face of a global economic crisis, this has been a difficult time for businesses and families, not just here but around the world. What this country needed was a Budget to support economic growth, to protect jobs and to cut the deficit fairly, but what we have got is a reckless Budget that pulls the rug out from under the economy. Predictably, the Tories do not care and are not listening. The Lib Dems are wringing their hands, and well they might, but that is not good enough. They should think about their constituents who will suffer if this Budget goes ahead. The Lib Dems should think again, but whatever they do, we will vote against it.
Chris Bryant (Rhondda) (Lab)
On a point of order, Mr Deputy Speaker. The Chancellor of the Exchequer said to us earlier that this country would hear the facts about his Budget straight from him at the Dispatch Box, but this morning his freeze of the civil list moneys was announced in The Guardian, his announcements on capital spending plans were in The Guardian and his proposals on national insurance, child tax credit and the VAT rise being delayed were all in The Guardian. Also, the precise figures about the changes to income tax—rising by £1,000 to £7,475—were in every single media outlet in this country. That is an abuse of the privilege of this House. Will Mr Speaker, or you on his behalf, refer this issue of the abuse of the privilege of the House to the Select Committee on Standards and Privileges?
Mr Deputy Speaker
As hon. Members well know, Mr Speaker is unhappy about announcements being trailed before they come to this House. If the hon. Member speaks later, he can bring it to the House’s attention once more. No doubt, this will be passed on to Mr Speaker.
Mr Andrew Tyrie (Chichester) (Con)
It falls to me to respond just as everybody quite reasonably goes off for a bite to eat. I commiserate with the right hon. and learned Member for Camberwell and Peckham (Ms Harman) about having to respond to the Budget without a chance to absorb it, although I must say that that showed in some of the things she said. She made the best of a very weak hand, but a couple of points must be borne in mind. I shall say this as best I can without partisanship.
First, all three parties were committed at the last election to sharp cuts in spending. According to the Institute for Fiscal Studies, Labour was planning about £45 billion-worth of cuts, which, because of ring-fencing, would have had to fall on only four main areas: education, defence, transport and housing. To give people an idea of the scale, defence spending is only about £40 billion, so massive adjustments would have had to be made by Labour, but that did not seem to feature in anything the right hon. and learned Lady said.
A second point that needs to be made is that we went into the recession carrying a huge structural deficit. Again, the right hon. and learned Lady did not acknowledge that at all. That deficit developed as a result of over-ambitious spending over many years by the previous Government, particularly by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). It simply had to be tackled; it could not have been left unaddressed. It really is not correct to attribute most of the tightening we need now to the mistakes of banks, the global recession or, as she has suggested today, to coalition ideology. The overwhelming majority of people who have looked at this have concluded that we must take early action to curb the huge, burgeoning deficit.
Mr John Redwood (Wokingham) (Con)
Does my hon. Friend agree that it was a disgraceful performance by the acting leader of the Labour party to accept no responsibility for the disgraceful state of the public accounts, and to dare to say that we wanted to cut when Labour was going to have to cut?
Mr Tyrie
In my new job, I am doing my best to avoid putting things in such trenchant terms, but I feel that not enough has been accepted by the Labour party about the scale of the mismanagement on the economy—requiring us to do something about it now.
This was an astonishing and phenomenal Budget—a tour de force. It really was a further addition to the early economic radicalism of the coalition Government. We have already had announcements about a complete overhaul of financial regulation and an innovative body, the Office for Budget Responsibility, has been created. We have also had announcements about vigorous action being taken on the deficit as well as major proposals for tax and benefit reform. The first of these measures is needed, among other things, to change the culture. The politics of plenty have to give way to the politics of thrift in Whitehall. That, above all, is why it is right for the Government to make the £6 billion-worth of cuts.
On the second of the measures that I have just mentioned, we must have tax reform and simplification if we are to have any chance of improving Britain’s long-run growth rate, which has been imperilled by immense complexity in the tax system.
Kevin Brennan (Cardiff West) (Lab)
On taxation, when the Prime Minister said on 1 April, when he was the Leader of the Opposition:
“Our plans don’t involve an increase in VAT”,
did the hon. Gentleman believe him?
Mr Tyrie
As I recall, all three parties talked about having no plans to increase VAT, and it would not have surprised me a scrap, had the positions been reversed, if we had had an increase in VAT. How would Labour have filled the £45 billion deficit? We have not heard a word on that. That brings me to a point that I had decided, on the grounds of non-partisanship, not to make, but that I now think needs to be made. It was irresponsible and damaging to British democracy not to have had a spending review on which to judge the decisions to be taken. In my current job, if I were to find the coalition Government as evasive as that, I would do everything in my power to call them to account and to make sure that they told us the facts.
Albert Owen (Ynys Môn) (Lab)
I congratulate the hon. Gentleman on his election as Chair of the Treasury Committee. Does he accept that the rise in VAT that the Chancellor announced today will have a huge impact on small companies in the construction industry in my constituency that are looking for business building extensions to houses and so on? They will have to pass the rise on to those individuals, so the rise will slow down growth in that sector and will cause further job losses.
Iain Stewart (Milton Keynes South) (Con)
Does my hon. Friend recall that when the former Chancellor temporarily reduced VAT to 15%, a Treasury document clearly showed that afterwards the Labour Government were planning to increase it to 20%?
Mr Tyrie
I thank my hon. Friend for reminding me about that, as I had completely forgotten it. The whole House has heard the point he made.
The central judgment in the Budget is about the scale and speed of the fiscal adjustment. Whatever the Chancellor does, there are risks. If he shows lack of resolve on the deficit, the Greek experience beckons, as markets lose confidence in our ability to service our debts. The Chancellor was right to emphasise sovereign debt risk in his speech. That is not a fanciful risk, but a clear and present danger for Britain and he was right to flag it up. If we show too much zeal, too early, on the deficit, some people fear that the Japanese experience awaits us—being caught in a heavily indebted deflationary trap.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
I voted for the hon. Gentleman to hold his new position and even told his opponent that I had done so, but I am deeply concerned that today he is making the same mistake as the Chancellor. He said that the greatest problem facing economies is sovereign debt, when in fact analysis shows that it is bank indebtedness. Greece has a sovereign debt problem, but other countries of Europe have a problem with bank debt. That is the problem, so we are looking at the wrong target.
Mr Tyrie
I agree that both are extremely important. I do not think I said that the greatest threat is necessarily sovereign debt, although Hansard will show whether I did. I said that I agreed with the Chancellor that it was an extremely grave risk. That is supported by the overwhelming majority of commentators—the International Monetary Fund, the OECD and a large number of independent commentators.
From the remarks made by the Leader of the Opposition, I presume that she is more fearful of the recovery being snuffed out by further tightening than of the risk of a downgrade in the bond markets. I shall not form an instant judgment now. I shall want my Committee to take a look at the situation and report to the House. None the less I noted a couple of relevant points. With the benefit of hindsight—looking historically—most fiscal retrenchments in this country have erred on the side of too little, too late, rather than too much, too soon.
My other general comment is that although the Japanese parallel is well worth examining, it should be borne in mind that the Japanese banking system was in a shocking state even by comparison with ours, and it has remained in grave difficulties. The revival of our banking system is crucial if we are to have sustained recovery. In some degree, that answers the point made by the hon. Member for Linlithgow and East Falkirk (Michael Connarty), and agrees with it.
Whether the Chancellor’s judgment turns out to be right or wrong, there are a couple of points on which I should like to hear more from him over the coming days and weeks. First, although he must be resolute in his judgment his policy framework could, and I think should, signal that if the facts change, he will change his mind—he hinted at that in his speech. The global economic situation is fluid and fragile, so if we were to find ourselves in another global downturn, possibly triggered by global fiscal contraction, we need to know that he would deploy whatever tools were required to avoid deflation. There must be some risk of that. It is not just a matter of Governments around the world, and particularly in Europe, beginning to address their deficits after their bail-outs. The banking system, too, will remain under strain. Banks will be subjected to a levy and will be required to secure major increases in capital and liquid assets, both of which will reduce lending. On top of that, there is the risk that household saving might sharply increase at the expense of consumption.
However, looking at things from an international perspective, I am heartened by the global growth forecasts of the IMF, which suggest that global growth for the next two years will be running in excess of 4%. I have not yet had a chance to see what the Office for Budget Responsibility has written in, but I suspect it will probably be in line, which would appear to buttress the Chancellor’s judgment that the cuts are sustainable.
My second question to the Chancellor relates to the first: what is the overall macro-economic framework for the Budget judgment? I should like more information about that. In previous squeezes on fiscal policy, it has been reasonable to argue that tight policy has created room for a compensating looser monetary policy through short-term interest rates. This time, however, interest rates are already very low, so the only offset comes in long-term bond rates. Interestingly, the OBR has already published a second estimate for gross debt interest, which takes account of the tighter fiscal policy that has just been announced. On its forecast, the figures show a reduction in central Government gross debt interest of £7 billion over the planning period, so there is a long-term bond yield dividend to be had from the tighter fiscal policy.
In any case, the Chancellor may have spelt out his macro-economic framework in more detail in the Red Book. None of us has yet had a chance to read it, although some people may be taking that opportunity while I am speaking. It would be worth hearing more about the policy framework, because it must leave the Chancellor with enough room to alter course if circumstances change, otherwise credibility could collapse in the face of unforeseen events. The one thing I can predict is that there will be quite a few of those.
Whatever else people conclude about the Budget, it is fair to say that it shows extraordinary political courage by the Chancellor and by the coalition Government. There will be rumblings in the undergrowth in both coalition parties. The vested interest groups will cause enormous trouble, just as they would have done if a Labour Government had been implementing their cuts. It will take sustained resolution by the Prime Minister, his Deputy and the Chancellor to stick to their course. The relationship between No. 10 and No. 11 will be absolutely crucial in the months ahead.
I have concentrated on the deficit and the macro-economic framework, but the Budget will be judged on more than just accountancy. There are a number of other important issues. Does the Budget pave the way for providing better economic performance in the long run? Does it adequately protect the poorest and the most vulnerable in our society? I hope the Treasury Committee will look at that issue. Does it take enough account of both regional and structural imbalances in the economy? What role will Britain play in addressing the large global imbalances that still remain? Those are some of the questions that I very much hope my colleagues on the Treasury Committee will agree should be looked at in the months and years ahead.
I look forward to the formation of the Committee, the first-ever Treasury Committee that will benefit from a democratic mandate. Our task now is to get on with the job. I am open to suggestions from both sides of the House about what exactly we should look at; indeed I am already being inundated with proposals and suggestions, so we shall need to prioritise. Of course, I shall await the views of my Committee colleagues, but it would surprise no one—certainly not me—if we concluded that the central fiscal judgment of the Budget, and both the structure and early output of the new Office for Budget Responsibility, should be high on our agenda.
Barry Gardiner (Brent North) (Lab)
Today, let us spare a thought for the Liberal Democrats. In April, the great cause célèbre—the only amendment they fought for in Labour’s Budget—was deferring the rise in the rate of duty on cider until June. Today, they achieved that ambition; duty was reduced from 10% to just 2%. In April, Liberal Democrat spokespeople loudly claimed to have stopped the wicked Labour Government from raising a few million pounds from west country cider farmers. Today, they sit, quisling apologists, for a Budget containing the most savage cuts and devastating tax increases in a generation.
On 8 April, the Deputy Prime Minister accused the Conservatives of wanting to raise VAT to plug a black hole in their financial plans. He boasted:
“We will not have to raise VAT to deliver to our promises. The Conservatives will. Let me repeat that: our plans do not require a rise in VAT”.
No wonder that, when the Prime Minister was asked during the election campaign for his favourite political joke, he replied in just two words: “Nick Clegg.” The Liberal Democrats have now delivered the tax bombshell for their Conservative masters, precisely targeted at the poor, who spend a far greater proportion of their income on VAT-able items.
Stephen Williams (Bristol West) (LD)
Would the hon. Gentleman like to look at the tables on pages 67 and 68 of the Red Book, which disprove the point that he has just made?
Barry Gardiner
I should be very happy to look at the pages of the Red Book in due course, but if the hon. Gentleman wants to challenge the fact, which I have just stated, that the poor spend a greater proportion of their incomes on VATable items, I am sure that he will find not only that he is wrong, but that he is out of sync with other Liberal Democrats—his leader, in fact, and his deputy leader—who have said exactly the same as I have. No wonder that the Liberal leader had to write to his MPs today to insist that he had not sold out on his party’s promise to protect those who are on average incomes.
I simply refer those hon. Members to “Liberal Democrat Voice”, published on 8 April, in which the Liberal leader said:
“So if you’re on an ordinary income, you have a choice. If you want your taxes to rise: vote Labour or Conservative. If you want your taxes to fall: choose the Liberal Democrats.”
The smugness is breathtaking, but nowhere near as breathtaking as the G-forces exerted by the speed of the U-turn that he has performed. His talk of progressive cuts certainly did not go down well in Sheffield, Hallam, where the axing of the Labour Government’s £80 million loan to Sheffield Forgemasters has denied his constituency of the manufacturing future and new jobs that local people so badly wanted and that he once said that he believed in.
As the Social Liberal Forum reminded the Deputy Prime Minister in an open letter last week:
“The Liberal Democrats did not sign up to the Conservative formula of cutting £4 for every £1 raised in additional revenue and it would be impossible to pursue such a policy without adversely hurting the most vulnerable in society. With this in mind, it seems incomprehensible that we could be contemplating a rise in VAT at this stage. As the Liberal Democrats pointed out before the election, a VAT rise to 20% would cost every person in the country an average of £389, disproportionately hurting the least well-off who would be least able to afford it.”
That is Liberal Democrats talking. Frankly, we expect the Conservative party to attack the poorest in society. It was rather refreshing to be told a week last Thursday, by the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), that
“Those in greatest need ultimately bear the burden of paying off the debt”.—[Official Report, 10 June 2010; Vol. 511, c. 450.]
At least he got it right.
Paul Blomfield (Sheffield Central) (Lab)
It is unfortunate that the Deputy Prime Minister is not listening to the comments about Sheffield Forgemasters, and I assume that he was not listening to the Prime Minister’s remarks yesterday, when he made disparaging comments about the shareholders of Sheffield Forgemasters and the financial engineering associated with the deal, which has been through the most robust critique by the Treasury. Does my hon. Friend agree that, when the Deputy Prime Minister returns to Sheffield, it would be appropriate for him to apologise on behalf of the Prime Minister for those comments?
Barry Gardiner
I entirely endorse my hon. Friend’s remarks. The only thing that I find more smug than the comments that have been made was the fact that, during the entirety of oral questions to the Deputy Prime Minister, he refused to answer any of the questions that he would have found difficult to answer. One wonders why they are called oral questions to the Deputy Prime Minister if he is not going to bother to answer them.
Mary Creagh (Wakefield) (Lab)
How does my hon. Friend feel that the Budget will impact on the poorest of his constituents in Brent? The impact will be felt by the poorest people across the country, but does he agree that, with this Budget, we have finally seen the Liberal Democrats for what they are: the real wolves in sheep’s clothing?
Barry Gardiner
My hon. Friend is absolutely right. It is very clear that the Liberal Democrats vary not just what they say from doorstep to doorstep, but what they say before the election from what they do after the election, and many of us have bitter experience of that.
Today, it was interesting to hear the Chancellor say that council taxes will be frozen. I thought to myself, “Yes, I’ve heard that mantra before.” My hon. Friend prompts me. That is exactly what the Liberal Democrats promised in the run-up to the 2006 local elections in Brent. Strangely, after that local election, they went into a coalition with the Conservatives, who had promised not just a freeze on council tax but a reduction in council tax. When they got into power, what did they do? They raised council tax for three years in a row.
Moreover, before the election, the Minister of State, Department for Education, the hon. Member for Brent Central (Sarah Teather), was photographed with the elderly—I have a copy of it here—and appeared on a leaflet that said, “Free Personal Care for the elderly say Lib Dems”, but when they got into office on Brent council, they raised the personal care charges from £5 an hour to £16.50 an hour.
When the Chancellor talked today about how the Government would freeze council tax, I thought, “Yes, I know how they will manage to do that.” All the charges that councils make people, such as elderly residents in Brent, pay will be bumped up. The increase will be imposed not on council tax, but on those who have the very least ability to pay—the most vulnerable people in our community.
Last week, I was invited to the Brent Teachers Association meeting to debate the future of education in the borough with the Minister of State, Department for Education, the hon. Member for Brent Central. As she had promised in her election literature an extra £2.5 billion towards education and smaller class sizes, but subsequently approved a £1.88 million cut to the borough’s education area-based grant, I was looking forward to that debate. However, I understand that, half an hour before the start of it, her office phoned to indicate that she was indisposed and could not attend. If I had been in her position, I would have been indisposed and unable to attend, too. To cut one’s education department in the borough, having promised such a vast increase in the education spending, is typical of how the Liberal Democrats have proceeded around the country, and we now see that what they do in national government is absolutely no different. The disillusion of those who believed the Liberal Democrat promises before the election can be only further deepened by the Budget statement that they have heard today.
Barry Gardiner
No, I am moving on from the Liberal Democrats. [Interruption.] We have got to go for the Tories now. Go on, I will give way to the hon. Lady.
Jo Swinson
I thank the hon. Gentleman for rethinking and giving way. I am listening to what he is saying with great care, but I wonder whether he is going to tell us—I am yet to hear about this from any Labour politician—where he would like any of the £44 billion of cuts that the Labour Government decided were required to fall.
Barry Gardiner
The hon. Lady has been a Member for a number of years. She will remember the answer that she and her colleagues gave when they sat on the Opposition Benches and Labour Members asked them exactly that sort of question: “You’re in government. It is you who provide the answers and we who ask the questions.”
People were told, “Vote blue, go green.” Vote blue, go green? Go green with frustration? Go green with fury? Where was that—did I miss it? Was there anything in the Budget about going green? I heard a mention of an investigation into whether there should be a per-passenger or per-plane duty, but that hardly constitutes vote blue, go green. There are many things that a really progressive Government could be doing to improve the way in which the environment is treated in this country.
Stewart Hosie (Dundee East) (SNP)
The hon. Gentleman is absolutely right that there are a great many such things—fairness in transmission charges to the grid, for example, and access to the fossil fuel levy—so perhaps he will explain why, over 13 years, his party did not do them either.
Barry Gardiner
I am happy to give an answer to the hon. Gentleman. We introduced the first legislation on climate change anywhere in the world. We put in place carbon budgets and feed-in tariffs. We ensured that we set a reduction target for 2050 of not just 50% but at least 80%, with interim budgets that can be examined every year, so that Parliament can hold the Government to account. The Labour Government achieved substantial things on the environment, but I agree with the hon. Gentleman that we did not do enough. I often spoke from the Government Benches to ask my own Ministers to go further. In addition, the system of renewables obligation certificates is a good deal more generous in Scotland than in England. However, does the Budget address the environment? Not one whit; we heard only a mention of an investigation into duty for planes rather than passengers.
Heather Wheeler (South Derbyshire) (Con)
If the hon. Gentleman reads page 57 of the Red Book, he will see that it states:
“Legislation will be in the Finance Bill introduced in the autumn for an enhanced capital allowance for zero-carbon goods vehicles.”
If that is not a green element, I do not know what is.
Barry Gardiner
The hon. Lady is new to the House and might not have had the opportunity to read earlier Red Books. The previous Government were also doing quite a bit on zero-carbon vehicles.
The Budget is a dreadful missed opportunity. It should have ensured that we can resolve the problems with our public finances and pull the country through the recession. It should have achieved that in a staged and phased way. The Government tried to paint a dichotomy between those who appreciated that this had to be done—that this was the inevitable Budget—and, as they put it, those on the other side who said, “No, no. Hold back.” However, it was never like that. Labour Members said that this must be done, but more progressively and slowly. We said that we must not jeopardise the recovery now by taking a macho posture that goes too far, that chokes off recovery and that will ultimately be self-defeating.
Barry Gardiner
I am about to conclude my remarks.
If the Opposition’s policies had been followed, we could have pulled the country through the recession and reduced the structural deficit to half its present level, as has been shown by today’s predictions and forecasts. However, the Government have decided to go for machismo over prudence—they will pay the price for it.
Malcolm Bruce (Gordon) (LD)
The Labour party’s synthetic anger, and the rather pompous and patronising show that we have just seen, are perhaps a reflection of Labour Members’ inability to accept their share of responsibility for the mess that the country is in. The party is in total denial. It is leaderless and rudderless, and it has not even had the courtesy to apologise to the British people for what it did. Perhaps Labour Members are also reflecting on the things that they could have done over 13 years but never got round to, such as restoring the earnings link for pensions, introducing a bank levy and raising the tax threshold. I do not think that Labour Members will find those on these Benches receptive to a party that has shown no leadership, no responsibility and no ideas, and that does not know where it is going.
We should be grateful that my right hon. Friend the Chancellor has set out a Budget that has ideally balanced the need to deliver tough control over our finances with a fair approach that, as the Red Book shows, will mean that in tax terms 80% of people will be better off under the Budget, while the richest 20% bear the greatest share of the burden. That is a proper expression of a progressive Budget.
Jack Dromey (Birmingham, Erdington) (Lab)
The right hon. Gentleman talks about balance and fairness. Will he comment on the balance between £11 billion of welfare cuts and less than £2 billion from the bankers, which is offset by the decrease in corporation tax? Will he also comment on the fairness and balance of setting an average of £35 per household from council tax against taking an extra £12 billion in VAT, which will hit the poor hardest?
Malcolm Bruce
I am sorry but that intervention also shows no recognition of the fact that we have to find the money from somewhere. Our approach to that gives the poorest the most and makes the richest pay the biggest contribution. I cannot think of anything more progressive than that, and the more the hon. Gentleman and others consider the Budget, the more they will recognise that it stands up to robust analysis.
I had the honour of being my party’s Treasury spokesman between 1995 and 2000. During the 1997 election, the Liberal Democrat manifesto included an aspiration to raise the threshold at which people started to pay income tax to £10,000. That was only an aspiration because, try as we might, we were unable to find the resources at that time to pay for it. However, when the Labour Government were elected in 1997, the first thing that they did was to introduce the most generous capital gains tax relief that the richest people in this country had ever enjoyed—Mrs Thatcher never contemplated it! However, closing such tax loopholes has enabled us to start to deliver the increase in the tax threshold so that people will not have to pay tax and then apply for benefit, as the Chancellor said. I for one am absolutely delighted to support a Budget that fulfils a commitment set out in an aspiration on which I fought the 1997 election.
The hon. Member for Brent North (Barry Gardiner) suggests that Liberal Democrats should be ashamed of the Budget, but far from it. There is much in the Budget of which to be proud, and I make it clear to right hon. and hon. Friends in the Conservative party that it is not a Conservative Budget or a Liberal Democrat Budget, but a coalition Budget. I would argue that it draws on the best on both parties. Those parties command the support of the majority of the British people, and the Budget’s approach will deliver benefits to the majority of the British people. I said in the election campaign, when I became aware of the seriousness of the financial situation facing the country, that the position would be much better after the election if cuts that had to be made were implemented by more than one party, as they would be forced to engage with each other and find a balance that would be more acceptable than measures adopted by one party running for a sectional interest that did not have the same strength of appeal. I honestly believe that the coalition has found a dynamic that has delivered something that is greater than the sum of its parts: a Budget that is genuinely progressive.
Simon Hughes
Does my right hon. Friend agree that another part of this package is fundamental? The discussion about the cuts and savings in public expenditure will take place with the public, the trade unions, business, communities and local government, so that decisions are not only informed by the prejudices of civil servants and Ministers but are made as a result of the widest consultation with the British public to make sure that although, yes, they may be tough, they will be absolutely fair.
Malcolm Bruce
I am grateful to my hon. Friend. Opposition Members and the wider audience looking at the Budget should examine it in detail and recognise the extent to which it is based on a much broader consensus and approach to consultation, while being radical across the piece and balanced. That is not easy to achieve, and I am prepared to admit that I had my doubts about whether the Chancellor of the Exchequer would be able to achieve it. I am pleasantly surprised by the extent to which he has been able to do so.
Indeed, there is little in the Budget to which I can fundamentally take exception. It is absolutely true that an increase in VAT is a painful decision—there is no question about that. It is difficult to understand how the Opposition could balance their books without any such tax increases. Although our proposals in the self-contained Liberal Democrat budget did not require an increase in VAT, we always said that if the financial situation required it, we would not rule it out. We never did rule it out, so those attacks that suggest that somehow this is a betrayal are not true. There was careful and guarded explanation of that position.
Mr Redwood
Has the right hon. Gentleman noticed that on page 45 of the Red Book the public spending figures make it quite clear that there is not a single year in which there is a cash cut in overall public spending? Public spending goes up every year in cash terms.
Malcolm Bruce
I am grateful, because I have not had time to look at the Red Book, only at one or two selected items. The health budget overall is protected. As the Chair of the Select Committee on International Development, I am delighted that the coalition is committed not only to protecting the aid and development budget but, over the coalition period, to delivering our promise of 0.7% of our gross domestic product in overseas aid spending.
Even in these difficult times, we can protect key areas, and the Chancellor demonstrated his recognition of the vulnerability of education and his desire to make sure that it received a degree of protection. I have been involved in working up a policy on the future of Royal Mail and the Post Office. I do not know how many times most hon. Members have debated the closure of post offices and problems in the Royal Mail. We all recognise that what we have at the moment is not fit for purpose, and has to be radically reformed and changed. I can honestly say that the Liberal Democrats have made a big contribution to producing a proposal that brings capital into Royal Mail, will help to support the post office network, and will enable Royal Mail employees to take a share in the business in which they are engaged in a way that makes it a much more co-operative venture. That is something that we have brought to the coalition, and I am delighted that it has been accepted.
A number of small details are worth acknowledging—for example, reversing the policy on furnished holiday lets, which affects some constituencies more than others, but is a serious cause of concern for people who have a single holiday cottage, and who would not have been able to maintain it. The policy would not have been good for tourism, and it was not a fair system, so I am glad that the Government have withdrawn it.
The commitment to deliver broadband support across the country is extremely important for rural areas, because if we want to encourage people to run businesses in such areas they need access to high-speed broadband. I am attracted to the proposal to provide finance for regional capital, although I want to hear the details of it. I can certainly think of projects in my constituency that I want to suggest to Ministers should bid for that fund. Indeed, I wrote to them in advance of the need, before I knew that there was a fund to tap into, but I think that it has real prospects. An important part of the Budget, which goes completely against the rant by the Leader of the Opposition, is the promotion of enterprise to create new jobs and businesses, whether through corporation tax reductions, decreases in national insurance costs for small businesses, or a regional premium for those areas where the public sector is disproportionately large.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
My right hon. Friend will know, as he represents a neighbouring constituency, how important the oil and gas industry is to our constituencies. It was refreshing not to have a tax bombshell dropped on that industry, as has happened in the past. The press notices for the Budget say that further improvements in the field allowance regime will be made to encourage exploration in the high-temperature, high-pressure world. That industry brings so much revenue into the Treasury that it must be treated in such a way as to make sure that the maximum investment is delivered.
Malcolm Bruce
My hon. Friend and I represent neighbouring constituencies, where a high proportion of people and companies work in the oil and gas industry. Far too often—and this applies to both Labour and Conservative Governments—sudden changes in the tax regime have been deeply damaging, and I am grateful that that is something else that will be done by consultation. It is, I hope, recognition that north-east Scotland, which my hon. Friend and I represent, makes a disproportionately large contribution to the economy of Scotland and of the United Kingdom, not just in oil revenues but in the 450,000 jobs that derive from the activities that run out of Aberdeen and north-east Scotland. There is £5 billion of exports in sub-sea technology, and a burgeoning new industry in marine renewables, which uses the same technology. It is important that the Government understand how they can support that industry, so my hon. Friend’s intervention is pertinent and relevant.
I declare an interest, as I have a grown-up deaf daughter who receives disability living allowance, so I certainly welcome the simplification of the process for applying for that abstruse allowance. It is not means-tested—people do not have to prove that they need the money; in fact, that is not a valid reason at all for qualifying for it—as individuals have just to prove how disabled they are to enable someone to make a judgment. That is difficult, and it goes against the grain for disabled people, who want to show how able they are, in spite of their disability. A simple medical test, if it is applied objectively and fairly, would work, and I hope that someone like my daughter, who can prove that she is profoundly deaf, would automatically qualify, as would others with a similar category of disability.
Jim McGovern (Dundee West) (Lab)
I would like to take the right hon. Gentleman back a couple of steps. He said that his party, and presumably the coalition, welcome the part-privatisation of Royal Mail, but is he aware that people employed by Royal Mail definitely do not welcome it?
Malcolm Bruce
I am aware that some people employed by Royal Mail have argued that they are not in favour of that, but they include people who are involved in the downfall of Royal Mail, too. We have to undertake a consultation, and let those people make a judgment. Royal Mail needs capital, without which it cannot survive and compete. It is a good idea to give the employees a real stake in a reinvested and reinvigorated Royal Mail. I hope that when many of them see what has been proposed they will welcome it as a positive.
Mr Brian Binley (Northampton South) (Con)
Does my right hon. Friend accept that the real need for Royal Mail is to get an injection of management skills, which is what the proposals will create?
Malcolm Bruce
Good management and good industrial relations are something that Royal Mail needs. Perhaps we all need to pull together a little bit to make that happen, but reinvigorating the organisation financially is part of the process.
I had some reservations and concerns about the proposal to freeze council tax, although my fears have been substantially allayed by what the Chancellor said. We have had a freezing of council tax in Scotland under the Scottish National party Administration, and I believe that it is a populist but extremely regressive development, because it effectively weakens local authority control and accountability and strengthens the centre.
The tone of the Chancellor of the Exchequer’s explanation of the measure allayed many of my fears. He said, first, “for one year” and, secondly, “based on incentives and encouragement, rather than imposition”. However, I hope that the measure will be set against a background whereby we think again—this is in the coalition agreement—about how we finance local authorities in a way that not only makes them locally controlled and accountable, but reduces the intervention of central management and control. I repeat that, although freezing council tax in Scotland is popular because people do not have to pay for an increase, people realise over time that their local council does not have the flexibility to fund some of the services that they want. People have certainly said to me, “We’d rather pay a little bit more council tax and have more investment in our schools,” or roads, or whatever it may be, so it is not the right long-term way in which to operate local government finance.
Stewart Hosie
The council tax freeze is most certainly popular, but the argument that it removes flexibility is completely wrong. The Scottish Government ended ring-fencing. We trust local authorities—[Interruption.] Ah! I see from the sneers that the Liberals now want to bring back ring-fencing and put up the council tax. Are they at odds with the Scottish Government or their coalition partners?
Malcolm Bruce
I was not quite sure how the measure went down in Glasgow. I am very disappointed by the hon. Gentleman’s intervention, because he could have defended the council tax freeze as a short-term measure in difficult circumstances—although nothing like as difficult as our current circumstances. However, he cannot possibly defend it as a long-term policy, arguing that councils have no right to determine their own precept, and that it is entirely a matter for the Scottish or UK Governments. That cannot be the right way to proceed, and I hear nothing from the Scottish National party about its ideas. Its local income tax policy was simply not viable.
Malcolm Bruce
Well, it was not viable and it did not add up, because it was not local. That was the problem. It was a central measure. Indeed, the hon. Gentleman might also want to listen to the fact that the centralisation of business rates is one reason why north-east Scotland is so underfunded. The city of Aberdeen pays £150 million a year in business rates to Edinburgh—to the SNP Government—and gets £75 million back. That is a pretty bad deal for a city that supports the economy and has severe financial difficulties, so I do not think that we need to hear any more from the SNP.
Malcolm Bruce
I do not really understand where these people are coming from. I believe in an open, pluralistic democracy and a reformed electoral system, and I believe that, ultimately, we should all recognise that we are all minorities. No one party in the House commands majority support, and that is why we have a coalition. That is what the electorate, effectively, voted to deliver. If we want a democratic, pluralistic system, and if government is to be delivered, we have to recognise that one way or another more than one party will have to work together, either by supply and confidence from the Opposition or in a full-blown coalition.
Chris Leslie (Nottingham East) (Lab/Co-op)
Will the right hon. Gentleman give way?
Malcolm Bruce
No.
Confidence and supply gives the minority Government the freedom and the party providing the confidence and supply the responsibility, and that does not seem to be a good deal. Coalition gives both parties the opportunity to be full playing partners, to inject their own ideas, policies and people and to strike sparks off each other in ways that they could not if the situation were different. Over the past seven weeks, I have been really pleasantly surprised by how many sparks have been provided and by how rigorously a flame of reform has been blown into life as a result of the coalition.
When the Leader of the Opposition reflects on the intemperate tone of her response, she will understand that the people will say, “Those in Labour are substantially responsible for the situation in which the country finds itself, they are in total denial and they have not offered an apology or an explanation of anything that they would do.” Right now, they should just go away, have a leadership competition and let the rest of us get on with running the country and getting it out of the mess in which they left it.
Sammy Wilson (East Antrim) (DUP)
First, we all must recognise that this is a very difficult Budget at a difficult time. Throughout the United Kingdom, people are talking about this Budget. They were fearful of what was going to come out, of its consequences and of the fallout from it. However, as the Chancellor said, with the announcement of the emergency Budget, at least we can now start to inject some certainty into the economic way forward, and from that point of view it must be welcome. Secondly, despite the background to the current situation, there is still immense economic uncertainty, even among those who have been professional economists, about the best way forward. I shall address that point when I discuss what we are looking for in the Budget.
Thirdly, I come from Northern Ireland, where the major party in the coalition was recently rejected by the electorate, so we do not have too much to fear from them; where the Labour party does not even stand; and where the Liberal Democrats do not have a presence, either, although they have a sister party in the Alliance party. Therefore, the political point scoring in the debate so far does not have to form part of my response. I sit on the Opposition Benches, but the Leader of the official Opposition’s hysterical reaction does not grace this debate with the seriousness that it deserves. There was not even any recognition of the role that the previous Government played. Although there were many other responsible factors, the previous Government played a role in the situation in which we now find ourselves. Indeed, there was not even any recognition that, as today’s figures point out, something similar would have had to be done if there had been a different outcome in the election. The Leader of the Opposition’s reaction was disappointing, and it is right that I make that point. However, I do not make it because I have to score party political points; I make it just as a general observation on a very serious situation.
Stephen Pound (Ealing North) (Lab)
I appreciate that the hon. Gentleman is rising above the fray in this debate, but, as a former economics lecturer, is he as concerned as I am about paragraph 2.108 of the Red Book, which refers to
“rebalancing the Northern Ireland economy”?
I suspect that I know what that means. What does the hon. Gentleman fear it means?
Sammy Wilson
I shall come on to the issue of rebalancing the Northern Ireland economy. My understanding is that it is in keeping with the Northern Ireland Executive’s programme for government, namely that we cannot for ever remain as dependent upon the public sector as we are at present. There must be a rebalancing, so that we have a structured economy that allows for greater private sector involvement and, therefore, leaves us less open to the dangers of what has had to be done today. I do believe that what has been announced today will be very detrimental to the Northern Ireland economy in the short term.
However, let me turn to what we were looking for in the Budget. We want a Budget that is effective at getting us out of the current economic situation. The Chancellor’s view is that, given the size of the debt, the interest that is accumulating on it and the fact that we have to finance it for a large number of years, we must show the financial markets that we are serious about getting the deficit down. That will ensure that our good credit rating continues, and that we do not have to borrow at punitive interest rates and, therefore, take even more money from that which we have for current spending. I have been able to have only a cursory look through the Budget statement, but it seems that the Chancellor’s assessment is that if we do not do this quickly, we will find that our credit ratings go down and we lose the confidence of the financial markets, with all the consequences of that.
The other side of the coin is that if that assessment is wrong—if our credit rating is good for a number of years because we show that we are starting to make efforts and we do not have to take draconian measures of the kind that have been announced today—then withdrawing public spending from the economy will lead to a downward multiplier effect. That will impact on the level of growth, thereby getting us into what has been called the double-dip recession, whereby tax revenues go down, welfare spending goes up, support for industry has to increase, and we get ourselves into an even bigger muddle.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
Does the hon. Gentleman recall that prior to the election, the leader of the Conservative party particularly targeted Northern Ireland and the north-east of England, my region, for criticism on account of the amount of investment in public sector funding? We have seen in today’s Budget that the Chancellor has not heeded the advice of the North East chamber of commerce, a leading voice of business in the north-east, which has said that the Chancellor and the coalition Government need to re-check their commitments on public sector spending so as not to jeopardise economic growth in the north-east.
Sammy Wilson
The hon. Gentleman is leading me on to my second point, which is about fairness, but let me finish this point first.
I have described the two sides of the argument. It is a subjective assessment, because the report before us does not present any conclusive evidence to the effect that the financial markets are so nervous that we have to take such deep, draconian action at this stage. Neither is there an assurance that the reduction in the amount of money that is going into the economy as a result of public spending cuts will not have an impact on economic growth.
Mr Redwood
I think that we should try to talk about the Budget that was actually presented. The figure for total spending in 2009-10, the last year of the previous Government, was £669 billion, and the forecast total spending for the last year of this Government, if they run to five years, is £737 billion. That is an increase of about £77 billion over the period, so what is the hon. Gentleman talking about?
Sammy Wilson
The right hon. Gentleman quotes the figure for spending, not the figures for taxation or, indeed, those relating to bringing down the deficit. That money was borrowed to be pumped back into the economy, so the amount of money going into the economy will be substantially less.
This is a subjective assessment, because the report does not give us any clear picture of what the likely impact will be. At least we now have an independent body reporting on whether these measures will be effective, but only time will tell as to whether the risk that has been taken today will pay off and will balance the economy quickly.
Gavin Barwell (Croydon Central) (Con)
Is the hon. Gentleman aware of the paper published by Goldman Sachs on 14 April, which reviewed every major fiscal correction in the OECD since 1975, and concluded,
“we find that decisive budgetary adjustments that have focused on reducing government expenditure have…typically boosted growth”?
Sammy Wilson
The context in which those adjustments take place is important, as is the speed at which they happen. All I am saying is that one way in which this Budget must be judged is on how effective it will be. Neither the report, nor the assurances given by the Chancellor today, offers any firm guarantee, if indeed that can be given, that the Budget will be effective.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I suggest that the hon. Gentleman look at the report by the independent Office for Budget Responsibility in the Red Book, which sets out the impact on growth of the package proposed by the Chancellor and suggests that, post-2012, GDP growth will be stronger than the OBR initially estimated in its work prior to the Budget.
Sammy Wilson
As far as I am concerned, this is not about scoring political points off the Conservative party; the Conservatives do not present any threat to us in Northern Ireland. This is all about ensuring that the citizens of the United Kingdom do not have to live in the economic doldrums for a long period. I hope that the projections that have been quoted are correct, but it is right at least to look at both sides of the argument and make an assessment on that basis. Should these measures have been delayed, or should we have jumped in as we have done?
Secondly, we will judge this Budget on the basis of fairness. I look at that in two ways. First, is it fair to individuals; and secondly, is it fair to specific regions of the United Kingdom? The second point, as the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) suggested, is extremely important to people in Northern Ireland. Before the election, the Prime Minister—he has tried to explain it away and qualify what he said—stressed in a “Newsnight” interview that Northern Ireland is heavily dependent on the public sector. That is a fact, but he then implied that Northern Ireland would be targeted as a result. That is one of the reasons why the alliance between the Ulster Unionist party and the Conservative party failed so miserably—I do not know how well it would have done otherwise. People in Northern Ireland were extremely nervous that we in that part of the United Kingdom were going to be treated unfairly.
Under the proposals in today’s Budget, a regional fund will make money available immediately. However, it will not apply to Northern Ireland, or to Scotland or Wales, but only to England. Infrastructure projects have been guaranteed spending, but none of that applies to Northern Ireland. We are promised a report in the autumn on how Northern Ireland’s economy might be rebalanced, including an examination of proposals on economic enterprise zones, a possible mechanism for changing corporation tax rates, and other economic reform options. I look forward to that paper, and I am sure that the Northern Ireland Executive will do so too, but I note that that paper is merely examining options and proposals.
The Northern Ireland Executive have made a genuine attempt to restructure the economy by using public policy and public spending, trying to build up the infrastructure, trying to get people economically active by giving them new skills and preparing them for work, and so on. The reduction in public spending will have an impact on the ability to do such things, because they required that pump-priming. We will look to see how quickly the impact of the reductions in public spending is offset by some of the proposals in the promised paper on rebalancing the economy. This is important to us, and we want to drive it forward, but it will be made more difficult by some of today’s announcements.
Mark Durkan (Foyle) (SDLP)
Does the hon. Gentleman recognise that in the autumn, around the same time as the consultation document on rebalancing the Northern Ireland economy is published, the Executive and the Assembly will find out the outcome of the review of departmental expenditure limits in the current comprehensive spending round? That will have an effect on what Northern Ireland gets through the Barnett formula. The Budget also projects serious reductions in annually managed expenditure in the form of social security benefits, and those two squeezes on Northern Ireland combined could have a high economic impact that would make what is in the consultation document pretty irrelevant.
Sammy Wilson
That is related to the point that I made about the downward multiplier impact that the proposals will have on the UK economy, and particularly on the Northern Ireland economy. I am always reluctant to plead special cases, but one has to consider where Northern Ireland is in the economic cycle. We lag behind, as we are still in the downward part of the cycle. All the available indices, whether of output, employment, forward orders, investment or whatever else, show that we are still on the downward slide in the cycle. Our concern is about the impact that the attempts to restructure the economy could have, and the fact that while growth might occur in the rest of the United Kingdom, we might find ourselves still stuck in a recession because of the particular circumstances in Northern Ireland.
Ian Paisley (North Antrim) (DUP)
On the subject of fairness and special cases, the Red Book outlines a special case for Scotland, where there is to be a possible pilot scheme for rural fuel duty. Given that Northern Ireland is the only region of the UK that has a land border with another EU state whose fuel duty is progressively lower than ours, would it not be wise for that possible pilot scheme to be extended to the region that would benefit most from its findings?
Sammy Wilson
I would like to see that scheme initiated quickly in Northern Ireland. I suspect that it is one of the proposals that the Liberal Democrats were keen on pushing forward. Given the rural nature of much of Northern Ireland and the particular circumstances that we face, we would welcome it. We will be interested to see the outcome of the pilot scheme and how quickly it is rolled out across the rest of the UK, if at all.
I turn to fairness for individuals, on which there are things to be welcomed in the Budget. I suppose that at the end of the day, it will all be about balance. I am pleased to see that the pledge to restore the link between earnings and pensions has been honoured. For many pensioners who find themselves in difficulty, that will be an important gain. We also have the banking levy, the change to capital gains tax for those paying the top rate of tax and the fact that the pay freeze will not apply to those at the lower end of the public sector pay scale. There has been a genuine attempt to recognise that those who are already on low incomes should not be pushed down further.
On the other hand, there will be concern about the regressive nature of the VAT increase and the freezing of child benefit and tax credits. I am particularly concerned about the backdating of tax credits for one month instead of three, and I hope that the Chancellor will give us an answer about that. I hope that Her Majesty’s Revenue and Customs will improve its performance in dealing with tax credits, otherwise many people will have an unfair result through no fault of their own. They will be powerless against a bureaucracy that seems unable to move on the issue.
Kate Green (Stretford and Urmston) (Lab)
Is it not also the case that the families whose circumstances are most prone to change will be particularly hard-hit by a mere one-month backdating period? Those are families, of course, for whom jobs are particularly stop-go and at risk. The risk to families who already face dangerous and unstable economic circumstances will be heightened by that ungenerous measure.
Sammy Wilson
Not only are those the families whose circumstances are most liable to change, they are often the ones who find it the most difficult to deal with the bureaucratic maze that they face when making applications. I should like to hear from the Chancellor what proposals are in place to ensure more efficient processing of claims.
The final thing that I am looking for in the Budget is some certainty, particularly about its impact on Northern Ireland. We have been told that there will be a 25% cut in departmental expenditure limits over the next four years, but that it will not apply evenly and some Departments and areas of Government spending will be hit more than others. In Northern Ireland, we have now started the budget process. Because of the neglect of the previous Government, there was no comprehensive spending review announcement for the previous year, so we are planning in a vacuum. It is important that information be made available quickly to regional Assemblies as to what the impact on their departmental expenditure limits is likely to be, so that effective planning can take place. There is nothing worse than asking Departments to deal with difficult economic circumstances and then giving them a list of parameters and assumptions that are so vague that is almost impossible for them to make any long-term decisions.
If less money is going to be available, it has to be used more effectively. For that, there must be an ability to plan, so that we can look forward and see how that money can best be put to use and how Departments might work together to get more services from the available money. That can be done only if there is certainty, so I appeal for the information that regional Assemblies require to be given to them quickly.
Mr Deputy Speaker (Mr Nigel Evans)
Order. I am sure that Members will wish to observe the conventions of maiden speeches when they take place. We will have a small number of them this afternoon.
Simon Reevell (Dewsbury) (Con)
I am grateful to you, Mr Deputy Speaker, for the opportunity to make my maiden speech this afternoon. It is both an honour and a privilege to make these observations on behalf of the constituency of Dewsbury, which sits proudly in the West Riding of Yorkshire and comprises, in its northern half, the towns of Dewsbury and Mirfield, and in its southern half the rural wards of Denby Dale and Kirkburton.
Dewsbury is a diverse constituency in both geography and population. It has many famous sons and daughters, but before I mention just a few of them I should pay tribute again to Corporal Stephen Curley of 40 Commando Royal Marines, who was from Dewsbury and who recently made the ultimate sacrifice for our country in Afghanistan. Those of our footballers in South Africa who hint that their poor performance may be attributed to being away from their families for a few weeks should reflect on the fact that our real heroes are serving six-month operational tours in Afghanistan.
I referred to sons and daughters of Dewsbury, and I cannot make reference to any of them without mentioning Betty Boothroyd, as was, who became Speaker in 1992 and remained so for eight years. Another Dewsbury politician is my predecessor as a candidate, Sayeeda Warsi, who is an inspiration to many young Muslim women in my constituency and beyond. I should mention Sir Owen Richardson, who won a Nobel prize in physics; Patrick Stewart, an outstanding actor on television, screen and stage; Eddie Waring, successful pre-war manager of Dewsbury’s rugby club and for so many years the voice of rugby league; and current British super-featherweight champion Gary Sykes.
Although it is interesting to note the achievements of the famous, the real issues that affect people’s lives are my primary concern. In the Denby Dale ward, the village of Birdsedge supports sustainable energy, but rightly cannot understand why anyone would try to site huge turbines so that they overshadow the village and village school. Renewables are important, but so is quality of life, and I am pleased that the planning process will soon reflect that. I support BOLT—Birdsedge and district Opposition to Large wind Turbines—the village’s action group.
The villages of Skelmanthorpe and Scisset recognise the need to provide homes to sustain their villages, but could not understand how anyone could suggest doubling them in size without addressing the infrastructure that thousands of new homes would necessitate. Thankfully, the regional spatial strategy is behind us, along with the local development framework, but the local authority must recognise local people’s legitimate concerns as it considers its plans. I am pleased to support Save Our Scisset and the Skelmanthorpe community action group.
In the Kirkburton ward, there are successful businesses supplying everything from mineral water to precision engineering components. There is a remarkable company, which manufactures a machine that can prevent hair loss—
Simon Reevell
It is good, but not that good. It can prevent hair loss for some chemotherapy patients.
I have given examples of enterprises that must be encouraged, and the same applies to those who farm in rural areas. Honest food labelling is a reasonable request from those who farm the southern half of my constituency. Those who maintain our countryside and those who build up private sector businesses deserve a tax system that recognises generations of careful investment.
In Mirfield, as everywhere, education is important. Mirfield’s Castle Hall and the Mirfield free grammar are two of the local authority’s top performing schools. It was acknowledged that any sort of merger would harm the standards in both, yet that was the local authority’s plan. Many groups and individuals fought those proposals, and this is an appropriate moment to pay tribute to my predecessor, Mr Malik, who, through this involvement, put party loyalty to one side and stood with parents, pupils, teachers and politicians of all parties to oppose the local authority’s proposal. It is a good example of how a constituency MP should and did put people before politics. The schools adjudicator threw out the proposals for Mirfield, and I hope that they never resurface, but against such a background, schools such as Mirfield free grammar now look to academy status.
Mirfield has an excellent Air Training Corps and Army Cadet Force. Those organisations teach young people discipline, self-confidence and respect. Their colleagues in the Sea Cadets and Army Cadets in Dewsbury do the same.
Let me consider the town of Dewsbury. It was in the news again last week when the local authority published the summary of its serious case review into the Shannon Matthews case. I am glad that the publication of the entire report will follow, but publication of the summary was sufficient to cause the media to descend once more on the town. The real story is that the people of the town of Dewsbury are no different from the people of Mirfield, Kirkburton or Denby Dale. The Shannon Matthews case concerned only two members of a single family, who behaved in a truly appalling way, but no two individuals can define a town. What defines Dewsbury is the fact that when the people of the town believed that a vulnerable young girl had been abducted, friends, neighbours and strangers spent hour after hour, night after night searching for her, just as they would do in Kirkburton, Mirfield or Denby Dale.
That is not to say that Dewsbury is without problems. Despite its fine Victorian buildings and the best market in the country, regeneration is a priority, and there is a growing feeling that there is an obligation on the local authority to consider carefully whether relocating part of its work force to Dewsbury, a town with first-rate road and rail access, would be a responsible contribution to that process. Some landlords must be more realistic about their rents and more proactive about their responsibilities to the town centre.
Dewsbury’s minster stands on a site of Christian worship going back to 672. In its walls nearly 900 years later, the Protestant faith replaced the Catholic faith. More recently came the chapels, and even more recently, the minster was joined on the skyline by the silhouette of the town’s mosques. That is a sign of a confident and tolerant place, and no one should be allowed to jeopardise that.
The minster’s most famous curate was an Irish immigrant born Patrick Brunty. His is an interesting story. In 1799, after his victory in Naples, Admiral Nelson received the title “Duke of Bronté” from a grateful King Ferdinand. Patrick Brunty changed his surname in honour of the great naval hero. As Patrick Brontë, he worked as curate at Dewsbury’s minster, then went with his daughters to the parsonage at Haworth. The novels written there by his daughters, the Brontë sisters, made their new surname famous the world over. The point is not that those who come to West Yorkshire should change their names to honour the hero of the hour, but that much of what we regard as a product of England, even its finest literature, has roots further afield.
Integration is important—it is not about where someone is from, but the extent to which people are prepared to mix, and ensuring that we respect one another, whatever our cultural differences. It is about asking ourselves if a particular course of action will be helpful or inflammatory; whether something we want to do or even want to wear can be better explained or even changed if it alienates others. It is a central issue in the town of Dewsbury. We are entitled to expect integration and to say to community gatekeepers that their role is to hold the gate open, not force it shut. I pay tribute to all the organisations that do so much already to pursue that course.
Many people in my constituency are fed up with working hard and doing their best, and seeing others who make little or no effort being better off because of the vagaries of the benefits system. The system is unfair and I am delighted that, under the coalition Government, it will change to reward those who strive in the face of adversity, rather than those who sit back and ask, “What can I have for as little effort as possible?”
I thank those who worked so hard to win in Dewsbury. No one had a better team than me. I recognise that alongside victory comes great responsibility. It is an enormous privilege to shoulder that responsibility on behalf of the constituents of Dewsbury.
Rachel Reeves (Leeds West) (Lab)
I have great concerns about what the Government have outlined today. First, international evidence shows that hasty cuts will derail growth. Secondly, by failing to set out a vision for the future, the coalition destroys our chances of rebuilding a balanced economy. Thirdly, the Budget’s measures will hit the poorest in society—those who can least afford the pain—hardest. I fear for my constituents in Leeds West and am worried about how they will fare in the months and years ahead.
On growth, it is clear from the Chancellor’s speech that he has chosen to ignore the harsh lessons of history—from Japan in the 1990s and the USA in the 1930s. Despite his talk of a plan for growth, as a result of today, we face the real prospect of a double-dip recession.
I wholeheartedly agree that the deficit needs to be cut, but the issue is whether it should be cut this year or next year, and the method of making those cuts. The surest way to bring down the deficit is to embed strong and sustainable growth, but we heard nothing about that from the Chancellor today. The Office for Budget Responsibility’s forecasts have revised growth downwards—after those presented only a week ago—by 0.1% this year and 0.3% next year, and an additional 100,000 people are due to go on the dole.
Kwasi Kwarteng (Spelthorne) (Con)
What does the hon. Lady think about the sovereign debt crisis in Greece, to which my right hon. Friend the Chancellor referred in his Budget statement?
Rachel Reeves
I thank the hon. Gentleman for giving me the opportunity to address that issue. The debt-GDP ratio in Greece is two and half times that of the UK, and the maturity on UK debt is, on average, 13 years, compared with an OECD average of two to three years. In addition, the Greek economy remains in recession, while the UK is beginning to recover from a recession. We cannot take that recovery for granted, but our economy grew by 0.3% in the first quarter of this year, and we are beginning to emerge from recession.
The downgrades from the OBR reflect the fact that the cuts will stall the recovery and throw more people into unemployment. There are two ways to reduce the deficit: strong growth, or wielding the axe. The Chancellor has today chosen the latter, and the result will be, as we have seen from those forecasts, weaker growth, higher unemployment, more business failures, more home repossessions and a less competitive British economy. Instead of a strategy for growth, we have been given a strategy for austerity, cuts and pain for working people—the people whom I have been sent to Parliament to represent.
Christopher Pincher
When the Governor of the Bank of England, who was of course Governor when Labour was in power, said that the deficit reduction plan is strong and powerful; when José Manuel Barroso says that fiscal consolidation is necessary; and when Lord Myners, who has made an astonishing but none the less welcome conversion to sanity, says that Governments should spend less than they earn, does the hon. Lady agree with them?
Rachel Reeves
I will give way less often if interventions last that long. The hon. Gentleman made a long intervention, but missed a couple of points on which I should like to fill him in. In its statement from South Korea a couple of the weeks ago, the G20, as well as calling for countries to address budget deficits, argued for growth-friendly deficit reduction strategies. Today we did not get that. Another of the hon. Gentleman’s omissions is President Barack Obama’s warning. In a letter ahead of the G20 meeting this weekend, he said that we should
“learn from the consequential mistakes of the past, when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession”.
The hon. Gentleman failed to mention those points, but they are extremely relevant to the debate.
Stewart Hosie
The hon. Lady is absolutely right on the early withdrawal of the fiscal stimulus—so does she regret the fact that her Government were one of only two Governments fully to withdraw the fiscal stimulus package in 2010?
Rachel Reeves
What I regret is that the current Government withdrew the future jobs fund and the extra 20,000 places that Labour introduced to universities, and cut the regional development agencies, which were doing fantastic work in my region of Yorkshire and Humberside. Those are my regrets.
Frankly, there is no vision from the Chancellor and the Government of the sort of economy they want to emerge from the recession. What sort of society and economy do they want when they have reduced the budget deficit? Labour wants a sectorally and regionally diverse economy that is robust enough to face future shocks. None of that is on the Chancellor’s or the Government’s radar—let alone within their grasp—because they are cutting the very measures that would ensure not only growth in the short term but future economic security.
The new Government are portraying their cuts as eliminating waste, when in fact they are risking our future economic prosperity. Eliminating the future jobs fund, which has got almost 200,000 people back to work through the recession, axing the loan to Sheffield Forgemasters—an absolute disgrace that has cost jobs and economic growth in my region—cutting funding to universities, and cutting hospitals, transport and school building programmes across the country, including in my city of Leeds, is certainly not my idea of eliminating waste. Rather, it is cutting the front-line services on which my constituents rely.
Jim McGovern
My hon. Friend mentioned her regrets and went on to describe some of the things that are happening in her constituency, but does she agree that the Government’s refusal in today’s Budget to honour the commitment to tax breaks for the computer games industry will have a detrimental effect in my constituency?
Rachel Reeves
My hon. Friend is absolutely right, and we could think of countless examples of things that the Government have done today that will risk the future economic prosperity of this country.
Worse than that, ordinary people—those least responsible for the recession—will be hardest hit. In Leeds West, average earnings are £16,000 and unemployment stands at 8.7%. Increasing VAT, reducing access to free school meals, abolishing the health in pregnancy grant, freezing child benefit and cutting tax credits will hurt my constituents. The people who bear no responsibility for the financial crisis and recession will be hardest hit. An extra £13 billion is to be paid in VAT, but there will be only £2 billion extra from the bankers. Is that fair? Is that the way to bring down a budget if we are “all in this together”? I think not. Asking those who already struggle to make ends meet, such as those in Leeds West, to make the same sacrifices as, or more than, those at the top is plain unfair and socially divisive.
I began by urging the Government not to forget the lessons from Japan in the 1990s and the United States in the 1930s. However, I am filled with fear that they want to learn a lesson from Canada, because we are in a totally different position from that of Canada when it approached its fiscal consolidation. At that time, Canada was a partner in the newly formed North American Free Trade Agreement, and was experiencing strong demand for its exports. It was also able to loosen monetary policy, which was integral to getting its economy back on track. Given that UK interest rates are at 0.5%, that rates will be low in the long term, and that quantitative easing has already been undertaken, it is pretty much impossible to see how we can loosen monetary policy further—that is simply not at our discretion. I urge the Government not to manipulate the Canadian experience to justify today’s deep cuts.
I do not dispute that we need a realistic and credible plan for reducing the deficit—[Hon. Members: “Hear, Hear!”] In response to those heckles, as far as I am aware, it is the Government’s responsibility to come up with the plans, but without a credible plan for growth, we risk a double-dip recession, or a British economy that splutters along in the slow lane of the global economic recovery.
The Government are trying to convince the public that there is only one way that Britain will bring down the deficit—pursuing hasty and unjust spending cuts—but that is simply not true. They are using the budget deficit as a cloak for fulfilling their overriding ideological desire for a smaller state. They are set on achieving that by doing the economy down—as the hon. Member for Spelthorne (Kwasi Kwarteng) did when he made the comparison with Greece, which was the most misleading comparison he could have made—and by panicking the public into thinking that there is no other option.
However, there is another option. The surest way to reduce the budget deficit is to ensure strong and sustainable growth and a rebalanced economy. Yes, taxes need to increase and spending to decrease, but not at the expense of the economic future of this country or of a diverse, strong regional and national economy; and not in a way that will plunge more families and children, who played absolutely no role in causing this recession, into poverty, unemployment and despair.
Mr John Redwood (Wokingham) (Con)
I remind the House that, in the declaration of Members’ interests, I have revealed that I offer business advice to a global industrial company and an investment company.
In her response to my right hon. Friend the Chancellor’s Budget, the Leader of the Opposition gave one of the worst speeches I have ever heard in the House. It was intemperate and ill judged, and did not seem to be based at all on the Budget presented to us today. It is a great pity that she and her party still do not understand their culpability for the financial mess in which we find ourselves, show a little humility over the inheritance they have passed on—the worst financial and economic inheritance any Government have received since the second world war—and show a little willingness to work with us on getting out of this hole.
Many Labour Members, having been Ministers or ministerial advisers until just a few weeks ago, have a lot of information. They told us during the election, in general terms, that they would unleash substantial public spending cuts after the election, and it would be good to know from them where those cuts would have been made. They might be preferable to some of the ones we are thinking about, and it would be most useful if they would share them with us. If they are not prepared to share them with us or the country, the country is entitled to say, “These people got us into this mess, are totally unconstructive and still have not learned anything.” As other Members have said, it might be better if they got on with their leadership election, and let us get on with the serious task of debating the state of the country.
Austin Mitchell (Great Grimsby) (Lab)
If the public finances are in such a mess, why did the Conservative party want to adopt Labour’s spending targets in 2008, and did it oppose the huge amounts of money put into the banks to save the banking system, which was responsible for much of the borrowing?
Mr Redwood
I was clear throughout the previous Parliament that I thought Labour’s spending targets were unaffordable, and I said so in the economic policy review that I wrote for the Conservative party at the time. I was strongly opposed to the indiscriminate subsidies and moneys flung at the banks on a scale that defied belief and which I felt was totally unnecessary. I offered an alternative way of saving what needed saving in those banks, for the sake of the general economy and at a much lower cost, so I think that the hon. Gentleman has challenged the wrong person on that issue.
I pay tribute to my hon. Friend the Member for Dewsbury (Simon Reevell). He gave an elegant, traditional and classical maiden speech that bodes well for his representation of the people of Dewsbury. It was funny and detailed; showed a great love of the territory and people he now represents; and showed that he will be a campaigning politician. I also detected just a little conservatism in his attitudes, so I was entirely happy with it and wish him a long and successful stay with us in the House.
The Budget has been little understood by some of the people who have commented on it so far—perhaps that is not surprising because those who speak early do not necessarily manage to read the Red Book quickly enough. I praise my right hon. Friend the Chancellor for producing a Red Book half the length of the Labour Red Book—and, therefore, a lot cheaper and economical—but containing much more useful information. With a short read one can understand exactly what he is trying to do in the measures he is proposing, whereas I used to find it took more than a day to winnow out the truths from the great weight of paper that the previous Chancellors of the Exchequer used to present, because they were always trying to disguise the negatives and highlight and exaggerate the positives.
My right hon. Friend is right to say in his Budget that we can get out of this mess only with a strong and vigorous private sector-led recovery. We need to preside over the creation of a very large number of new private sector jobs, because we need to absorb many of the people languishing on benefits as a result of past policies—almost 6 million people of working age without a job, many of whom would like and need a job. We need to create a much more vibrant private sector that can take them into employment, so that the benefit costs come off the public accounts and those people can start to make a contribution through taxes.
We also need to create many more jobs because the 6 million people currently employed in the public sector are too many. I do not wish to see compulsory redundancies, but I am glad that my right hon. Friends in ministerial office are now imposing freezes on recruitment and allowing recruitment from outside only where it is really necessary. We need to reduce the number of people across the public sector, and I am pleased that we will be showing the way here as well, so that nobody can say that MPs are exempt from the process.
Chris Leslie
The right hon. Gentleman is talking about the number of people in public service employment. What sort of reduction does he feel would be acceptable? How many people should no longer be employed in the public sector?
Mr Redwood
That has to be judged case by case. I will not play the hon. Gentleman’s silly political game so that he can create a sensational press release immediately after I have given him a suitably large number, and I am not going to give him a suitably small number so that he can say it would not have the necessary impact. Suffice it to say that proper management could deliver more for less across many parts of the public sector, and we can do that without compulsory redundancies; we can do it by sensible management.
My first test for my right hon. Friend’s Budget is: how does it promote private sector-led recovery? I am pleased that he has said that he wishes to cut, through a steady process, the headline rate of corporation tax by rather more, I think, than under the plans when he was in opposition. The receipts pages—pages 40 and 41 of the Red Book—on “Budget policy decisions” show that he will be reducing the tax burden for most of business, and that not all of it will be given back in the form of reduced capital allowances in the way that Labour feared. However, if we add in the banks tax, the corporate sector as a whole will be making a bigger contribution. So the thrust of the Budget is that non-banking businesses will get a modest benefit from the changes and that overall business will have to help to pay for the large amounts of public spending still going on. However, a clear message will be sent to the outside world that we want lower taxes and that we believe in lower tax rates. The lower headline rate is the most beneficial thing that we can do to get people abroad interested in coming here with their companies, investments and new ventures, which is what we need.
I am pleased that the Chancellor has done more for small business. [Hon. Members: “Hear, hear!”] All the evidence shows that small businesses are not only politically popular with my colleagues, as we have just heard, but the main generators of new jobs during an economic recovery. They are more creative and need to take on more people. He has targeted them favourably with both the small business profits tax rate reduction and, for those outside London and the south-east, the generous national insurance reduction—as a Member for a south-east constituency, I would like him to extend that to the rest of the country as well, but I understand his argument that he wishes to concentrate the help on those parts of the country with the most unemployment and the biggest public sector problem.
Overall, the Budget judgment is not to ensure that 80% of the strain is taken by public spending reductions. The idea is that next year 57% of the strain is taken by public spending changes and 43% by tax increases. That is quite high on the tax increase side, which is a little worrying, but it reflects how my right hon. Friend is very reluctant to cut public spending in a damaging way and his understandable wish to get on with Budget deficit reduction.
Tom Blenkinsop
The right hon. Gentleman mentioned that he would like to see extra advantages for his constituents in the south-east. The Financial Times recently calculated that cuts to benefits and key Departments will have twice the detrimental impact on family incomes in Middlesbrough South and East Cleveland and other constituencies in the north-east as they will in the home counties. Given that, how can the Government talk about us all sharing the burden, and about all of us being in this together?
Mr Redwood
I was coming on to talk about the impact on incomes. The Red Book is quite explicit about that, and has some very helpful tables. I suggest that the hon. Gentleman gets a copy for his greater interests, as those tables make it very clear that the more one earns, the bigger will be the negative impact on earnings. As the Chancellor himself said, in that sense this is a very progressive Budget: he has shielded people on low incomes from part of the impact, and made those on higher incomes carry more of it. Although the hon. Gentleman represents a place with more people on lower incomes, they will be relatively protected.
Mr Nigel Dodds (Belfast North) (DUP)
The right hon. Gentleman listed a number of measures that the Chancellor is taking to promote the private sector. I am sure that he will agree that one of the most welcome proposals is to reduce the volume and complexity of regulation. However, does he accept—I am sure that he will—that a lot of regulations come from the EU? How can we grapple with the extent and complexity of regulation if a lot of it emanates from somewhere other than Whitehall?
Mr Redwood
The hon. Gentleman is right to say that we have much less power to reduce or improve regulation from Brussels than we do with what is homespun. However, so much crass and foolish regulation has been put on British businesses over the past decade by the home legislators—the then Labour Government—that we can get quite a long way by removing, amending or changing that. In the meantime, we need to summon up a bit of courage and tell those in Brussels that they, too, should join in the process, as that would benefit their businesses as much as ours.
I have often said in this House that, from the point of view of running a business, reducing regulatory cost is a good way of offering something that is just like a tax cut without reducing the public revenue. Indeed, it is even better: not only is there no revenue loss, but public sector costs can be reduced, as the enforcement and monitoring costs of needless or over-the-top regulation can themselves be reduced. That means that businesses get a cash flow benefit, and that there is a reduction in the costs of Government.
The previous Government regulated too many things, and they did so too much and too often. They often regulated in a way that made things worse rather than better. We often found ourselves opposing them, even though we did not disagree with their aims. Like them, we wanted people to have nice lives and decent jobs, and to be free from risk in the workplace and so forth, but we often found that the regulation that the former Government proposed was very expensive and did not achieve the required result.
A tick-box culture means that people get very good at ticking boxes and writing memos, but that they do not manage in the proper way. A factory can be made less safe if the process is merely bureaucratic. Instead, the notion that safety comes first, second and third must be inculcated in all the senior people in that factory. They must manage safety intuitively, as ensuring that a workplace is safe cannot be achieved by tick boxes, inspectors or regulators.
Safety must be inherent in every workplace, and what we can do is to set a tone by saying that it matters above all else. We can have laws at a high level on safety but we need not go into as much detail as the previous Government did. Their approach often made things worse, and much more expensive.
The most important table in the Red Book can be found on page 45. It is one that we must discuss and understand, as it sets out the expenditure patterns for the forthcoming period of Government. The information in the table will come as a pleasant surprise to many neutral people outside the House, although it may worry Labour Members, who seem to be in denial about it. The table shows that total expenditure in the last year of the Labour Government reached £669 billion, and that expenditure will rise steadily to £737 billion by 2014-15.
Stewart Hosie
The right hon. Gentleman is accusing Labour over this cash-terms expenditure increase, but I am sure that he will remember that the Chancellor explained early in his speech that ever-increasing debt repayment costs were included. I have no doubt that, for the sake of completeness, he will want to remind the House of the gross domestic product deflators of 3.2%, 2.1%, 2.1% and 2.6% over the next four years.
Mr Redwood
I was going on to say that we are talking about a big increase in cash. If all of us in the public sector can get better at managing that cash, we should be able to do a good job for people because the amount of spending is going up.
What could go wrong? Well, the hon. Gentleman has mentioned two things that could go wrong. If public sector inflation is as high as, or higher than, forecast general inflation, that will eat away at the value of the money that we are spending and make it more difficult to sustain good public services. However, Ministers tell us that they will be very tough on wage increases. That will help, as it will share the work and mean that we can keep more people doing more worthwhile things for our constituents, without all the money being eaten away by wage increases.
After all, that is what the private sector had to experience for two or three years, during the worst of the recession. In that regard, I pay tribute to the many work forces and unions in this country that did not merely accept that there would be no pay increases; instead, they often accepted pay reductions and very tough work-sharing schemes. They did so because they understood how dire the position of their industries and companies were, and they helped their managements to see their companies through.
We do not have to go that far in the public sector, but there is something that we need to tell all our public sector employees, and I think that this is a task for Opposition MPs as well as Government MPs. We need to say, “Things will be less painful and better for all of us if we can keep costs down and wages and salaries under control. More jobs will be preserved and a better service delivered to the people whom we serve, because more of that cash increase is going to go into helpful spending.”
As the hon. Gentleman says, the rising interest charges are also a worry, albeit one that makes the coalition Government’s case rather well. If we do not tackle the rising deficit now, more and more of the money will go on paying interest bills for past spending, rather than being available for paying teachers’ or nurses’ wages, which is what we would rather be doing with it. His point therefore makes the case strongly that the more action that is taken at the beginning, the better, because then more of the quite large sums of extra money that will be available will go on buying real improvements or maintaining a decent quality of public service, instead of going on the rising interest bill.
The Government have had just one piece of good fortune with their rather bleak inheritance, as well as quite a lot of bad news from outside the United Kingdom. The one piece of good fortune is that over the weekend the Chinese Government announced that they were going to allow their currency to start to move upwards against the dollar. We have had quite a long period of the yuan/renminbi being pegged to the dollar. That has meant that China has been super-competitive. China works hard, she is developing much better technology and she produces good products. With the managed exchange rate that we were experiencing, with the pound sticking around with the dollar in recent months, we discovered that China was getting more and more competitive. Indeed, there has been another huge surge in Chinese exports in recent months.
Let us hope that the Chinese will now allow their crawling peg to crawl up quite a bit. The last time they had a crawling peg, it started a bit slowly, but then there was a 20% revaluation of the currency, which was quite helpful. We need all the help that we can get, because Britain has to export more and earn more money in overseas markets. The world’s No. 1 colossus—the dominant, most competitive exporter—is China, and any currency revaluation would be helpful. We still have to work hard—we have to get smarter and control our costs—but that revaluation might take some of the pressure off.
However, the bad news is that the European market is getting worse. We had hoped that European countries would have a normal, cyclical recovery, such as that which the United States is enjoying. However, it now looks as if their recovery will be slow, with quite a number of countries going backwards this year and early next year, because of their deficit problems and difficulties with the euro. Indeed, those countries’ economies might continue to fall or start to fall again. That is difficult for Britain, because euroland is an important marketplace for our physical goods—it is not nearly so important for services or inward and outward investment, but it is important for physical goods. It is therefore in our interests that euroland starts to mend itself as soon as possible. I therefore hope that the Chancellor will continue his negotiations and work with his European partners, because it is important that we allow them to take the actions that they need to take to start mending the euro.
The euro is a single currency in search of a single country, and that has been its tragedy ever since it was first created. Those of us who warned that we could not have a single currency without a single economy, a single budget and a single Government were told that we were quite wrong and that we had misunderstood things. Apparently all that history that we had read was a waste of time. However, all the history of currency unions that I have ever read shows that they work only if there is control of the borrowing and spending levels through a central power, which is what we are now told our friends and colleagues in euroland are learning. They have discovered that they cannot allow Ireland, Greece, Portugal and Spain to free-ride at the expense of the rather more prudent core. Those in euroland are learning that, if they allow those countries to borrow and borrow at the lower common interest rate that Germany has granted them, there comes a point when the markets no longer believe in those countries and they start to blow their debt markets apart.
Sammy Wilson
Is the right hon. Gentleman not a bit concerned that the Government now accept that the European Union perhaps has the right to scrutinise the budgets of euro countries before those budgets are implemented? Does he not believe that that could be the thin end of the wedge, and that such scrutiny might eventually extend to all members of the European Union?
Mr Redwood
I am very strongly of the view that countries have to do that, and more, in euroland. As Members might guess, I am passionately of the view that that has nothing to do with Britain. The deal I want my right hon. Friends to offer our European partners is that we will accept more or less any kind of treaty change to give them proper control over the budgets of euroland as long as we get some powers back and it is made very clear that we are not part of this new machine to try to create an economic Government of Europe.
There need to be changes. The system is not at all stable, and I do not think that the much advertised trillion dollar package of loans and guarantees, and possible facilities, is necessarily going to see all these countries through the future threats to their stability. Given the rather damaged states of their private sector economies in many cases, there is a danger that, if all they do in response to the financial market pressures is to cut public spending to try to get their borrowing down, they will not succeed. If they are cutting their public spending, but there is no growth coming through in the private sector to take up the slack, or if they are cutting their public spending while their tax revenues are falling, the gloomy pundits will be right and the medicine will not work. Just cutting expenditure does not create a strong economy.
It is important to cut spending sufficiently to allow the private sector to grow and it is important to cut spending sufficiently so that the deficit does not get out of control and produce too much pressure on interest rates, but that needs to be done against the background of the beginning of a recovery—as we have in the United Kingdom. For a country in turmoil with a deeply damaged economy, as some of the southern states seem to have, simply cutting expenditure might make the problem worse, not better, without taking other action to try to get the economy’s private sector going.
The proof of the Budget will be in what happens to the private sector recovery over the next year or so. I hope that the Office for Budget Responsibility will turn out to have been too gloomy. It says that the impact of the Budget in the first two years will be to lower the growth rate slightly; it says the growth rate will be better in the following years when the full benefits of deficit reduction and private enterprise promotion kick in.
It need not be like that; we could do better than that. If the Chancellor wishes to do better than that, as I trust he does, he needs to turn his attention urgently to the state of the British banking industry and the capability of British banks to finance the private sector-led recovery that we clearly need. I do not believe that the current regulators of the British banks have got it right, and although I fully support centralising the regulation of money markets and banks in the Bank of England—I advocated it myself and I am happy that that is going to be done—that in itself is not enough. That is a structural change, but what we also need is an attitude change.
The sad truth of life is that we have just lived through the worst five years I have ever seen in terms of mismanagement of money and banking in this country. Labour Members will want to blame just the private sector banks, and I agree that some directors of those banks got it horribly wrong and they deserve to be dealt with in the appropriate way by their shareholders and by others. However, I hope that sensible Opposition Members would agree with me that it does not speak well of the monetary control system and the regulatory system that that happened. Why do we have financial regulators? We have them to stop that kind of thing happening. They are meant to stop runs on banks, even if banks have directors who are likely to produce a run. They are meant to stop systemic collapse, even if directors get a bit carried away.
Mr Binley
Is it not right to point out to the Opposition that the then Chancellor of the Exchequer, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), asked the Financial Services Authority to apply a light touch in order to sustain his myth that he had done away with bust? Is that not one of the reasons that Labour Members should apologise?
Mr Redwood
If one interprets light touch as meaning regulating the wrong things, I would agree with my hon. Friend. There was a huge increase in the amount of regulation during the Labour years, as one would expect, as Labour Members believe in regulation, but I think that they have demonstrated that it does not work. Our old friend the box ticker is relevant. There were many more box tickers in the City at the end of the Labour period than at the beginning: lots of nice, neat forms were duly filed; and people got into trouble if they put the wrong figure in the wrong box, which was apparently a great crime.
Meanwhile, the regulators simply ignored the phenomenal explosion of the banks’ balance sheets. I do not mean just hedge funds or off-balance-sheet items; the actual balance sheets ballooned in a crazy and unreal way. As I recall, the main banks went from 20 times to 34 times leverage, and not once did the regulators ask, “What is going on here? Is this not a bit excessive?” Why did the banks have only 20 times leverage in Lady Thatcher’s day? She was not known for being too shy about promoting private sector recovery. Perhaps there was a reason why banks were only allowed to gear that much in those days, and perhaps we should think again about the degree of gearing.
We then lurched from that to the opposite position. At the depth of the recession the regulators said, “We have now decided that the banks must get rid of all this leverage. They must have huge amounts of cash and capital pumped into them so that they cannot lend anything to anyone.” That made the recession 10 times worse.
Mr Graham Stuart (Beverley and Holderness) (Con)
My right hon. Friend has just made the very point that I was going to make. The regulators compounded their failure to regulate at a time when they should have reduced the lending of banks by, during the bust, doing the precise opposite, and compressing lending when the economy desperately needed the banks to lend more. That was a double whammy for the British economy, it was entirely due to the behaviour of the Labour party, and it has left a terrible economic legacy which the Chancellor today set out bravely to put right.
Mr Redwood
I think that we now need to be positive, and I want to try to engage the Labour party in the process. I understand that the hon. Member for Leeds West (Rachel Reeves) used to work at the Bank of England, and we may have learnt from her speech why it is a good thing that her advice is no longer available to the Bank; I do not think that she would have helped to get us out of the mess. From now on, however, we need to ask ourselves what we should do about banking regulations, because I do not believe that the current system is right. It is all very well for us to say that it was wrong under the previous Government, as it clearly was, but it is our duty now to try to ensure that we do a better job. Unless we change the system, it will not be much better under the present Government.
I believe, and I think Treasury Ministers believe, that we should now have counter-cyclical rather than pro-cyclical regulation. What does that mean? It means that when times are tough and we are in recession, we should allow banks to lend more money on easier terms, and when times are really good—as in 2006-07—we should rein in the banks and say, “You cannot go on lending like this.” In the immortal words of the Governor of the Bank of England, we should remove the punchbowl before the party has everyone blind drunk. It is a pity that we did not do that in 2007.
Some of my critics say to me, “That is all very well, but how do we know where we are in the cycle?” We can never be sure where we are in the cycle, but I should have thought that it was fairly easy at the moment to agree that we are somewhere near the bottom of it. Heaven help us if this is not the bottom of it. I do not believe that all the figures in the Red Book about growth from this point are wrong, and I do not believe that all the independent forecasters are wrong. I think it quite likely that there will be some growth, but not as much as I would like and not as much as we will need.
The main reason that there will not be enough growth is that we do not have easy enough money for the private sector to refuel the recovery. The overall money supply figures are pretty dire, and we should bear in mind how much of the money is circulated around the system from the Bank of England to the Treasury to the spending Departments. Labour left a perfectly good money machine to put relatively low-cost money into the public sector, but at the cost of the private sector, which—particularly small and medium-sized enterprises—is still shivering in a world in which there is not enough sensible credit.
I do not want to stoke a new unsustainable boom, but there must be a judgment about whether the recovery is too fast or too slow, too hot or too cold. At present, it is most people’s judgment that in the private sector is too cold. It is not going quickly enough, and it is not easy enough. We need to make it easier for ordinary, run-of-the-mill entrepreneurs to succeed. It should not be necessary to be a complete genius who is prepared to take on all the odds in order to establish a company. We want people to be able to do that who have reasonable skills and do not want to have to fight the jungle all the time.
Nadhim Zahawi (Stratford-on-Avon) (Con)
I agree with my right hon. Friend. He has heard me speak passionately about start-ups, and I was pleased that my right hon. Friend the Chancellor provided some incentives for them today, but given the reality of where we are today in the economy, the recovery will be fuelled less by start-ups than by medium-sized businesses that are already exporting to countries such as China and Brazil, where our record is currently abysmal. We export more to Ireland than to those countries. It is those type of companies that have a more mature business that are not investing at present. They are not retrenching, but they are not investing. Banks need to send a message to them that there is money available to them to make that investment and to grow their business from medium to large.
Mr Redwood
I am grateful to my hon. Friend, and I agree exactly with what he said.
My conclusion on this is that to promote a proper recovery the Government need to have words with their financial regulators to say that at this stage of the cycle they should not be demanding more cash and capital from here. The banks are now perfectly solvent. They are perfectly liquid; they are lending huge sums of money to the Government, and that counts as liquid resources because they hold it in the form of Government bonds and Treasury bills. Job done, therefore, but by all means start to tighten things again in a year or two if we have a really good recovery going on and if credit is beginning to build up.
The economy is still anaemic, however; it is still short of credit. It does not have the oomph behind it that we need, and the answer lies in the banks. So my plea to the Chancellor is that in order to make his strategy successful he needs to do something about the way we approach banks, credit and money supply in this country.
The overall Budget strategy takes the risk of doing rather more by tax and rather less by public spending reductions than the Chancellor himself was suggesting when he first looked at this problem, but I wish it well. It is very important for all of us that it works. Every Member in this House wants their constituents to have more chance of a decent job, more chance of getting off benefit if they are unemployed, and more chance of keeping good-quality schools and hospitals.
We have seen what happens in extreme situations in countries that did not take their deficit seriously. They not only end up with a worse economy; they end up with much bigger slashes in public services because they literally run out of money. The previous Government very helpfully advised us that all the money had gone. We know where it went and who took it. The Red Book today gives a pathway to get back from that, so I hope that we will get behind it and try to make it work.
Chris Leslie (Nottingham East) (Lab/Co-op)
It is an honour to represent Nottingham East, having had a few years out of Parliament from 2005. Although I would encourage Members to treat my contribution today as a maiden speech—following, perhaps, the conventions of treating me gently and with great respect—I suspect that might be twisting the rules on maidens a little bit. I do not know whether one can be a born-again maiden, but I will try to focus today on the measures in the Budget speech.
First, I would like to pay tribute to my predecessor, John Heppell, who served Nottingham East faithfully for 18 years, not only—and perhaps most infamously—as Parliamentary Private Secretary to John Prescott, but for several years in the Whips Office.
Nottingham East is truly a wonderful constituency, ranging all the way from St Ann’s, Sneinton, Mapperley, Sherwood and Carrington to Bakersfield and other parts of the core of Nottingham city, which has some of the poorest parts not only of the city, but of the country as a whole. It is because of my concern about the impact of the Budget on those in my constituency who are among the poorest in the country that I wanted to speak today to signal my deep reservations about the measures announced.
I particularly want to focus on the Chancellor’s taxation measures, but there is also the hidden part of the iceberg beneath the waterline: the 80% public spending reductions. That may harm my constituents most of all. We will not know the full ramifications until the spending review in the autumn, of course, but the Chancellor signalled that there could be a 25% reduction in those departmental expenditure limits that are not in the protected areas of health and international development. To take 25% so quickly out of some of the key budgets in the country such as education, transport, housing, police and counter-terrorism will affect key services, and there will undoubtedly be a major effect on our quality of life, in particular on the least well-off.
I want to challenge some of the Conservatives’ spin and assumptions. I understand where they are coming from. They had to set out the context as best they could to try to soften up the public before they wielded the axe, but I am not convinced that it has worked on this occasion. The notion that the condition that we are in is all the fault of the previous Labour Government is really stretching things too far. Even the right hon. Member for Wokingham (Mr Redwood), who is not at the wetter end of the Conservative party, had to acknowledge that the banks were the root cause of the credit crunch and that it was a global credit crunch that started in America and spread around the world. Yes, the regulators failed, but regulators failed worldwide. He might well be like Mystic Meg in his understanding of the sorts of problems likely to range from the regulation of derivatives all the way through to the gearing ratios that the banks pursued, but the truth is that the then Government had no choice but to take steps to save the banking industry, otherwise the cash machines would not have been working; Had he been in government, he would have done exactly the same thing. It is important to put that on the record.
Mr Redwood
The hon. Gentleman should really point out that Australia, China, India and Canada have had much better success at getting their banks and economies through without the kind of crisis that we have had.
Chris Leslie
If the right hon. Gentleman is seriously suggesting that this was not an international credit crunch, I just do not think that is plausible. The House deserves better from him.
Chris Leslie
Let me make a little progress first.
The notion that the debt is solely Government-authored debt has to be rebutted. The problem was not so much about excessive public spending as about tax receipts being drastically reduced because of the recession that came as a consequence of the credit crunch. That is the reality of the situation. The Conservatives try to promulgate the notion that the situation is far worse than expected, but the statistics show that the borrowing requirement is not as difficult as it was a few months ago and that the receipts we now gain from revenues are recovering better than expected.
The notion that debt is out of control was rebutted quite well in today’s edition of The Independent by Sean O’Grady, the economics editor, who illustrated very well that Britain is not Greece. The right hon. Member for Wokingham talked about the difference between euroland and our particular predicament. Although we have difficulties, we also have our own currency and some flexibility. We are not trapped in that currency zone, we have a more diversified economy than others in those areas and our debt has a longer maturity—it is not as short as in other countries. Our national debt might, unfortunately, peak at around the 75% mark, but that is very far from the levels that other countries are talking about.
There is a concentration solely on deficit, rather than on debt, but debt should be the issue at hand as that is the best way of comparing, historically, where we are. At the end of the second world war, Britain had a debt ratio of about 262% of gross domestic product, but the Labour Administration were able to establish a welfare state even with those levels. There is this notion that we are in a dreadful predicament, but the Conservatives have to concoct that urgency and talk about emergencies. There is absolutely no consensus either in the House or among economists more generally that the severity and the austerity that the Government have introduced in the Budget is on a necessary scale.
Nadhim Zahawi
The hon. Gentleman speaks as though his Government were not going to introduce any cuts. Is he telling the House that if Labour were on the Government side, they would do nothing about this? As my right hon. Friend the Member for Wokingham (Mr Redwood) has mentioned, Labour suggested during the election that there would be cuts of £40 billion but gave no further detail. Is the hon. Gentleman suggesting that everything was rosy in the garden before and that we should continue as we were?
Chris Leslie
No, we have to be mature and grown-up about these issues. It is important to recognise that the best way to address our deficit is to have a pro-growth strategy, because it will be through growth that we generate receipts, so that we can make improvements. If we have to restrain public expenditure, doing so in such a short space of time, with such severity, is an exceptionally risky strategy. In Sweden, and even in Canada—countries the Conservatives keep citing—such changes were made over 10 or 15 years. Yes, they rebalanced and consolidated, but for the Government to do so with such fervour betrays what is really going on in the Conservative party. Ideologically, the Conservatives secretly enjoy the cutting back of public expenditure. They hate state expenditure—they absolutely loathe it. They take a certain kind of masochistic relish in scaling back public expenditure.
Steve Baker (Wycombe) (Con)
Does the hon. Gentleman recognise that there is not just one school of economic thinking but at least three? Keynesianism, monetarism and the Austrian school have very different ideas about the rate at which we should cut and about how the economy would recover. Will he at least recognise that in academia there are real differences in economic thinking?
Chris Leslie
I could not agree more. That level of maturity is refreshing, but the Chancellor of the Exchequer saying that there was consensus that the measures had to be taken in a particular way shows how the hon. Gentleman departs from his Front-Bench colleagues. I hope he will have the foresight to listen to the differences of opinion and recognise the possibility that austere and harsh public expenditure reductions, as well as some of the tax increases, could have a harmful effect on the economy. We do not know about the individual measures, but we have already heard from my right hon. and learned Friend the Leader of the Opposition about the effect on unemployment, as shown in the forecasts from the so-called Office for Budget Responsibility, appointed while the Conservatives were in opposition.
Sammy Wilson
The hon. Gentleman is making some good points, but he takes his argument a little too far when he describes Government Members as economic masochists who enjoy the process. At the end of the day, their constituents will not thank them for unnecessary cuts. There is a good argument to be made, but does the hon. Gentleman not agree that the extent to which he is taking it may diminish his case?
Chris Leslie
I hope that the hon. Gentleman is right. Judging from the Conservatives’ reaction—the papers waved in the air when the Chancellor sat down—the enjoyment they took in those harsh—[Interruption.] The hon. Member for Devizes (Claire Perry) calls out, “Pathetic”, but why else would they cheer with such fervour?
Claire Perry (Devizes) (Con)
I too welcome the chance to have a grown-up and sensible discussion, but could the hon. Gentleman not do the Tory cuts thing every time we come into the Chamber? Even my seven-year-old finds it rather childish. Of course the Budget will be tough to justify in our constituencies; no one wants to talk to their constituents about public spending reductions, particularly ones that we did not put on the statute book. We have to deal with a legacy problem and I waved my Order Paper because for the first time in 13 years we had a Budget designed not to win votes but to get Britain back on track.
Chris Leslie
The hon. Lady will have to forgive me, but sometimes I get the impression that sign language is the only one she might understand. Cutting back budgets is exactly what she has been doing and she will be voting for it with relish.
Andrew Bridgen (North West Leicestershire) (Con)
I assure the hon. Gentleman that Conservative Members would have liked to enjoy Labour’s economic inheritance in 1997.
Chris Leslie
It is important that we start to look at the measures in the Budget. They did not deal with the waste and inefficiency the Government promised to find. The Government said that waste and inefficiency would form the totality of their public spending reductions. They said they would not hit front-line services. The fallacy of those claims is beginning to show.
Bill Esterson (Sefton Central) (Lab)
Does my hon. Friend agree that one of the concerns is that Government Members say that the Budget is about fairness, yet a good degree of the suffering that will be inflicted on people as a result of the cuts will be felt hardest by those who are least able to bear it? In particular, areas such as Merseyside will bear the brunt.
Chris Leslie
Absolutely, and the local and regional impact of many of the announcements will become clear over the next few days. It is very difficult to assess the full extent of the impact on our constituents only a matter of hours after the Budget has been delivered, but I shall pick out some of the most pernicious measures announced. Putting up VAT to 20% is undoubtedly one of the most regressive tax decisions ever made by a Government in this country—20% indirect taxation, hitting those people who need to buy some of life’s necessities. Yes, indeed, some things may still be zero-rated, although people should watch this space on that one, because the Liberal Democrats in particular promised that they had no plans to increase VAT—that was a secret tax bombshell—but they then introduced a tax bombshell of that scale.
Chris Leslie
I suspect that it would be far preferable to follow a progressive route, not a regressive one, if taxation needed to be increased.
Chris Leslie
I am answering the hon. Gentleman’s question. There are significant revenue-generating measures, particularly in respect of the wealthiest in society, that should have been taken. The fact is that he will vote to take £12 billion in VAT—three letters that will be tattooed for ever on to the face of his constituency—annually from people, including his constituents, yet the Government have only managed to take £1 billion in revenue from the banking levy. That ratio says it all.
Lilian Greenwood (Nottingham South) (Lab)
Does my hon. Friend agree that increasing VAT will also have a significant impact on places such as Nottingham, where large numbers of people are employed in the retail sector, and that it will affect retail jobs? Is he aware that the Centre for Retail Research estimated that increasing VAT to 20% would lead to a reduction of 47,000 retail jobs and 10,000 stores closing?
Chris Leslie
I sincerely hope that that does not happen, but I worry that my hon. Friend may well indeed be right. The Government have tried their best to stagger the arrangement by delaying the introduction of the VAT rise, but they had better hope that the recovery is well under way by the time that the increase comes in—I think, in January—because, if there are still difficulties in our economy and they wallop up VAT by such a large amount, we risk a double-dip recession, which would particularly hit those who are in greatest need.
I want to talk about the most pernicious parts of the Budget which affect child poverty and even infant mortality: for instance, the scrapping of the health in pregnancy grant—just stating its name makes me incredulous that the Government have chosen it—in this financial year, from January onwards, coupled with the restriction of the Sure Start maternity grant to the first child from April 2011. I shall be very interested to see whether Government Members will walk through the Lobby with their heads held high to vote on those measures in respect of pregnant women in the greatest need. Coupled with the freezing of child benefit for three years, the shunting of lone parents off income support from next year—something that is also hidden away in the Budget—the abolition of the child trust fund and a couple of other things that the Chancellor spoke about very quickly in his statement, such as reversing the child tax credit supplement for one and two-year-olds and removing the baby element of the child tax credit from next year, which will cost young new families across the country £295 million, that is a phenomenal tax essentially on those who are in greatest need. Taken together, that seems to be one of the most despicable series of changes in the Budget.
Chris Leslie
I should like to hear the hon. Gentleman justify those changes.
Gavin Barwell
The hon. Gentleman is being very generous in taking interventions. Has he had the chance to look at chart A6 on page 70 of the Red Book, which shows the combined effect of the freeze in child benefits and the indexation increase in child tax credit? It demonstrates that the two changes are extremely progressive when taken together and not regressive, as he tries to argue.
Chris Leslie
It is interesting that the hon. Gentleman talks about that table because I have looked at the whole of annexe A of the document, which attempts to suggest that the changes will affect all income levels fairly and that we are all in it together. However, the tables extend only to 2012-13, which is only a couple of years hence. If the hon. Gentleman has a copy of the document in front of him, he will see that page 40 shows that cuts in benefits really start to bite in—guess when—2013-14 and 2014-15. There is more spin in the document than in any Budget document that I have seen before. If the hon. Gentleman would care to table a written question to the Chancellor to ask for the tables to be extended beyond the short period to 2012-13, I would then be more than happy to debate fairness implications.
I would like to raise a few more of the many hidden elements in the Budget. The Budget will levy an extra £455 million of tax on the insurance bills that our constituents pay, such as for buildings and contents insurance, although I do not think that the Chancellor mentioned that in his statement. The Government will also scrap the saving gateway, which was due to be introduced in July. That initiative was designed to encourage the very poorest in society to save for the future, but it is gone as a result of the Chancellor’s generosity. Given that the child trust fund is also being scrapped, we will have no measures to encourage the poorest in society to start the savings habit, so it is a great pity that Government Members will support such policies.
A further hidden element in the Budget is the Government’s announcement that they will cut support for the payment of unemployed people’s mortgage interest by £15 million in this financial year, although that support is given at the point of those people’s lives at which they are in most need.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Is the hon. Gentleman aware that the interest paid by the Government under the existing mortgage interest support regime is fixed at 6.08%, even though many people pay interest at 2%, which means that the Government give them 4% more than they need to? In addition, surely it cannot be right that those payments can cover mortgages of up to £200,000 over two years.
Chris Leslie
It can if a person who is made unemployed relies on the mortgage interest support to keep a roof over their head, because they will otherwise be in great jeopardy. The hon. Gentleman might think that people should simply cope with the situation, but I believe that we need to scrutinise the measure much further.
The housing benefit changes announced in the Budget are exceptionally complex, so it is difficult to assimilate their likely impact. However, the reduction of the local housing allowance to the 30th percentile of local rents will distort housing support for the poorest in society.
The hon. Member for East Antrim (Sammy Wilson) talked about the tax credit regime and the reduction in the time period for backdating changes in circumstances from three months to one month. That mean-minded reform is an attempt to claw back money by reducing the period in which people in changeable or almost chaotic circumstances may analyse their position and go through the bureaucratic process of reclaiming their tax credits by submitting correct arrangements. As all hon. Members know, many people will find it difficult to do that within 28 days, and the measure typifies the mean-spirited nature of the Budget.
Claire Perry
I am grateful to the hon. Gentleman for giving way again—he is generous with his time. He is eloquently highlighting many of the tough decisions that have to be taken. He seems to be ruling out almost all of the deficit reduction measures that we have proposed, so may I again ask what he or his party would do to get to grips with the deficit?
Chris Leslie
As I have said before, we need a pro-growth strategy. Sometimes we have to spend to save. Investment is exceptionally important at this point in the economic cycle. All borrowing is not evil, as the hon. Lady suggests. [Interruption.]
Chris Leslie
Absolutely—my hon. Friend is right. We need a mature debate about the economy, and the hon. Lady should listen to her hon. Friend the Member for Wycombe (Steve Baker), who said that there are differences of opinion. There is not just one particular view of these things.
There are risks to the economy from completely pulling the rug from under it by doing things such as imposing tax increases that go too far or cutting public expenditure too swiftly or harshly. If the hon. Lady thinks that we can cut public expenditure harshly without any ramifications for the economy, I shall just have to beg to differ.
I have been director of a local government research organisation for the past five years, and something that I suspected would be in the Budget looks as if it may be coming. Capital expenditure will reduce significantly, but many local authorities rely on public borrowing from the Public Works Loan Board, which has a prudential borrowing regime that offers considerable freedom to local authorities as a means of accessing capital for important projects in our constituencies. The Budget document reveals that the tap may well begin to be turned off for local authorities, and discusses monitoring that lending far more closely. Reading between the lines, the implication is that the Government are considering reviewing the prudential borrowing regime. I urge members of the Government, particularly the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), who helpfully has come into the Chamber especially to hear my contribution, not to change that prudential borrowing framework, because the implications may be severe.
Gavin Barwell
I thank the hon. Gentleman for giving way again. He has just made an important point, but I should like to take him back to his reply to my hon. Friend the Member for Devizes (Claire Perry). He said that he wanted a pro-growth strategy. I am sure that everyone in the Chamber wants growth, but does he accept that by definition, growth will not deal with the structural deficit, which is what is there, even when the economy returns to growth. How would he deal with that deficit?
Chris Leslie
I disagree. I think it is possible to deal with the structural and cyclical deficits through pro-growth strategy. The fact that the Government’s so-called independent Office for Budget Responsibility has downgraded the growth forecast as a result of measures in the Budget shows that even it has had to admit that there are dangers in their strategy. I hope that they are absolutely confident about this—they seem to be—although I detect that a few Government Members may have doubts and questions in the evening when they are looking at the measures that will be introduced. I hope that they will look at them line by line, and not just hold their noses and vote regardless, especially Liberal Democrat Members.
Kate Green
It is absolutely right that the measures need to be examined in great detail to discover their true impact on individuals and families. Is it not the case that the distribution effects go beyond simply looking at income and expenditure deciles to groups that are especially vulnerable to poverty? My hon. Friend will agree that the damage done by linking benefits over the medium term to the consumer price index, and the attack on benefits such as disability living allowance will be particularly harsh for some of the most vulnerable members of society. It is important that we do not take a simplistic view of the impact of the measures but look at their effect on the most vulnerable groups.
Chris Leslie
I could not agree more with my hon. Friend, who knows a great deal about these matters. These are stealth cuts from the Government. When they were in opposition, they liked to talk about stealthy measures. Well, these are the stealth cuts. The change from retail price index to the consumer price index is not something that many of our constituents would necessarily notice in the small print, but there are vast reductions affecting them.
There are all sorts of tricks in the Budget, such as linking pensions to earnings—at a time when the Government are going to freeze public sector pay and they know that earnings will be deliberately depressed. With supposed generosity, they can of course link the two at that point in the cycle.
The change to the personal tax allowance was another part of the Liberal Democrat manifesto. It seems that they were not able to fulfil that manifesto pledge, so they have managed to change it a little, but they do not recognise that the people who earn an amount that is below the existing threshold will benefit not at all from the change. We have to think about the very poorest in society, and I urge hon. Members to do that.
Martin Horwood (Cheltenham) (LD)
The hon. Gentleman must admit, however, that taking almost 1 million out of income tax altogether must be a good thing for some of the poorest in our society. If he is keen on looking at the small print and for stealth impacts on the poor, he need look no further than the Budgets that we used to get from the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), which included the supposed abolition of the 10p tax rate. That was cheered by Labour Members, because everyone thought that it meant reducing the rate to zero, but it was in fact being doubled.
Chris Leslie
This Budget makes the 10p tax rate issue look like a drop in the ocean. Some Members want to look at one particular measure on income, and nobody objects to a personal tax allowance change, but we cannot just look at income tax on its own. The Chancellor has shunted revenue generation from income tax to VAT, and that is a Liberal Democrat strategy. The Liberal Democrats prefer VAT now, we can see that, despite the posters.
Chris Leslie
If the hon. Gentleman is going to apologise for the VAT increase.
Martin Horwood
Let us not look at income tax alone. Why do we not look at the comparison between increasing VAT and increasing duties, which the previous Labour Government always used to do? That hits people across the income bands, whereas VAT, although no one likes it to increase, is less regressive because it is not imposed on necessities.
Chris Leslie
If the hon. Gentleman feels that every single item of expenditure that has VAT imposed upon it is not a necessity, I must disagree. It is not simply a tax on luxury items, nor is it akin to duties. The VAT yield is astronomical: £12 billion annually, some of which comes from his constituents. We will see what their reaction is to the increase, and I urge them to write to the hon. Gentleman, because they need to convince him on that issue.
A couple of items in the Budget statement were definitely very confusing. Now that the Under-Secretary of State for Communities and Local Government is present, I must say that I am still at a loss to understand quite how the Government’s council tax freeze will work. It sounds superficially plausible to say that the Government will give an amount equivalent to 2.5%—I think that that was the figure when it was last in the Conservative manifesto—to councils that keep their council tax increase below that level in order to reach a zero increase. That guarantee has been reduced from two years to one year, but with one hand they give a little and then, with the other, yank away a great chunk of the grant that local authorities receive.
Local authorities throughout the country will have to pull those two elements together, but how on earth that supposed council tax guarantee is going to work will be a mystery to them. They will delay their budget setting and budget planning until the spending review is clear, because until they know the departmental expenditure limit for the Department for Communities and Local Government, and until they know their grant settlement arrangements, they will be none the wiser about the Government’s plans either on council tax or on how they should set their budgets. I urge hon. Members to speak to their local authority leaders and elected members about that point, because whether or not we agree with the strategy, if we are to believe in local democracy, the technicalities—the operational details of those matters—count a great deal.
Andrew Bridgen
The hon. Gentleman talks about the coalition Government’s cuts, but he has forgotten about the biggest cut of all. We are going to cut the deficit, which is a millstone around the necks of current and future taxpayers. That will secure the future of our economy.
Chris Leslie
And everyone will live happily ever after—in the rainbow land that the hon. Gentleman inhabits. If he feels that the deficit reduction is the only issue that he needs to worry about, then he is looking at only a very narrow band of the issues that face our economy. Of course we need to have a pro-growth strategy in order gradually, over a longer period, to deal with our debt and deficit strategy, but not at the expense of the poorest in society and of economic growth or employment. The hon. Gentleman may well feel that unemployment is a price worth paying, which was the famous mantra of the Conservatives, but Labour Members do not.
On a technical issue, will Ministers come back at some point to talk about the limit on savings as regards ISAs? There is a suggestion that they are going to be index-linked, but now that we are moving from RPI to CPI in terms of indexation, the Red Book is not clear whether the link will be made on that lower level.
On the weekend before the general election, the Prime Minister appeared on “The Andrew Marr Show”, where he apparently promised to avoid cuts to front-line services, saying:
“But what I can tell you is any cabinet minister if I win the election, if we win the election, who comes to me and says, “Here are my plans” and they involve frontline reductions, they’ll be sent straight back to their department to go away and think again.”
That is what the Prime Minister said only a matter of weeks ago. Unfortunately, Ministers have not been thinking again, but have simply taken the axe to vital services.
In Nottingham, we know that the services people rely on most will be severely hit, and that is only from the £6 billion of changes that have been announced so far. The tidal wave—the tsunami—of spending cuts that is coming in the autumn will be shocking indeed. In Nottingham, we know that £2.7 million is being taken out of education expenditure, with savings from one-to-one tuition, school transport, and provision for special educational needs. We know that £1.2 million is being taken from the working neighbourhoods fund, which includes back-to-work programmes, literacy and numeracy support, and welfare rights advice. That is the front line in Nottingham—cutting by the Conservatives. We know that they have even scrapped the right to see a GP within 48 hours: again, changes to arrangements for which they have no substitute, affecting the front line in Nottingham. They have chopped £350,000 off the road safety budget in Nottingham, as well as the £2 million taken from the transport capital plans. In my constituency, the Conservatives have frozen—I hope that they will reverse this decision and allow the project to go ahead—£5.9 million of housing renewal money for Stonebridge Park, where more than 250 old homes were to be cleared and the same number of family-sized one and two-bedroom units constructed to help to take some pressure off the 15,000 people on housing waiting lists. Again, I fear that that is the front line in Nottingham.
This unholy alliance between the Liberals and the Conservatives—I suppose that one could characterise it as an axis of the axe—will be absolutely to the detriment of my constituents. It makes me concerned about the potential merging of the Liberals and the Conservatives around a right-wing, ideological pole that has shown a clear divide between the parties in this country. I hope that hon. Members on the Government Benches will listen to their consciences, look at the detail in these proposals, recall their election promises—particularly those of the Liberal Democrats on VAT—and vote against this dreadful Budget.
Richard Fuller (Bedford) (Con)
I rise for my maiden speech to applaud my right hon. Friend the Chancellor for his courage in meeting the challenge of the most parlous state of our public borrowings, and for proposing a series of measures that attempts to deal with that problem while striving to protect the most vulnerable. I know it is a task he does not relish, but it is a burden he shoulders on behalf of us all.
I appreciate the opportunity in this robust debate to have a brief interlude—a commercial break, if you wish, Madam Deputy Speaker—to say good things about my home town and constituency of Bedford. I hope that in so doing, I can do as good a job for Bedford as my hon. Friend the Member for Dewsbury (Simon Reevell) did for his constituency in his maiden speech. I shall of course thereby lose the enticing opportunity to correct some of the breathtaking assertions I have heard from the Opposition Benches, not least from the hon. Member for Nottingham East (Chris Leslie), who strains the credulity not only of those of us on this side of the House but of a great proportion of the British public, who really do not understand where he is coming from.
I am the first Member to represent Bedford who was born there since the Liberal Member, Mr James Howard, in 1868. I truly love my home town. It is a wonderful and diverse community, and I am extremely honoured to be able to represent the people of Bedford and the neighbouring town of Kempston. It is an honour that I share with my predecessor Patrick Hall, who was a tireless advocate on behalf of the constituents of Bedford and Kempston. I can say honestly that his work on their behalf knew few limits. He was their constant companion in their navigation of the bureaucratic state that has come to bedevil the lives of so many of us. Patrick was the first Labour MP for Bedford to be re-elected, and in fact he secured a second re-election, a feat so remarkable that I doubt it will ever be repeated by a Labour politician in Bedford.
I also pay tribute to Patrick’s predecessor, Sir Trevor Skeet, who represented the constituency for 27 years. I remember him fondly as I began my political career delivering leaflets for him in 1979. I am happy to say that 150,000 deliveries later, the post finally arrived.
Bedford is a town remarkable for its diversity, both in ethnicity and in culture. It is a most harmonious town and has much to teach the rest of our country about the power and potential of diversity. It can truly be said that a child in the course of their school career in Bedford may well meet other children whose parents come from every single nation in the world. What a fantastic start that gives children in my home town, and what a wonderful job the teachers of my town are doing to ensure that those children have a world-class education.
We are very proud of our education in Bedford, and it is very important to us because we are a town of young families. We embraced the legislative freedoms that the previous Government provided through the opportunity for schools to set up their own trusts. We are also looking forward to September, when two of our finest institutions, Bedford college and the Bedford Charity, join together to establish the John Bunyan academy. I know that many parents and teachers in Bedford look forward to the legislation that my right hon. Friend the Secretary of State for Education will propose, and we intend Bedford to be at the forefront of the free schools initiative.
Great schools beget great Bedfordians. Archbishop Trevor Huddleston was born in Bedford and was a relentless campaigner against apartheid. He was so strong in his actions, against such great odds, that he earned the nickname in South Africa of “the dauntless one”. John Le Mesurier, better known as Sergeant Wilson of “Dad’s Army”, was another Bedfordian and a great man of comedy, who penned his own obituary in The Times thus:
“John Le Mesurier wishes it to be known that he conked out on November 15th. He sadly misses his family and friends.”
It is said that his last words were, in true Sergeant Wilson fashion, “It’s all been rather lovely.”
The challenge for the Government, met in the Budget, is to balance our books while rewarding work; to find a way in which our public services can support and raise up the people of this country who need their help, and not—as happens too frequently, despite the best intentions—hold them down. I believe that a key to that is unleashing the power, potential, leadership and creativity of our social enterprises and charities.
Recently, Bedford college hosted an evening with the entrepreneurs—an opportunity for schoolchildren to meet some of the leading lights in our social enterprises, including Adele Blakebrough of Community Action Network and Tim Campbell of the Bright Ideas Trust. The schoolchildren could hear the passion that guided those people’s lives, and learn about their potential to provide for social services in a better way than the bureaucratic state.
In Bedford, groups of charities have already come together in a formal coalition, Consortico, which will enable them better to compete for the contracts that local government offers. Those charities and social entrepreneurs need the Government as an ally who will enable them to overcome the inertia and intransigence of some arms of the bureaucratic state. We need the leaders of the arms of the bureaucratic state to become champions of unbundling their privileges, not intransigent defenders of their own interests.
Social enterprise is one key, but as has been said many times in the debate, enterprise is absolutely critical. For the arc of my life, my home town has been in economic decline. It is not unique in that—indeed, the causes transcend party and are a pattern repeated throughout our country. Manufacturing jobs have been exported as we plugged into the global economy. There are measures in today’s Budget that will start to address that and rebalance growth throughout our economy. We have witnessed a persistence by Government in permitting those who are able but idle not to contribute to the economy. Again, this Government will tackle that.
In Bedford, we have experienced a doubling of unemployment in the past 10 years. The so-called boom of the past decade seemed to pass our town centre by. It is now in urgent need of regeneration, but incapable of making that happen unless we achieve the economic recovery that we need. The measures the Chancellor proposed today will hasten that recovery.
Our bypass is tantalisingly close to completion after 70 years of waiting. As a town, we need to start punching above our weight to attract more capital to it and to the constituency. We will do that together as a community, by promoting entrepreneurship so that we can start more small businesses, and by opening up our bureaucracies to the social entrepreneurs who can provide a much better service for our community in the long term. We will provide a beacon for other communities to show what can be done by harnessing the opportunities that are presented even in these most difficult times for communities to step forward and fulfil the challenges.
It is said that courage is often found in the most challenging times. With the very difficult measures that he proposed in his speech today, the Chancellor has shown us the courage that is needed, and that he can set us on the right course.
We need a House that can both strive for the most important interests of this country and amplify the weakest and quietest voices in our community. The people need a House that can be a beacon for liberty, freedom and democracy for those in the world for whom those are still ideals and not reality. We need a House that will restore probity to the public finances, so that future generations of Britons are not shackled by the excesses of this generation. The Budget has made a start. I hope, in my time in this House, that I can make a brief and small contribution to achieving those ambitions.
Austin Mitchell (Great Grimsby) (Lab)
In rising to make what must be my 13th maiden speech, I congratulate the hon. Member for Bedford (Richard Fuller) on his graceful maiden speech. He ensured that what can be an ordeal for new Members was not an ordeal for the rest of the House. I am afraid that my one association with Bedford is an unhappy one. I was carted there in an ambulance after a car crash on the A1 and was in concussion for some time. When I woke up, the surgeon came to see me and congratulated himself on having stitched my right hand together, before telling me that I should be very grateful to him. When I explained that I am left handed, he just said, “Damn!” and went away. It was interesting to hear of the famous people from Bedford—better John Le Mesurier than Eddie Waring, I suppose—and of the attractions of the town. I am sure it has produced almost as many interesting people and has almost as many attractions to visit as Grimsby.
I am less congratulatory to the Chancellor on his Budget. I congratulate him on the provision to protect low-paid civil servants, of whom there are many, from the rigours of a pay freeze, but I am not sure that such measures will be sufficient to outweigh what my hon. Friend the Member for Nottingham East (Chris Leslie) called, in his very effective speech, stealth cuts, or the general depressive impact of not only the Budget, but the £6 billion of cuts that went before it and the massive cuts still to come. Those are not part of the Budget package, but they must be viewed as part of the approach. I am sure those measures will have such a depressing effect on the economy that the poor cannot be protected by the simple measures the Chancellor introduced.
In fact, collectively, the package of cuts and the Budget lead me to lament the economic ignorance and social arrogance behind them. The Budget is a dangerous assault on the economy when growth is just beginning—it is not fully entrenched or powerful yet—and there is a glimmer of light ahead. It also represents a transformation in the attitude of the Conservative party. Its leader tried to win the election—he did not actually do so—by charm and by presenting the face of compassionate conservatism. He undertook to protect spending on aid, defence, the NHS and education, to protect front-line services, and to preserve free bus travel and winter fuel payments for pensioners. He also told us that he had no plans to increase VAT. Those must have been the same non-plans that the Conservatives had in 1979, when they increased VAT from 8% to 15%—their non-plans then were equally fulfilled.
That charm offensive—compassionate conservatism—has been replaced by the Chancellor, who was clearly kept in the attic, like Mrs Rochester, during the election campaign, so that he did not go out and frighten people with the extent of the cuts that he wanted to make. He has now been released from the attic to impose his Mrs Rochester economics on the system, with a few pathetic crumbs and benefits, such as the abolition of the cider duty, which we had already in fact abolished before the election. That has now been dropped from the Tory table to the Liberal Democrats to give them and their leader something, however small, to compensate them for having betrayed those who voted for them, thinking them an independent-minded, compassionate middle party.
Martin Horwood
Does the hon. Gentleman really think that taking nearly 1 million people out of income tax, which was a key pledge in the Liberal Democrat manifesto on which we insisted in the coalition agreement, is a small matter?
Austin Mitchell
No, it is of great benefit. I congratulated the Chancellor on it, and I am glad the Liberals won it. However, it is still not sufficient to compensate those 1 million people for the increase in VAT, which is a regressive tax, and for the general depressing effects on the economy and employment of the other measures in the package of cuts in the Budget. That policy on income tax is a gain for the Liberals—and, indeed, the country—and it was right. I congratulated the Liberals at the time on including it in their manifesto.
The transformation of the Liberals is like that of the pigs in “Nineteen Eighty-Four”—I am not calling the Liberals pigs, but they were pigs in “Nineteen Eighty-Four”—into human beings, if not Tories. The Liberals have been transmuted not into Tories, but into European liberals—I am thinking, in particular, of the Free Democratic party, which is an economic liberal party that, I am pleased to note, is now disrupting the coalition in Germany by demanding stringent cuts from Angela Merkel and the Christian Democrats. I am sorry to see my friends in that situation. There are difficulties in the coalition between the Liberals and the Conservatives, because it is like merging a Brownie pack with the Brigade of Guards. I feel sorry for Liberal Ministers who have to sit there and join in the chorus of nodding dogs on the Front Bench at every Tory policy announcement. I am sorry to see that habit spreading to the Liberals.
Austin Mitchell
In a minute, when I have finished the joke!
It is sad to see the Liberals justifying Tory policies, while their Ministers in the Cabinet are being picked off one by one by the Tory press, which is maligning them and doing them down. That is a pathetic spectacle.
Richard Graham
Does the hon. Gentleman agree with Oona King’s remarks to The Guardian last week that the tragedy of new Labour is that, while many signed up to the concept of social justice and economic growth, too many Labour Members concentrated on social justice and forgot about economic growth? The reality can be seen in my constituency of Gloucester, where 4,600 jobs have been lost in the private sector over 10 years, 7,600 have been created in the public sector and there is record youth unemployment. Economic growth has completely disappeared, so it is the Government’s job to restore the economic growth in order to provide the social justice we all want.
Austin Mitchell
I am surprised that the hon. Gentleman has not heard of the economic recession and its effect on our economy. Before now, we have enjoyed 10 years of steady, substantial economic growth that has improved everything—it has put more people in work, improved people’s quality of life and made them better off. Does he deny that reality? I do not want to get into an argument about history, but he is blaming the recession and putting the blame for that on the Labour Government.
I want to move on to the substance of the Budget. The package of cuts in the Budget represents a gigantic confidence trick bigger than the Zinoviev letter, which the Tory party was seen to be responsible for as well. We have to accept that recession brings a need for social democratic, governmental state solutions. Recession brings a need for regulation and fairness, and for public spending to counter the curtailment of private spending and to protect the community. The Conservative party has reacted to that by creating panic about debt, borrowing and the possible foreclosure of our credit cards in Europe. Conservative Members warn about us becoming another Greek economy and, through their tirade of anti-British complaint, they consistently knock Britain.
The clamour about debt is designed to frighten people into accepting measures, cuts in public spending and the roll-back of the state that the Conservative party certainly wanted to put in place anyway.
Austin Mitchell
There is no need to defend the Conservative party at every juncture in my speech. The hon. Gentleman might concentrate on defending his own party for its part in the process—[Hon. Members: “He’s a Conservative.”] In that case, I apologise and give way.
Richard Graham
I am very grateful to the hon. Gentleman for giving way again. Has he looked at the other role model example, which is that of Spain? Currently, it has 20% unemployment, and 40% youth unemployment, having followed precisely the policies that he and so many of his colleagues appear to be advocating—that is, to carry on spending regardless. That leads not to economic growth but to economic disaster. If it were to happen in my constituency, there would be riots on the streets.
Austin Mitchell
I am sorry for mistaking the hon. Gentleman for a Liberal. As a Conservative, he must be sitting in some kind of custodial role on the Liberal Benches.
The analogy that the hon. Gentleman makes is false. It is no use comparing us with Spain, Greece or any of the European countries. Our borrowing is on 13 or 14-year terms, and the interest rates that we pay on it are much lower, whereas Greece’s borrowing is on two-year terms, or less.
We are protected by something for which our previous Prime Minister is never given credit—the fact that we did not enter the euro. The Liberal party wanted us to do that, but our being outside it means that we can take exchange rate adjustments that Greece, Spain, Portugal and the other countries in this situation cannot. As a result, we are not facing the same problem, or the same threat to our debt.
Chris Heaton-Harris (Daventry) (Con)
I take it, therefore, that the hon. Gentleman is proud of the fact that we pay £80,000 in debt interest every minute that ticks by. Is he proud of that?
Austin Mitchell
I am proud of that, because it keeps the economy running at a higher level than would otherwise be the case. It keeps people in work, and it stimulates the growth that is the only answer—
Austin Mitchell
I am sorry, but I want to make a little progress with my argument. I am proud of borrowing. I believe that we have not placed enough emphasis on the need for borrowing, or its role. Borrowing is extremely important, and the panic being created about debt and borrowing is totally unrealistic. It is counter-productive economics at a time when we are facing a recession.
First, I should point out that the debt is not a serious problem. Our debt-to-GDP ratio is lower than that of any other country in the G7, except Canada. We are in a healthy situation when it comes to debt.
Secondly, borrowing by the Government is not the same as borrowing by a household or a company. A Government cannot feel the burden of debt in the same way, because Government borrowing stimulates the economy, growth, jobs and employment.
Mr Sam Gyimah (East Surrey) (Con)
To see the problems caused to a country by debt, we only have to look at what happened to Greece. It is clear that it can be a problem, and that something has to be done to resolve it.
Austin Mitchell
We are doing something to resolve it, and that is to get growth. The only way to bring down borrowing and get the economy moving so that it can bear a heavier burden of debt repayment is through economic growth—all the rest is simple piggy-banking and economic ignorance. If I am going to have to face a chorus of that kind of piggy-banking attitude for the rest of my speech, it will be very unfunny, and I had intended it be as humorous as I could make it.
We have to accept that borrowing is important, and that borrowing by a Government is not the same as borrowing by a household. That is because Government borrowing stimulates the economy, growth and jobs. Borrowing in a recession is a virtue. Indeed, it is absolutely essential, because if the private sector is contracting and credit is tight, and if people are not spending, borrowing is the only way that purchasing power can be kept up, so that the economy can be stimulated. It is simple Keynesianism, and I am surprised that the Tory party seems to have forgotten Keynes.
Steve Baker
The hon. Gentleman has said the word himself, so I will make the same point that I made to the hon. Member for Nottingham East (Chris Leslie) earlier. The hon. Gentleman is just rehearsing Keynesian arguments that died in the 1970s. Even the Labour party in the ’70s understood that, to the extent that Keynesianism worked at all, it only succeeded in stimulating inflation. Would he please consider the inflationary effects of the policies that he is recommending?
Austin Mitchell
Well, where are they? The Government claim that we have been borrowing at too high a level, yet in 2008 the Conservatives were keen to accept—as an electoral manoeuvre—our spending targets, saying that they would adopt the same targets themselves. Did they mean that we should not have borrowed to save the banks? Should we have let the banks go under, with the cataclysmic consequence of credit contracting in our society? Much of that borrowing went into saving the banks. Should we not have done that?
Claire Perry
I am listening, as always with great interest and enjoyment, to what the hon. Gentleman is saying, but in my constituency people were worried that we were about to lose our sovereign credit rating, which would have been a consequence of the sort of borrowing that he is talking about. Do his constituents not care about that, or not think that it is a risk?
Austin Mitchell
My constituents care about the jobs, benefits and growth that borrowing can give them. That kind of threat that the hon. Lady describes is not talked of in the fish and chip shops of Grimsby, nor is it part of any realistic assessment of our economic situation. There is no threat to our credit rating. The idea is absolutely ludicrous. In fact, the Office for Budget Responsibility, which is a wholly owned subsidiary of the Bank of England as far as I can see, has said that the borrowing estimates are coming down. We are borrowing less than the Government predicted. We can well bear that total of borrowing—we should bear it; we must bear it—to get the economy growing again, because that is the only way to pay off the borrowing and to reduce the overdraft.
The Government insist on cutting spending, but I am not sure about the scale of unemployment that today’s cuts in spending will produce. The figure might be 100,000, but it might be up to 500,000, because that is how many jobs have been saved by Labour’s expansionary policies and stimulus spending. However, if we increase total unemployment, those people will no longer be paying taxes. They will be receiving benefits and all kinds of public support, which is necessary to support them and their families. That means that the deficit will increase. Therefore, borrowing goes up as a consequence of an increase in unemployment. The only way to counter that is for the Government to spend and borrow to stimulate the economy.
The proof of that point is dramatically demonstrated in British history by the situation from 1931 to 1934. Because of the cuts made in 1931, with the Geddes axe and all that, public sector borrowing increased substantially from 1931 to 1934, because the economy was not growing. From 1934, when the economy began to grow under the stimulus of the housing boom and, later, rearmament, the public sector borrowing requirement as a proportion of GDP came down rapidly and substantially. That indicates my point, as did our experience when we came into government in 1997. The Conservatives seem to forget that, when Labour came to power in 1997, we paid off massive amounts of debt in the first three years, because the economy was growing and we could do so.
That is the solution to our problems. Only growth will allow what we borrow to be paid off. It is no use knocking Britain and saying that we are like Greece, Spain or Portugal. We are not like any of those: our credit standing is not threatened in any way and we can adjust through the exchange rate, because of what our previous Prime Minister did in keeping us out. The only way to reduce borrowing is to get economic growth. I hope that I have made that point sufficiently clear, because I have made it pedantically and at some repetitive length. It does indicate to me that borrowing is not a problem, and the panic created about it is something of a confidence trick. It is a smokescreen to allow the Chancellor to do what he wants to do for his own political motives: cut public services, roll back the state, cut public spending, cut benefits, cut provisions, and weaken the protection of the poor and those on benefit that comes from borrowing and higher public spending. It enables him to implement his own prejudices.
The cuts are supported by untrue claims about what Mrs Thatcher did in the 1980s. Mrs Thatcher was able to get away with those cuts, which destroyed so much of British manufacturing and certainly turned us from a net manufacturing exporter into a net manufacturing importer, because of the cushion of North sea oil. The Norwegians invested the proceeds of North sea oil in the future; what we did was waste them on a process of creative destruction of British manufacturing industry, which left us the weaker at the end of it.
The cuts are also justified by the claims that Canada and Sweden were able to carry successful spending rounds, but in both cases, the spending cuts were across the board with no huge chunks of the public sector being exempted from them. Both were carried out at a time when the world economy—including the American economy—was expanding rapidly, so that sustained the Canadian and the Swedish economies. We are carrying out our spending cuts, however, at a time of growing recession. Our ex-Prime Minister was trying to lead the world—he did lead it successfully—to agree on stimulus spending to get the economy to grow. This Government are joining a chorus of cuts that will deflate European economies and the world economy.
Bill Esterson
Has my hon. Friend had the same experience as I did in my constituency when discussing how to deal with the budget deficit? Not one person mentioned to me the issue of sovereign debt, yet every single person I spoke to agreed with our analysis that the deficit should be paid off by growing the economy.
Austin Mitchell
Yes, certainly. Sovereign debt is never mentioned. Indeed, this is one of the weaknesses of the Liberal party approach of supposedly involving the whole community in deciding on the cuts. First, it assumes that the cuts are necessary, but, secondly, we have to remember that one person’s cut is another person’s Trident missile.
Martin Horwood
In advancing this rather extraordinary proposition that we have nothing to worry about with the level of borrowing in this economy, is the hon. Gentleman saying that he would have opposed the Labour Government’s plans to reduce departmental budgets by more than £40 billion over the next four years?
Austin Mitchell
Look, I am not an apologist for everything that happened under the Labour Government. I thought that that was an unnecessary commitment, particularly as it was made in order to safeguard our position and not frighten people in response to the Tory clamour about cuts. The Liberal party made the same concessions, actually, so it is no use the hon. Gentleman coming back to me on that. Even if we attempted to cut the deficit by half in four years, it is all a question of timing. There is a time for cuts—“Lord, make us cut borrowing, but not now” would have been my approach, and I believe that that is the only sensible approach. These cuts are premature. The economy is teetering on the brink of recovery, but it is not recovering, unemployment is still rising, the difficulties are still there, and credit is still tight. The banks are not providing credit on a sufficient scale; they need to expand credit and their lending. In that situation, cuts compound the problem. Thanks to these cuts and thanks to this Budget, we now face the danger of the economy slipping back into a recession.
Martin Horwood
Will the hon. Gentleman clarify his position, as it seems to have changed within the space of one speech? Five minutes ago, he was saying that only through growth would these issues be tackled and that we need not worry about borrowing. Now he is saying that it is only a matter of timing and that the Labour Government would have done exactly the same thing in due course.
Austin Mitchell
I was not responsible for the decision to try to cut borrowing within four years, but I assumed that it would be a question of “Let us do it as time allows”. I am sorry that the hon. Gentleman is so strenuous in defending Tory positions—for his is essentially a Tory argument.
The answer is to expand the economy. Growth was beginning, and, as the report from the Office for Budget Responsibility shows, it is now threatened by the cuts and the Budget. Is that what the Liberal Democrats want? Do they want to reverse the improvement that is taking place? If the improvement continues and becomes more substantial, we shall be able to begin to cut borrowing, but that can only be done once the economy is growing strongly and effectively; and it will only need to be done then. We must keep spending high if we are to achieve that economic growth. The Liberal Democrats can make a lot of sacrifices to support the Conservatives, but prostituting their intellects is not one of them.
Claire Perry
I am learning a great deal about economics today. Presumably the hon. Gentleman would have advocated a strong reduction in borrowing at the height of the last piped-up economic boom at some point in the mid-2000 cycle. I should be interested to know what his views were back then.
Austin Mitchell
I think, retrospectively, that we expanded public spending without increasing taxation enough to pay for it. The result was a series of subterfuges, such as the public finance initiative and the public-private partnership. It would be interesting to know what the Government are going to do about them in order to get borrowing off the books.
It was right for us to expand public spending. Society has improved enormously. Public spending improves the lot and the lives of the people, and it is our job to improve those things. I would certainly have spent more, but I would probably have taxed more to pay for that spending. I do not see why the people who benefited so substantially and did so well during the period of growth that we experienced under a Labour Government should not pay more in taxes now in order to counteract the recession with which we are currently trying to deal.
This is a circular argument, but, as I have said, the only answer to the borrowing problem and the deficit problem is economic growth to close the deficit and ease the borrowing, and to make it easier—as we did between 1997 and 2000—to reduce borrowing substantially. When we have growth, that is an easy process. It is silly to worry about it, become obsessed with it and create an atmosphere of fear, but that is what the Government are doing.
The leader of the Liberal Democrats, the Deputy Prime Minister, told us that this was a Free Democratic party moment, and that these would be progressive cuts, the poor and the north would be protected, and the cuts would deliver fairness. That is totally wishful thinking. Cuts always, and must necessarily, hit the poor and the vulnerable hardest. They have less with which to protect themselves. They are more dependent on public spending. Grimsby is more dependent on public spending than, say, Weybridge, or some of the other more prosperous southern areas. Any group or area that is heavily dependent on public spending will be hit by cuts, and that means Grimsby. I am now trying to protect Grimsby from those consequences.
An article in yesterday’s Financial Times provided us with an interesting map. Members should read the article, headed “Poorer areas are to be hardest hit”, and stating that the cuts would be
“striking twice as deeply in parts of the Labour-dominated north of England as in the Conservative-dominated home counties.”
That is the effect of cuts on the people and the spending in my area.
Richard Graham
Does the hon. Gentleman agree with Lord Myners, whose speech in the House of Lords last week reflected his deep frustration following conversations with Ministers in the previous Government who constantly expressed the belief that Government created jobs? His core point was that Government create the environment—the framework—in which jobs will be created by business. The problem with constituencies such as the hon. Gentleman’s, and to some extent mine, is that over the years Government have been led into the belief that they can create jobs themselves. In fact, what has happened is that more people have gone on to benefits, and our cities have stopped being working cities and have increasingly become benefit cities that need to be rescued today.
Austin Mitchell
The short answer is that I do not agree with Lord Myners in any respect at all.
I have just been passed a note from the Hansard reporters, which must imply that I have finished speaking, but in fact I have not.
I must point out to Members, particularly those on the Government Benches, that public money follows need. We are spending at a higher level because need is greater because of the recession. If we cut public spending, as the Government intend to do, we punish need. We do not punish the greed that brought the banks and the economy into recession, nor do we punish the people who have done well out of the economic growth. We punish the needy people and the needy regions. As I represent one of those needy areas—Grimsby—I object strongly to the £6 billion of cuts now being carried out, which the Liberals joined in with, as well as the cuts to come and the cuts foreshadowed in this Budget.
I cannot welcome this Budget, therefore. I think it will be disastrous for the Liberal Democrats. It will also be bad for the poor and the vulnerable. It will be bad because it will hit the recovery that is now taking place, and which is all too slow. It will be bad because it will increase unemployment. It will be bad because it will increase the deficit, and it will be a disaster for our nation, which will be locked into deflation; it will be pushed into it longer than need be.
I give the Chancellor a message from Grimsby, therefore: we who are about to suffer, certainly do not salute you.
Andrea Leadsom (South Northamptonshire) (Con)
According to the Bank for International Settlements, the amount of global derivatives outstanding is now $1.14 quadrillion; that is more than $1,000 trillion and more than 10 times the GDP of the entire world. It is a vast risk, and not only that; it is largely unregulated and traded between the banks themselves.
I am grateful for this opportunity to give my maiden speech during today’s crucial Budget debate. There is no doubt that the actions we take now to cut our deficit and make our banking system safer will determine how quickly our economy recovers.
In speaking today, I am following in the big footsteps of my predecessor, Tim Boswell. He made his maiden speech during a debate on the Finance Bill in 1987, and I hope I am not tempting fate, because within a few months of his speech the stock market spectacularly crashed.
It is a great pleasure to pay tribute to Tim’s 23 years of service in this House. He is one of a small number of politicians to have been called a saint by The Daily Telegraph and he has certainly been an honourable Member of this House. As well as his many virtues, however, he also has a wicked sense of humour. He recently e-mailed me to tell me he was never going to vote for me again—ever. It was only after a few minutes of sheer panic that I realised that that was his way of giving me the great news of his elevation to the other place. Tim has many friends on both sides of the House and I am sure many Members will want to join me in congratulating him on his well-deserved new role.
South Northamptonshire is a new constituency, with two thirds of it from Tim Boswell’s Daventry and a third from Northampton South. My family members have worked and farmed there for generations. It is a wonderful place in the heart of England: we have a mixture of ancient villages, with the market towns of Brackley and Towcester; we have thriving new communities on the outskirts of Northampton; and, of course, we have the world-famous Silverstone circuit. Engineering and technology businesses are a great strength, and we also have some big local employers, such as Barclaycard and Carlsberg.
We do have our own challenges, however. Under the last Government Northamptonshire was a huge target for housing growth, with little regard for the needs and desires of existing long-standing communities, and I am very glad that my right hon. Friend the Secretary of State for Communities and Local Government has announced plans to scrap the regional spatial strategies, thereby giving power back to local people.
We have been beset with applications for wind turbines on the edge of villages, where local residents have felt unable to defend their own environment.
More recently, we have whole communities under threat from Labour’s preferred route for high-speed rail. It would literally cut through farms and villages in my constituency, in some places on a 6 metre-high embankment. We all know that we cannot build new infrastructure painlessly, but there is a huge price to pay by people whose homes and businesses would be destroyed by the track. I urge our Government to make sure that the consultation on high-speed rail gives to everyone whose life and business will be affected the opportunity to have their voice heard. South Northamptonshire is a gem of a place to live, to work and to visit and I am hugely honoured to be its first Member of Parliament.
Let me return to the subject of the debate. To me, it is absolutely key to restore the health of our financial services sector as a critical part of restoring our broken economy. There are two ways of doing that. First, I am glad that my right hon. Friend the Chancellor of the Exchequer has already decided to give back extra responsibility to the Bank of England.
In 1995, Barings bank collapsed due to rogue trading in the far east. Nick Leeson had found a way to put on massive uncovered derivatives exposure without the knowledge of Barings’ treasury in London, in a different time zone if not on a different planet. At the time, I was managing the investment banks team at Barclays, and we were the principal banker to Barings. The collapse came on a Friday evening and the markets were threatening chaos, but Eddie George, the then Governor of the Bank of England, called together a small group of bankers, including myself, and we worked over the weekend to calm the fears of banks that were exposed to Barings. The direct result was that there was no run on the banks on the Monday morning, Barings was allowed to fail and there was no systemic contagion.
The difference between that experience and the more recent experience with Northern Rock is the difference between accountability and the tripartite system. In 1995, Eddie George knew that it was down to him to prevent a run on the banks, whereas in the case of Northern Rock, we had the Financial Services Agency looking to the Bank of England, which was looking to the Treasury for action. The result was the first run on a bank in 150 years and a taste of the financial meltdown to come.
From my experience, I am positive that a key to restoring the health of our financial sector is giving back powers and accountability to the Bank of England, and I am delighted that my right hon. Friend plans to do just that.
There is a second key action that we need to take as well. The financial crisis was not just a failure of regulation; it was also a failure of competition. The great Adam Smith always said in his wealth-creation ideas that for markets to be free and for us to create new wealth we have to have free entry and free exit of market players.
But in the world of finance those principles have not been true for years: cost and complexity have created huge barriers to new entry; we have already seen that Governments cannot possibly allow a single bank to fail when there are issues of systemic contagion; and we see every day the distortion of free competition in the power of investment banks to charge huge margins for derivatives trading and underwriting.
So, I and many of my ex-City colleagues argue that a key way of making our banking system safer is through measures to change the culture of our financial sector. The banks that are supposedly too big to fail must be broken up. The barriers to entry must be removed. The ability to charge monopoly prices must be taken away.
In South Northamptonshire, businesses are struggling because of the lack of available working capital, but with our high-tech and engineering expertise we should be really well placed to build new jobs in the low-carbon economy that our Government want to create.
The Government are right to want to promote a broader mix of business in our economy. That mix must contain a successful financial services sector with healthy competition and the free availability of working capital.
It is a mix that will be at the core of our economic recovery.
Stewart Hosie (Dundee East) (SNP)
I congratulate the hon. Member for South Northamptonshire (Andrea Leadsom) on her maiden speech. She brings great experience to bear, and her description of accountability versus the tripartite, in the differences between Barings and Northern Rock, was instructive. Many of us remember that there were so many cracks between the three pillars of the tripartite they were unable even to agree a weekend takeover of Northern Rock, which led to a five-month hiatus before the action to nationalise was finally taken. I agree entirely with the hon. Lady, who said enough today to show the whole House that she will be a huge asset to her constituents and her party.
Before I comment on the Budget proper, I have a question for Members on the Treasury Bench about the bank levy. The Chancellor said it would apply to the balance sheets of banks and building societies, and to the UK operations of banks from abroad. He sensibly said that there would be deductions for tier 1 capital and insured retail deposits, and a lower rate for longer maturity funding. However, we already have the financial services compensation scheme and some banks are also paying considerable amounts towards insurance premiums for the asset protection scheme for non-performing distressed assets.
Furthermore, the European Banking Authority proposed both a European deposit guarantee fund and a European bank stability fund. Will the levy be discounted, or deductions made, on the basis that funds are going to those schemes too? I make the point not because I do not want the banks to take their full share, but because for every £1 billion in bank levy, there is £20 billion less to lend in the real economy. A little understanding of the relationship between the bank levy and other draws on banks’ cash would be helpful.
The Chancellor clearly confirmed the position of the economy. There is a deficit of £149 billion—10.1% of gross domestic product—and national debt is still about £1 trillion. Using the treaty calculation, we know that it is due to hit £1.3 trillion by 2015-16, which is still about 80% of GDP. In the real economy, our balance of trade position last year was £32 billion in the red and there was a catastrophic £82 billion deficit for trade in goods, which was no doubt a consequence of Labour’s managing to lose a million manufacturing jobs between 1997 and the start of the recession. Notwithstanding what was in the Budget statement, I found it heartening that in so many maiden speeches, particularly during the debates on the Gracious Speech, Members spoke about rebalancing the economy and supporting manufacturing in their constituencies. We certainly need to do that.
The economic backdrop to the Budget—the mess left by Labour—is clear, and demonstrates many of the irresponsible decisions taken by the Labour Government. However, I shall concentrate on the implications for Scotland and the UK economy of the solutions proposed by the Chancellor. To summarise, he said there would be an additional £32 billion reduction in spending by 2014-15, as part of an additional £40 billion in so-called fiscal tightening by the same year. That is an extraordinary additional amount to take from the economy.
It is worth repeating how much the UK economy has been supported over recent years by Government spending. At the time of last year’s Budget, Government consumption was up 2% on the year, which helped keep the economy afloat when household consumption was down 1.9%, business investment was down 24% and gross fixed capital formation was down 14%. That was investment in productive assets for the future.
Household consumption is now 0.5% lower than last year, while business investment is still down 11% and gross fixed capital is down 5.7%. Government consumption was up 3% on the year, to support the gap and keep the economy going. I hope the Government are right about their plans, but I have a serious question about the Office for Budget Responsibility forecast that from 2011 onwards business investment would rise at rates between 8% and 11%. I very much hope that the OBR is right, but they seem to be heroic growth figures. I hope that we are not in the same position with the new Government’s business investment figures as we were with the old Government’s raw, vulgar growth figures—overstated—and I hope that the OBR is correct. We are certainly not out of the woods yet economically.
Although Labour cut the Scottish budget and the UK budget in real terms in this financial year and Labour ensured that the UK was one of only two countries in the G20 without a fiscal stimulus package this year, the new coalition Government appear to be ignoring much of the evidence that only Government consumption shored up and supported the economy when private spending and investment had fallen through the floor. I hope that the Government are not blind to the fact that such support is still necessary.
Given that the Chancellor’s comments today on accelerating the attack on the structural deficit confirm the presumption that most of the savings will come from cuts, he runs the very real risk of pulling the rug from under what remains fragile growth and risks undermining economic recovery. Given that the ratio of cuts to tax increases has gone from 2:1 to 4:1, his comments certainly confirm that we are pointing in the direction of a 25% reduction in unprotected departmental spending—an extraordinary reduction in many Departments’ budgets.
The OBR has downgraded growth forecasts—this was published today—from the 3.2% growth figure published by the previous Government for four of the next five years and the 2.1% to 2.35% average trend growth figures that it published on 14 June to 2.3% for 2011 and 2.7% to 2.9% thereafter. The implications are massive real-terms cuts affecting both Scotland and the rest of the UK. Although a £400 million real-terms cut to Scotland this year was announced in Labour’s last Budget, this Budget will deliver further billions of pounds in real-terms cuts on top of the £330 million in cuts that come from the £6 billion cuts announced earlier this year but deferred until next year by the Scottish Parliament.
The problem is that we were all critics of the last Government for not holding a comprehensive spending review, but, of course, the departmental expenditure limits in the Red Book today give no clarity, as they do not go past 2010-11. Although the Chancellor offered a deal of information, those figures were not—unless I have missed them completely—in the Red Book today.
Steve Baker
This emergency Budget is much needed, and I hope that we can forgive my right hon. Friend the Chancellor if it is missing some of the detail that the hon. Gentleman wants.
Stewart Hosie
I appreciate that this is an emergency Budget. The emergency has been going on for some years. It was foretold by this Government, who said in opposition that they would introduce this Budget. They have had plenty of time to prepare, and they have done so as well as they possibly could. My criticism is that, if the Labour party did not have a comprehensive spending review with the pre-Budget report last autumn and if it did not have one with the Fiscal Responsibility Act 2010, in which it set out £57 billion of cuts in a single year, and if it did not have a CSR with the March Budget, which imposed real-terms cuts on the UK and Scotland this year—that criticism was made by the Tories in opposition, as well as by the Scottish National party, having heard the Chief Secretary’s announcement of £6 billion in early cuts a month ago—perhaps we could have had one with this Budget, but I take the hon. Gentleman’s point that the Government have been in power for only a few weeks.
Given the cuts that we have seen and the growth forecasts that have been laid out by the OBR, my assessment is that they can only add to the cumulative £25 billion shortfall in available public expenditure in Scotland over the next 13 years that is a consequence of the previous Government’s plans. With an accelerated attack on the structural deficit, I fear that that cumulative figure may become worse.
The Chartered Institute of Personnel and Development has warned of overall UK unemployment pushing past 3 million. I genuinely hope that the OBR is right and that unemployment will peak this year at 8.1%. Time will tell, but I suspect that the cuts that we are likely to see will mean that that figure is optimistic. Of course, we hope that those who are in jobs will stay in jobs and that unemployment will not push beyond the forecast peak of 8.1%, because if it does, there will be a reduced tax yield, higher benefit costs and less spending in local economies. In short, today’s plans, like Labour’s at the previous Budget, might make the task of tackling the deficit and debt more difficult.
I suppose that my criticism of this Government is similar to that of the previous Government. We needed a credible deficit consolidation plan that took account of all economic circumstances, rather than a high-risk assault on public sector spending. Given that market confidence is based on the credibility of the deficit consolidation plan, rather than simply the speed of the cuts, I do not understand why the Government chose to use the Canadian model of perhaps 20% reductions over three years, rather than the New Zealand model over the medium term. The New Zealand model was equally successful, and such an approach would have allowed the UK Government to choose to take advantage of £50 billion of medium-term savings by cancelling Trident and its replacement.
The hon. Member for Great Grimsby (Austin Mitchell) made the point that sustained, above-trend growth in the economy is the real solution to the deficit and the debt. Given the tough situation that we are in, we need a proper, serious and sensible discussion about actions that have been taken, and indeed those that have not. Although I recognise that the Budget includes cuts in business tax and I welcome the move to reduce corporation tax, the decrease in capital allowances and the annual investment allowance will take £7 billion from business over the next four years. I wonder whether that approach will have a disproportionate impact on growing businesses that use the investment allowances, while benefiting firms that get on with their business and enjoy the corporation tax benefits but do not necessarily invest and recruit more people.
When the Government took the appalling decision to scrap video games tax relief, why did they not take their own advice, which was published only this month in the spending review framework, to
“Protect, as far as possible, the spending that generates high economic returns”?
One would have thought that we should be protecting and growing investment in that field, because it is exactly the kind of area that could generate the high economic returns demanded in the framework. When the money from the fossil fuel levy is sitting in an Ofgem account, why did the Government not decide to free it up for investment in Scotland’s green future, instead of simply reviewing the position? Why, given that it was Conservative party policy, did the Government not move to introduce quickly a fuel duty regulator that would deliver fairness to business and stability to allow them to plan transport and haulage costs, instead of punting the proposal into the long grass?
It is clear that ordinary people will pay the price for the recession, as we see from today’s announcements on VAT and benefits. The jobs and necessary spending power of ordinary people in the public sector will be lost. Many in the private sector might come under huge pressure when the public sector contracts awarded to the private sector dry up or end.
Much of the Budget might represent short-term thinking. The Public and Commercial Services Union estimates that there is some £123 billion in uncollected tax, yet this Government’s plans, like those of Labour before them, could well lead to a reduction in the head count at Her Majesty’s Revenue and Customs just when such people are needed most to maximise the revenue yield. Although I hope that I am wrong, there is a clear risk that the plan set out in the Budget will lead to a stagnation of growth. Perhaps Lord Mandelson’s threat of 10 years of austerity under Labour will come true, albeit with different parties at the helm.
Whoever is in charge, it is obvious that Scotland can no longer afford to be tied to an economic policy set out in successive UK Budgets that could undermine public services when we need them most, lead to the loss of spending power as public sector employees lose their jobs, and result in public sector contracts in the private sector drying up, and still also be tied to a fiscal regime that, at least under this Budget, fails to deliver the agenda for long-term growth that Scotland and the Scottish economy desperately need.
It is time to take full fiscal responsibility for reshaping and growing the Scottish economy, with the transfer of fiscal powers and responsibility from Westminster to Holyrood; to give the games industry a chance to grow and prosper; to use the fossil fuel levy to invest in our green future; to ensure both that the deficit is tackled properly over the medium term and that we do not take risks with a short-term consolidation. My great fear about the Budget, as was the case with Labour’s plans, is that while recovery is fragile, to suck out consumption, clearly in excess of 3%, 4% or, indeed, 5% of GDP in single years, almost certainly runs the serious risk of tipping the economy back into recession and, as I have said, of making tackling the deficit and the debt, which is important, more difficult rather than more straightforward.
Neil Carmichael (Stroud) (Con)
First, I pay tribute to my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) for an excellent speech on an important subject—regulation and competition in banking—that was worth while and useful to hear. I should like to refer, too, to a comment by the hon. Member for Great Grimsby (Austin Mitchell), about his love of borrowing. Borrowing is not exactly always a bad thing, but there is simply too much borrowing now, and that is what we have to address. We have to remember that £1 in every £4 that we spend is borrowed, which is ridiculous.
The hon. Member for Nottingham East (Chris Leslie) has disappeared, but I want to make two points about his observations. First, he said that we would cut capital expenditure. Actually, we are not doing so. The Chancellor made that perfectly clear, and we must repeat it often, so that people understand that capital expenditure is not going to be cut. Secondly, the hon. Gentleman discussed cuts in Nottingham East in local government and the health service. If he had been in Gloucestershire before the general election, when Labour was in power, he would have noticed that it was subject to cuts, too, in the number of beds in our hospitals. Those cuts, and his cuts, are all about the fact that the Government are facing a situation summed up neatly by the former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who observed that
“there’s no money left.”
Whichever party, or set of parties, won the general election, there were going to be changes, and I am afraid that we have to face up to the consequences. This is not just a Budget about cuts; it is not just a Budget about being responsible in dealing with those cuts; it is not just a Budget about being fair to everybody, although it certainly is—we are being fair across the board in the amount of expenditure being cut and the changes in taxation; but it is a Budget about growth, and we must remember that. It includes useful tools to encourage small and medium-sized businesses to begin growing again.
Bill Esterson
The hon. Gentleman makes the point that we need a Budget for growth, and has just begun to discuss small and medium-sized businesses, and the important role that they have to play. However, does he agree that if we take the stimulus out too fast, it will prevent those businesses from playing the role they need to play in growing the economy again?
Neil Carmichael
The point I am making is that we are providing stimulus for small and medium-sized businesses to get going. We are not going to increase national insurance, for example, as the Labour Government would have done, which is a significant step in the right direction. We are introducing a green investment bank, to make sure that small businesses can develop new technology, which is good news and a stimulus. We are going to ensure that there is more business rate relief for small businesses.
All those steps will help small businesses to progress, and it is important that we help them to do so, because, if we are really to protect our economy, we must not just deal with the deficit, although that is important, but ensure that we have growth. That growth will come in large part from small and medium-sized businesses. I know that from my constituency, because I keep being told, “We would like to have a simplified taxation system,” and that is what we will introduce through the Budget; I keep being told, “We would like to see lower corporation tax levels,” and that is what we will introduce through the Budget; and I keep being told, “We would like simpler ways of employing people,” and that is what we will introduce. Those measures will help small businesses to deliver the growth that we need and, through that growth, the increased tax receipts that will further help to reduce the deficit.
It is important to emphasise that aspect of the Budget and, indeed, our whole economic plan, but we are going to go further, with the banking levy, which we have briefly discussed. That will be useful, too, because it sends a signal to banks that they must act more responsibly, and obviously as a levy it is also a money-raising measure. I must emphasise that, if we want to create an economy that can cope with the deficit, we must recognise that the ingredients for growth are important, and that the Budget provides them. It is important also to recognise that, throughout the entire time that I have been in the Chamber this afternoon, Labour Members have not talked about that; they have always talked about cuts. Yes, cuts are here; yes, they are quite serious; and yes, they are going to be painful for some. But, it is better to tackle that problem now in a responsible and planned way than effectively to back off and ignore it, because unless or until we start reducing the deficit significantly we will not be able to produce the growth that this country needs.
Bill Esterson (Sefton Central) (Lab)
I have registered in the appropriate place my interest as the director of a small business.
I congratulate the hon. Member for South Northamptonshire (Andrea Leadsom) on her maiden speech. She made some interesting points about the banking system and the need to break up the bigger banks into small banks. Perhaps she will agree that no bank should be too big to fail, as that was one cause of the many problems that we have seen recently.
I should like to discuss the Budget’s likely impact on jobs, businesses and, in particular, my constituency. The Chancellor said that he had a plan to reduce the deficit, yet the Office for Budget Responsibility said that the deficit would have been halved under Labour’s plans. Our plan was to cut spending, but only when the economy was strong enough, and Tory and Lib Dem Members seem to have forgotten a simple rule of economics: the role of government is to intervene in a recession when the private sector is struggling. The evidence from history shows that that works time and again. The time to cut the deficit is once the recovery is strong enough, not when the private sector is still on its knees after the deepest recession since 1931, apart from the one following the war.
The OBR, by the way, is staffed by the same people who wrote the Treasury forecasts. The Tories and Lib Dems have made much of the lower growth rate predicted by the OBR had Labour’s approach continued, but in reality the OBR prediction factored in the market’s reactions on interest rates, which in turn allowed for the £6 billion of spending cuts that the coalition planned. The Financial Times commented that the OBR did not note any fundamental skeletons in the Treasury, so it had taken account of the changes since March’s Budget.
The Chancellor has adopted a programme of austerity. After the war, rationing continued under a programme of austerity. We really were all in it together, unless people bought on the black market, which of course the rich were able to do. For most people, however, it did not matter whether they had money or not, because of rationing: they could not buy things because they were not available. It was austerity based on scarcity. This time it is different. In this kind of recession, austerity hurts only those who are on low or middle incomes.
The increase in VAT will hit people on low incomes, and it will hit small businesses. When Labour cut the VAT rate, we saw a stimulus to the economy. The increase that the Chancellor announced today will have the opposite effect. The cap on housing benefit will also hit those at the bottom most, and reforms to benefits will not provide incentives for people to go into work. Removing tax credits for middle-income families removes a big incentive for many to work, particularly in the south, where middle incomes provide barely enough to get by.
The scale of the cuts is 25% for most Departments. That is a hell of a lot of cuts. It means the loss of front-line jobs, and many people in Sefton, and elsewhere on Merseyside, will suffer as a result.
Steve Rotheram (Liverpool, Walton) (Lab)
Does my hon. Friend agree that the real result of today’s Budget announcement will be huge increases in unemployment, which will have a devastating effect on the areas that we represent on Merseyside? That is something that we both predicted before the election, as did our friends on the Liberal Democrat Benches, who now seem to be siding with their friends in government.
Bill Esterson
I am grateful to my hon. Friend, who is absolutely right. Before the election, in his constituency and mine, the Lib Dems made much of their opposition to cuts in the current year, saying that it would increase unemployment, hit those on low and middle incomes, and increase homelessness and business failures. They were right to say so. When they changed their tune after the election, they did so purely for opportunistic reasons, not because they are interested in representing the people in the sorts of communities that my hon. Friend and I represent.
Mr Stewart Jackson (Peterborough) (Con)
How does the hon. Gentleman account for the fact that in 15 years of economic growth based on the success of the previous Conservative Government, the Government he defended at the election managed to produce social welfare dependency to the extent that more than 5 million people were on social welfare payments, with the corrosive social impact involved in that? Is that something that he defended and lauded to his constituents in Sefton Central?
Bill Esterson
I am grateful to the hon. Gentleman for his intervention. In Sefton, unemployment was running at half the level of what it was during the last Tory recession, as were home repossessions and business failures. That, to my mind, is a sign of economic success. Given that, as I said, this recession is the deepest since 1931 apart from the period after the war, that is a measure of the success of Labour’s policies in seeing off the worst effects of the global recession. That is an important difference between what Labour Members see as the way forward and what the coalition is trying to do.
Mr Russell Brown (Dumfries and Galloway) (Lab)
The hon. Member for Peterborough (Mr Jackson) refers to 5 million people being on benefits. He tends to forget something that my hon. Friend and I, and other Labour Members, recollect; there is collective amnesia about this. People were driven from being unemployed on to benefits—incapacity benefit or disability living allowance—simply to massage unemployment figures. That is what it was all about during the previous recession, and we are hearing the same thing again.
Bill Esterson
I am grateful to my hon. Friend, who is absolutely right. The reason why Labour Members who represent constituencies on Merseyside and elsewhere in the north-west did so well in the election is that people have memories of what Thatcherism meant. As other Opposition Members have said today, this is a Budget of Thatcherism, not one for sustainable growth. That should concern everyone in this country, because the Government are trying to repeat the failed economic policies of the 1980s and early ’90s. My concern is that the cuts that my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) referred to will lead to the unemployment, home repossession and business failures that we saw all too often then, because of the loss of jobs in the public sector and the impact on people with small businesses.
The Liberal Democrats say that this is a Budget for fairness, but how can it be fair that an area such as Merseyside, which has some of the poorest parts of the country, is hit so hard? How can that be anything other than a very unfair way of “sharing the pain”, as coalition Members have rather unfortunately called it?
The review of capital projects, which the hon. Member for Stroud (Neil Carmichael) mentioned, was first announced on 1 January. Unfortunately, the delays in the capital programme have taken out of the economy the stimulus that was following as a result of such projects. That review, announced for October, will mean taking money away from the economy at a time when it would have been most useful to support infrastructure projects and when, as my hon. Friend the Member for Great Grimsby (Austin Mitchell) so eloquently put it, the recovery is fragile. In my constituency, the Thornton relief road is a much-needed bypass that would stimulate the economy by bringing benefits to the construction industry and self-employed traders. I hope that the autumn review will mean a reprieve for a scheme that is much needed by residents and businesses alike.
Although the Chancellor’s announcement that capital totals will not be cut further is welcome, it is bizarre that the capital schemes have been frozen since 1 January. The effect on the construction industry has already been severe. The industry itself says that 50% of construction projects should be publicly funded, as they currently are. The scale of cutbacks as a result of the delays has already had a profound effect, and in the case of schemes such as the Thornton relief road that is having an effect on contractors and subcontractors. They need the certainty of knowing whether the work will go ahead, and the lack of certainty is my concern about the delay.
Self-employed traders in my constituency have told me that trade has been down during the recession, but they are surviving. Unless projects such as the relief road go ahead, more small businesses will suffer. I have mentioned the unemployment figures and the rates of business failure and home repossession, and if we go back into recession, it will be far worse this time because there is not financial support in constituencies such as mine for large capital projects, and because of the level of public sector employment. I therefore urge the Government to bring forward their review of capital projects so that we can have support for the economy now, when it is most needed, in my constituency and across the rest of the country.
The Building Schools for the Future programme is of huge significance in Sefton and elsewhere. Phase 1 was due to start this year in Sefton, but again, the delay in confirming whether the programme will happen is having a huge impact on the children at two schools in my constituency, Chesterfield and Crosby high schools. It has also had a huge impact on contractors and small businesses. The summer holiday is a big opportunity to build schools and carry out the refurbishment and rebuilding work that is part of BSF, but it will be missed this year because of the delay. Projects that were due to start in April cannot now start before November. That will have a profound impact on schools, and businesses, jobs and the wider economy will also be affected.
The Chancellor gave hope when he mentioned the bank levy, but he said that it would raise £2 billion. The VAT rise is estimated to raise £13 billion, while the freeze on housing benefit will yield a further £1.2 billion. What is fair about asking the banks to contribute just £2 billion towards the deficit, while asking those on low incomes, such as pensioners and low income families, to pay far more? The Labour Government rightly bailed out the banks to keep liquidity going in the economy. We had to do that, but, if we are talking about fairness, it is now time to make those responsible for the biggest financial crisis of our age take their fair share.
Cutting free swimming is just mean. It hits the poorest hardest—£3 per child adds up for a family on a low income or a pensioner on a fixed income. What happened to Government commitments to healthy living for young people and pensioners? They did not last when things got tough.
The Chancellor talked about risk and reward, but the reality is that the biggest banks suffer little risk, as the bail-outs show. There are plenty of rewards through bonuses. Those on low and middle incomes have little reward, but face losing livelihoods and homes if the economy goes back into recession. If we really are all in it together, the bank levy should be far higher.
In Sefton, many people work for Departments and many are self-employed. The two are related. The Lib Dem and Tory councillors in Sefton foresaw the scale of Government cuts. They voted for 400 compulsory redundancies and massive cuts in council services, which would hit the most vulnerable, the elderly and the disabled hardest. Labour councillors and the trade unions in Sefton have resisted them so far. If the Government and council cuts go ahead—from Lib Dems and Tories at both levels—thousands of staff will lose their jobs across Merseyside. Those staff will struggle with housing costs and no longer pay into the local economy, hitting local traders. The Budget contained nothing about help for those who face unemployment or struggle with mortgage payments as a result of the proposed measures.
I have mentioned how hard the Budget will hit the area that I represent. The coalition is making a huge mistake by withdrawing the stimulus to the economy this year. The Budget risks pushing the economy back into recession. The deficit can be cut only on the back of a strong economy, which can come only with support from the public sector until the private sector is strong enough to take over.
It is not a Budget for growth. I fear that it will push us back into recession, with misery for people who lose their jobs, homes and businesses.
Mr Speaker
Order. As things stand, no fewer than six hon. Members are seeking to catch my eye. We have about an hour to go and hon. Members can do the arithmetic for themselves.
Gavin Barwell (Croydon Central) (Con)
Thank you, Mr Speaker, for that advice on timing.
My constituents understand that, as a country, we are in a hole. The public sector makes up nearly 50% of the economy, and we have the second highest budget deficit as a percentage of national wealth of any OECD country—it is high not only relative to our competitors, but by historical standards. According to the Library, the deficit was 11.1% last year, compared with previous peaks of 7.7% in 1993-94 and 4.8% in 1980-81. This year, we are in the ludicrous position whereby almost a quarter of all the money the Government spend is being financed by more debt.
According to the OBR, things are worse than the previous Government told us. The structural deficit—the part of the deficit that will not disappear as the economy recovers—which we should focus on, is worse than predicted in the previous Budget. My constituents recognise that the structural deficit is partly the result of a global recession. They and Conservative Members also entirely understand that it is not all the fault of the previous Government, who had to respond to a recession. However, it is also partly the result of the previous Government spending more than they were willing to raise in tax over a prolonged period.
Some Labour Members seem to have convinced themselves that the recession is all the fault of bankers. It is rather ironic for them to blame bankers when we consider that the things the banks did wrong—failure to set aside money in the good years, holding liabilities off balance sheet and constantly going to the markets to raise money—are exactly the policies that Labour pursued in government. The fact is that we were running a structural deficit of nearly 3% from 2002-03 through to the beginning of the recession. We are still waiting for an apology for that mistake, which has contributed to the problem that we face. Indeed, listening to the synthetic anger of Labour Members today has been rather difficult, because the current Government are dealing with the mess they inherited from the previous regime.
Nicky Morgan (Loughborough) (Con)
Would my hon. Friend like to comment on the fact that there is not a single Opposition Back Bencher here today? It may well be a sunny afternoon, but not a single person is here to defend Labour’s record when my hon. Friend is talking about some very serious matters.
Gavin Barwell
My hon. Friend’s question is almost telepathic, because I was about to say that if the anger was genuine, I would have expected the Opposition Benches to be full throughout the debate, but that has not happened.
Gavin Barwell
I would happily give way but I want to make progress, if I may, given the time limit.
My constituents understand that the problem is due partly to the recession and partly to the previous Government. What they were looking for today is the truth, and for the Government to take the right decisions for the long term rather than chase tomorrow’s headlines. They want the deficit to be tackled without undermining the recovery, and as far as possible in a way that is fair to all sections of society and that protects front-line services. In her response, the Leader of the Opposition seemed to agree with those principles—but then told us absolutely nothing about how Labour would do things differently.
Bill Esterson
Last time I checked, I was an Opposition Back Bencher, as are my colleagues sitting next to me. I take exception to comments that suggest otherwise.
Gavin Barwell
Some Labour Back Benchers have attended the debate, but the Opposition Benches have hardly been full. The record is fairly clear.
The hon. Member for Leeds West (Rachel Reeves), who is not in the Chamber, said that it is the responsibility of the Conservatives to come up with the answers. It certainly is, and the Chancellor has discharged that today. However, it is the responsibility of the official Opposition to come up with a realistic alternative if they disagree with his measures. The hon. Members for Nottingham East (Chris Leslie) and for Great Grimsby (Austin Mitchell), who are also not in the Chamber, went much further and suggested that we could just grow our way out of the problem. They seemed not to understand that a structural deficit is one that will not disappear as the economy grows.
The key questions that my right hon. Friend the Chancellor had to answer today were: by how much to reduce borrowing, how quickly to do that, and what should be the balance between spending cuts and tax increases. The previous Government planned to dig deeper still into the hole by the end of this Parliament, and my right hon. Friend made the right judgment when he said that we should be in balance by the end of that period, and that we should have started paying off debt by 2014-15.
To the extent that I understand the Opposition’s position, they seem to be saying that we are doing too much too soon, and with too heavy a reliance on spending cuts. There are no risk-free options—it is actually a matter of judgment of the balance of risks—and there is growing evidence that the real risk to recovery is not robust action, but inaction. Anyone who has got into debt could tell us that the longer one leaves the problem, the worse it gets.
We are not going to convince Opposition Members on that point, because they have convinced themselves that Conservative Members take some ideological joy from cutting public services. It is worth putting on the record that that is complete and utter nonsense. I had lymphatic cancer at the age of seven and the NHS saved my life, and I have two children in a state primary school. My constituents want more police officers on their streets, and road maintenance to improve. I have come to this place wanting better public services, but they can be delivered only within a stable financial setting. That is what Conservatives stand for. There is a growing consensus on this point: the Liberal Democrats have shifted their position in the light of recent events in the money markets, and the Governor of the Bank of England, in a press conference on 12 May, said:
“it is very important that measures are taken straight away to demonstrate the seriousness and the credibility of the commitment to dealing with that deficit… I am very pleased that there is a very clear and binding commitment to accelerate the reduction in the deficit over the lifetime of the parliament, and to introduce additional measures this fiscal year to demonstrate the importance of getting to grips with that”—
problem—
“before running the risk of an adverse market reaction.”
The G20 communiqué a couple of weeks ago stated:
“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their…frameworks”.
On the balance between spending cuts and tax rises, Goldman Sachs published a paper on 14 April that reviewed every major fiscal consolidation since 1975 and concluded:
“we find that decisive budgetary adjustments that have focused on reducing…expenditure have…been successful”
and “typically boosted growth”, and that by contrast, those that rely on tax increases
“typically fail to correct…imbalances and are damaging for growth.”
The Office for Budget Responsibility forecasts, based on the Budget, to which the Leader of the Opposition referred, show a slight reduction in growth this year and next compared with previous forecasts; but then, forecast growth is actually stronger as a result of the measures the Chancellor announced today.
On public services, there are many public sector employees in my constituency and they will be rightly concerned about what the Chancellor’s announcement today will mean for them. I welcome the commitment to protect the NHS, which clearly suffers from inflation above and beyond general inflation in the economy. That protection is well justified. I also believe there is the potential to make cuts without damaging the front line. Lord Myners, the former Financial Services Secretary, said in the other place:
“there is considerable waste in public expenditure. I have seen that in my own experience as a…Minister.”—[Official Report, House of Lords, 8 June 2010; Vol. 719, c. 625.]
Between 26 May and 2 June, the Institute of Chartered Accountants in England and Wales interviewed a number of its members, over 80% of whom believed that further efficiency savings were possible. I point out to the Treasury Bench that we must look at welfare payments, as the Chancellor said we would, over the next few months, because a 25% reduction in departmental expenditure is a significant target.
Let me say a few words about fairness. We need to protect not just the poorest but those in lower-paid jobs, who all too often are the group targeted whenever money needs to be raised. In that regard, raising the income tax threshold, thereby taking 880,000 people out of income tax, is a fantastic measure from the Liberal Democrat manifesto—but one that all Conservatives, I think, are happy to support. I also welcome the one-year council tax freeze. My own Conservative-controlled local authority will take advantage of it, and we hope that the Treasury Front-Bench team will find the money to extend it for a second year, as promised in the Conservative manifesto. On being progressive, I draw Members’ attention to chart A2 on page 67 of the Red Book, which shows that the overall effect of the package of measures announced by the Chancellor is progressive.
Finally, I would like to make a moral point, above and beyond the economic arguments I have tried to advance. Over the past few years, we in this country have been living beyond our means. The current generation is imposing a burden on our children and grandchildren. Above and beyond the economic arguments that will take place on the Floor of the House about that, it is morally objectionable to saddle our children in this way with debts they will spend their entire working lives trying to pay off. Although the measures the Chancellor has announced are tough, he told the truth and struck the right balance. There is a stark contrast between that and the Labour party’s complete lack of recognition of the problem, its lack of responsibility and its failure to apologise.
Jesse Norman (Hereford and South Herefordshire) (Con)
I congratulate those who made their maiden speeches today.
I welcome the Budget. It was extraordinarily wide-ranging, fair and far-sighted, and I particularly welcome its measures to support small and medium-sized enterprises and to raise the tax threshold for the very poorest in our society. I cannot discuss this without mentioning the glorious success of the repeal of the cider tax, which will be of enormous value and very welcome to my constituents in Hereford. If I were to add a small codicil to that, it would be a call for us to look, in the next Budget or the comprehensive spending review, at rebalancing duty in the beer and cider industries from the off-trade to the on-trade, so as to create more supervised and responsible drinking by young people.
I share the view that it is astonishing that just four Labour Back Benchers should be present for a Budget debate, but the person whom we really miss is the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). He should be held to account in this House, and he should apologise. Instead, I think that he is sitting in his cave like Ben Gunn in “Treasure Island”, composing his memoirs and dreaming of a triumphant return while the world moves on. All over the country, the owners of bargain bookshops are looking forward hungrily to his next volume filling up the remainder bins.
We can guess the theme already—that the right hon. Gentleman and his party were right all along, but I draw the House’s attention to an interesting asymmetry. When the British economy was supposedly riding high, the reason was said to be the far-sighted economic management of the Government. Now it is struggling, it is supposed to be entirely due to forces outside the previous Government’s control.
However, the facts tell a different story. We can see that by looking at how the UK was before the crash in 2007-08. Let us not forget that 1997 to 2007 was what the Governor of the Bank of England called the NICE decade—a non-inflationary time of consistent expansion. It was the period when worldwide monetary conditions were extremely favourable, with low interest rates and headline inflation in the major industrial countries generally at post-war lows. That was how the UK economy looked in 1997, as a result of the extraordinary economic inheritance that the last Government received.
Even then, however, economic growth was never as good as the previous Government claimed. Our GDP growth per capita in the period until 2007 was barely better than that of the eurozone countries, which were themselves held back by German unification. It was far worse than in similarly open and mature OECD countries. Australia, Canada, the US and New Zealand—every one of them grew faster over the period 1992 to 2007 than did the UK, and their growth was not concentrated in the period 1992 to 1997, but in the latter decade.
We have all made much of the fact that the former Prime Minister claimed to have abolished boom and bust, but the fact is that he presided over four booms—in Government spending, immigration, house price inflation, and personal debt.
The first of those booms was the massive ramp-up in public spending after 2001, which was financed by a huge counter-cyclical increase in Government debt. In other words, the previous Government were able to run a budget deficit of 3% at a time when the economy was supposedly growing at 3%. If that was how that Government handled the boom time, is it any wonder that we are in such a hole today?
The second boom was in immigration, with as many as 1 million immigrants from Poland coming over in the period 1997 to 2007. They added to GDP, pushed up demand and kept a lid on wage inflation.
The third boom was in house price inflation, with a massive ramping up of house prices and the diversion of personal savings into housing, pushing the savings rate down from 8% in the 1990s to 1.1% in 2007 and clobbering savings as a result.
The final boom was in personal debt, which totalled nearly £1.5 trillion before the crash. In 2007, personal debt for the first time in our history was higher than the country’s entire annual economic output, and 80% of that debt was secured on private property. Is it any wonder that the crash, when it came, was so disastrous?
We have noticed that the Opposition have made great claims that this Government do not have a growth strategy—language that is code for an unwillingness on our part to waste public money as the previous Government did. The Opposition’s claims are untrue, however. Exercising control over debt and public spending will have a positive effect on growth, in and of itself, as will the proposed reforms to education, local government and transport policy. Of course, there is more to do to flesh out those policies over the next few months.
Matthew Hancock (West Suffolk) (Con)
Is my hon. Friend aware that since the announcements in the Budget today, the interest rates charged on medium-term Government debt have already fallen, which adds to a fall that we have seen since the election of a coalition Government who are prepared to deal with our debts?
Jesse Norman
I have been in the Chamber since then, but I thank my hon. Friend very much for that intervention, which brings home the credibility and respect that the Government are already earning in the international capital markets.
The deepest truth is that for all their talk, the previous Government never properly addressed the fundamental drivers of economic growth. Far from it being the case that this Government lack a growth strategy, the previous Government’s strategy over the past 13 years was not sufficient to ensure decent economic growth. The four booms that I have described washed through the economy, leaving us without a world-class infrastructure or adequate broadband coverage, but with a legacy of educational underachievement, low productivity and low innovation—nothing like the energy, competitiveness and entrepreneurship that we need.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
The hon. Gentleman refers to four booms, the first of which was in public investment. Does he think that the public investment that my local authority made—investment that saw new hospitals built, along with 45 new primary schools and 17 new high schools, and which was funded by the Labour Government—was wrong, when Members from his party were supporting it at the time?
Jesse Norman
I absolutely accept that a lot of that public investment was very well taken and important. I would not demur from that at all, but there is a huge difference between building buildings and building schools. It is noticeable that levels of educational achievement have not kept pace with the staggering amount of money that was spent under the previous Government. If we had paid more attention to institutions and standards, we would now have a higher quality educational sector.
The cancelled comprehensive spending review was not a thing of great honour or glory for the previous Government. It is noticeable that the Office for Budget Responsibility has downgraded its long-term growth forecasts for this country from the trend rates that we have supposedly enjoyed historically over the past 20 years. That is to say that, instead of the growth rates we should have expected—rates of 2.25%, 2.5% or perhaps even 2.75%—we are now expecting a long-term growth rate of 2.1%. That is the tangible quantification of the lack of success of the investment over the past 13 years, so let us hear no more of Labour’s growth strategy, and let us welcome this Government’s willingness—already recognised in the capital markets—to take this massive task in hand.
Pauline Latham (Mid Derbyshire) (Con)
I would like to pass on my congratulations to my right hon. Friend the Chancellor on his prudent emergency Budget, which was so necessary, given the appalling legacy left by Labour. There is one point in particular that I would like to draw to his attention today, although it is about something that will not come into effect until next year, after the proposed rise in VAT. I refer to the listed places of worship grant scheme, which was mentioned in questions earlier and which is due to finish in March 2011. The grant currently enables all listed places of worship across the UK to claim back 100% of VAT incurred on repairs and maintenance.
The scheme is crucial to those places of worship that already require enormous sums for maintenance and repair, of which there are many in my constituency. Since the grant’s introduction in 2001, it has enabled those who look after valuable heritage and community buildings to maintain them for future generations and to ensure that they remain available for use by the whole community. Nationally, £110 million is spent every year on the upkeep of those buildings, and 66% of that sum has to be found by local congregations, the remainder being met by English Heritage’s and the Heritage Lottery Fund’s joint repair grant scheme for places of worship.
Across the country, more people do unpaid work for Church organisations than for any other organisation. Every month collectively, Church of England churchgoers contribute 23.2 million hours of voluntary service to their local communities. At the same time, Church of England congregations give more than £51.7 million each year to other charities, in addition to the large sums raised for local church work.
More than half a million worshippers subscribe to tax-efficient giving schemes. If the listed places of worship grant scheme is not renewed beyond 2011, congregations will have to find an additional 20% of the total cost of repair works, and the impact on them will be huge. That, coupled with the ending of the transitional rate of gift aid for all charities in 2011, means that next year, churches, chapels and other places of worship will effectively face a major financial double whammy.
Many listed cathedrals and churches already have significant maintenance and development programmes, which will begin once they have raised the money. These programmes tend to be quick start and are labour intensive. Often specialist trades are employed. For example, a £100,000 project in a parish church can produce eight or nine jobs for six to 12 months; a cathedral project of, say, £500,000 produces correspondingly more. In terms of job creation in the hard-pressed building industry, one construction job can maintain or sustain up to eight in support services and suppliers, many of which are the small businesses that the Chancellor wishes to help.
That means that, in terms of job creation, repair programmes are much cheaper, quicker, less bureaucratic and simpler than any Government scheme. In other words, the assistance given by the listed places of worship grant scheme is quick and effective, low cost for the employment result and represents extraordinary value for money for those local communities that benefit from the tourist boost and the civil engagement that churches provide.
I know that the Chancellor and his colleagues have had to make very hard choices this year, but I urge him to consider continuing the scheme after March 2011.
Mr Dominic Raab (Esher and Walton) (Con)
This is a crossroads Budget; it sets not just the terms of the next fiscal year, but the policy direction that will determine Britain’s economic competitiveness in the years that lie ahead.
The debt crisis was exacerbated, not created, by the banking crisis. The epic challenge we face today is the result of reckless state spending from 1997. In 1999, the OECD calculated that the British state was spending 38% of the nation’s wealth measured by gross domestic product. By 2008, before the crisis and the banking bail-out, it was 48%—an unprecedented rise of 10%. By 2009, as we all know, the state was eating up over 51% of national income. On these OECD figures, the British state spends more than Portugal, Spain and Greece, let alone Germany, and 10% more of our nation’s wealth than in the United States, Canada or Australia.
We have witnessed a seismic shift in the balance of our economy, which has blunted our economic competitiveness. On the World Economic Forum international rankings for economic competitiveness, Britain was fourth in 1998; today we are 13th. UK tax competitiveness has dropped from 11th lowest in the world to 23rd. According to The Economist rankings, the business environment in Britain has plummeted on its international rankings from seventh to 19th place.
For 13 long years, we were told that all that state spending was really investment, so amidst the shrill cry and synthetic outrage from the Opposition, let us remember precisely what their so-called investments really delivered. Britain has fallen on The Economist innovation rankings, we issue fewer patents, and the productivity gap still haunts the British economy, mainly because of the grotesque underlying inefficiencies in the public sector. In 2002, our roads were the 23rd most crowded in the world; today, they are the 17th most crowded, and our car-to-road ratio is up by 23%. Rail usage is up 17% since 2006, but we have almost 1,000 km less track.
Perhaps the greatest failure has been on Labour’s own terms. Despite unprecedented spending on schools, UK students, measured at 15, have tumbled down the OECD PISA—programme for international student assessment—rankings: from eighth to 24th in maths, from seventh to 17th in literacy, and by a similar measure in science. If social mobility remains an issue in Britain today, as Alan Milburn’s report stated last year, that reflects those basic failings in policy, not spending.
The nail in the coffin of the previous Government’s legacy must be this year’s finding by the National Equality Panel that, after their 13 years in power, inequality has just become worse. Their experiment failed, the spending spree is over, and now, in this Budget, Britain must face up to the reality of the mess that the previous Government left behind.
The OECD has predicted that this will be the last year in which developed countries account for more than half global output. The international competition has well and truly arrived, yet Europe lags well behind the United States in terms of levels of economic growth, and is ill equipped to rise to the challenge presented by new competition from Asia and Latin America.
David Wright (Telford) (Lab)
The hon. Gentleman mentioned the expansion of public spending over the past 13 years. One of the things that public spending does during a recession is blunt—a word that he used—the worst impacts of that recession. Can he cite three projects that he would have cut to provide an economic stimulus at the worst point of the recession?
Mr Raab
I will not mention three specific projects now, although it would be very easy to do a trawl and find far more than three. The previous Government spent billions on quangos, public relations, management and marketing. The basic point, however, is that for far too long the nation has failed to cut its coat according to its cloth, and that must end.
Unless we tackle the legacy of debt that we have been bequeathed by the Labour party, we shall be threatened with high interest rates and even higher taxes, which will mean fewer jobs and fewer opportunities for the next generation. Nor will we reach our economic potential, or keep up with our competitors during the mid-term, unless the weight of taxation and regulation comes down. We must never forget that the economic engine that drives wealth also generates the revenue to pay for our vital public services. This is not a zero-sum game.
While we must act out of necessity, we must also act out of fairness. We should bear in mind that 100% of the contraction in GDP during the recession fell on the private sector. None fell on the public sector, which continued to expand. That is unfair. Median salaries in the public sector are 12% higher than those in the private sector, yet private sector employees work 23% longer hours. That is unfair. In the 11 years up to 2008, the proportion of pensionless employees in the public sector dropped to 16%, while in the private sector it rose to 63%. That too is unfair, and it must change.
This Budget marks the first opportunity for us to change the reckless course of the past 13 years. I commend the Chancellor on his structural reforms, the creation of the Office for Budget Responsibility and the strengthened mandate for the Bank of England, and I welcome his resolve in tackling the deficit. Of course, he is right to cut out the reckless waste in the forthcoming spending review: the billions spent on Government PR and marketing, and the bloated quangocracy. However, I also welcome his resolve in making the tougher decisions today which no one relishes, but the necessity of which must now be beyond doubt. He is right to freeze pay in the public sector and review the structure of pensions. He is right to scale down welfare entitlements that we cannot afford, and which have fuelled a dependency culture that traps too many in a rut that leads nowhere.
Cutting the deficit, however, is only half the answer; we also need a pro-growth Budget. I therefore welcome the cuts in corporation tax and small business rates, and the abolition of national insurance for new jobs created by start-up companies. At last small businesses in this country have a Government who are on their side, not on their backs.
I regret that the legacy of the previous Government has forced us into certain unpalatable choices such as increasing VAT and capital gains tax, and I hope that those measures can be short-lived. Given the global competition, when we protect spending it must be to strengthen our infrastructure or to boost productivity, so I accept that it is right to spare capital spending from further cuts. We must also protect those who are in the greatest need—the most vulnerable. It is absolutely right to lift the lowest paid out of income tax altogether, and to protect public sector workers on salaries of £21,000 or less. The days of tax and spend for the sake of social engineering are, however, well and truly over. The economic costs are too high, the social gains a mirage. So I commend the Chancellor and his team on their first Budget. They must steel themselves with resolve for the long road ahead. Our future economic competitiveness depends upon that.
Margot James (Stourbridge) (Con)
May I congratulate my hon. Friends the Members for Dewsbury (Simon Reevell) and for Bedford (Richard Fuller) on their maiden speeches, and also my hon. Friend the Member for South Northamptonshire (Andrea Leadsom), whose maiden speech, sadly, I missed? I shall have to catch up with it in Hansard tomorrow. I also congratulate any other Members who made their maiden speeches this afternoon.
It is said that “You can’t make a silk purse out of a sow’s ear,” but I must congratulate my right hon. Friend the Chancellor of the Exchequer for doing just that. What a sow’s ear it was, however. Let me revisit the legacy we have inherited from the Labour party. We are borrowing £1 for every £4 that we spend. National debt is running at £3 billion per week. We have a budget deficit of £155 billion, which is 10% of GDP.
As if these headline statistics are not bad enough, there has also been the corrosive effect of some of the shibboleths that the previous Government instilled in our country. My hon. Friend the Member for Esher and Walton (Mr Raab) has just mentioned the fact that public spending grew at a dramatic rate under the previous Government, from less than 40% in ’97 to 48% in 2007. They established the lie that for every social ill—for every problem—there must be a Government solution, and that every Government solution must carry an ever-rising price tag.
The right hon. Member for Birkenhead (Mr Field) has just taken on the dramatic challenge of reducing poverty in our country. He could give a very good answer to the question the hon. Member for Telford (David Wright) asked of the previous speaker about where we might have seen some cuts. The right hon. Gentleman described a situation in his constituency, where children were being sent to school with nothing to eat and having had no breakfast. The Government’s response was instantly to set up a breakfast club—paid for from hard-pressed taxes on people on low pay—thereby undermining the parents who struggle alongside other parents who think it acceptable to send their children out of the house in the morning with nothing to eat. That undermines those parents who struggle and who do provide for their children and do bring them up properly. That is just a small example of additional expenditure that is merely undermining family life.
There is nothing progressive about taxing the next generation for our out-of-control consumption. There is nothing progressive about putting our recovery at risk by continuing the borrowing, and the spending that will inevitably result in higher interest rates and higher mortgages and more people out of work, which all of us in this House are—
Toby Perkins
The hon. Lady mentioned higher interest rates and, of course, her party knows all about that because it was under a Conservative Government that we had record repossessions and interest rates went up to 15%. Is she aware that interest rates under the Labour Government have been lower than at any other time in history?
Margot James
Interest rates reduced partly, of course, thanks to the excellent management of the economy by the former Chancellor of the Exchequer, now Lord Chancellor and Secretary of State for Justice, and also partly because of our exit from the exchange rate mechanism, which I feel all of us on the Conservative Benches were only too relieved to see at the time.
If I may return to the present day, I was pointing out that there is nothing progressive about some of Labour’s policies, and with the interest on our debt heading for £70 billion a year by 2014, we cannot sit here and do nothing. That really is the ultimate hypocrisy given Labour’s fiscal plans, of which we are all aware, and which were revealed in the previous Budget. Some £59 billion-worth of spending cuts and tax increases were made public, but where they would hit was never made clear. My right hon. Friend the Secretary of State for Health was able to unearth some of the detail through freedom of information requests. Many trusts throughout the country revealed exactly where those cuts were going to be made. In my area, the West Midlands strategic health authority was going to make them by ordering cuts in front-line services, hospital beds and the number of nurses and doctors. So we in the west midlands were clear about the nature of some of the cuts that were going to be on order had Labour stayed in government.
Given that we are faced with the terrible legacy that I have just outlined, I applaud the Chancellor for his many acts of brilliance in the Budget, which I shall outline, starting with those concerning pensioners. I am connected with groups that represent older people, and have been for many years. I think that the late, great Baroness Castle of Blackburn would have been very pleased to see at last the restoration of the link between pensions and earnings, for which she long campaigned, but she would have been very sad that after 13 years of Labour Government it has taken a Conservative Chancellor, in his first Budget, to bring that sense of hope back to our pensioner community. Indeed, he has gone one step further by introducing the triple lock of ensuring that, whichever is the greatest of the rise in prices, the rise in earnings or the figure of 2.5% will be our tribute to pensioners, as a minimum, year on year.
On the tax proposals, I can say from the bottom of my heart that none of us wants to increase tax. The VAT rise, which I feel is the legacy of the Labour party, is not such a regressive tax according to the Institute for Fiscal Studies, which makes a greater study of these matters than I do, given that the poorer population spends a greater proportion of its income on items that are exempt from VAT. That is a point worth remembering. I am very pleased that the low paid are being taken out of income tax to the tune of 800,000 people a year, and I acknowledge the presence of the Liberal Democrats in our coalition as the authors of a number of these policies. I am delighted that low-paid people are being helped in that way.
I was one of the Conservative Members who were deeply concerned about the prospect of a rise in capital gains tax, and I am very impressed by how the Chancellor has gone about increasing that tax in a way that protects business assets, protects people at the lower rate of income tax and assigns a more modest increase than we were all expecting to those paying tax at the higher rate. We can all be very pleased by the outcome of the concerns that we expressed on that subject.
I was also delighted to see protection built in for capital spending, which has been really slashed in the past 12 months. I have been lobbying on behalf of the hospice in my constituency, which had received approval for capital funding, not all which was funded—that is a familiar refrain. I was delighted to hear last week that it had received approval in full for its funding. I shall meet the Minister for Housing on behalf of Dudley council to press for the completion of funding for new council housing in the Quarry Bank ward of my constituency, which was promised and partially committed to in funding terms. I was very pleased to see that signal in the Budget.
None of us likes freezes and none of us likes the idea that someone living on benefits will receive a cut, but in the current climate it cannot be right that families with an income of up to £80,000 a year benefit from tax credits. I applaud the Chancellor for bringing in limits for housing benefit, which has risen out of control over the past 10 years.
Overall, I welcome the Budget. Despite some of its measures, which we deeply regret having to take, it rebalances the public and private sectors—not before time. The reduction of corporation tax to 24% by 2012 and its reduction to 20% for small and medium-sized enterprises is very welcome indeed. There are many SMEs in my part of the world, so that measure is marvellous. Manufacturing can continue to claim full allowances for depreciation, albeit over a longer period, and that is welcome news for the manufacturing sector.
I welcome the review of public sector pensions. We will see the detail in due course, but the £25 billion cost to the public purse of unfunded public sector pensions is a great worry. There is deep unfairness. The gap between public and private sector pensions is daylight robbery from people struggling on lower-paid jobs in the private sector. It must be righted. I was horrified to hear the general secretary of Unison say that the Government
“won’t know what has hit them”
if they attempt pension reforms. That bullying defence of vested interests flies in the face of the fairer society that, through the Budget, we are trying to build.
Coming from the west midlands, I warmly welcome the commitment to tax incentives for employment outside London and the south-east. That rebalancing of our economy is long overdue.
The best way to support the crucial public services that we all want—on both sides of the House—is to put them on a sound financial footing, something the previous Government so miserably failed to do. It falls to us to put that vision into practice.
Steve Baker (Wycombe) (Con)
When I came to the House today, I expected to hear a great deal of Keynesian argument and I have not been disappointed. I am sorry that the hon. Member for Great Grimsby (Austin Mitchell) is no longer in the Chamber, as I wanted to congratulate him on his comprehensive grasp of Keynesian arguments. Unfortunately, it was also excruciating.
I am told that Keynes thought that the safe upper limit for the size of the state was 25% of national income. He might have halved the size of Government, so we can applaud the Budget as extremely moderate and thoughtful.
I have to tell those who propose deficit spending that it is inherently unsustainable. When Governments spend with a deficit they are bound to inject funds in a particular location in the economy and that is bound to create a pattern of economic activity that can be sustained only with deficit spending. We all accept that deficit spending cannot go on for ever. As one of my hon. Friends explained earlier this week, last year we were able to borrow only because we created a hole in the market for bonds using quantitative easing. That is so dangerous. In the past the world has seen the effects of printing money to pay off Government deficits, and I would dread to think that this country should live through such a circumstance.
I am reminded of some words published in 1945:
“I see now more clearly than ever before that even our greatest troubles spring from something that is as admirable and sound as it is dangerous—from our impatience to better the lot of our fellows.”
That is a quotation from Karl Popper, who is an interesting philosopher because, like his contemporary, Friedrich Hayek, he was a socialist until he understood where that philosophy went.
I am interested in the general well-being, particularly as Wycombe has not only great wealth but significant poverty and income levels everywhere in between. We must take seriously the realities that we face. I am glad that the Budget has included an announcement that there will be a review of pensions, and I should like to speak on that. I am grateful to my hon. Friend the Member for Stourbridge (Margot James) for having brought up the subject.
The Institute of Economic Affairs published a paper called, “A Bankruptcy Foretold”, in which it explains that the Government use cash-basis accounting, whereas any commercial firm would use an accrual basis. Our accrued pension liabilities are therefore not on the Government’s balance sheet. If they were, at April 2010, the true public liability would be £4,771 billion. The Office for National Statistics has suggested that the banks’ full liabilities should be included in the public liability. That would make it £6.3 trillion. Those numbers are preposterous.
I should like to break down the last number, because it is so preposterous: first, the official debt, £772 billion; the cost of financial interventions, £73 billion; the current accrued public sector pension liabilities, £1,179 billion; liabilities to current pensioners, £1,120 billion; and the liabilities for future basic state pensions, £1,211—I am nearly there—and future additional pensions, £467 billion. Somewhat laughably, we can deduct from that catalogue of disastrous numbers the national insurance fund balance of a staggering £51 billion.
Those numbers have a profound implication, not for this year or the Parliament, but for the next 10 to 20 years. If we are serious about the general well-being, public sector pensions, the state pension and those vulnerable people who will rely on all those things—I include members of the armed forces currently serving us—we will need to think today about how we will fund those pension liabilities. I am glad that there will be a review of this subject and that one of the right hon. Members who sits on the Opposition Benches will head that review.
I should like to turn to our economic future in the international context. The Bank for International Settlements published a paper—working paper 300, which I recommend to hon. Members—that considers the future of public debts, the prospects and implications. In my hand, I have a set of graphs that show the public debt for western European nations, plus Japan and the United States, disappearing exponentially. Hundreds of per cent. of GDP are owed by the nations of the western world, including Europe and Japan. The situation is dire. By 2040, our largely age-related debt is projected to be five times GDP. By 2040, our interest payments would be more than a quarter of GDP. I do not know about the rest of the House, but I do not believe that we will ever get there. Long before interest payments reach 25% of GDP, we will have a social catastrophe. We cannot allow that to happen.
Perhaps bond investors with short time horizons of days and weeks will continue to put their faith in the nation’s ability to repay, and perhaps they will not demand higher interest rates. Perhaps, as some people suggest, debt can be inflated away, but let us not forget that we are talking about index-linked debts; we are talking about pension obligations.
The Bank for International Settlements set out a different view. It pointed out that the path of growth pre-crisis was insufficient to pay those liabilities, but that now our prospects are worse. It pointed out that financial restraint historically has only stabilised the debt, without substantially reducing it. It also pointed out that swings from deficits to surpluses have been historically accompanied by falling interest rates and rising growth. I think that we can rule out the former, and at the moment it seems that our growth prospects are modest.
The Bank for International Settlements explains that it is ultimately not possible to roll over ever higher Government debts and that sooner or later debts are monetised, leading to inflation. It explains that that inflation may or may not be controllable. Perhaps there will be future political pressure to inflate away the debt but, of course, expectations of inflation automatically increase interest rates. In any event, inflation is a poison that hits pensioners, savers, and those on low and fixed incomes hardest. As I said, my concern is the general well-being.
We cannot afford further to distort the structure of our economy with inflation, so what is to be done? It seems that we are at the limits of taxation. We cannot borrow our way out of the problem and nor can we inflate our way out of it. We might well be impatient to better the lot of our fellows, but past impatience to better their lot has created huge liabilities that future taxpayers will have difficulty paying. If Members on both sides of the House are serious about building a better society, we have no choice but to reform radically the size, scope and role of the state. We must urgently see to it that our pension liabilities are funded and that public sector pensions are reformed. I congratulate the Chancellor on an emergency Budget that makes a strong, moderate and reasonable start at dealing with the serious problems that face us not just today, but in the decades ahead.
Chris Heaton-Harris (Daventry) (Con)
I am grateful for the opportunity to say that I am winding up for the Government side of the House in today’s debate. I shall certainly put that in my press release, and I am sure that the Daventry Express will print it word for word.
The emergency Budget was unavoidable because the previous Government’s handling of the UK economy simply failed. Labour did not understand what every business and family throughout the country knows: if money is borrowed, it must be repaid or trouble will come; and it is best for people to live within their means. My constituents and I struggle to comprehend the size of the problem that the Budget sets out to fix. Every minute that passes, the Government spend £80,000 on debt interest, so £800 million a week is spent just servicing our debt. The money that is used for interest payments cannot be spent on things such as education, health, defence or poverty eradication in Sefton.
It was pleasing that today’s measures were at least announced against the backdrop of growth in the economy, which is in spite of, not because of, the previous Government. I have been surprised to hear that Labour Members do not understand that every penny spent by the public sector was initially raised by the private sector.
Stewart Hosie
Will the hon. Gentleman explain what happens to public sector employees’ tax? Where does that go in this pot?
Chris Heaton-Harris
It certainly contributes to tax income, but if we were to rely on only the public sector, an ever diminishing circle of tax income would come into the Exchequer and, in the end, we would not be able to pay for anything.
The way out of this mess is undoubtedly to boost and revitalise the private sector, so I welcomed the announcements in the Budget on regional job creation and the measures to cut waste and unaffordable cost from the public sector. That is exactly what our European partners and competitors are doing. Jean-Claude Trichet, the president of the European Central Bank, told the European Parliament—my old place of work—that firm control of Government spending and tax policies is essential to restore the confidence of households, businesses and investors. He said:
“We are in a situation where a lack of confidence is operating against recovery. A budget policy which you”—
if he were addressing the House, I assume that he would mean Labour Members—
“might describe as restrictive from a certain point of view is in fact a policy which we would call confidence building.”
He went on to say that if public finances continue along an unsustainable path,
“households are going to be frightened. They will not spend or consume as much, companies will not prepare for the future and investors will know they are going to have difficulty getting a return.”
Those investors have choices: they do not have to choose the United Kingdom or, indeed, Europe, as other markets are becoming increasingly attractive. France and Germany—in fact, nearly all our major competitors—have taken tough measures to sort out their public finances, and make their economies strong and attractive to future investors. We would weaken the chances of prosperity for our children if we did not do the same.
As the Chancellor noted, we need to increase the incentives to work. Welfare costs under the Labour Government rose by nearly 40 per cent., but there are still more than 5 million people on out-of-work benefits. Youth unemployment is a massive problem—1.4 million people under 25 are unemployed—and Labour’s spending to alleviate poverty failed, and has fractured society. Many people thought that the previous Government built barriers based on welfare payments that disincentivised individuals from finding a job. At the same time, those who are working pay more in tax, but why should they work hard to do the right things for themselves, their communities and their families when people who choose not to do so seemingly have everything that they do? It is a terrible disincentive.
I am a bit of a supply-side economist. I do not like tax rises, but anyone who looks at our structural deficit will understand that we need to remove as much of it as we can as quickly as possible. I will swallow my pride on the capital gains tax rise, but I note that it is a voluntary tax—people can sit on their hands and not realise the value of their shares, their property or whatever it might be. I certainly welcome the cuts in corporation tax, but I accept that the cuts in departmental budgets will be tough. I suggest that there is a great deal of waste to remove, especially from middle and upper management in some Departments. I recently received a letter from a constituent who works for the Vehicle and Operator Services Agency, who said that the directors, who were all based in the Bristol headquarters, travelled to Edinburgh for meetings, for no reason other than that it was a nice place to go.
Toby Perkins
The hon. Gentleman is raising an issue that many of his colleagues have raised, and said that somehow under a Labour Government there was profligate, wasteful spending that could easily be tidied up—[Interruption.] They all agree, and I am glad to hear it. Why, therefore, have the Government cut not that wasteful spending but the future jobs fund, thus pulling the rug from under the economic recovery? Why has the Sheffield Forgemasters loan been cut? Why do they not cut this waste, rather than all the things that will hit the poorest people most?
Chris Heaton-Harris
If only we had the money to spend on some of those projects, it would be wonderful but, unfortunately, your party spent it all. If you live in Northamptonshire, you can see areas—
Mr Deputy Speaker
Thank you for that. We have to make sure that we are in order.
Chris Heaton-Harris
I apologise, Mr Deputy Speaker. I am new to the conventions of the House.
People who live in Northamptonshire see some parts of government where costs could be removed. Something that I hope will be looked at in the spending review is the cost of quangocracy. I am not against all quangos—some do a good job—but the money spent and the powers wielded by many non-departmental public bodies could, and should, reside with locally elected officials. The budget for those bodies in 2009 was a massive £46.5 billion, although the TaxPayers Alliance pitches the figure a bit higher.
To give a quick example, someone who lives in Daventry in my constituency has a good district council and a county council, but they also have the west Northamptonshire joint planning unit, which tries to impose housing plans and which, as my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) outlined, local people absolutely do not want. They also have the West Northamptonshire Development Corporation—there is also a North Northamptonshire Development Corporation—the East Midlands Development Agency and the Government office for the east midlands. All those quangos do roughly the same thing, so I very much welcome the announcement in the Budget—on page 31 of the Red Book—of local enterprise partnerships, which could lead to excellent consolidation in that field.
One quango that I would very much like to see examined is the National Policing Improvement Agency. Set up in 2007, it now has a budget of more than £500 million. I suggest that those who, like me, are facing cuts in their local police forces, look at the report on that agency, because it is not worth the money.
I certainly welcome the measures on encouraging small businesses—
Fuel Duty Regulator
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I have a petition from my constituent Erica MacDonald of the Isle of Lewis, who has raised her concerns about the effects of disproportionate petrol and diesel costs under successive Governments.
The petition states:
To the House of Commons, the petition of Erica MacDonald on behalf of the consumers of fuel in the Outer Hebrides,
Declares that the people of the Outer Hebrides are economically disadvantaged by the universal road fuel taxation programme and that taxing families and businesses in the rural economy of Na-h-Eileanan an Iar at the same rate as businesses and families in the urban economies of Edinburgh or London is economically unsound and damaging to the economy.
The Petitioners therefore request that the House of Commons urge the Government to introduce a fuel duty regulator—
a rural fuel duty derogation—
in the Emergency Budget with a view to reducing the tax burden on a fragile rural economy.
And the Petitioners remain, etc.
[P000837]
Health Protection Agency (Porton)
(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John Glen (Salisbury) (Con)
Thank you, Mr Deputy Speaker, for the opportunity to bring the issue of Porton Down’s future to the House this evening.
My purpose in requesting this debate is to highlight the critical role that the Centre for Emergency Preparedness and Response plays in the life of this country, and to raise the question whether the current outline business case that the chief executive and board of the Health Protection Agency have put before the Department of Health to move the CEPR to a site in Harlow is right for the country’s public health needs and right for many of my constituents who work at Porton.
First, it may interest colleagues to know that Porton Down came into being almost 100 years ago, as a response to the horrific chlorine attacks on allied soldiers during the first world war. The institution has been active and working for almost 100 years. It was a chemicals research centre in 1916. In 1930 it became the Chemical Defence Experimental Station, and in 1940 it began looking at biological warfare and carrying out experimental investigations into anthrax.
The current CEPR building was built between 1948 and 1951 and named the microbiological research department. Thirty years later it became the Public Health Laboratory, and subsequently it split from the Ministry of Defence facility at Porton Down, now the Defence Science and Technology Laboratory, which is co-located next door.
In 1993 Porton became an independent agency of the Department of Health, and in 2003 it became one of the founder establishments of the Health Protection Agency, being renamed the Centre for Emergency Preparedness and Response. Now co-located on site with DSTL, it is treated as one site by the Health and Safety Executive. DSTL provides a back up of containment level 4 laboratories for the highest microbiological risks. The work at Porton is complex, involving the study of dangerous pathogens of humans, animals and plants. They can be a major threat to public health and include anthrax, swine flu and foot and mouth.
Porton is a world leader for examining diseases that spread rapidly: for example, insect-borne diseases such as West Nile fever and malaria spreading to new areas. It is a world-class centre for translational research that helps to ensure that new discoveries are developed and translated from the mind of the scientist into real benefits of tested medicines for patients. It routinely works with partners to develop tuberculosis vaccines and vaccines for whooping cough, meningitis and anthrax. Porton has the biggest TB group in Europe. It also has an aerosol delivery function using specialist equipment.
The CEPR is routinely asked to do work by the US Government, as it is one of very few centres in the world with the capability and experienced staff to carry out that work. Through its work, Porton manufactures Erwinase, a drug developed there for the treatment of childhood leukaemia, estimated to save 1,400 lives annually. It has the rare capability to manufacture emergency vaccine in response to emerging disease threats. Porton receives a massive amount of its funding—between 70% and 80%—from the work that it does for academia and Governments overseas.
I wish to make the point that the CEPR at Porton Down has been very long established in my constituency, and it does critical work that is vital to this nation and to the world. However, I am a reasonable man, and if I felt that the proposed move was in the best public interests of the country as a whole, I would have to concede reluctantly and accept the proposals that have been tabled. I do not believe that that is the case.
On the day when my right hon. Friend the Chancellor has indicated that future capital spending should be prioritised on those items of expenditure that give “significant economic returns”, and at a time when £1 in every £4 is being borrowed, why has the option of allowing more operational autonomy for the CEPR not been examined carefully? It is my contention that the best way to maintain excellent service for the public health needs of the country, while achieving cost-effective solutions, is not to spend the estimated £400 million on a move to Harlow when the financial benefits set out in the outline business case would accrue after 60 years. I believe that a cheaper solution exists, whereby the risks of investment can be shared with a new co-operative led by experienced Porton-based scientists who are keen to take on the challenge of building new revenue streams from the US Government and academia while maintaining their vital commitments as an HPA establishment.
Let me move on to the background behind the outline business case proposing a move to Harlow. In 2008, the previous Government announced a major funding initiative—Project Chrysalis, a rebuilding programme to update the facilities at Porton, which was, I acknowledge, much required. Then, in October 2009, out of the blue, a proposal for Terlings Park in Harlow emerged as a option. Then, in January 2010, a new preferred option emerged—the GlaxoSmithKline New Frontiers site in Harlow. Now, the outline business case is being pushed through.
Project Chrysalis has already spent about £10 million on the plans for the rebuild at Porton Down on an site adjacent to the current one. It has been ongoing, assessed and developed over two years. The move to the GSK site in Harlow has been considered only since January this year, and it is thought that the project team is still undertaking assessment of the site. There is therefore significant cause for concern that insufficient information is available to substantiate a compelling business case to make this decision. The £85 million that was budgeted for the moving costs has not been fully scrutinised, and it is likely significantly to understate the true costs of the work required. The GSK site currently undertakes neuroscience research, and the laboratories are mainly chemistry-type labs that are not suitable for easy conversion to the sort of work that is undertaken at the CEPR. At so many levels, the move does not make sense.
Some questions need to be asked about the proposed move to Harlow. As there is to be a break of synergy with the DSTL, which is immediately adjacent to the CEPR at Porton, will it be acknowledged that the new CL4 lab in Harlow, which is to be the same size as the one formerly proposed for the new build at Porton, will cost more in reality? There will be no benefits from having a similar lab next door, as we do at Porton, because there will be nothing next door. What costing and risk assessment has been undertaken with respect to the travel arrangements between Porton and the densely populated town of Harlow?
Has the planning process to allow the construction of such sensitive facilities, where such difficult work is undertaken, been examined? During any proposed transition, staff will need to be trained on both sites in both CL4 labs to ensure that there is no interruption during a national emergency. How will that be achieved initially and kept workable if the CEPR is in Harlow, when I am told that up to 80% of the experienced scientists do not want to move? Has a skills availability assessment been made as part of the outline business case?
What functional dependencies exist with other agencies of the HPA? It is my contention that although their technologies may be similar, the functions of the different HPA agencies are very different. Does the outline business case set out explicitly the financial business case for the co-location of the different agencies of the HPA? The head of the CEPR has said to me that the detailed synergies have not been worked out yet, but it seems that the logic for the business case relies on the notion that all the HPA agencies can be brought together at some time in the future. He also said that potential synergies would be looked for, but they have not been established yet. At a time when every penny counts and the health budget is facing severe pressure, why should we back a move in relation to which the co-location potential and synergies will be “looked for”? Furthermore, if co-location is such a panacea for the operational effectiveness of the HPA, can it be confirmed whether the costs of moving the other HPA agencies from Chilton and Colindale to Harlow have been worked out? When are those moves likely to take place?
Having visited Porton, I am unsure of what overlap there really is. There is the possibility of some animal facilities being shared with the National Institute for Biological Standards and Control, and that some microbiology labs may also be shared. However, any sharing is not really possible, and money cannot be saved, until all agencies are on the same site, and there are no plans in sight for that to happen. Currently, the plans are therefore notional, uncosted and unproven. If the proposed move goes ahead, it will break up translational research—that is, scientists taking stuff from the desk to tested medicine. Manufacturing will remain at Porton, but the key translational function will be lost.
It remains my contention that the proposed Harlow move has not been properly thought through. The benefits of co-location had not been mentioned before the first Harlow site came on the scene, so opportunistic were the uncosted arguments for co-location. The well- intentioned arguments to move the Porton Down facility to Harlow have not taken into account the opportunity that exists for Porton to generate its own income and increase its own revenue. That should be explored before the Government back a move to Harlow, which would be expensive, is unproven and would put at risk the unique, world-class facility that we have been operating successfully at Porton.
The CEPR has its own funding stream from royalties from various vaccines, and it is almost self-sufficient. To upgrade its facilities, it would need help only with capital costs, which it could repay if given the operational freedoms that I have suggested. It has unique synergies with the defence establishment next door. Eighty per cent. of the work force would not like to move. It is important when working in those high containment laboratories to have experienced staff—their combined experience stretches back over many hundreds of years. If those people will not move, the challenge to the public health of this country is significant, putting it at risk.
Robert Halfon (Harlow) (Con)
I thank my hon. Friend the Member for Salisbury (John Glen) for being utterly decent in giving me a couple of minutes to respond, given our conflicting constituency interests. It is much appreciated.
Mr. Deputy Speaker, you would expect me to seek investment in Harlow—I am the local Member of Parliament. However, that view is not just mine; it is also that of the Health Protection Agency. Its board concluded that, for pure cost-effectiveness and value for money, the HPA must move to Harlow. The foreword to its “Outline Business Case” states:
“Relocating to Harlow is the preferred option. It offers excellent value for money. In addition to significant savings, and reduction of overheads, there are major benefits.”
What are the facts? We know that the 50-year-old site in Porton Down is rapidly approaching the end of its life and that it would be expensive to refurbish—it would cost almost the same as buying the GSK facility, and offers little strategic value. We know that the option of staying at Porton Down was fully considered in the business case and rejected on the ground of poor value for money. We know that GSK will sell its Harlow facility to the HPA for 30% cheaper than the construction cost, so moving to Harlow is a bargain for the taxpayer. We also know that there are strategic benefits for the HPA in Harlow—the London-Cambridge corridor is the heart of biomedical research in the UK. Moving closer to its north London facilities will ultimately save HPA money because it can substantially reduce its overheads. Moving to Harlow would increase the HPA’s capacity. The economic benefits have been assessed as “in excess of £100 billion” over the lifetime of the new site.
For the record, I must say that GlaxoSmithKline is a huge local employer in Harlow, and that it recently announced up to 1,000 redundancies. Unemployment in my town is already the highest in west Essex. Sadly, some estates in Harlow are among the most deprived in Britain, but the investment would transform economic prospects in Harlow.
The 50-year-old site in Porton Down is too expensive to repair. We have a good deal in Harlow, and we must take it. The huge regeneration that it would bring to the town is desperately needed, but I urge my hon. Friend the Under-Secretary of State for Health to base the decision primarily on the business case and value for money.
The Parliamentary Under-Secretary of State for Health (Anne Milton)
I congratulate you, Mr. Deputy Speaker—I do not think I have stood at the Dispatch Box with you in the Chair, so it is a pleasure to be here this evening.
I congratulate my hon. Friend the Member for Salisbury (John Glen) on securing his first debate. I also congratulate him on securing his seat, and thank him for continuing the work of his predecessor, who also argued passionately on behalf of the establishments at Porton Down. He is sadly missed in this place. My hon. Friend has taken up the cause and pursued it with similar vigour. I am grateful to him for his correspondence on the matter and for sharing some of the issues that he mentioned this evening, including planning, relocating staff, skills availability, costs and the detailed synergies.
I also thank my hon. Friend the Member for Harlow (Robert Halfon). Oh my, the difficulties of government. In time, I will upset one hon. Friend and please the other.
As my hon. Friend the Member for Salisbury knows, the issue came before the House just a few months ago, when he was still a candidate and I was an Opposition Member. How times have changed. Our roles have substantially changed since then, and I am grateful for the opportunity to set out the Government’s position. For the benefit of Members present, I will set out the situation as it stands before responding to my hon. Friend’s points in detail.
As my hon. Friend pointed out, the history of chemical and biological research at Porton Down is long. Throughout many changes in name and number, the centres continued to provide research and production programmes of the highest international quality. Today’s debate concerns the future of the Health Protection Agency’s facilities at the Centre for Emergency Preparedness and Response. The centre is a specialist facility providing protection against some of the most dangerous organisms in the world. From identification to containment, and from research to production, it fulfils a critical national security function, as well as providing valuable expertise internationally.
As the world of microbiology has grown, so the centre’s responsibilities have also expanded, yet its current home says more about its past than its future. The site is 60 years old, the building structures are in a poor state of repair and the laboratories clearly do not meet modern safety standards, so something must be done. The centre’s work is vital to protect the nation’s health, and it is important that the facilities at Porton Down are fit for purpose not just over the next Parliament, but over the next dozen years or so. That is why it is so important that we make the right decision about the centre’s redevelopment. I appreciate that both my hon. Friends believe they have the right solution to the problem of the centre’s location.
I understand that in September 2008, the Department of Health authorised the HPA to develop an outline business case for the improvement of the laboratory facilities, a process known as Project Chrysalis. That case was submitted to the Department on 4 June 2010, and the Government have not made a decision on it. As I am sure my hon. Friend the Member for Salisbury will appreciate, a proposal with so many implications—not least cost, safety and security—must be thoroughly scrutinised. His concern that that will not be the case is probably the basis for this debate. Officials at the Department are considering the business case and will make a recommendation to Ministers as soon as possible. Provided that we are content, the business case will then be passed to the Treasury, where it will be subject to further scrutiny before final sign-off by the Chief Secretary.
My hon. Friend raised concerns about the way the business case is considered. For his benefit and that of my hon. Friend the Member for Harlow, let me be clear that the Department of Health’s assessment of the business case will be rigorous, fair and grounded in this simple set of principles: first, that redevelopment is necessary to protect this critical national infrastructure, and to allow it to provide an even better service to the country and its international customers; secondly, that all options must be examined on the basis of cost, value, safety, security, sustainability and strategy; and thirdly, that our assessment must be forensic in its analysis, unprejudiced in its conduct and unbiased in its conclusions. That means looking closely at the risks and benefits, and at the selection criteria. It also means checking that the proposals are affordable and sustainable and that they represent real value for money, and that the investment fits with the organisation’s long-term strategic aims. We are pressing to ensure that every consideration, particularly cost, is taken into account. There is an explicit requirement that the successful proposal must represent value for money, even when weighted for the various external factors such as relocation, staffing and business opportunities, which both my hon. Friends mentioned.
I understand that the business case also includes details of the possible effects on the work force, including the cost and security impact of any relocation. The impact of any disruption to the centre’s work, whether financial or operational, will also be taken into account, as it must be. At each stage of the assessment process, the HPA will provide any data or analysis that might be helpful in reaching a decision.
My hon. Friend the Member for Salisbury mentioned other options, including splitting the Centre for Emergency Preparedness from the HPA to create a co-operative at Porton Down. I thank him for his suggestions, and I trust he will be reassured by this debate and our correspondence on the matter that we remain open to new ideas. I hope he will acknowledge, however, that any decision about the future of the facilities must be taken with the national interest in mind. The issues facing the HPA at Porton Down will be solved not by simply changing ownership or management, but by a significant redevelopment of the existing site, or a move to a more suitable location.
The work that the centre does is vital to protect the nation’s health, but my hon. Friend rightly stated that it is vital across the world as well. It is in all our interests that we arrive at the right decision, which means taking the time properly to assess the business case put forward, and exposing it to detailed scrutiny. It also means being unafraid to listen to new ideas. As he said, every penny counts, so close scrutiny and robust analysis of the business case will be vital. I ask my hon. Friends the Members for Salisbury and for Harlow to have a little faith. The Government will take every precaution to make sure that the future of this work is secured, and we will look closely at every reasonable consideration before reaching a decision that is right for the centre and the nation.
Question put and agreed to.
Westminster Hall
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Nuclear Energy
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
John Robertson (Glasgow North West) (Lab)
Thank you, Mr Brady, for this opportunity to seek assurances from the new coalition Government on their energy policy. I have considerable concerns, which are well founded and based on the track record and previous rhetoric of the Ministers now responsible for delivering a comprehensive, balanced energy policy that will provide security of supply and reduce our CO2 emissions. Internationally, there are tremendous concerns regarding the effects of climate change, and the UK must continue to play a major role in delivering. There are many hon. Members present, and quite a few will want to intervene or speak, so I will try to keep my remarks as short as possible. Having said that, I have a number of things to say and a number of questions to ask.
We have had considerable discussions on the subject over many years, started by scientists and political leaders who believe that climate change is the most dangerous and life-threatening issue facing the world. That, along with security of supply, has been my focus for a number of years, and we need clarity and a positive response to the issues that I will raise in this brief but important debate.
The UK’s security of supply is a major concern, and it is vital that the Government take appropriate action to ensure that we do not run out of power and end up with black-out Britain. The demise of the coal-fired power stations, and the closure of nuclear power stations at the end of their life cycle, will create tremendous challenges for the Government, and it is important that they are united in the pursuit of a coherent energy policy.
All energy sources must be developed to reduce our carbon footprint and allow us to meet our emissions targets. Although I am in favour of a balanced energy policy, it is time that we looked at the ever-increasing subsidies for renewable energy. Onshore wind energy, which is intermittent and requires 100% back-up, has benefited enormously from the renewables obligation, but it is extremely expensive and it is not the best way to use our huge levels of investment.
I must declare an interest as the chair of the all-party group on nuclear energy. Over the years, we have had considerable success in highlighting the issue of nuclear energy and promoting solutions to the problems that the UK faces over its security of supply and the devastating effects of climate change. As chair of the APG, I had hoped that the general election—no matter what the result—would not affect the nuclear industry and the future of new build. However, there is a problem with the Con-Dem coalition, because the Government said one thing—or, should I say, two things—during the election and another after it. That has been a regular occurrence with the coalition over the past few months.
Despite considerable misfortune, recent polls clearly demonstrate that those who support having a nuclear component of a comprehensive energy policy are winning, and may indeed have won, the argument. The majority of the general public are now convinced that we need to build new nuclear power plants. When the APG was formed, nuclear energy was on the back-burner, but leading environmentalists who have spent a lifetime opposing nuclear energy have recently gone public in support of it. The former head of Greenpeace, Mr Tindale, has openly come out in support of nuclear and is lobbying for it. It is interesting to look at his reasons for once opposing, and now supporting, nuclear energy; his reasons for having opposed it are shared by many of those who oppose it today. He says that
“nuclear power was wrong, partly for the pollution and nuclear waste reasons but primarily because of the risk of proliferation of nuclear weapons…My change of mind wasn’t sudden, but gradual over the past four years. But the key moment…was when it was reported that the permafrost in Siberia was melting massively, giving up methane, which is a very serious problem for the world…It was kind of like a religious conversion. Being anti-nuclear was an essential part of being an environmentalist for a long time but now that I’m talking to a number of environmentalists about this, it’s actually quite widespread this view that nuclear power is not ideal but it’s better than climate change”.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
Given that analysis of the global impact of carbon emissions, the melting of the permafrost and the release of methane, what contribution will nuclear make to the reduction of global carbon emissions?
John Robertson
I thank the hon. Gentleman for his question. As I develop my argument, he will get the answer to it, but I will happily let him intervene again before the end of my speech if he wants to repeat his question.
As I said, I am concerned about the new Government’s policy, because their strongly held, differing views will not be coherent and will lead to the development of a mishmash of energy policies that does not meet the country’s needs. We are fast running out of time, and my concern is that we will end up with a dash for gas that leaves us dependent on imports for our energy supply. Any delay in delivering new nuclear build would be disastrous. Unfortunately, the history of some members of the Government raises major concerns about the new nuclear build programme. If Government policy is less than positive, the delivery of new nuclear power stations in the UK will be undermined.
Across the globe, there is strong demand from many countries that wish to build new nuclear power plants. The Government’s recent decision to withdraw funding for Sheffield Forgemasters must be viewed with deep concern.
Mr Tom Watson (West Bromwich East) (Lab)
My hon. Friend is making a strong case for a low-carbon future, but does he agree that what happened to Forgemasters was not just a tragedy for British jobs? The only other company that makes these reactor pressure vessels—these large components for nuclear reactors—is Japan Steel Works, in Hokkaido, Japan. We therefore face a huge lost export opportunity. Forgemasters has tripled its order book in recent years, and there is now a waiting list. Not only have we have lost an opportunity to be a major exporter of a key component in nuclear growth, but we may be at the end of a waiting list, which may jeopardise the future build programme in the UK.
John Robertson
My hon. Friend is absolutely right, and I will go into that in more detail later. The situation with Forgemasters is symptomatic of the problem that we will face in years to come. The previous Government pledged cash to Forgemasters to enable the Sheffield company to build parts for nuclear power stations—it was as simple as that.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I have a simple question that touches on the Forgemasters issue. Should there or should there not be any direct or indirect public subsidy to the nuclear industry?
John Robertson
The hon. Gentleman makes a fair point, which he has made many times. It has been said on many occasions that no subsidy will be given. Indirect subsidy is a different thing; it would be about what was happening with the carbon price in European markets and so on. We can never say never about anything, but the Labour Government said that they would not give any subsidy, and that it was down to the companies to cover the cost of not only building plants but dismantling them at the end of their life cycle. I hope that that answers the hon. Gentleman’s question.
When the loan to Forgemasters was announced in March, it was clear that it would make the plant one of two in the world—the point that my hon. Friend the Member for West Bromwich East (Mr Watson) made—able to make large forgings for the nuclear energy industry. Apart from creating employment opportunities and highly skilled jobs, it would lead to international order opportunities for the product. Those of us who have been involved in nuclear energy know that a number of nuclear stations are being planned all over the world. It does not come as a surprise to me, although it will to some, to hear that even Sweden is jumping on the bandwagon. As we speak, people all over the world are tackling the issues of security of supply and the need for a base load that includes nuclear. On that basis, it is essential that the Government look again at the decision. We need world leaders, and the Sheffield plant, with the investment, would have an opportunity second to none.
I do not feel the need to rehearse the concern about climate change and emissions targets; we have expressed it many times. However, I seek assurances from the Government about their intent. It is vital that we hear at first hand what position Ministers at the Department of Energy and Climate Change and the Prime Minister will take not just on climate change but on nuclear power. I have some concerns about their policy on new build. The Secretary of State for Energy and Climate Change has long been completely and unequivocally opposed to nuclear build. He has said:
“No private sector investor has built a nuclear power station anywhere in the world without lashings of government subsidy since Three Mile Island and Chernobyl. The World Bank refuses to lend on nuclear projects because of the long history of overruns.
Our message is clear, No to nuclear, as it is not a short cut, but a dead end. Yes to energy saving, yes to renewables, and yes to a sustainable energy future.”
That view—that nuclear power is not the answer to future energy needs—is the view, of course, of the Secretary of State.
On Friday 12 May 2006, the Secretary of State said, responding to an affirmation by the then Secretary of State, my right hon. Friend the Member for South Shields (David Miliband), that the Government were considering a new generation of nuclear power stations:
“While Mr Miliband’s acknowledgment of the scale of the climate change challenge is welcome, his comments on nuclear power are worrying.”
He went on to say:
“Not only does nuclear cause a great threat to the environment through the large amounts of waste produced, but it is also economically unviable.
The Government intends to use private investment to fulfil our future energy needs. However, since the Chernobyl disaster, no nuclear power station has been built anywhere in the world without huge amounts of government subsidy.”
That is the point that the hon. Member for Bermondsey and Old Southwark (Simon Hughes) was making earlier. Such statements cause problems for those of us who want a balanced energy policy, because it is the Secretary of State making them, and one would expect him to be writing the policy.
I want to quote Melanie Phillips of the Daily Mail, although it is not a paper that I quote very often, and is not known to be a friend of mine—
John Robertson
As my hon. Friend says, I shall do so just this once. The Secretary of State’s former colleague at The Guardian highlighted the dilemma of the coalition when she wrote:
“Or look at the farce about to play out in the energy ministry. To stave off Britain’s looming power crisis, the Tories are committed to building more nuclear power stations.
Yet the new Lib Dem Energy Secretary Chris Huhne is viscerally hostile to nuclear energy. So to stop the lights from going out in Britain, Mr Cameron has apparently given the Tory junior energy minister Charles Hendry responsibility for civil nuclear power.”
I have great respect for the Minister. We both served on the Select Committee on Energy and Climate Change, as did several other hon. Members who are here—I thought I was at a Select Committee meeting when I came into the Chamber. I think I can say that the Minister and I have been singing from the same hymn sheet for some years, even if that did upset the Front Benchers of our respective parties. Melanie Phillips continued:
“But with Mr Huhne so opposed, is it not all too likely that Mr Hendry’s boss will find ways of kicking the nuclear power station programme into the long grass—thus provoking a possible nuclear explosion in the energy department?”
No pun intended.
I know that I should not believe everything that I read in the Daily Mail, or other media, for that matter, but will the Minister give this House an assurance that nuclear new build will go ahead, that the Secretary of State has changed his stance, and that the Secretary of State’s complete dismissal of the building of any new nuclear power stations has been sacrificed for his present position?
Mr Iain Wright (Hartlepool) (Lab)
I appreciate my hon. Friend’s obtaining this debate. I am completely confused about the coalition’s policy on nuclear. “The Coalition: our programme for government” states:
“We will implement a process allowing the Liberal Democrats to maintain their opposition to nuclear power while permitting the Government to bring forward the National Planning Statement for ratification by Parliament so that new nuclear construction becomes possible. This process will involve: the Government completing the drafting of a national planning statement and putting it before Parliament; specific agreement that a Liberal Democrat spokesperson will speak against the Planning Statement, but that Liberal Democrat MPs will abstain; and clarity that this will not be regarded as an issue of confidence.”
How on earth can we keep the lights on when we have such confusion at the heart of such an important part of Government energy policy?
John Robertson
My hon. Friend played an important part in the previous Government and should be thanked for all the work that he did—and for all the work that he will do in opposition. He makes a fair and valid point. The Minister must answer those questions. Those of us who are not trying to make political points— [Laughter.] I am shocked by that reaction. The point of the debate is to clarify exactly where we are on energy, where the industry stands, and where we are on this country’s security of supply. I know that the Minister does not mean to be flippant, and takes his job seriously, and will be able to answer all my questions to my satisfaction—I say that tongue in cheek.
While the Minister is confirming the change that I spoke of, will he also confirm the position of the Prime Minister, who has also seen the light, like Paul on the road to Damascus, and who no longer feels that new build can be seen only as a last resort? Will the Minister comment on that? If the Prime Minister is not behind a nuclear programme and a balanced energy policy we certainly have a problem.
Damian Collins (Folkestone and Hythe) (Con)
Given the strong points that the hon. Gentleman has made about the need for nuclear power and, in the light of the potential energy gap, the need to press ahead with the nuclear programme as swiftly as possible, does he share my concern that it was premature of the previous Government to take Dungeness off the list of approved sites?
John Robertson
I welcome the hon. Gentleman to the House and hope that he has a long and happy career here—but perhaps not too long. I totally agree with him, but that will not be a surprise to the Minister. Options must be kept open. Acting prematurely for the sake of looking good is a mistake. I asked a question in a similar vein yesterday, but did not get an answer, but I hope that the Minister will answer me today.
It will be the Government’s fault if we end up with power cuts. If they do not pull their finger out, that is exactly where we are going. It says here in my speech that I have tremendous respect for the Minister, and I do; I hope that that has not affected his political career or job prospects, as I am sure that he would like to move up at least one place. I hope he will. In a recent speech at Chatham House he said that he welcomed the opportunity to focus on one of the biggest challenges facing Government—the issue of energy security and how we decarbonise society. He went on to say:
“This is a green coalition with a shared priority. Both to create a low carbon economy to meet the urgent challenge of climate change and to help achieve energy security.”
That sounds a bit like “peace for our time” because there was no mention of nuclear power.
Sir Robert Smith
The hon. Gentleman made the point that if the lights go out, the Government will be at fault. The Government on watch must deal with the situation on the day, but with his knowledge and experience of the energy industry, the hon. Gentleman must accept that there is a huge lead time in the development of energy policy and in capital planning. We have had 13 years of a Labour Government; does the hon. Gentleman accept that the legacy of their decision making will contribute to the consequence, if the lights go out?
John Robertson
The hon. Gentleman has obviously read the next paragraph of my speech. I give him credit for his X-ray vision; perhaps what I say next will position me exactly as he has said.
Low-carbon technologies have an important role to play, not only when it comes to meeting our climate change targets, but with regard to building recovery from the recession and creating new jobs and industries in the coming decades. We face the greatest energy challenge of our lifetime. Over the next 10 to 15 years, we will need something in the order of £200 billion of new investment. How does the withdrawal of funding from Sheffield Forgemasters fit in with that rhetoric?
The need for a balanced energy policy that uses all proven sources of generation has been reinforced by the events of the last few years. The increased price of oil, and the effect that that has had on the economy, has highlighted the need to reduce dependence on imported gas and oil. Petrol prices have gone through the roof, with knock-on effects for transport and food bills, and inflated electricity and gas prices. The UK cannot be left at the mercy of imported oil and gas, but the demise of coal and nuclear would leave us dependent on our core source, gas, for at least 50% of our electricity needs. If, as is hoped, we go down the clean cars route with electric vehicles, we will need more electricity to cover the increase in demand. To ensure cheap, reliable electricity, we will need more than simple efficiency savings or more clean-generated electricity—either that, or the answer to our energy needs will have to be magic or come from thin air.
I have raised my concerns. It is essential that we have a coherent energy policy, but that requires total agreement within Government. I seek assurances that they will deliver a comprehensive balanced energy policy that includes a nuclear component. The decision to withdraw funding from Sheffield Forgemasters must be reversed, as that is contrary to delivering the skills and the means to make Britain a world leader in nuclear technology. As the Minister has said,
“Time is not on our side, and we recognise the scale of the challenge. We see low carbon technologies as the way forward to meet our climate change commitments, but also to enhance our energy security.”
He alluded to the fact that if we do not plan now—we should have planned already— we will hit a spot when there are real problems. That, of course, is where the dash for gas comes in.
When we get to about 2016-17, we will be in a particularly vulnerable position. It is hoped that the first nuclear power station will soon be given planning permission, and that it will be available and ready for commissioning in 2017-18. The most important time is between 2020 and 2025, when other power stations go offline and new power stations will have to be built. The Government have to make a commitment today: if they do not, those power stations will not be built. Indeed, that was said by my predecessor on the all-party group in 2002-03, when it was not popular to be a member of the group. It is amazing how time has proven him to be correct. Our original goal—when I say ours, I mean everyone’s; I am referring not only to you, Mr Brady, but Opposition and Government Members and the people of this nation—was to make Britain the most attractive place to invest in energy. In order to provide secure, low-carbon energy, we need to keep bills affordable.
In conclusion, I must tell the Government that talk is cheap and that actions speak louder than words; they must lead, proving that they have the solutions to our energy needs. If they act, they will have my full support and that of my party, as well as the support of everyone else in the country. If they do not act, I shall look forward to the next Labour Government being here—but we will probably need candles to see one another.
Damian Collins (Folkestone and Hythe) (Con)
I congratulate the hon. Member for Glasgow North West (John Robertson) on securing this important debate. I may not be able to say this a huge number of times in my parliamentary career, but I can say this morning that I agree very much with the thrust of his argument on the importance of nuclear being part of our energy mix. In an intervention this morning, I spoke of the Dungeness nuclear power station in my constituency, a subject that I also mentioned in my maiden speech. My hon. Friend the Minister knows that I take a strong interest in the matter; I am grateful for his reciprocal interest, as it is important to my constituents.
As I said earlier, in their consultation on the nuclear new-build programme, the previous Government removed Dungeness from the national policy statement on approved sites. That caused great concern in my constituency, and it was something of a surprise. There has been nuclear power at Dungeness since the 1960s, and there have been two generations of facilities. Dungeness A is being decommissioned, and Dungeness B is due to run until about 2018. It has always been anticipated that there would be a third—and, potentially, a fourth—generation of nuclear power stations on the site, which is strategically important; it is the only nuclear facility to the south-east of London, and it is in an area of high energy demand. It produces enough power to provide electricity for the whole of Kent.
I share the concern expressed by the hon. Member for Glasgow North West: if that facility is no longer available, and there is no new nuclear power, where is the energy to come from? It is likely to be imported, and the sources of that energy may not be as secure and certain as we would like. That will have a knock-on effect for consumers in the prices that they have to pay.
Like many Members who have nuclear facilities in their constituencies, I am aware of the excellent safety record of the British nuclear industry, and of the large number of jobs created by the building and running of nuclear power stations. They create an important economic infrastructure for the local economy. It is estimated that Dungeness B nuclear power station puts £20 million into the economy that it serves; in the current economic climate, I struggle to see where else that funding could be found, or what other investment could match it.
I wish to consider why the right hon. Member for Doncaster North (Edward Miliband) decided to take Dungeness off the list of potential new nuclear sites. Was it a lack of local support? No, not at all: there is a huge amount of support for the Dungeness nuclear power station. Research conducted in that area of Kent shows that the nearer one gets to Dungeness, the more popular it is. Was it because of the risk of coastal flooding? The Environment Agency says that it is perfectly content with managing the flood risk at Dungeness. If anything, maintenance of the flood defences there has a knock-on benefit for the whole of the Romney marsh area, which is largely below sea level and is considered to be one of the areas most at risk from sea flooding, so it was not that. Was it, as some in my constituency have suggested, concern about the proximity of a small, local airport? In evidence to the previous Government, the Health and Safety Executive said that that was not a concern, either now or if the airport should expand; it would not be a reason for not progressing with the Dungeness site.
The European Commission is not a body that I would normally draw upon for supporting evidence, but it clearly considered Dungeness to be a site for potential new nuclear build, because when EDF Energy completed its takeover of British Energy, it requested the new company to consider selling sites where new power stations might be built, so that it did not have a monopoly. Dungeness was earmarked as a site that might have to be sold. Clearly, at the macro level, the European Commission considered that it was logical for Dungeness plans to be taken forward, which is interesting.
It seems that Dungeness was taken off the list because of an interpretation of the habitats directive, and because of the Natura 2000 reserves, which are set up at a European level, although enforcement takes place on a national level. The Dungeness site would fall foul of the environmental protections under the habitats directive. That was certainly the view of Natural England, the Government’s statutory consultee. My predecessor, Michael Howard, raised that point with the right hon. Member for Doncaster North before the general election, asking whether Natural England had a veto on Government policy in such matters—its objection would seem to be the primary reason why Dungeness plans have fallen—but the right hon. Gentleman said that it did not. I hope that that is so.
We know that overwhelming national interest can take precedence over concerns about enforcing the habitats directive. Given what the hon. Member for Glasgow North West said about the huge need for nuclear power, I hope that we will consider it a matter of great national importance to have as many new-build nuclear sites as possible. I know that there would be problems with planning, and local opposition to grid connection points in various sites around the country. However, in evidence to the Select Committee on Energy and Climate Change before the election, EDF Energy said that it considered Dungeness to be an excellent site for grid connection, and that it could potentially be online and producing energy before 2020.
Mr Watson
The hon. Gentleman makes a compelling case, and he will have a very long career in this House if he makes arguments as potent as the one that he makes this morning. I suspect that part of the reason why Dungeness was taken off the list is that it does not work well—or occasionally does not work very well. Does he think that it would be useful for the Minister to forge links with the nuclear industry work force, and to perhaps meet Mr Dougie Rooney of the Amalgamated Engineering and Electrical Union, who could build common cause with him on the work force of Dungeness?
Damian Collins
I am grateful for the hon. Gentleman’s comments. I am assured that there is a lot of life in Dungeness B power station yet, and I hope that continues. As regards his other comments, I am sure that my hon. Friend the Minister can speak for himself.
Sir Robert Smith
The intervention from the hon. Member for West Bromwich East (Mr Watson) was confusing, because the performance of an existing power station does not have anything to do with the performance of the next power station on the site. Not to defend the previous Government, but I am sure that the decision was to do with the environmental impact locally, and the fact that the Government found sites elsewhere to fill the quota that they were looking to hit.
Damian Collins
The hon. Gentleman makes an important point about the nature of the environmental objections and whether they are well founded. Natural England’s objection is that Dungeness sits on a peninsula of shingle. It is the second largest shingle peninsula in the world; the largest is Cape Canaveral in Florida, so clearly either NASA has found ways of managing the natural environment, or the Americans are working to different rules. We are talking about a living, moving landscape, with nuclear power and other development. There is a need to intervene to prevent coastal erosion of the shingle peninsula, which is moving, and to maintain the defences and protect the existing power station; that means moving shingle from Lydd-on-Sea to the western end of the peninsula. That work has to go on, and people who have lived in Dungeness all their lives are aware that human intervention is natural.
Natural England is right to raise concerns about this important ecological site, which is unique in our country and, in many ways, in Europe. The history of Dungeness is the history of man working in successful partnership with nature. The site is excellent for meeting the energy demand for nuclear power in our country, and it should be considered as a site for a station. Given that the development area for the new power station sits alongside an existing power station, and is on land previously disturbed and developed as part of the building of the first two power stations, we are talking about potentially less than 1% of the entire protected area that covers Dungeness and Romney marsh and the Rye site of special scientific interest. That is a relatively small area of development; development could not be said to bring into question the integrity of the whole site. Only a very small part is affected, so some mitigation may be possible.
The national case and demand for nuclear power is such that we should seriously look at that option. We should not get into a position where any area of development is considered impossible, or where Natural England has, on certain sites, a veto over whether anything happens at all. There are even objections to the movement of shingle from one area of Dungeness to another to maintain the sea defences; there are questions over whether that should be stopped, and whether the building aggregate should be dumped into the sea instead, at great cost to the taxpayer.
Mr Iain Wright
I am following the hon. Gentleman’s argument closely. Like him, I have a nuclear power station in my constituency, and there is the possibility of a replacement power station next door. There is also an area for birds, which is of scientific interest, so we have very similar views. I would like nuclear power to be part of a balanced mix of energy for Britain. We need that to happen as quickly as possible, and I think that he agrees with me. On that basis, does he think that the Government’s abolition of the Infrastructure Planning Commission is a good or a bad thing?
Damian Collins
The hon. Gentleman makes an important point. The question is, what planning framework should deliver the nuclear new-build programme? Regardless of what takes the place of the IPC, all Members want a structured and coherent plan to take the sites forward. My concerns and argument are about the bit that comes before the IPC—the consultation on the list of nuclear sites. My concern is that that system has fallen down.
I am aware that the Government have inherited a live and open consultation from the previous Government. Ministers are still considering the evidence given by my constituents and many others during the consultation period, as well as the evidence in the report of the Select Committee on Energy and Climate Change. Those things will be taken into account, and I look forward to reading the report. I hope that Ministers will consider some of the points that I have made on the suitability of Dungeness as a key site.
Joan Ruddock (Lewisham, Deptford) (Lab)
Of course Natural England does not have a veto, but new build will take place only at a certain rate, and that is determined entirely by the private sector. It makes a great deal of sense for a Government to choose the sites most likely to progress at speed. In the case of Dungeness, the consultations necessary would be complicated. It was a purely pragmatic, straightforward and reasonable decision for the Government to withdraw the site from the consultation.
Damian Collins
The right hon. Lady makes an important point about the nature of consultation and how it is conducted. From the evidence of the Department of Energy and Climate Change on the consultation on Dungeness—available on its website—it seems that Natural England raised the issue early, and that meetings were called between it and EDF Energy very early on in the process. I am not certain how much interrogation there was of Natural England’s argument, or whether it was just accepted. Were the Government concerned that Natural England might make a serious challenge? Natural England said that it potentially had concerns about a number of the sites, but it had the greatest concern about the one at Dungeness. My concern is this: how much exploration has there been of Natural England’s argument, and what cases for mitigation have been made?
I am conscious that other right hon. and hon. Members would like to contribute. I obviously want Dungeness back on the list of sites, maybe with caveats at the planning stage that a very detailed plan for managing the local environment must be part of the consideration of how that power station could be built. I am sure that the right hon. Lady is correct that there will be issues with a number of the sites, whether or not they are included in the national policy statement on nuclear power. It would therefore be sensible to have as many sites on the list as possible that can contribute to our energy needs. We can then progress as many as possible and hope that a good number are delivered.
Mr Mike Weir (Angus) (SNP)
I am pleased to make a brief contribution to the debate. I congratulate the hon. Member for Glasgow North West (John Robertson) on securing the debate. He is, of course, a well known and passionate advocate of nuclear power, as is the Minister—these debates often seem like a meeting of old friends. While I respect their positions, it will not come as a great surprise to either of them that I take a somewhat different position. The Scottish National party remains opposed to new nuclear power stations. We believe that Scotland neither needs nor wants such stations, and there is a clear majority in the Scottish Parliament against them. This debate centres on the new Westminster Government’s policy, and I do not want to debate the pros and cons of nuclear power as such, but will focus on what their policy is.
Before the election, the Conservatives made no secret of their support for nuclear power, and their manifesto clearly supported new nuclear power stations
“provided they receive no public subsidy”.
The Liberal Democrats clearly stated that they
“reject a new generation of nuclear power stations”.
However, the coalition agreement states unequivocally:
“We will implement a process allowing the Liberal Democrats to maintain their opposition to nuclear power while permitting the Government to bring forward the National Planning Statement for ratification by Parliament so that new nuclear construction becomes possible”—
a fudge if ever there was one. It gets worse, in that the Liberal Democrats can speak against it but are committed to abstain on any vote. That seems to lack principle completely. The present Liberal Democrat Secretary of State for Energy and Climate Change, the right hon. Member for Eastleigh (Chris Huhne), who once described nuclear power as a “failed technology”, has stated that it is very clear that there will be a new generation of nuclear power stations. No doubt the Conservative party are relying on a temporary coalition with Labour to ensure the measure goes through.
We should not be unduly surprised; the Liberal Democrats were against nuclear weapons, but now appear to be in favour as long as they cost less than Trident. The position appears to be that there will be new nuclear power stations provided the private sector meets all the costs, but how will that work? In November last year, Citigroup published a fascinating report entitled “New Nuclear—the Economics Say No”, in which it describes the “three Corporate Killers” and says:
“Three of the risks faced by developers—Construction, Power Price, and Operational—are so large and variable that individually they could each bring even the largest utility company to its knees financially. This makes new nuclear a unique investment proposition for utility companies.”
I presume it does not mean that in a good way. It makes the point that
“No where else in the world…have nuclear power stations been built on this basis”,
and concludes:
“Nor will they be built in the UK—We see little if any prospect that new nuclear stations will be built in the UK by the private sector unless developers can lay off substantial elements of the three major risks. Financing guarantees, minimum power prices, and/or government-backed power off-take agreements may all be needed if stations are to be built.”
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Has the hon. Gentleman not seen the comments by the head of EDF, Vincent de Rivaz, about how his organisation welcomes this new development and how it will continue to put forward its programmes despite there being no subsidy from the public sector? Such comments will be very pleasing to my constituents because it should mean that Sizewell will get built.
Mr Weir
I have heard Mr de Rivaz’s comments, but he seems to be the only one to make such comments. Different comments have been made by the head of E.ON UK, who is also interested in new nuclear power stations.
Let me return to what Citigroup was saying. I should add that the report was written before the oil spill in the gulf of Mexico, where BP has found that legal maximum liabilities are meaningless. Already, it has paid out more than the legal maximum under United States federal law and is facing many billions more in compensation payments. Just what would the cost be to any operator of a nuclear power station should—God forbid—there be a serious incident? The fact that there is a serious potential liability should be a red light to utility companies, and all those who invest in them. It is also worth noting that the present Secretary of State has already reported a black hole in the budget of his Department to meet the cost of decommissioning current stations and of containment of our existing stock of nuclear waste. Given that situation, how will the Government ensure that the new nuclear power stations will be built without public subsidy, especially as that has never been done anywhere in the world?
The coalition agreement gives us a clue when it states:
“We will introduce a floor price for carbon, and make efforts to persuade the EU to move towards a full auctioning of ETS permits.”
It seems that that is the answer as to how nuclear power is to be given a subsidy. Nuclear is to be made commercial by introducing a floor price for carbon. In a recent speech to the Nuclear Industry Forum, the Minister said:
“The carbon price is not a subsidy for new nuclear, it is to drive forward low carbon investment.”
An argument can be made that that is the case, but it is also undoubtedly true that new nuclear will be the main beneficiary of such a policy. It will have the effect of driving up, perhaps very substantially, the price of energy produced by fossil fuels, thus making nuclear much more attractive, which is why the nuclear industry is the cheerleader for this particular policy. In his speech, the hon. Member for Glasgow North West said that without nuclear power, we faced the prospect of very high energy prices, but if this policy is pursued, we may face very high electricity prices across the board with or without nuclear power.
In effect, the introduction of a floor price would be fixing the market, which I thought would have been anathema to free market Conservatives. It will no doubt be argued that that is a move that will help all other low carbon emitters, and that there are already many subsidies on different kinds of renewables. That point was also made by the hon. Member for Glasgow North West. Some of that is true, but other forms of renewables are new technologies that are receiving help to get them to a take-off postion in the market. The previous Government’s proposals to stagger renewables obligation certificates recognised that some of them had almost reached that position.
Nuclear is not a new technology; it is an old technology that has already had a shedload of money from the taxpayers. I am old enough to remember when it was said that nuclear power would be too cheap to meter. That did not happen, and we have seen the vast amount that will be needed to deal with the legacy of waste, now and far into the future.
It seems, therefore, that rather than making private investors take the risks, it is again the taxpayer who will do so, and I would be interested to know whether the Minister can give us more details on how the policy of the floor of the carbon price is to work. For example, when and how is it to be introduced? I noticed that The Independent suggested that it will be introduced when new nuclear power stations would be up and running in 2025. Will the policy apply only within the UK if he is unable to persuade the EU to adopt such a position, and how will that work with the competition laws within the EU?
Finally, I ask the Minister to confirm that the coalition Government remain signed up to the respect agenda with the Scottish Government that the Prime Minister talked so much about, and that there will be no attempt to amend the powers of the Scottish Parliament in that area so that we might continue to be nuclear-free.
As I stated at the outset, the SNP remains opposed to new nuclear power stations. We believe that Scotland has great potential to be the green powerhouse of Europe and that the determination of all three Unionist parties to pursue new nuclear power stations is an horrendous mistake that will cost the taxpayers dearly in the future.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I congratulate the hon. Member for Glasgow North West (John Robertson) on securing this debate and on putting his case for nuclear power, as he did so many times in the previous Parliament. As he recognises, one of the legacies that this Government will have to address is the previous Parliament’s lack of momentum in decarbonising electricity generation in the UK.
The hon. Gentleman did not address my specific question about nuclear power’s global contribution. Although nuclear power will be embraced by some countries, it will not be the solution to providing a low-carbon future across the world. Therefore, it is very important for us to develop other low-carbon energy systems, such as carbon capture and storage, especially if they can be retrofitted in China. That will have a far greater impact.
John Robertson
I thought that I had addressed the hon. Gentleman’s point; if I did not, I apologise. As we speak, power stations are being built around the world. Still more will be built when people see the low-carbon output—it is practically nil—of nuclear power stations.
The hon. Gentleman is absolutely right. China is the market that we have to get into, and CCS would help us do that. Nevertheless, the case has to be proven and the technology has to be there, and it is not there at the moment. The hon. Member for Angus (Mr Weir) said that nuclear power is an old energy. It is, but it is also a tried and tested energy that can be relied on.
Sir Robert Smith
Historically, the nuclear industry has required public subsidy for the purposes of trying and testing. Even the great white hope in Finland, which was meant to show how the market could deliver, has turned out to need an underpinning of public subsidy. I recognise that the carbon market is an important way of incentivising whatever means of low-carbon electricity generation comes before us, and anything that can be done to get a better price for carbon will be an important part of driving forward alternative energy supplies.
I must declare an interest here as a shareholder in Shell. I also represent the north-east of Scotland, where the oil and gas industry is extremely important. The hon. Gentleman said that he was worried about us relying on gas. This Government will have to address one of the legacies of the previous Government and make sure that we maximise our own gas production, because in that way we will reduce any immediate worries about having to rely on imported gas.
Moreover, the Government must recognise that the big change resulting from the near-decoupling of the oil and gas markets following the discovery of the means of producing shale gas—a new means of producing gas—is altering the whole concern about a further dash for gas. Gas is one of the cleaner fuels. Although it produces CO2 , it produces less than other fuels. Therefore, it can play an important part in our electricity mix without too much concern.
Mr Weir
I hear what the hon. Gentleman says, and I agree with him in many ways, but does he not accept the point that raising carbon prices will affect the cheapness of gas? It will substantially push up the price because gas is a fossil fuel and will be hard hit if we put a floor on the carbon price to benefit nuclear power.
Sir Robert Smith
What the hon. Gentleman has to accept is that we want a low-carbon future. Can he suggest a mechanism other than putting a price on carbon? The EU has embraced the idea of putting a price on carbon as the only means of producing a low-carbon future for the European Union.
Mr Weir
The EU has not accepted a floor price for carbon, as is proposed by the coalition Government. So we may have a position in which the UK is the only country trying to impose a floor price for carbon while remaining within the emissions trading scheme. I cannot see how that is workable.
Sir Robert Smith
That is why we have to convince the EU that, if it is going to deliver on a low-carbon agenda and if it has embraced the ETS, it will have to put a floor on carbon to make the ETS deliver the treaty commitments and other commitments to having a low-carbon future.
The hon. Member for Glasgow North West said that the world is facing the major problem of there being too much carbon dioxide going into the atmosphere. There is no way of not putting CO2 into the atmosphere unless we are willing to pay the costs of producing alternatives to CO2. Nuclear is one alternative, which we do not think is the right alternative, but marine renewables also need a floor on carbon—all low-carbon energy systems, if they are going to take off and be delivered, will need a floor on carbon. That is the only way. The EU has decided to embrace the ETS and unless we actually make the ETS work, we will not deliver on all our commitments.
Graham Stringer (Blackley and Broughton) (Lab)
I think that this debate about the European ETS is at the heart of European energy policy. Would the hon. Gentleman go as far as I would and say that the introduction of that scheme has been a catastrophe, that the low level of carbon is actually subsidising polluting industries and that it would be better to start again?
Sir Robert Smith
The EU cannot keep inventing new schemes. I think that we need to make the ETS work now that we have embraced it and we actually need to deliver it, because at least it uses the market to try to come forward with the best and most efficient solutions for achieving the low-carbon future that we need to embrace. So that is an important point.
There is another situation with nuclear. When we on the Energy and Climate Change Committee were looking at the planning statements, it struck me that the long-term solution for nuclear waste may well be a deep repository, but the plans now are to keep the waste on site for a considerable time. Therefore, all these communities must be managed for a long time, to protect those waste sites. They are all in low-lying floodplains, so we had this vision of little islands of nuclear waste being protected by flood defences, as the sea level rises and the legacy of the new nuclear generation is left for future generations to pick up.
So it still seems a major challenge for this country to go down that route of nuclear if we can embrace other technologies, such as carbon capture and storage and marine. We have a massive tidal resource around our coastline, which we have failed to tap and failed to launch. Those of us who are committed to marine renewables and the alternative technologies have been frustrated about the legacy of so many resources going into nuclear. That has diverted resources away from what could have been another great export industry and a very substantial source of low-carbon energy for this country, and it does not pose the risks of pollution that we would still face with nuclear.
Simon Hughes
I just want to make one other point. My hon. Friend has huge experience in all of these areas. However, the statutory body that advises on waste and nuclear waste, and that gave the official advice to the last Government, has not said so far that there is a safe method of disposing of nuclear waste. Yes, it has accepted methods of storage of nuclear waste, and the communities where that waste is produced and stored understand that, but there is not yet an agreed safe method of disposing of nuclear waste. Going ahead with a programme of new nuclear without a safe method of disposal being objectively agreed would be another folly.
Sir Robert Smith
Yes. It seems that we should deal with the legacy that we already have before adding to that legacy.
I am conscious that other Members want to speak. As the hon. Member for Glasgow North West said, we have the serious challenge of ensuring that the lights stay on. We need electricity to be generated. There is also the serious challenge of producing a low-carbon future. We need long-term investment, and we need the incentives that have been mentioned. I think that a price on carbon is an important incentive to low-carbon energy industries and that nuclear is not the great white hope that will solve the problem, although it is portrayed as such.
I also think that we need to embrace marine renewables and carbon capture and storage, and ensure that we achieve the most effective gas production from our own gas resources before we waste them and leave them locked in the ground. There is a low-carbon future in which we can keep the lights on, but I do not think that nuclear is the means of achieving that future.
Dr Alan Whitehead (Southampton, Test) (Lab)
I congratulate my hon. Friend the Member for Glasgow North West (John Robertson) on securing this debate. It is, of course, a debate about Government policy on new nuclear; we are not talking about the overall advisability of going down the nuclear route. My view remains that nuclear power is not renewable. We have no nuclear fuel in or around the UK and I have my views on that subject. However, Government policy on new nuclear is the important issue that we need to concentrate on right now.
In that context, the Minister has an enormous responsibility on his shoulders. I, too, have a great regard for him and for his skills in tackling these matters. However, he will need at least the skill of those responsible for putting in and removing the nuclear cores from Three Mile Island to keep the coalition on track as far as its policy is concerned, because although the provisional wing of the coalition is in for this debate, the official wing is apparently locked into Government policy on nuclear, in respect of the decisions that will need to be made as far as the Department of Energy and Climate Change is concerned.
Of course, we have clarity about what those decisions will consist of—indeed, we had that clarity in a speech that the Minister made to the Nuclear Industry Forum very recently. In that speech, he stated:
“We will keep the fast-track process for major infrastructure, but planning decisions will be made by Ministers thereby ensuring democratic accountability”.
There is a national policy statement on nuclear. Incidentally, the new Government are going to take that statement apart and put it together again, which I think will ensure further delays in the process. Among all the national policy statements that have come out, the statement on nuclear is unique in that it is site-specific. We have already heard mention this morning of the inclusion or exclusion in that statement of a particular site at Dungeness; in total, 10 sites have been identified in the statement.
If that is to happen as far as those sites are concerned, the decision taken by the Minister will mean that he will have to frank each of those sites and so will, among other things, give an enormous use value to those people who are then commissioned to develop them. The Minister will have to take a positive decision; he cannot remove himself from it.
As my hon. Friend the Member for Hartlepool (Mr Wright) mentioned, we will therefore have the spectacle of an agreement that appears to suggest that the Liberal Democrats can maintain their opposition to nuclear power while permitting the Government to bring forward the national planning statement for ratification. But that same Minister, in agreeing to that national planning statement, will specifically have to frank those sites, thereby allowing those particular nuclear stations to be developed.
Dr Whitehead
I was just going to reflect on that issue very briefly. As the Minister mentioned in his recent speech to the Nuclear Industry Forum, these decisions will come before Parliament. Presumably, therefore, the Minister who has made the decisions will be in the position of abstaining during votes on them. That will be an interesting piece of choreography, if the policy is to go ahead.
In his recent speech to the Nuclear Industry Forum, the Minister also emphasised that there will be no cost to the public purse as a result of the new nuclear programme. We need a little more clarification of what that actually means. In the past, one of the reasons why potential builders of nuclear power stations said that they might go ahead with nuclear build was that their clear underlying view was that they really did not believe that the new proposals would present no cost to the public purse.
It is one thing to say that there should be a floor price for carbon—that would not be a cost to the public purse, but generic assistance for all forms of low-carbon energy—but there is also the question of subsidising or giving guarantees of last resort on insurance, waste and storage, and of giving assistance on how all that works. Those are subsidies. If the Government are saying out of one side of their mouth that there will be no subsidies but out of the other side that, actually, there will be subsidies in several areas, that may be the way forward that they wish to assume as far as their policy is concerned. However, if they really do mean that there will be no subsidy from the public purse, there will also be no timetable for the build of new nuclear.
That is the crucial issue that we need to face in respect of future policy. If there is no subsidy at all from the public purse, a company may come forward and build a new nuclear power station, two or three companies may come forward and build two or three new nuclear power stations, or perhaps no one will come forward to build a new nuclear power station. We cannot easily afford that uncertainty, given our energy supply situation.
The previous Government’s timetable for the arrival of the first new nuclear power station was 2017-18. My hon. Friend the Member for Glasgow North West mentioned that potential date today. Interestingly, a policy document issued in 2007 by the then Department of Trade and Industry, “New nuclear power generation in the UK: Cost benefit analysis”, gave a different date—the early 2020s—for the arrival of the first new nuclear power station. Indeed, several industry analysts and others suggest that a realistic date is more likely to be in the mid-2020s.
That is important because, by that date, some 8 GW of coal-fired power stations, 3 GW of oil-fired power stations and 7 GW of nuclear power stations will have gone out of commission—for various reasons, including the large combustion plant directive, the age of the plant and the difficulty of maintaining or extending the life of nuclear power stations. That capacity will definitely be out of the system, so the question is what we do in the meantime to replace it. If no nuclear power stations are likely to come on stream until the mid-2020s, it will have to be replaced by other means.
Damian Collins
Does the hon. Gentleman share my regret that the previous Government did not get into the timetabling much sooner? We should have developed the process much earlier.
Dr Whitehead
Personally, that is not a source of regret to me, but there certainly is an argument that, because of the long-term scale of the planning, if one were to develop a range of new nuclear power stations to replace power stations as they ran down, replacement should be on that basis: as they run down. However, successive Governments have not taken that view on nuclear power; it was not only the previous Government for whom it was not an issue. However, we are in a position where like-for-like renewal would mean an enormous fleet of new power stations coming on stream at an early stage.
If that does not happen, base-load power, which is so important for our energy economy, is likely to be replaced by other means such as carbon capture and storage-fitted coal-fired power stations or—the Committee on Climate Change recently wrote to the Government to emphasise this—CCS-fitted gas-fired power stations. That would then be a new generation of base load, on the back of which new nuclear power would have to compete.
If new nuclear power has not been planned in any way, it will have to compete with that new form of base load, and whether it can compete on price for its power will be entirely determined by whether there is a subsidy for new nuclear power or whether there is some form of carbon pricing that enables nuclear power, at the point at which it comes in, to compete effectively against other forms of power. The time scale is crucial as far as new nuclear power is concerned.
That is the central issue for this country’s future energy policy. The challenge that we face is to keep the lights on, to replace an enormous amount of generating capacity—not just base-load, but other forms as well—and to ensure that that generating capacity is low carbon for the low-carbon economy that we must move towards. Above all, that needs planning. Planning is needed to ensure that that happens over a period of time.
For the new Government to announce a policy that says, in essence, that there will be no planning as far as new energy supplies are concerned seems perverse, given the imperatives ahead of us. Whether we plan to have a fleet of CCS-fitted power generators, large-scale renewables—wind, wave and tide, and large deep-sea wind arrays—or a new generation of nuclear reactors to provide energy, we have to ensure that there is planning at some stage.
I am concerned that the new Government’s announcements in their early days about how they will manage the energy economy, and what they are doing in respect of national policy statements, the Infrastructure Planning Commission and nuclear power, appear to be moving away from ensuring that we plan our energy economy so that we can keep the lights on for the next 50 years.
Joan Ruddock (Lewisham, Deptford) (Lab)
I congratulate my hon. Friend the Member for Glasgow North West (John Robertson) on his success in securing the debate and on the way in which he made his case. He has always been a supporter of nuclear power and has worked hard to keep the issue before the House. Not all of us in the Labour party have shared his enthusiasm over the years. Indeed, my own position was not dissimilar to that of the Prime Minister, who said that nuclear energy was an energy of last resort. However, in any consideration of nuclear energy, we need to ask why so many people have changed their minds in favour of new nuclear, and what that means for those who have not.
As my hon. Friend said, the twin imperatives of tackling climate change and achieving energy security have focused and changed minds on new nuclear—but only some minds. Despite constantly challenging the Labour Government to do more on climate change, the Liberal Democrats in their manifesto explicitly rejected a new generation of new nuclear power stations, and we have heard contributions this morning that have entirely underlined that.
Perhaps the Minister could say whether he remains committed to a reduction in greenhouse gases of 34% by 2020, and at least 80% by 2050, as specified in Labour’s Climate Change Act 2008, given the Liberal Democrats’ brake on his nuclear ambitions. Does he recall the warning given by his newly acquired friend, the hon. Member for Cheltenham (Martin Horwood), who stated:
“I assure any investors who may be watching our debate…that their investment will be at risk if we play a part in any future Government, because if we had the chance we would seek to slow down, and if possible to stop, the development of nuclear power.”—[Official Report, 30 April 2008; Vol. 475, c. 322.]?
That is in stark contrast to the Minister’s statement that clarity is essential if new investment is to happen.
What are business and industry to make of the coalition Government’s position? It is clear that there is no united Government position on nuclear energy. As my hon. Friend the Member for Hartlepool (Mr Wright) said, there is not just one or even two but three positions. The coalition agreement states that the Government will introduce a national planning statement, so they are notionally in favour of nuclear. But a Liberal Democrat representative will speak against it, and the Liberal Democrat party will abstain in any vote. We always knew that being a Liberal Democrat in opposition meant not having to choose. It seems that old habits die hard and that Liberal Democrats do not accept the responsibilities of government, so perhaps the Minister will tell us whether his right hon. Friend the Secretary of State is committed to nuclear power. Was not one of the very first actions of his Government to create the very risks to investment, and slow-down in the development of nuclear power that the hon. Member for Cheltenham threatened?
Much has been said about Sheffield Forgemasters, and some of it bears repeating. Surely the Minister—I have the greatest regard for him and welcome him to his new position—must have shared my astonishment at the decision to cancel the loan to that company. I well remember him in opposition constantly banging on about energy security and investing in manufacturing, so what is his explanation? The deal took two years to negotiate, and would have put the UK at the forefront of an expanding market with great export opportunities. There must have been collusion between a Liberal Democrat Chief Secretary and a Liberal Democrat Energy Secretary who are determined to slow down the nuclear replacement programme that we were putting in place. Exactly what role did Liberal Democrat opposition to nuclear play in the Sheffield Forgemasters decision, and can we have a full explanation? How will that decision affect the timetable for new nuclear?
Without the new investment by Sheffield Forgemasters, the waiting list for pressure vessels is too long. Korean and other companies, including two in China, intend to enter the business of making large forgings, but the work necessary to ensure that steel is made to the right quality is bound to take several years. Any failure of the reactor core would be catastrophic, as the Minister knows, and customers will be wary about buying from a company without sufficient experience. Sheffield Forgemasters is one of a small number of businesses in the world that could increase the speed of roll-out of new nuclear. Forgemasters might have been the central company in a nuclear renaissance in the UK.
So what now? In government, we systematically developed the instruments and legal frameworks necessary for the transition to a low-carbon economy. We believed that the energy revolution was vital to our security and to tackling climate change. Planning was clearly an obstacle, so we created the Infrastructure Planning Commission. Despite the CBI saying that it is vital for strategic infrastructure, we understand that the coalition plans to scrap it. In response to that announcement by the Secretary of State for Communities and Local Government, Clare Spottiswoode, chair of Energy Solutions Europe, which helps to manage five nuclear sites in the UK, said:
“People are already nervous...the risk is they will just take their money elsewhere.”
Who will make the decisions on new nuclear plants under the coalition’s proposals? I believe that it will be none other than the Energy Secretary, who opposes nuclear power. Does his hon. Friend the Minister of State have any confidence that new nuclear plants will be built? Will the Secretary of State chair the Nuclear Development Forum, or will that also be scrapped? If he does not want to support British manufacturers of components for new nuclear, how does he plan to encourage industry? Is he aware that in the real world where private finance is hard to come by, support through soft loans, tax breaks and procurement policies is commonly provided by our competitors?
In the run-up to the election, both parts of the coalition talked about the need to make Britain less dependent on financial markets and property speculators as the engines of growth. They talked about green investment banks. They talked the talk, but clearly they have no intention of walking the walk. Frankly, cutting investment in a highly skilled and productive British manufacturing company is economically illiterate. Last week the Minister talked about skills, and praised the chief executive officer of the National Skills Academy for Nuclear, John Llewellyn.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
Jean Llewellyn.
Joan Ruddock
I am grateful for the Minister’s advice. I shall call him Mr Llewellyn—I do not know him.
Joan Ruddock
I accept entirely that I have made an error, but I obtained the information from a good source, so I blame that source and not myself. I accept that the chief executive officer is a woman. I have never met her, but she praised the Northwest Regional Development Agency and said that the sector’s collaboration in skills training with the agency’s backing
“was an example envied by other countries”.
Will the Minister tell us his Government's intentions for that agency?
What is left? Is it correct that there will be no assistance with planning, no assistance with investment and no assistance with skills? I anticipate that the Minister's answer will be to create a floor price for carbon, something that we, of course, considered when in government. Unusually, I join the hon. Member for Angus (Mr Weir) in asking what progress has been made. How effective does the Minister believe he can be in trying to set a floor for a single member state, at what level might it be set and what might be the effect on energy consumers? What talks have he or his officials had with other member states on the functioning of the EU’s emissions trading scheme and the carbon price? I can tell him that there is no easy solution.
The Labour Government transformed the UK's approach to energy security, and recognised the finite future of North sea oil and gas, the challenge of imports and the need dramatically to increase renewables in the face of climate change. We added to that mix the need for a new generation of nuclear power stations and the development of carbon capture and storage to enable us to burn clean coal. We put everything in place to achieve a low-carbon economy. This should be a time of great opportunity. Instead, it is a time of confusion, contradiction and lack of confidence. The Government have made a bad start.
I am grateful to my hon. Friend the Member for Glasgow North West for giving us all the opportunity to make these issues clear to the coalition, and I congratulate him and all other Members who have contributed to this debate. I look forward to the Minister’s reply.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
I welcome you to the Chair, Mr Brady, in this important debate, and I congratulate the hon. Member for Glasgow North West (John Robertson) on securing it. He has had an interest in this area of policy for many years, and we welcome his commitment. He delivered his speech with the degree of mischief that we have come to expect from him. I hope that we all approach the matter on the basis of needing to find common ground. In opposition, we approached the nuclear debate by asking how we could best co-operate with the previous Government’s approach and how to take the matter out of politics. I hope that that approach will continue during this Parliament, because some of the most important decisions will have to be made during it. I will try to answer as many as possible of the points that have arisen during the debate, but if I do not respond to any, I will be more than happy to make an early appearance before the hon. Gentleman’s all-party group on nuclear energy to try to provide the assurance that its members seek.
The hon. Member for West Bromwich East (Mr Watson) asked whether I would meet the trade unions. I have already had contact with some of them. They are all part of the family, and I am keen to work closely with them because they have a significant contribution to make on skills, safety issues and the whole approach to new-build nuclear in this country.
This has been a good debate and I am grateful for the kind comments that people have made to me personally—they normally say that they respect me just before disagreeing with virtually everything they think I might be about to say. This is perhaps a bit of a replay of the work of the Energy and Climate Change Committee, to which I am sure we will return more formally in due course. We have heard some extremely useful contributions. My hon. Friend the Member for Folkestone and Hythe (Damian Collins) made an extremely impressive speech. He will understand that I am constrained in what I can say about Dungeness, but it is very encouraging indeed that it has such a strong advocate in Parliament for its interest and for the nuclear agenda more generally.
The hon. Member for Angus (Mr Weir) asked about the respect agenda. We absolutely understand that those planning issues are a matter for the Scottish Government, and it will be up to them to decide whether there should be new nuclear plants in Scotland. We have a fairly clear idea where they are coming from on those issues. The national policy statements covered only England and Wales, so the process for Scotland has not been considered, but if one talks to the investors, one realises they have essentially ruled out investment in new nuclear plants in Scotland for the time being. Many people will feel that that is a mistake and is unfortunate. However, we completely respect the position of the Scottish Government.
The hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) talked about the range of other low-carbon technologies that we should also be considering. I agree with him. This is not just about nuclear; it is about marine development, in relation to which the United Kingdom is not taking the lead that it should. The issue is also about carbon capture and storage, and we must up the game in terms of our contribution to that. As he said, the matter is critically also about the offshore oil and gas industry and having policies in place that enable us to get the maximum potential out of the resources that are there. That is a central part of our national interest in relation to energy policy.
Mr Iain Wright
The hon. Gentleman commands the respect of all parties and I welcome him to his position. He mentioned the issues of nuclear on the one hand and renewables on the other. I agree with him that those matters are not mutually exclusive—in fact, a range of infrastructure is needed to have a degree of compatibility. In Tees valley in my constituency, there are great opportunities to have not only a nuclear power station but a range of renewable energy. What help and support can he give my area to make sure that we become a real centre of excellence and an engine for growth for energy policy in the UK?
Charles Hendry
I absolutely understand that it is not just a nuclear matter. The Tees valley can play a crucial role in the development of carbon capture in nearby Teesside, and there are also many offshore opportunities there. We want to try to find the best way we can to encourage a supply chain to invest in Britain. That is not always going to be through Government grants and subsidies, although there is a role for that and such an approach can make an important contribution. Other issues will also determine whether people invest in Britain. It is mostly—although not exclusively—international companies that will be making such investment, and there is a wide range of issues surrounding the regulatory and tax environment that will be central to whether they invest here. Nuclear is part of an overall approach. I hope I will have the chance to come up to Hartlepool to see some of those opportunities, and perhaps be shown around by the hon. Gentleman.
Some of the issues raised today have to be considered against the backdrop of the challenge that we face as a country. In the course of the next few years, we will see a third of our coal plant being taken out of commission because of the large combustion plant directive, and most of the rest will go as a result of the industrial emissions directive. Much of the remaining oil plant will also be closed because of those measures. Based on current plans, if there are not life extensions, apart from Sizewell B, the nuclear fleet will have closed down in little over a decade. We therefore have an incredible challenge to face.
The hon. Member for Glasgow North West, who introduced the debate, talked about £200 billion of new investment, which compares with about £350 billion of new investment in energy infrastructure in the other 26 nations of the European Union. We have a uniquely serious challenge, and part of the problem is that not enough has been done soon enough. If the five-year moratorium on nuclear had not taken place, we would obviously be five years further forward in the development of those plants. The pressure points in our energy security to which he and others have referred exist because we have not been securing enough investment at an early enough stage during the course of the process.
The coalition agreement is absolutely clear. By definition, a coalition agreement brings together people of differing views to work together for the national good, and that is what we are seeking to achieve. It has been made clear that nuclear will be part of the mix as long as that is done without subsidy. Above all, we have to know whether the industry itself is comfortable with that position and whether the people who will be required to invest billions of pounds in each plant are happy with that agreement. The discussions that we have had since the election suggest that they are comfortable with that arrangement and with the position of myself and the Secretary of State.
Some people opposed nuclear for philosophical reasons; others believed that it would not happen because it would never be economically viable. The Secretary of State has always questioned the economics. However, he is happy that if people come forward with an application for a new nuclear plant without subsidy, it should be part of the mix going forward. We have a clear position, which the investors themselves have been very keen to clarify and which they are now able to support. I hope hon. Members will give us the credence to work forward on that basis, because it is critical for investor confidence that they see a broad coalition in Parliament in favour of a future role for nuclear in this country.
We will go to great lengths to ensure that the taxpayer is protected—no subsidy means no subsidy. We are considering areas in which there may have been hidden subsidies and dealing with those. For example, we will certainly maintain—and reinforce if necessary—measures put in place by the previous Government to ensure that the operators of new plants are required by law to set aside money from day one to pay for the waste and clean-up process. The industries themselves will have to carry out the investment, but the Government will be responsible for the regulation of the safety and environmental aspects that go with that.
The Office for Nuclear Development will continue its crucial work in trying to remove barriers to investment. I give the right hon. Member for Lewisham, Deptford (Joan Ruddock) an assurance that the Nuclear Development Forum will be a key part of taking that forward. It has been an extremely important part of that process, in which both the Secretary of State and I will be very involved. We want people to see that we are at one on these issues.
There has been much discussion of planning during the debate. A statement will be made to Parliament in the near future that will set out exactly how the changes will work. We want the national policy statements to be ratified by Parliament because that reduces the risk of judicial review and makes them stronger and more robust. We want investors to see that there is a strong majority in Parliament in favour of new build, as that sends a strong signal to their overseas boards. We will certainly take account of the representations made by Dungeness to be included in the list, but we will also give similar weight to the representations from community groups in areas concerned about new build, so that we can ensure that their views are fully taken into account. We are currently considering our response to the NPS consultation process and we will make it clear as soon as we can.
On the Infrastructure Planning Commission, we will be introducing a degree of democratic accountability. There will not be delays as a result of that process because we totally understand the urgency of driving these decisions forward, not just in nuclear but right across the board in the energy mix. However, we are keen to ensure that there is parliamentary accountability—again, because we believe that reduces the risk of judicial review.
Charles Hendry
I hope the hon. Gentleman will understand that, with just two minutes left, I shall do so for just a few seconds.
John Robertson
Will the hon. Gentleman mention Sheffield Forgemasters, because a number of colleagues have mentioned that matter?
Charles Hendry
I am grateful for that intervention. Other issues have also been raised, on which I will certainly write to hon. Members. On Sheffield Forgemasters, the decision was not a reflection of the quality of its workmanship or the nature of the company. We simply had to look across the board at a vast number of projects to which significant sums of money had been committed at a time when the nation could not afford it. Essentially the Government were having to borrow money to lend money. If one went to a bank and said, “I need an overdraft because I want to give more money to charity,” the bank would question the wisdom of that approach.
Charles Hendry
It is not, but the similarity in the situation I outlined exists. I am not suggesting that the money was for charity but, however good the cause, it does not make it right to borrow money when one cannot afford to do so. As a Government, we clearly recognise that the previous Government committed us to borrowings that we cannot afford. Sheffield Forgemasters is not a charity; it is a very important business and a key part of the Sheffield community. We will work with Sheffield Forgemasters, which has indicated that it is looking for commercial routes to make its plans possible. We very much want to see that happen, but we do not believe that it is possible to provide Government funding to do so. We will obviously want to return to some of the other issues, and I will certainly write to hon. Members on them. Once again, I thank the hon. Gentleman for giving us the opportunity to discuss such a crucial subject.
Northwick Park Hospital
(14 years, 5 months ago)
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Mr Gareth Thomas (Harrow West) (Lab/Co-op)
I am grateful for the opportunity to raise the future of Northwick Park hospital on the Floor of the House today. Although I have no financial interest to declare, I should declare that the hospital has looked after me and my family and friends at many points in my life, dealing with things ranging from running injuries through to dislocated shoulders as a result of canoeing accidents. I continue to be extremely grateful to the staff of Northwick Park hospital. Although no speech in the House could ever be regarded as anything other than political, I hope that this one will at least be judged to be not partisan. I have sought to give the Minister and my parliamentary neighbours notice of the issues that I intend to raise. I see in their places my hon. Friend the Member for Brent North (Barry Gardiner) and my immediate neighbour, the hon. Member for Harrow East (Bob Blackman).
Northwick Park hospital is the primary hospital serving my constituents. Mount Vernon and the Royal National Orthopaedic hospitals are nearby, but Northwick Park sees the vast majority of work involving Harrow NHS hospital patients. I want to raise with the Minister four issues: the case for capital investment for the rebuilding of the hospital; the ongoing revenue budget of the hospital; the hospital’s move towards foundation hospital status; and whether the hospital will be designated as a major acute centre for north-west London.
The hospital is 40 years old, having been opened by Her Majesty the Queen in 1970. It has a certain celebrity status, having featured in, for example, the Channel 4 comedy “Green Wing”, in “Prime Suspect” and—I suspect this will worry my constituents a little—in the 1970s horror film “The Omen”. More recently, the hospital merged in 1994 with St Mark’s hospital, a national centre that is world renowned for gastrointestinal medicine. Northwick Park is also home to the British Olympic Association’s Olympic Medical Institute and, together with Central Middlesex hospital, forms part of the North West London Hospitals NHS Trust.
Northwick Park is in general extremely well run. After 13 years of substantial investment in the NHS, I now rarely receive complaints about the quality of care at Northwick Park. Its mortality rate—a crucial indicator of quality—shows Northwick Park to be one of the best hospitals in the UK. I pay tribute to its current management team and the trust board for a job that I think they are doing well.
The hospital provides a range of services that straddle acute and community care. It also provides a large range of important regional services, including maxillofacial services for all of north-west London and parts of the NHS Eastern and South Central regions; a neuro-rehabilitation medical in-patient centre for NHS London and the east of England; bowel cancer screening; clinical genetics; and a dedicated infectious diseases centre. If it is not the largest acute hospital in north-west London as a whole, it is certainly the largest in outer north-west London. It has a very busy accident and emergency department, is a key part of the Imperial College Healthcare NHS Trust trauma network and, crucially, was recently designated as one of eight hyper-acute stroke units in London. The decision to have an acute stroke unit there enabled the hospital to take a significant step towards formally securing designation as a major acute centre for north-west London. First, therefore, I formally ask the Minister, can he confirm that a journey that the hospital has been on towards designation as a major acute centre is complete and that crucial status has been secured?
Secondly, the trust board has faced and still faces a challenging financial picture, in part, as I understand it, because of the level of usage of the Central Middlesex site. The trust has succeeded in meeting many of its financial targets, but has faced pressure in part because of the impact of the polyclinic model of care and, more generally, the steady move of out-patient services from hospital settings into the community. I should make it clear that my constituents and I are strong supporters of the Rayners Lane polyclinic, run by the excellent Ridgeway Surgery group of GPs. Can the Minister confirm that there will be no cuts to Government funding for NHS London or, crucially, to NHS Harrow—the chief although not the exclusive source of funding for the hospital? Can he set out to the House how he sees the hospital’s financial future?
Barry Gardiner (Brent North) (Lab)
I applaud my hon. Friend for securing the debate and for all the remarks that he has made. Does he share my concern that we should hear from the Minister about the business case for £23 million that has been presented to the Department for a series of essential works as a result of the Arup review in 2009? Does he agree that it would be extremely helpful if the Minister could give us some indication about the outcome of that to settle the minds of our constituents?
Mr Thomas
I certainly agree with my hon. Friend. That maintenance work is essential, as I shall come on to say, and it would certainly be good to hear the Minister’s reaction to that bid.
The third and most important of the issues that I shall raise today relates to the issue alluded to by my hon. Friend—the case for additional investment out of the NHS’s capital budget for the redevelopment of the hospital. A fire in the hospital’s basement in February last year led to the trust board commissioning a report into the maintenance situation at Northwick Park. It recommended up to £65 million of improvements to the infrastructure on the site to ensure that it remains fit for purpose. Indeed, on the basis of annual NHS estate returns, the trust has one of the largest backlogs of maintenance in London. It has been clear for a considerable time that a major redevelopment process is required.
In November 2004, a strategic outline case for redevelopment of the whole site was approved, and private finance initiative credits of more than £300 million were made available the following March. However, redevelopment did not start, on the grounds of the project’s affordability. Various reviews of the PFI project, all crucially linked to an ongoing debate about levels of usage of both hospitals in the trust and therefore likely levels of income, have not yet led to enough clarity about how redevelopment of the hospital might proceed. I believe that it was not until February 2009 that the PFI project was formally cancelled.
There has been and remains, in my view, little doubt that major redevelopment of the whole site is required. Indeed, senior figures in NHS London have consistently accepted the need for a major rebuild. There is unfinished business on the redevelopment of the hospital. I therefore ask the Minister, does he accept that the case for a rebuild is strong, and on what timeline does he envisage such a redevelopment taking place?
To be fair, the NHS has certainly not ignored Northwick Park. There has been significant capital investment in clinical and IT equipment; in reducing the backlog in maintenance and ward refurbishments, particularly in refurbishing maternity services; in a new children’s centre and paediatric accident and emergency; in oral maxillofacial services; in bowel cancer screening; and, as I mentioned, in the new stroke unit. Indeed, more than £85 million of capital investment has been put into Northwick Park since 2005. There have also been more than 300 extra staff at Northwick Park, the bulk of them clinical, since 2005. However, the need for capital investment remains.
I should make it clear that I remain a very strong supporter of foundation hospital status. Its governance model will, I think, help to bring the hospital closer to those who use it. The mutual element of foundation hospitals has long been championed by the Co-op party, of which I am lucky enough to be the chair. In particular, I welcome the role of the board or council of governors that foundation hospitals have. The council of governors comes from staff, patients and members of the public and from other local nominating partner organisations, who together form a local membership base for such hospitals and can introduce a hugely important local level of accountability into NHS decision making. They also help to draw local people closer to what can sometimes seem a remote, albeit local, institution. There are other benefits to foundation hospital status, but it is that greater access to senior figures within the hospital, and therefore the greater sense of ownership of their local hospital, that will be of most long-term benefit to my constituents.
I therefore ask lastly of the Minister, when will my constituents be able to sign up to become members of the North West London Hospitals NHS trust? I have welcomed the opportunity given to me by the Speaker to put an issue of profound concern to my constituents before the House, and I look forward to the hon. Gentleman’s response.
The Minister of State, Department of Health (Mr Simon Burns)
I begin by congratulating the hon. Member for Harrow West (Mr Thomas) on securing the debate. I wish also to pay tribute to the NHS staff, not only at Northwick Park hospital but across north-west London, who do so much, day in, day out, to look after patients and, it turns out, the hon. Gentleman and his family. The staff consistently deliver first-class care, benefiting his and other hon. Members’ constituents throughout north-west London.
Before I get on to the hon. Gentleman’s specific points—I shall seek to deal with all the issues he raised—I wish to set out the general financial situation. All decisions around NHS funding need to be seen in the context of reducing the deficit. Despite the massive debt acquired from the previous Government, and the measures to rectify our situation, which are to be set out later today by my right hon. Friend the Chancellor of the Exchequer, the NHS budget is protected. More than that, it will receive real-terms increases in each year of this Parliament. That underlines the Government’s commitment to the national health service.
However, the NHS still faces a huge challenge to improve patient outcomes and meet the increasing demand for services and new medicines within a tight financial settlement. North West London Hospitals NHS Trust, which runs Northwick Park hospital, is still dealing with long-standing financial difficulties. Two years ago, the trust was almost £24 million in debt. Since then, NHS London has been gradually helping the trust to return to economic stability one step at a time. I know that clinical staff and managers are working hard to ensure that cost savings do not come at the expense of patient care. Savings can be and have been made by providing more effective and efficient care for patients, and by reducing the burden of back-office costs. Notable examples of cost savings by 2010-11 include: recruiting permanent staff to replace, and reduce reliance on, higher-cost agency staff; a 10% reduction across all corporate areas, such as finance, human resources and information technology; and improving procurement, principally through bulk buying and working in collaboration with the London procurement programme.
As well as savings, there are new investment proposals on the table, as the hon. Gentleman said. They aim to address the essential and immediate needs of the hospital, and to improve the fabric of the hospital and the facilities on offer to patients. If approved, the programme will complement other investments in recent years, including: the £4.1-million new hyper-acute stroke centre, which he mentioned; the £6.7 million for three dedicated elderly care wards; and a £4.3-million bowel cancer screening hub based at Northwick Park—one of six such hubs across London.
The total value of the proposed programme is £65 million, with most of the money coming from the existing budget. A business case for the additional £23 million needed—a point that the hon. Member for Brent North (Barry Gardiner) raised—was submitted to NHS London for approval on 7 June. After careful consideration, the hospital trust was asked to improve the bid. NHS London received the strengthened business case last Friday, and we hope that it will be ready for consideration by the Capital Management Group on 25 June, a little later this week. If the business case is approved, my Department will then thoroughly consider the loan application from NHS London. Let me be clear: my officials will need to see a sound and credible recovery plan before they can agree to the investment.
I am afraid that I cannot give a specific time when a final decision will be reached, but we are acutely aware of the urgency of the issue, and we will reach a conclusion as quickly as we possibly can. I hope that that reassures both the hon. Member for Harrow West and the hon. Member for Brent North.
Mr Burns
I can categorically give the hon. Gentleman an assurance that at the appropriate time, before the announcement, I will make sure that my office contacts all three hon. Gentlemen present to ensure that they have advance notice of it.
On the question of foundation status, the hon. Member for Harrow West raised the possibility of North West London Hospitals NHS Trust attaining foundation status. The Government strongly support all trusts that aspire to that aim. Foundation-trust status enables the local NHS to develop stronger connections with communities, so that health care better reflects patient needs. It also creates the conditions for improving performance, which can only benefit patient care. More than half of all eligible NHS trusts are now foundation trusts, but we want to go further. We want to reduce Government control over the health service and set trusts free to innovate and take decisions based on what is right for their local populations. That includes North West London Hospitals NHS Trust.
The trust serves its population well and delivers good-quality care, as the hon. Member for Harrow West mentioned, but to step up to this new challenge, the trust needs to establish a solid financial foundation and needs to gain the support of GPs and commissioners. Bearing that in mind, I understand that the trust is likely to apply to become a foundation trust in 2012, and I wish it well in its application.
Barry Gardiner
I am grateful to the Minister for giving way; he has been most generous. He talked about building the confidence of local commissioning GPs. My understanding is that under his Department’s new arrangements, the ring-holder for the GP commissioning groups set up under the auspices of Brent primary care trust—I am sure the same applies in Harrow also—will no longer be the primary care trust. How does he propose that those groups of private businesses avoid the risk of being providers of services that they commission? Who will hold the ring, as the PCTs used to do?
Mr Burns
The hon. Gentleman is tempting me to go down a path that it would be unwise to go down at this stage. The reason I say that, and why I will not be tempted, is that as he is probably aware, my right hon. Friend the Secretary of State and my ministerial colleagues are doing a considerable amount of work putting together and fleshing out our vision for the NHS, not only for the next five years but thereafter—a vision that puts patients at the heart of the NHS and that is driven by the needs and improved care standards of patients. It would be inappropriate and wrong of me to succumb to temptation and to start to unveil, in this august debate, what my right hon. Friend the Secretary of State will announce in due course. The only good news that I can give the hon. Gentleman is that he will not have long to wait before all these mysteries are explained to him, and I am confident that he will be reassured and pleased by what my right hon. Friend the Secretary of State has to say.
Bob Blackman (Harrow East) (Con)
One of the key issues for Northwick Park hospital is how it deals with both Brent and Harrow primary care trusts. Both are in desperate financial straits, as I think hon. Members would agree. My concern is how that will be manipulated for Northwick Park and St Mark’s hospital trust in the future.
Mr Burns
My hon. Friend raises an interesting point. It is true, as I hope I have explained, that there have been challenges for the North West London Hospitals NHS Trust with regard to its finances in recent years. However, as I explained—I will go into more detail on this later—measures are being put in place to seek to minimise the problems. I can assure my hon. Friend that when it comes to dealing with PCTs, trusts and the finances, I do not recognise the word “manipulate” as being in the lexicon. Everything is done to ensure that the maximum amount of money is made available to PCTs and trusts, to ensure that we protect front-line services, and to provide the best health care possible for my hon. Friend’s constituents and those of all hon. Members throughout the country.
Barry Gardiner
I wish to correct any suggestion that Brent PCT is in any way financially embarrassed. [Interruption.] My hon. Friend the Member for Harrow West (Mr Thomas) wishes to correct any such suggestion for Harrow as well. Three years ago, Brent PCT was running a deficit of more than £20 million. It took the necessary measures, and that deficit has now been turned into a surplus of £12 million.
Mr Burns
I appreciate what the hon. Gentleman says. I am sure that my hon. Friend the Parliamentary Secretary, Cabinet Office, will have taken that on board, and the record will certainly reflect the accurate assessment that the hon. Member for Brent North makes of the situation. However, it is fair to say, particularly in the case of the constituency of the hon. Member for Harrow West, that there has been a problem with the finances. As I said earlier, the requests for a loan and for money that are being considered reflect a need to bring finances into better alignment without affecting front-line services. I am hopeful—probably a bit more than that—that, with the actions that have been taken and the proposals that are awaiting decisions, there will be positive movement.
I come to the point raised by the hon. Member for Harrow West about new hospital build. He mentioned his desire to see completely new build at Northwick Park. As he knows, plans were put forward in 2004 to build a brand new £305-million hospital for his constituents. In 2005, at an early stage of the business case and planning application processes, the plans for the scheme were put on hold by the trust and the local PCTs due to concerns about their affordability. After more than a year on hold, the proposals were formally cancelled by the Department in the summer of 2008. That is standard procedure for schemes that are not progressing and that have been put on hold for a specified period of time. I am afraid that those limitations remain. While the trust is working hard to achieve financial stability, I regret to say that it is still a long way from realistically being able to afford such a large building project.
The hon. Gentleman also raised the issue of designating Northwick Park hospital a major acute centre within the context of the north-west London sector review. The proposals, which I understand are still at a very early stage of development, would need to pass the Secretary of State’s four tests. They would need the support of GP commissioners; the support of the local community; to be evidence-based; and to develop patient choice. That relates to the decision that the Secretary of State took a few weeks ago to strengthen the criteria for considering any reconfiguration by placing more emphasis on gaining support following full consultations with GPs, clinicians and local stakeholders. I am sure that the hon. Gentleman, being a reasonable man, would accept that that is a sensible improvement, with regard to seeking to reconfigure health patterns throughout the country and to ensure that the local community and the clinicians and GPs who deliver the services have more say and influence over what happens.
The hon. Gentleman requested a commitment from me, but there is not a lot that I can tell him at present, because the proposals are at such an early stage. What I can tell him—I hope this will go some way towards reassuring him—is that all proposals, when put together as a final package for consideration, will be fully considered in the context of the Secretary of State’s criteria, and a decision will be taken at the appropriate time.
Mr Thomas
I should acknowledge the presence at this debate of the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), who represents the fourth constituency with a strong interest in Northwick Park hospital. I am indeed a reasonable man, and the Minister has a reputation for being a reasonable man, so will he meet with those of us who are interested in the future of Northwick Park within a minimum of 12 months to review some of the issues that we have discussed today, and particularly the affordability or otherwise of any significant rebuilding of the hospital?
Mr Burns
I am grateful to the hon. Gentleman. He is a knowledgeable man who knows that flattery usually gets one everywhere. I cannot resist flattery. It would be a considerable pleasure to meet him and any of his or my hon. Friends. If he would be kind enough to get in touch with my office, a meeting will be arranged in the not-too-distant future.
In conclusion, the Government have made a clear commitment to protecting the NHS and to ensuring real-terms increases in funding. There remains, however, a responsibility on all parts of the NHS to be innovative, to become more efficient, and to reinvest the savings that they make to improve quality of care for patients. North West London NHS Trust shares that responsibility, and must continue to rise to the challenge. We will consider all the proposals that we receive very carefully and will reach a decision as quickly as we can. Moreover, we will work with the trust to achieve ongoing improvements for the constituents of the hon. Members for Harrow West and for Brent North, and those of my hon. Friends the Members for Ruislip, Northwood and Pinner (Mr Hurd) and for Harrow East (Bob Blackman). I hope that we will be able to consider the issue further when I meet the hon. Member for Harrow West.
Health Funding
(14 years, 5 months ago)
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Andrew George (St Ives) (LD)
I am particularly pleased to have secured this important debate on health funding. I know that the allocation of funding has an impact on a large number of colleagues, particularly those from the north, the midlands and the south-west. I welcome the Minister of State, Department of Health, the hon. Member for Chelmsford (Mr Burns) and the shadow Minister, the hon. Member for Kingston upon Hull North (Diana R. Johnson), to their new posts, and I look forward to their responses.
Although the title gives the impression of a wide-ranging debate, I shall concentrate on a more narrowly drawn issue—the decisions that lie behind the way in which funding allocations for primary care trusts are made. In doing so, I refer to a debate in this Chamber on 18 March 2009 led by the then Member for Wigan and a debate in the House on 17 June last year that was led by me, both on this and related subjects.
When talking about health funding allocations, we speak of the NHS as a national service. The assumption is that funding is provided according to need, and most assume that it is allocated fairly and according to need; but as I have found during my years in Parliament, we may be assuming too much. The funding allocation formula has been reviewed and finessed over time since the inception of the NHS in 1948. However, 13 of the 52 PCTs in the country now receive funding at the floor of 6.2% below target funding. That is many millions of pounds. For example, the Cornwall and Isles of Scilly PCT receives at least £56 million less than the Government admit is needed or should be allocated. The funding formula was most recently altered for the year commencing April 2009.
The purpose of the allocation formula is to make changes on the most objective basis and, as far as possible, to take the matter out of the hands of any political influence. I admit that funding allocation—the weighted capitation formulas and so on—are some of the most dry areas of political debate one can imagine, but I do not apologise for briefly relating their history from the creation of the NHS. Then, of course, people made allocations as best they could in the circumstances, given the uneven pattern of hospital building in the previous century.
In 1970, the Labour Government’s Green Paper on NHS reorganisation included a commitment to a new method of resource allocation. The basic determinant of funding allocation was to be the population served by the area, modified to take account of relevant demographic variables and underlying differences in morbidity. That led to the development of the so-called Crossman formula. Over time, the formula changed to one in which allocations were made according to population, weighted by age, sex and the number of beds and hospital cases. That was further reviewed in 1974 by the resource allocation working party; the result was the transfer of resources from regional health authorities in the south-east to those in the north. The formula was further revised in the early 1990s, and that change resulted in resources being shifted back from the north to the south-east.
One significant element of the formula that has always caused concern to those in parts of the country such as mine was the market-forces factor. It was introduced in 1976, but was significantly altered in 1980 by the advisory group on resource allocation. That informed allocations from 1981-82. It based its recommendations on the new earnings survey, the annual assessment of average wages and salaries in all parts of the country. Cornwall has been at the bottom of the new earnings survey ever since.
What vexed us and others concerned about the allocation of health funding under the market-forces factor was that the poorest-paid areas received the least money. Salaries accounted for about 70% of the market-forces factor, which meant that they had a significant impact on the overall allocation and weighted capitation. Those areas with lower wages therefore suffered; salaries in an area would drag health funding down if they were low.
Throughout the entire debate on the change, we told the Government’s advisory committee on resource allocation that that was clearly unfair, especially as most of those employed by the NHS were paid according to national pay scales. Even those working in the grounds, including those doing building maintenance work, were receiving good money. We felt that the premise on which the calculation was made was unsound. Over the years, we have argued with the Government over the matter. Latterly, however, we persuaded the Government to review the market-forces formula. That review resulted in a change in the funding formula from April 2009.
There is one major element that adds to costs in places such as my area of west Cornwall and the Isles of Scilly. The area includes five inhabited islands—six including St Michael’s Mount—and two substantial peninsulas. It is difficult to provide access to services in that area; providing ambulance services, NHS dentistry and other health services in such a rural context is clearly a great deal more expensive than in suburban or urban areas, but that aspect is not properly taken into account in the funding formula.
On the social side, the impact of salaries and so on, we were pleased that the review resulted in a change in the funding formula for 2009. However, it identified a new set of losers—the 13 PCTs to which I referred earlier, which are currently at the floor of 6.2% below the national target.
Cornwall is £56 million below its target. In the south-west, Somerset is nearly £21 million, or 2.6%, below its target; Plymouth is £26 million, or 5.9%, below target; Devon is over £12 million, or 1%, below target; and Torquay is nearly £9 million, or 3.4%, below its target. Other areas with substantial, gross gaps in funding—those in the minus 6.2% league table—include Derbyshire, which has nearly £73 million less than its target; Lincolnshire, with £74 million less than its target; Nottinghamshire, with £65 million less than its target; and South Staffordshire, with £57 million less than its target.
In contrast, other PCTs receive more than their target and are overfunded in comparison with that target. The vast majority of those fall within the south-east. Surrey receives £171.5 million, or 11.6%, more than its target; Westminster receives £81 million, or 20%, more; Lambeth receives £78 million, or 14.8%, more; Wandsworth receives nearly £65 million, or 14.4%, more; and Kensington and Chelsea receives more than £60 million, or 20.4%, above the target funding. That contributes to health inequalities across the country. I would like the Minister, whom I am looking forward to hearing, to respond to the question of how we are going to ensure that the allocation of funding meets those targets, and does so as soon as possible.
Health Ministers in the previous Government made it clear that we need to be careful not to make catastrophic funding changes to PCTs receiving more than their allocated funding target. Withdrawing funding too rapidly would seriously impact on the health services in those areas. Nevertheless, a formula must be put in place to ensure that those places currently under target are not disadvantaged by remaining under target. For example, this financial year, Cornwall was 6.2% below target and remained there, so we are not moving very rapidly towards our target.
In the previous Parliament, the then Minister of State, Mike O’Brien, said:
“We are committed to moving all primary care trusts (PCTs) towards their target allocations as quickly as possible. In 2009-10 and 2010-11, we have ensured that the most under-target PCTs benefit from the highest increases in funding. Over those two years, the allocation to Cornwall and Isles of Scilly PCT will grow by…12.1 per cent., compared with the national average of 11.3 per cent…The rate at which PCTs will move towards their target allocation in future years will need to be considered in light of a number of factors including population changes, cost pressures and the overall resources available to the national health service.”—[Official Report, 30 November 2009; Vol. 501, c. 529W.]
This financial year, Cornwall has not moved one iota towards its target, which does not really amount to PCTs moving to their target allocations “as quickly as possible”.
Sarah Newton (Truro and Falmouth) (Con)
It is marvellous that Andrew has secured this debate so early in the new Parliament, because this is an important issue for everyone living in Cornwall. I applauded the previous Government’s efforts to focus on closing inequalities in health. However, their measure of success, which focused on average life expectancy, did a great disservice to people in Cornwall, as it masks a lot of the problems there. On the face of it, the average life expectancy is way above the national average—
Mr Mike Weir (in the Chair)
Order. I remind the hon. Lady that interventions have to be brief.
Sarah Newton
I shall wind up, then. The crude measure of average life expectancy covers up many problems of poor health and the cost of providing services in remote, sparsely populated areas to an ageing population.
Andrew George
I am grateful to my hon. Friend. She rightly highlights that many factors, including life expectancy, rurality and age profile, need to be taken into account, and we must get the balance right. The history of the changes to the allocation formula—not something I would recommend as bedtime reading—shows that all the factors have been conjured with and balanced over time. It is difficult to arrive at a formula satisfactory to all people.
I want to emphasise the fact that we need to identify and make the allocation formula clear. We need to be able to show that it takes into account the health inequalities across the country and, above all, does not further impoverish the most deprived areas. I represent the poorest region in the UK, yet its poverty was used as a reason not to give it additional funds. Its poverty acted against its best interests, which would have been additional funds, as I explained in my description of how the market-forces factor operated and the impact that it had in some areas.
It is difficult to assess what impact the Budget will have on the future of the PCT allocation formula so soon after the statement, which was made in the Commons today. The NHS Confederation recently estimated that the announcements made by the coalition Government indicate a real-terms reduction of between £8 billion and £10 billon in funding to the NHS in the three years from 2011. According to the King’s Fund, a rise in VAT will lead to an additional cost of £100 million per annum to the NHS budget overall.
My hon. Friend the Minister will no doubt ask where we will find the money to provide additional resources for deserving areas such as Cornwall and the Isles of Scilly, Bassetlaw, and South Staffordshire, and the other places that receive allocations that are further below their target than those anywhere else.
Andrew George
I will happily give way, because I asked myself a difficult question and I had better sit down.
Mr Wright
I am grateful to the hon. Gentleman for securing the debate and for giving way. He has been an extremely tenacious campaigner on health inequalities and housing, a subject on which I used to speak for the Government in a previous life. What are the hon. Gentleman’s views on the relationship between resource allocation and capital spend? It is an important subject to bear in mind when trying to iron out health inequalities. He mentioned the Chancellor of the Exchequer’s Budget statement, which said: “Well judged capital spending by Government can help provide the new infrastructure our economy needs to compete in the modern world.” If we put that in the context of reducing health inequalities, is it not important to have good capital spend in health? Does the hon. Gentleman share my disappointment at the £463-million cancellation of a new hospital for North Tees and Hartlepool?
Andrew George
I thought that the hon. Gentleman would use a local matter as a sting in the tail in his intervention. Let me commend his work on housing, which deserves a great deal of credit. With regard to capital spend, I was never terribly enamoured of the previous Government’s enthusiasm for the private finance initiative projects that were put in place across the country; they did not represent value for money. Having said that, I acknowledge that some difficult decisions need to be taken. I am sure that the hon. Gentleman’s point about his hospital will be heard by Ministers, and that he will be as tenacious in mounting a campaign to ensure that the right decision is taken as I have been on the issue of health funding, and on other issues.
As far as the health allocation formula is concerned, Hartlepool’s funding was 4.3% below its target, so the hon. Gentleman may wish to join the campaign to ensure that the areas furthest from their target achieve their target as quickly as possible. The PCT and the health community in that area may well be able to address their need for capital investment by ensuring that their revenue and allocations are increased by means of our campaign.
The difficult question that the Minister will be asking himself is where will the additional resources be found if areas such as Lambeth, Richmond, Westminster and Kensington and Chelsea are not to have the rug pulled from under them. Part of the answer lies in looking at how the last Government spent their money. There was an obsession with centralised, top-down and quite expensive projects, such as the alternative providers of medical services—or polyclinics, as some people have called them—and the independent treatment centres built across the country, which have never given value for money. A lot of money has also been committed to the NHS information technology programme. I urge the Minister to look at that, and at other such areas, to find the funding, and to give that funding to the PCTs. The PCTs can then decide how best to use their resources, rather than having decisions made for them in Richmond House.
Many issues in Cornwall need a great deal of further investment and support, including ambulance response times. Of course, given our geography, we do not expect to have the quickest ambulance response times in the country, but we would like resources to be put in place to ensure that the ambulance service can at least begin to address some of the deficiencies in the service at present. The NHS dentistry service in Cornwall is one of the most threadbare in the country. Given how difficult it is to see an NHS dentist in most of my constituency, and in many other parts of Cornwall, there would be massive benefits to improving the service there. Other such areas include: cancer screening and prevention; better support for the rehabilitation of stroke patients; improving the functionality of mental health services by ensuring greater availability of therapists and a greater ability to meet demands for treatment; improvements in psychological therapy support for armed forces veterans—provision is clearly insufficient in Cornwall, as in other areas—greater support for dementia; expanding physiotherapy; and improving and investing in the midwifery services in Cornwall, which are overstretched.
In closing, I want to ask the Minister a few questions that hit the bull’s eye of the issue. Bearing in mind that the NHS budget will be protected, how soon will the Government ensure that the funding shortfall in the most underfunded areas of the country is removed? I mentioned the 13 PCTs that are 6.2% below their target; do the Government see those targets as genuine targets to hit, or just as something for the Department to take note of? What is the Government’s policy on the pace of change in the most underfunded areas, and what will be the pace of change in future?
I know that a number of other hon. Members wish to contribute to this debate, so I will resume my seat now. I look forward to the Minister’s response.
Sarah Newton (Truro and Falmouth) (Con)
I add my support for all the things that Andrew has said. I should like to touch on two ways in which my constituency is affected by the underfunding of the NHS in Cornwall. First, there is the considerable debt that has been acquired by the Royal Cornwall Hospitals Trust. Andrew and I have three hospitals in our constituencies.
Mr Mike Weir (in the Chair)
Order. Let me remind the hon. Lady that she should refer to a Member by their constituency, not their name.
Sarah Newton
I am very sorry. You will have to forgive a new girl, Mr Weir. I will try much harder next time I speak. It is the first time that I have had the opportunity to speak in a debate, so I apologise for my mistake. As I was saying, the hon. Member for St Ives (Andrew George) and I share, in our constituencies, the three hospitals that are part of the Royal Cornwall Hospitals Trust. It is interesting to note that there has not always been below-target expenditure in Cornwall.
Mr Mike Weir (in the Chair)
Order. I am sorry to intervene on the hon. Lady again. She did say that this was the first time that she had spoken in a debate. She cannot speak here unless she has made her maiden speech in the main Chamber. Has she made her maiden speech in the Chamber?
Sarah Newton
It was my understanding that the rule had been waived because of the huge number of new Members waiting to make their maiden speeches. I have not yet made my maiden speech.
Mr Mike Weir (in the Chair)
I thank the hon. Lady. That has not been communicated to me, but if that is the situation, I will let her continue.
Sarah Newton
Thank you, Mr Weir. I appreciate your generosity, because the issue is of vital importance to my constituency.
It is interesting to note that there has not always been below-target funding in Cornwall. If we go back to 1997-98, we find that the funding allocation was just below the average and the hospital trusts in Cornwall were not in debt. A great gulf has arisen over the past 10 years, as has the debt that has accumulated at the Royal Cornwall Hospitals Trust. There are issues and problems at the trust, but the severe financial pressures that it has had to bear because of the unfair funding allocation over the past 10 years have definitely contributed to them, and those pressures are standing in the way of it acquiring foundation status, which would enormously improve its ability to provide excellent care to the people in Cornwall.
The other factor that I should like to mention arises from our geography. It is difficult for people in Cornwall to get to a dentist or a hospital. We have good access to GPs; most people can access a GP within a couple of miles from their home, but not a dentist or hospital. As part of a recent survey undertaken by Citizens Advice Cornwall and Age Concern, 411 people filled in questionnaires on how easy or otherwise it was for them to get to hospitals. The survey showed that a significant number of people are prevented from attending hospital by the costs involved. Of the 411 people who responded, 35 reported that the cost of getting to a hospital stopped them from attending a clinic; 28 said that it prevented them from accompanying someone to hospital; and 115 said that it stopped them from visiting friends or families.
Although I welcome the Secretary of State’s revision of the NHS operating framework yesterday, I hope that future revisions will include an examination of the whole issue of hospital transport. I say that because there is significant evidence to show that the current scheme is not always widely understood by constituents, and that some aspects of it do not work very well for people in remote rural areas who struggle to gain access to a car or public transport to get to hospital. Also, the costs involved are quite considerable for the large numbers of people living on low and fixed incomes in our part of the world.
Mr Iain Wright (Hartlepool) (Lab)
I want to reiterate what I said earlier in an intervention and congratulate the hon. Member for St Ives (Andrew George) on securing what I think is a very important debate; it is important not only in the south-west but across the country.
I also want to congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on what I think might be her maiden speech, although I am not entirely certain that it was. [Laughter.] I imagine that she will be as tenacious as the hon. Member for St Ives, her close parliamentary neighbour, in ensuring that she stands up for the interests of her constituents.
I want to make two or three key points about health funding issues that are affecting my constituents. The first point relates to something that the hon. Member for St Ives said; he has obviously done his homework and knows his brief incredibly well in this area. As he said, despite great improvements in recent years Hartlepool primary care trust is still some distance from its funding target. It is about 4.3% below its funding target, which is about £7.7 million. In the last two years, 5.5% more funding was provided year on year, but we still have some considerable way to go. I just want to press the Minister on the question asked by the hon. Gentleman—how far and how fast can we move to get to the funding target for deprived areas such as Hartlepool?
The second issue that I want to mention is access to health care and funding for health-care-related transport. The hon. Member for Truro and Falmouth made a telling point about how important it is that people should have access to transport in rural areas, to enable them to access health services. I certainly have that situation, to some extent, in my constituency. Hartlepool is a very urbanised constituency—one of the most urbanised in the country. However, we have outlying villages, such as Dalton Piercy, Elwick and Greatham, which I am thinking about in particular. In the last 12 months or so, Greatham’s nurse-led clinic has been closed, largely on clinical grounds rather than because of cost-cutting exercises. Nevertheless, I think that finance has still had a role to play. I have tabled a number of parliamentary questions about the provision of nurse-led clinics in rural areas and the Government, in their written responses, have said that they are very much committed to those clinics. But I want to know from the Minister what extra assistance will be given to residents of Greatham and other rural areas, which can really help communities to have access to health care—both preventive health care and care related to reactive clinical outcomes.
The third issue that I want to mention is the appalling health inequalities that we still have in Hartlepool, despite the improvements that we have made in recent years. A person is more likely to die earlier if they live in Hartlepool than if they live anywhere else in the country, with the possible exception of Easington, which is next door to Hartlepool. In certain parts of my constituency, particularly Stranton ward, the difference between the local life expectancy for men and the national life expectancy for men is 11 years; a man living in one of those parts of my constituency will die more than a decade earlier than if he lived in other parts of the country. That issue needs to be addressed, not only through funding but through reconfiguration of services so that they are really patient-led.
That brings me to my final point, which is my most relevant point at the moment. It is about the announcement made by the Chief Secretary to the Treasury on the Floor of the House last Thursday about the cancellation of the £464 million new hospital for North Tees and Hartlepool. That hospital was something like a decade in planning; it was not thought up in the last two months before a general election campaign. There has been an awful lot of pain with regard to reconfiguration of health services in Hartlepool. The issue dominated the by-election that I won to come to this House. It has been extremely painful for the community to get to this position, but with one swift swish of a pen we are back to square one, with no real vision about where we go to for hospital services north of the Tees in my area. With the co-operation of neighbouring primary care trusts, we are embarking on what is known as the momentum programme, whereby we are pushing services closer to the community. That has an impact on health funding allocation. What reassurance can the Minister give that we will receive additional services and additional resources, so that the momentum programme can go further and faster in pushing health care into the community?
Also, with regard to the cancellation of that hospital and with regard to the idea that we do not have a plan B—there is nothing in place—can the Minister provide me with a degree of reassurance that support will be able to maintain the existing North Tees and Hartlepool hospitals? Is that the way that his Department is suggesting that we are going? If so, that would be at odds with the clinical recommendations from the independent reconfiguration planning of a number of years ago. It was recommended that we should have a new world-class hospital, which could serve the communities of Hartlepool, Easington, Stockton and Sedgefield.
I hope that the Minister will agree to meet me and my neighbouring MPs, so that we can discuss these issues and ensure that the health inequalities and the uncertainty that has been created by the announcement last Thursday can be addressed; so that the concerns of my constituents and those of people in neighbouring constituencies can be addressed; and so that we can really begin to address health inequalities in the north-east.
Diana R. Johnson (Kingston upon Hull North) (Lab)
It is a pleasure to serve under your chairmanship, Mr Weir. I congratulate the hon. Member for St Ives (Andrew George) on securing today’s debate. From my reading in preparation for the debate, I know that this is an issue that he has taken up over many years during his time in Parliament and that he is a very committed campaigner for health funding for his local area and the wider area of Cornwall. I welcome the Minister of State, Department of Health, the hon. Member for Chelmsford (Mr Burns), to his role and wish him well in his new position.
It has been very interesting to hear the contributions of the two Members who have also spoken in the debate today, the hon. Member for Truro and Falmouth (Sarah Newton) and my hon. Friend the Member for Hartlepool (Mr Wright). As my hon. Friend said, I want to congratulate the hon. Member for Truro and Falmouth on her maiden speech, if that is how it is going to be seen. Like the hon. Member for St Ives, she is making a very strong case for her constituents and ensuring that there is an advocate for them in this House who stands up for the real health funding that is required for people in her constituency.
It was also very interesting to hear what the hon. Member for St Ives said about some of the different criteria that have been used to allocate funding and about some of the tensions that exist when one looks at some of those criteria. I hope that I shall have an opportunity to say a few words about those tensions shortly.
My hon. Friend the Member for Hartlepool made some very pertinent points about the need to get to the target for health funding for primary care trusts. I noted that he said that his constituency was 4.3% below the funding target. As a result, I had a quick look to see where my primary care trust was in terms of being on target. It is actually 6% below target, so we are just above the group of PCTs that the hon. Member for St Ives referred to, which are 6.2% below the funding target.
It was also very pertinent to raise the issue of access to health services, and of course there is a funding implication to that issue. If we want to have services out in the community, there is a need to look at how funding is allocated and at the issues related to health inequalities. It is not acceptable that there are still parts of this country where the mortality rates show that men in particular will live for fewer years than men born in the south of England. I know that in the north there are real concerns about that issue.
Very importantly, there is also the issue of hospitals and capital funding. I know that that is mainly about PCTs’ revenue funding, but we need to keep an eye on what happens to capital funding. Of course, the hospital at Hartlepool that my hon. Friend the Member for Hartlepool mentioned has been in the planning for a very long time and there has been a huge investment in it, through the PCT and other people and other organisations in that area ensuring that it was really going to deliver for local people.
Therefore, I am particularly concerned about the cancellation of that hospital, especially in the light of the reassurances that were given by the new coalition Government that the cuts that they would make this year would not to be to front-line services and that, as I understood it, they would protect hospital builds. So it would be very helpful if the Minister could say a little more about his view of how the cancellation of the Hartlepool hospital fits in with the agreement not to cancel front-line services.
The main thrust of the debate is the funding of health services in Cornwall, and I have looked with interest at what the hon. Member for St Ives has said about it previously. Today I also had a quick look at his website, where he trails the debate and says that he is looking to secure an additional £56 million of funding for his area. He also says:
“The Conservatives created a system of endemic underfunding. Now they are in Coalition they can put this right.”
The press cuttings prepared by the Library for the debate also include an article from The West Briton of 10 May, in which he says:
“The coalition is already starting to deliver many outcomes which Cornwall has craved.”
I admire his positive view of what the new Government will deliver for him and his constituents and I very much hope that he is correct.
What the coalition Government have said so far about the NHS is quite limited. Section 22 of the coalition agreement sets out their priorities for the NHS, and the first bullet point says:
“We will guarantee that health spending increases in real terms in each year of the Parliament”.
Paragraph 21 of the revision to the operating framework for the NHS in England for 2010-11, which was published just yesterday, reiterates that commitment, and I have just heard the Chancellor of the Exchequer make it clear in the Budget debate on the Floor of the House that the commitment remains.
Of course, that is just the headline, and we do not actually know what it will mean for services in the NHS in England in the coming years. Obviously, the Minister will be working hard on the comprehensive spending review over the summer months. He will be looking at how he can make sure that his Department secures all the resources that it needs to ensure that the view of the hon. Member for St Ives that he will get his £56 million comes to fruition. The written reply to a question that the hon. Gentleman tabled to the Minister contained a commitment just to increase spending
“in real terms in each year of the Parliament.”—[Official Report, 7 June 2010; Vol. 511, c. 47W.]
We really need to have the detail. I accept that it is very early days for the Minister, who has been in office a few weeks, and that the coalition Government are still trying to sort out their policies on NHS funding.
The hon. Member for St Ives made a clear and effective case for raising the funding for his constituency and primary care trust. There have been many written questions and debates on the issue, and I pay tribute to everybody who has been involved in the campaign to get additional resources into the primary care trust and into Cornwall. I also pay tribute to the staff, who are working hard day in, day out with the resources that they have.
Funding is obviously a key issue. The hon. Gentleman has given us quite a detailed canter through the historic reasons why we are where we are on funding, which was very interesting, but many of the views about why there is underfunding in certain constituencies and areas point to the 1970s as the time when allocations perhaps did not work in quite the way that they should have. That is the view that comes out of the debates and explanations about the current funding criteria.
At this point, it is worth reflecting on how the NHS has changed over the years. Patients now want access to high-tech, specialist services with the best nursing and clinical advice. There is also a tension around the fact that people want services much closer to home—in their local GP surgeries or at home if at all possible.
The Minister of State, Department of Health (Mr Simon Burns)
I was just reflecting on what the hon. Lady said before she got to this section of her speech. I must gently remind her that her party was in power for 13 years and introduced the funding formula that the hon. Member for St Ives (Andrew George) is complaining about. Having put that on the record, I beg to ask why the last Labour Government did nothing in those 13 years to remove the problem facing Cornwall and the Isles of Scilly.
Diana R. Johnson
I am grateful that the Minister intervened on me, because I am coming to that. I recognise, as the hon. Member for St Ives probably does, that where we are today might not be perfect, but the previous Labour Government made huge strides in terms of putting money into his area and others that were underfunded. The statistics show that there have been significant improvements since 2003-04, when some PCTs were 22% below target; now the figure is 6.2%, so there has been movement. I am not saying that everything done under the Labour Government was done as fully as we would have liked, but it would be interesting to hear what plans the Minister has to target the pace of change and how soon he feels we will reach the target level for all PCTs. We have to recognise, as I am sure the hon. Member for St Ives does, that taking money from other areas of the country in one fell swoop is not the best way to have a stable national health service.
Andrew George
If the hon. Lady rereads what I said earlier, she will see that I very much acknowledge that. Just to reassure her and, indeed, the Minister, let me say that it was in fact 1980 when the impact of the market forces factor changed quite significantly and created the detrimental impact that I described. Yes, I did make some disparaging remarks about the then Conservative Government and I welcomed the additional funding that the Labour Government put in, which I voted for and the Conservatives did not; that is a matter of record. However, I simply urge the hon. Lady to recognise that the formula change, which I fully applaud the last Labour Government for introducing, puts a responsibility on whichever party is in government to ensure that underfunded areas receive their target funding as quickly as possible.
Diana R. Johnson
We can probably agree that history is history. We are where we are today, and we need to make sure that we move forward as quickly as possible to get to the point that we all want to be at—an NHS that is funded fairly across England and that addresses some of the issues that the hon. Gentleman raised about rural constituencies and rural areas.
I want to address the rural nature of the hon. Gentleman’s constituency, the primary care trust and the patients that it serves. The issue of islands and peninsulas is also quite unusual, and few primary care trusts have to deal with it, so there needs to be some recognition of that. Clearly, the influx of people during the summer months must swell the demands on the national health service; all that must be recognised and factored in. There is also the issue of poverty. There can be pockets of poverty in rural areas; they are not just in urban areas, although we recognise that there might be different solutions to poverty in different parts of the country.
Let me reiterate that 80% of NHS spending is at primary care trust level, which means that the best solutions for an area can be put forward, debated and agreed at that level. I want to remove the myth that seems to exist that everyone is being told that certain areas have to do things in a certain way. That is wrong. Primary care trusts have much more capacity to design local services to meet their area’s needs. I understand that the new coalition Government will introduce directly elected representatives into primary care trusts to increase the level of local involvement and accountability. I hope that I have that correct, because the Minister is looking at me as if I do not.
Diana R. Johnson
I just wanted to make sure, because that was not a Conservative manifesto policy. As I understand it, such engagement and increased accountability in the NHS was one of the Liberal Democrat policies; but it is part of the coalition agreement.
Diana R. Johnson
I am delighted to hear it.
I now want to move on to the matter of health spending. I recognise that the hon. Member for St Ives would like more money for his constituency, but I think he recognises that since 1997 the relevant spending on St. Ives, and on Cornwall, has increased. This year the allocation for all PCTs is £164 billion. As I said, 80% of the entire NHS budget is now in the hands of PCTs—the highest proportion ever. That means that local decision making is possible. The PCT for Cornwall and the Isles of Scilly is this year receiving £856.2 million and its budget has increased by 12.4%, but we recognise that it is still 6.2% away from the target.
I am grateful that the hon. Member for St Ives has recognised the work of the independent Advisory Committee on Resource Allocation, which is made up of GPs, academics and health service managers, to develop a new funding formula to determine each PCT’s allocation. That has built on previous formulae to meet the objectives of providing equal access for equal need, and a reduction in health inequalities. Of course, a huge debate has raged about the tensions between the criteria used for allocating resources. For instance, there has been a debate about age versus deprivation, and the Conservative party in opposition would often argue that it was not deprivation but age that should be given more weight. The Conservatives also criticised the weighting of health inequalities in trying to remove those inequalities.
I hope that we now recognise that a series of criteria must be considered. Since last year a new formula has been introduced. We can clearly see how far the PCTs’ actual allocation is from their target allocation. The previous Government’s commitment was to move towards the target, while recognising that that would have to be done over a period of time, ensuring that it did not cause major problems to the smooth running of the NHS throughout the country.
When I looked again at the figures I found that the PCT that was the furthest over its target was Richmond and Twickenham; it was 23.4% over the target. I thought that it would make an interesting example to consider, as the relevant MPs are the Secretary of State for Business, Innovation and Skills, who is a member of the Liberal Democrats, and the hon. Member for Richmond Park (Zac Goldsmith), who is a member of the Conservative party. I can just imagine the tension and debate in that case about chopping the funding allocation for that PCT. Perhaps it would add some strains to the tensions within the coalition.
Andrew George
The hon. Lady makes a reasonable point about Twickenham and Richmond PCT, and about all those PCTs that receive significantly more than their target, because of the change in the funding formula. If she reads what I have said, she will notice that I recognise that it would be catastrophic to pull the rug out from under those PCTs, and we cannot do that: over a period of time, which I hope would be as short as possible, we need to find ways to ensure that if there are constraints on NHS spending, the areas that are now below their targets should not suffer.
Diana R. Johnson
I hope that the Minister will enlighten us with his thoughts on the pace of change in approaching the target and tell us whether he thinks the Department should adopt a target, with deadlines and dates. I know that he is not keen on targets, as we have seen from announcements in the past few days, but it would be helpful if he would explain his thinking about how we can arrive at a situation in which the hon. Member for St Ives gets his £56 million for his PCT, and other PCTs also receive the money that they feel they need.
The hon. Member for St Ives made a strong case for his constituents. I am grateful for his acknowledgment of the work of the Labour Government to deal with the problem; it may not have gone as far as he would have liked, but an attempt was made to deal with it. I look forward to hearing the Minister’s comments on NHS funding in this context. I wonder whether he will also discuss the issue of capital spending, which is preying on the minds of many hon. Members.
The Minister of State, Department of Health (Mr Simon Burns)
I congratulate my colleague, the hon. Member for St Ives (Andrew George), on securing this debate on NHS funding allocations. I also congratulate the shadow Minister, the hon. Member for Kingston upon Hull North (Diana R. Johnson), on her appointment to the Health Front Bench. In Government she was a Minister with other responsibilities, and a Whip, and I assure her that she will find serving as a shadow Health Minister tremendously rewarding, because of the important role of such matters in our lives and those of our constituents. I also congratulate my hon. Friend the Member for Truro and Falmouth (Sarah Newton) on her almost but not quite maiden speech.
I pay tribute to the NHS in Cornwall, which provides an excellent level of care to the constituents of my hon. Friend and those of my honourable colleague; he has long campaigned on how best to distribute resources and has argued that PCTs should be moved to their target allocations. Before I respond in detail to his points, perhaps I might set out the general principles of the system of funding allocation; that may help the hon. Member for Kingston upon Hull North.
The Government believe in an NHS that is free to all, irrespective of need or ability to pay; in which professionals are freed from the shackles of centralised targets and empowered to take responsibility for their patients; where better access to services is matched by improved quality and greater efficiency; and which provides value for money and health outcomes that are second to none. That is our vision for the national health service, and the coalition’s programme for government sets out how we will achieve it.
First, the Government will increase spending on the NHS in real terms for each year of this Parliament, as the shadow Minister acknowledged. It is a commitment that reflects a deeper belief: that the NHS must be protected and properly resourced to continue its vital work. We must focus our resources where they are needed most. That means stopping the flow of resources from the front line to the back office, giving front-line staff the responsibility and resources to improve outcomes for patients, and entrusting local professionals—and local people—with the means to improve local health. By committing to cut the costs of health bureaucracy by a third, we will release resources that can be reinvested in front-line services; by giving GPs the power to commission services based on need, we will push decisions about health care provision close to patients; and by giving local communities more responsibility for public health, we will create a more flexible national health system—one that is responsive to local demand for health services, and is able to react to changing health needs and to direct funds towards emerging priorities.
Secondly, we will establish an independent NHS board to allocate resources and provide commissioning guidelines. The board will ensure access to health services that are designed around the needs of the patient, not the needs of the bureaucracy. It will set standards based on clinical evidence, not political micro-management. The aim is to achieve the best outcomes for patients, instead of simply ticking boxes and meeting targets.
Mr Iain Wright
I congratulate the Minister on securing his post. I know that he is passionate about health, and I wish him all the best as a Minister in the Department of Health. He mentioned the establishment of an independent NHS board whose focus will be on clinical standards as opposed to political micro-management. Bearing in mind health services north of the Tees, a clinically led, independent reconfiguration panel recommended that a new hospital should be built. Is that not something that the Government should be doing?
Mr Burns
I have to congratulate the hon. Gentleman. I remember that as a Minister he was extremely helpful, within the confines and straitjacket of his remit. He was tenacious both in that job and this afternoon, and is using his skills to try to tease out an answer beyond the one that was given to him in my letter to him last Thursday explaining why that capital project was cancelled as part of the public spending review. However, to be helpful, and if he would like it, I will repeat basically what the letter said. Facts are facts, and I am afraid that the situation has not changed since I wrote to him.
When this Government came into power in May, we were faced with the largest deficit and debt that any Government had ever inherited from an outgoing Government. The debt is a financial problem that must be addressed urgently. Therefore, the incoming Government announced a review of spending commitments that were made by the previous Government after 1 January 2010—that is, in the run-up to the general election. As a result of the review, which has been carried out over the past seven weeks or so, an announcement was made on 17 June in which the coalition Government announced the go-ahead of four major hospital programmes, ranging from the Pennines to Liverpool and to St Helier in south-west London. Unfortunately, the North Tees and Hartlepool project did not get permission to go ahead. I am afraid that that is the answer. It is because of the economic situation and debt in which we find ourselves.
Mr Wright
The Minister is gracious in giving way a second time. On that basis, and given what the Prime Minister said about NHS funding increasing in real terms despite the financial problems that we find ourselves in, capital spends will be provided elsewhere in the country, but seemingly not in my constituency. Are my constituents’ health outcomes not to be thought of because of financial considerations?
Mr Burns
The hon. Gentleman knows the answer to that question. That is not why the hospital was not given the go-ahead last week. I can appreciate his frustration. As a constituency MP myself, I too would be frustrated, but the hon. Gentleman, who is a generous man, must not try to reinterpret the decision for other reasons. Sadly, the decision was taken simply because of the urgent need of this Government to take decisions to start curbing the ballooning debt problem, which needs to be addressed. That is the reason, I am afraid. It has nothing to do with our commitment to reducing health inequalities and spending more money on providing health care and services for people throughout the country.
I hope that the hon. Gentleman is satisfied with that. If he is not, and if it would be of any help to him, I would be more than happy to meet with him and, if he wants to bring them along, his colleagues from the Hartlepool area and the surrounding constituencies. They can discuss the matter with me—my door is always open. I would be more than happy to do that, if we can arrange a meeting, and if he thinks that it would be helpful.
Let me return to Cornwall and the general position on health funding allocations. I was saying, before discussing Hartlepool again, that we will establish an independent NHS board.
Andrew George
On that point, I would be grateful if the Minister would clarify whether the board will replace the Advisory Committee on Resource Allocation.
Mr Burns
I can reassure my hon. colleague that it will not. It will be something completely different. It will be a stand-alone body that will be the driving engine of the NHS, in its required field.
By strengthening the link between investment and outcomes, the board will enable the NHS to deliver improved quality, higher productivity and better value for money. I am sure that my hon. colleague will appreciate that I cannot yet discuss the precise functions of the board, nor its composition, but our proposals underline our central belief that resources should be allocated according to need, without ministerial interference.
Barbara Keeley (Worsley and Eccles South) (Lab)
Perhaps the Minister can touch on another hospital situation. I understand that the Secretary of State visited Bury on Friday and overrode a clinically reached decision on maternity units. He said that, in his judgment, Fairfield General hospital’s maternity unit could remain open, against a clinical decision made in the “Making things better” reorganisation in Greater Manchester.
Mr Burns
I hope that the hon. Lady is aware of the announcement that my right hon. Friend the Secretary of State made shortly after he assumed his current position, in which he laid down new criteria for determining the reconfiguration of hospital services. Prior to the general election, when he was the shadow Secretary of State for Health, he made it a priority that, in particular, maternity units and accident and emergency units would be looked at far more closely than they had been looked at. That is why, on assuming office, he strengthened the criteria for carrying out consultations on proposed reconfigurations, and brought in four new criteria that will apply to any future reconfigurations, and current ones that are still in the process. They will have to abide by the new strengthened criteria, which include ensuring that the wishes and views of GPs, clinicians, local stakeholders and the general public are taken into account. Decisions that affect local communities and people will have the input of local people, rather than simply being imposed on communities which, for a variety of reasons, do not want what is being proposed.
Barbara Keeley
Those of us in Greater Manchester who are affected by the decision and the new process that the Minister is outlining are struggling to understand how to square the clinicians’ recommendation, which was based on things such as the number of doctors available, doctor training and the experience that has to be gained in maternity to deliver a safe service—a clinically led decision was made in that case—and the community’s wish and desire always to keep maternity and A and E units. It is hard for local people to understand how such things can be squared. Most constituency MPs understand that no one ever wants to lose an A and E or maternity unit. Does that really mean that clinically led decisions, such as those in Hartlepool and Manchester, will be overridden if local people do not want them?
Mr Burns
No, it does not mean that. What I said when explaining the criteria that the Secretary of State has laid down is that it will strengthen the consultation process leading to decisions, but obviously there will be a number of processes thereafter. The different processes of assimilation before a final decision must ensure that the Secretary of State’s criteria for greater input of clinicians’, GPs’ and local communities’ wishes are taken into account. In the past, reconfigurations have too often left the impression among local communities that they have not been consulted or listened to, and that decisions have been made by managers or others based only on their narrow point of view without taking account of other people’s views.
Mr Burns
No. I have been generous, and I want to make progress.
That is the principle for the criteria, but it will not mean automatically that there will never be any changes because there is a block. We are strengthening the process to take account of local wishes and needs. There is a balance to be struck, which will emerge during the reconfiguration process.
Mr Andrew Turner (Isle of Wight) (Con)
Is my hon. Friend aware that we have a unique arrangement for health, and that a single organisation is responsible for both commissioning and delivery—the local hospital? That works for the Isle of Wight, and it has turned round a deficit of £3 million and broken even in the past three years. Can he assure me that the forthcoming White Paper will allow the success of the island’s health services to continue?
Mr Burns
I am grateful to my hon. Friend for that intervention. I assure him that the White Paper will be aimed completely at improving and enhancing the provision of health care throughout the country—not just on the Isle of Wight, but on the mainland from Cornwall and the south-west up to Hadrian’s wall in the north. That will be based on a principle of putting patients first and at the heart of health care provision so that they drive the national health service and so that it is there for them and their needs, rather than the needs of management bureaucracy or of politicians micro-managing the system from Whitehall down the road. However much affection and respect I have for my hon. Friend, I cannot be tempted to outline in detail now the White Paper’s contents, but I assure him that when it is published he will share my enthusiasm for the way in which the Secretary of State will unveil his vision for the national health service, not simply for the next five years, but thereafter. I trust that that satisfies my hon. Friend, if not the hon. Member for Worsley and Eccles South (Barbara Keeley).
My honourable colleague the Member for St Ives mentioned the current pace of change, and particularly the distance from target measurements used to assess relative progress towards target allocations. His constituency is in Cornwall and Isles of Scilly primary care trust. It received an allocation of £808 million in 2009-10, which increased to £856 million in 2010-11—an increase, as he knows, of 12.4% above the national average of 11.3%. However, under the formula established by the previous Government, and as many contributors to the debate have noted, that is still 6.2% or some £56.3 million below its target allocation for 2010-11.
I hope that my honourable colleague will appreciate that until the spending review is complete, I cannot comment on specific time scales or the future plans for NHS allocations, nor on the financial standing of specific local health services. I trust that he will be reassured that his partners in Government share a common assessment of both the problems facing the NHS and the solutions available to us.
During the spending review, we will examine rigorously all areas of health spending to identify where we can make savings—for example, by maximising the NHS’s buying power, renegotiating contracts and improving financial accountability throughout the system. The picture that I have painted is of an NHS in which decisions on resource allocation centrally are made by an independent NHS board. But although I cannot give the hon. Member for St Ives the commitment and promise that he wants now, the matter will be examined as part of the spending review between now and the autumn. When our reforms become reality, the NHS board will be responsible for the allocation of spending and will consider a whole range of areas.
Andrew George
I want to raise a point for clarification. The Minister described the role of the NHS board and made it clear that it will be remote from political micro-management. He also said that he cannot give me or the PCTs that are a long way below their targets any answer until after the spending review. Will the decision on the pace of change towards achieving targets be made by the spending review, or will that decision be made ultimately by the independent NHS board? If he cannot say which of the two, or which combination of the two, when will I and other hon. Members receive a clear answer on what will happen and who will make the decision on the speed of change?
Mr Burns
I believe that I can help my honourable colleague. The ultimate decisions will be made by the NHS board when it is established, but he will appreciate that primary legislation will be required and that that will take time. In the meantime, the allocation of funding for health care throughout the country will be done initially following the spending review, but when the board is established on a statutory basis and operating, it will take over that function. I hope that has cleared up the matter for my honourable colleague.
Diana R. Johnson
I am wondering about the time scale for the board’s establishment. When will the Minister be in a position to provide some dates for when it will come into existence?
Mr Burns
That is a reasonable question, and I shall be reasonable in my response. The date will be determined partly by Parliament because primary legislation will be required, as outlined in the Queen’s Speech last month. Speaking as an ex-Whip rather than a Minister for Health, I anticipate that the legislation will make progress through Parliament this Session and receive Royal Assent in July next year, or perhaps September, depending on whether there is a spillover in September or October next year, which I do not know at the moment. That is my guess as an ex-Whip for the timetable for the primary legislation. We will then have to wait to see at what point after that it will be up and running, but my guess is that it will be as soon as is feasible.
Andrew George
Given the state of flux and the uncertainty of the spending review, which will be followed by the creation of the independent NHS board, there will be a vacuum because decisions have yet to be made in this two-stage process. Will the Minister agree to meet colleagues from Cornwall and me to discuss the progress of that review, either at the time of the review itself or immediately afterwards? We would find that very helpful, because we know that the NHS budget in Cornwall is under tremendous pressure at the moment.
Mr Burns
I reassure my honourable colleague that there is not a state of flux. There is a state of potential change, yes, because there is a new Government with an important vision for the future of the health service. That is a difference, but there is not a state of flux because there is stability there. I am not criticising him, but I wanted to reassure him, so that he did not get the impression that there was a state of flux, with the connotations that that has. There is no state of flux. We have a vision, which will be unveiled shortly, but we have things in place to make sure that the system is running properly.
The other thing I would like to repeat—it is so important that it does not matter if it is repeated again, because the issue has featured frequently during today’s debate—is that the Department of Health budget is, of course, protected, which means that in every year of this Parliament, it will increase in real terms. There will be pressures on the Department of Health budget but, under the coalition agreement and the commitment that my party gave prior to the general election, which has been upheld by the coalition agreement, there will be a real-terms increase in that budget. That gives a degree of stability to the health service because it knows that, in every year of this Parliament, it will receive that money.
I thank my honourable colleague for his earnest and informed contribution to today’s debate. As a constituency MP myself, I respect and appreciate the tremendous battle that he has fought over a number of years for Cornwall. I am thrilled to see that my hon. Friend the Member for Truro and Falmouth is also joining in fighting for her constituents to ensure that they, too, get the best health care possible. That is something that all hon. Members want and fight for on behalf of their constituents.
At its most basic level, allocation is a question of measuring need and distributing resources accordingly. To the outsider—and some insiders—funding allocation is a dense and sometimes opaque subject. As the former health editor of The Times wrote,
“only the brave or foolhardy venture into some areas of NHS management. Resource allocation is certainly one”.
I can safely say that my honourable colleague falls into the former category. I trust that he is reassured that although it is too early to comment on specific funding allocations, the coalition’s programme for government shows that we share the same basic belief in the importance of both independence and local decision making when it comes to setting funding levels for the NHS.
Mr Mike Weir (in the Chair)
As the Minister is not present for the next debate, I suspend the sitting until 4 pm.
Foreign National Prisoners
(14 years, 5 months ago)
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Mr Philip Hollobone (Kettering) (Con)
I welcome you to the Chair, Mr Weir. I thank Mr Speaker for allowing me to have the debate and I congratulate the new Justice Minister on his well deserved appointment.
I have come here today, on behalf of my constituents in Kettering, to advance a proposal that would save Her Majesty’s Government quite a substantial sum of money and free up quite a large amount of prison space, and that would enable us to advance a sensible policy on law and order—putting criminals behind bars so that they cause less crime. The proposal is basically that we should send back to secure detention in their own countries the 11,500 foreign national prisoners in our jails.
Those 11,500 foreign nationals make up some 13% of the present prison population. It is a staggeringly large figure, and I understand that it has more than doubled in the past 15 years. The figures available to me show that in England and Wales, as of 30 June 1995, there were just over 4,000 foreign nationals in our jails. I believe that the latest figure is some 11,500. I should be grateful for the Minister’s confirmation of what the most up-to-date figure is.
I also understand that, on average, foreign national prisoners serve nine to 10 months in jail, including for some extremely serious offences, and that the numbers of foreign national prisoners are now so large that we have dedicated whole prisons to holding just them. I should welcome the Minister’s confirmation that HMP Canterbury, HMP Bullwood Hall and HMP Morton Hall are reserved, either entirely or almost entirely, for foreign nationals. This is a national disgrace. We cannot go on like this. We should arrive at a sensible situation in which we can return these people, who have done very bad things in our country and abused our trust, to serve out their sentences in their own countries.
It is no exaggeration to say that Britain has become the “United Nations of crime”. I understand that we are now paying for the board and lodging of criminals from some 160 countries, out of only 192 recognised countries; 80% of the world’s nations are represented in our jails, and there are some pretty nasty people. Apparently, one third have been convicted of violence or sexual offences and almost one fifth are guilty of drug crimes. Other offences include robbery, burglary and fraud. They come from some pretty exotic places. Apparently, 10 countries account for almost half these foreign offenders, with the leading countries in the league of shame, according to the numbers as of 18 December 2009, being Jamaica with 963, Nigeria with 752, the Republic of Ireland with 647, Vietnam with 620 and Poland with 617. By my reckoning, those top five countries as of last December accounted for 3,599 foreign national prisoners—one third of the total.
My contention is that we ought to send these people back to their country of origin. I am not a lawyer, and I am rather pleased that I am not a lawyer, but I understand that there are weighted meanings to words that most of us would regard as meaning the same thing. Repatriation, I understand, is different from deportation, which is different from removal, but to my constituents in Kettering, they all basically mean the same thing. We want these nasty people back in their countries of origin. I am not particularly fussed as to whether they are repatriated, deported or removed—I just want them there, not here.
I understand that until very recently, we did not really have any kind of prisoner transfer arrangements with any countries in the world. We then established some voluntary agreements so that prisoners could be transferred if they volunteered, and very recently we have just begun to look at compulsory transfer agreements. I would like to see more of those. I was pursuing the matter with the previous Government and not getting very far. I hope that with the enlightened good offices of the new and far-sighted Minister, we shall make rather better progress.
In the questions that I have asked so far, I have concentrated on the countries at the top of the list of shame, because that seemed a sensible place to start. I asked whether there were agreements in place with Jamaica. That is a Commonwealth country, to which we send very large amounts of development aid each year. My understanding is that a transfer agreement is in place. It was signed in 2007. However, it is still subject to ratification and also requires legislation in the Jamaican Parliament. I am unclear about whether it is a compulsory transfer agreement or just a voluntary one.
Mr Peter Bone (Wellingborough) (Con)
I am grateful to my hon. Friend for securing such an important debate. Does he know that our coalition partners were far ahead of us on this issue? In their wonderful manifesto, “change that works for you”, they say on page 76 that they will
“Prioritise deportation efforts on criminals”.
Our coalition partners should be congratulated on that, and we should follow their lead.
Mr Hollobone
I am grateful for that most helpful intervention from my hon. Friend, who I know has a prison in his constituency. I am sure that there are foreign nationals there as well. Of course, that is not the only policy from which we should learn a lesson from our coalition partners. It is a very helpful move forward.
Nigeria is second in the list of shame, with 752 prisoners as of December. I understand that we are looking for a compulsory transfer agreement with that country. Again, it is in the Commonwealth. I understand that a Bill is before the Nigerian National Assembly. I hope that we are using our diplomatic efforts abroad to encourage these countries to get a move on.
I also understand that at the end of last year, the United Kingdom brought into force the additional protocol to the Council of Europe convention on the transfer of sentenced persons. That took place on 1 November. Under the additional protocol, the United Kingdom can transfer prisoners, without their consent, to 34 signatory countries, provided that the prisoner is subject to a deportation order. The consent of the receiving state is required in each case. However, the written answer that I received on 1 February 2010 stated:
“To date no prisoners have been transferred under these arrangements.”—[Official Report, 1 February 2010; Vol. 505, c. 115W.]
Thirty-five countries are affected by compulsory prisoner transfer agreements, and of those 35, most are in Europe. There are 3,069 foreign national prisoners from the 35 countries in British jails, which is 28% of the total. The list of shame in this case is headed by the Republic of Ireland, with 647; Poland has 617; in third place is Romania with 357; Lithuania comes in fourth at 330; France is number five with 163—and so the list goes on. I also understand that we have an agreement for compulsory transfer with Libya but, to date, no prisoners have been transferred under those arrangements, although I understand that Scotland has been involved in sending prisoners back to that country even if England and Wales have not.
I should very much like to find out from the Minister the cost of keeping a prisoner in jail for a year; I understand that it is about £30,000 to £40,000. Given that there are 11,500 foreign national prisoners—again, the number is to be confirmed by my hon. Friend—that would imply that the cost to this country of keeping those nasty people in British jails is something between £300 million and £400 million a year. That is a substantial amount.
Mr Bone
My hon. Friend is being extremely generous in giving way. Matters go further than he has described. Wellingborough prison is in my constituency, and it is overcrowded all the time. Its prison officers, who do a wonderful job, tell me that they never have enough time to work with prisoners and get them educated, so that when they go back on the streets, they reoffend instead of being model citizens. That is partly due to the overcrowding, which is caused by there being so many foreign national prisoners.
Mr Hollobone
My hon. Friend makes an excellent point. The purpose of prison, in denying people their liberty, is to be a punishment, but it is also to rehabilitate them so that, when they go back into the real world, they do not reoffend. If we are having to spend such a length of time dealing with people, many of whom do not speak English and do not understand our customs and how we do things in this country, it makes prison officers’ jobs, which are already very difficult, far more difficult and challenging. That will have an impact on the rehabilitation of British prisoners, who are likely to stay in this country for a long time.
Mr Julian Brazier (Canterbury) (Con)
I am extremely grateful to my hon. Friend for giving way during his very powerful and important speech. Canterbury prison is in my constituency, and it is entirely composed of foreign prisoners. At stake is not only the cost, both financial and in management terms, of the prisoners, whose numbers almost trebled under the previous Government from 4,000 to 11,500, but the issue of deportation at the end of sentence.
We have several bad cases in my constituency. A woman who calls herself Sheena Daniels is perhaps the worst case of a person whom judges recommended for deportation. Somehow or other, she has claimed be a Zimbabwean—although I am told that she has a Nigerian name and a west African accent—and on the strength of that has finally received exceptional leave to remain. The judicial recommendation to deport has been abandoned, so that the community where she and her family have continued to commit criminal offences is suffering.
Mr Hollobone
My hon. Friend makes a very good point, and what a shocking case that is. Sadly, I do not think that it is the exception; I would have thought that it was probably fairly typical. Let us get things clear. These people have come to this country. They have abused our trust. They have committed offences so bad that even our creaky, criminal justice system has actually sent them to jail. I very much doubt whether they ever serve their sentences in full, given that most British prisoners do not.
A few years ago, there were lots of such cases, and there was a scandal about people not being automatically deported to where they came from. It is therefore important that, if foreign national prisoners complete their sentences, they should be deported. In my view, they should all be deported, repatriated or removed—whatever the legal term is—at the end of their sentences. However, I would go further and say that in-sentence prisoners need to be sent back to their countries of origin because of the costs that we are having to pay to keep them in British jails.
If the coalition Government were to take sensible steps to address the problem, especially with our European partners and our Commonwealth compatriots, we could make real progress in freeing up the prison space that our country badly needs. We could then send more prisoners from this country to jail. We know that too many people are not going to prison because magistrates and others are under direction to try to keep them out of prison, as there is not enough space. Given that 13% of our prison population is made up of foreign nationals, it is obvious to me that if we tackled this issue sensibly, we could make real progress on a wide variety of fronts.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
I congratulate my hon. Friend the Member for Kettering (Mr Hollobone) on securing the debate. He raised this issue on numerous occasions during the previous Parliament. He has found two occasions already to raise the subject orally with me, and I am delighted that he is going to hold this Administration to account with the same vigour as he did the previous one. I am grateful to him. This is an area where progress has been stuttering. The issue is bureaucratically complicated and difficult. I am as anxious as he is for progress and will welcome the regular spur that my officials and I will receive from Kettering to keep our focus and that of the bureaucracy—in the best sense of the word—on addressing the issue.
Foreign nationals who come to our country and abuse our hospitality by breaking our laws should face the full force of the law. If appropriate, they should go to prison. I share fully my hon. Friend’s frustration that foreign national prisoners who have no links to the United Kingdom are still not routinely transferred to prisons in their own country. As he said, a significant part of the purpose of prison should be the rehabilitation of the offender. That is not a duty owed by the United Kingdom taxpayer to foreigners in the same way as it is owed to our own citizens.
We currently hold 11,367 foreign national prisoners, of whom 7,824 have been convicted and are serving sentences of imprisonment, and who could be considered for transfer to their own country. In contrast, our posts overseas are aware of about 2,000 British prisoners held, of whom about half are thought to be sentenced prisoners. Yet in 2009, with this large number of foreign national prisoners in our prisons, we managed to transfer 41 back to prisons in their own country and we received 64 British prisoners back. While the proportions are striking, so is the feebleness of the overall number. I have asked my officials to pursue all possible options for increasing that number.
Nick de Bois (Enfield North) (Con)
I congratulate my hon. Friend on securing the debate. The Minister referred to the numbers of prisoners who are incarcerated abroad; may I draw his attention to an issue at a slight tangent to this debate? A significant number of British citizens are on bail in European countries. They are not in jail, having not served trial. Many are there as a result of the notorious European extradition warrants. They are there for an extraordinary length of time, which is a problem for their families, who face a lot of hardship. Can the Minister work with officials to secure an agreement to allow them to serve bail in their home country?
Mr Blunt
My hon. Friend has put that on the record. It is separate from today’s debate. I do not want to pursue that because it will reduce the time I have to reply properly to my hon. Friend who secured the debate.
Transferring prisoners to their own country frees up prison places here and reduces the cost to the British taxpayer, but that is not the only reason for seeking their transfer. The Government want our prisons to rehabilitate prisoners better and enable them to lead productive, law-abiding lives following their release from prison. Just as I want to see British prisoners provided with work, education and training to reduce reoffending in this country, so a foreign national prisoner is more likely to be rehabilitated if he serves his sentence in his own country where he can undertake offender behaviour programmes and pre-release activities most suited to his needs and those of his host community. There are real difficulties associated with imprisonment in a foreign land, including language and cultural barriers and visiting difficulties, which make rehabilitation less effective. A prisoner serving his sentence at home is also more likely to receive help and support from family and friends. Transfer is in the best interests of not only the prisoner but the public in his country of origin.
Since the introduction of automatic deportation in 2008, foreign national prisoners who receive a sentence of imprisonment of 12 months or more can expect to be removed from the United Kingdom at the end of their sentence. Transferring prisoners during the course of the sentence ensures that the receiving state is aware of the prisoner and his offence, and is better able to protect the public when the prisoner is released. Information on previous offences is plainly helpful and welcomed by overseas jurisdictions.
Although there are sound public policy grounds for transferring prisoners to their own country, I accept that the numbers transferred are pathetically small. As my hon. Friend the Member for Kettering is aware, the United Kingdom has prisoner transfer arrangements with more than 100 countries, yet we only managed to transfer 41 prisoners from prisons in England and Wales while 64 returned here. It is apparently the first time that we managed to get more imports than exports. I am determined to do everything to ensure that the risible figure for transfers is increased.
There are a number of reasons why the figure has remained stubbornly low, which my hon. Friend probably already appreciates, and which need to be addressed and overcome. The vast majority of the transfer arrangements have been in place for some time and require the consent of the prisoner, without which the prisoners cannot be transferred. Prisoner transfer was initially conceived as a humanitarian measure, and I understand that it is for that reason that Parliament thought it right to make prisoner consent a prerequisite to transfer when passing the Repatriation of Prisoners Act 1984. That remained the case until 2006, when Parliament amended the Act to enable prisoners to be transferred without their consent. I have asked my officials to investigate the scope for renegotiating arrangements on the basis of compulsory transfer. Although we may not be able to achieve compulsory transfer arrangements in all cases, we should do so wherever we can, and there is some limited progress to report.
In November 2009, the UK ratified the additional protocol to the Council of Europe convention on the transfer of sentenced persons, which provides for compulsory transfer where a prisoner has been served with a deportation order. My officials are working closely with the UK Border Agency to identify suitable prisoners for transfer under the protocol. As an example, I expect the first prisoners, from Lithuania in this case, to be transferred later this year. No-consent arrangements have also been concluded with Uganda and Rwanda, but as my hon. Friend pointed out, they await ratification.
Work is also ongoing with the Nigerian Government to put in place a no-consent prisoner transfer agreement. My hon. Friend may be aware that legislation to amend Nigeria’s prisoner transfer legislation is currently before its National Assembly. Like the UK law before its amendment, current Nigerian legislation requires prisoners’ consent. I am grateful to the Nigerian Government for their willingness to engage with us on the issue, which I hope to discuss further with their Ministers during a visit by President Jonathan of Nigeria to the UK next week. In the meantime, we continue to pursue the option of voluntary transfers to Nigeria. To date, 22 prisoners have applied for transfer, and the applications are currently being considered by the Nigerian Government.
Although we support the principle of compulsory prisoner transfer, some countries maintain that sentences should be served where they were passed, claiming that rehabilitation can be achieved only if the prisoner wants to transfer. I disagree with that view, but where it is held, it is an obstacle to the compulsory transfer of a significant number of foreign national prisoners. However, we will continue to negotiate compulsory agreements wherever we can.
My hon. Friend will be aware that the European Union has agreed a framework decision governing the transfer of prisoners between member states of the Union, which comes into force next December. The agreement provides for compulsory transfer under certain defined circumstances: where the prisoner is to be transferred to the country of his nationality in which he is ordinarily resident, where the prisoner is to be transferred to the country of his nationality, to which he would otherwise be deported at the end of his sentence, and where the prisoner has fled and a sentence is transferred to his country of nationality for enforcement. Regrettably, the framework decision does not apply to sentences before its implementation, but we expect to see a steady increase in the numbers transferred after December 2011 and consequently a steady decline in the number of EU nationals held in our prisons after that date.
My hon. Friend has already drawn attention to the fact that the largest group of foreign nationals are Jamaican. In 2007, the United Kingdom signed a prisoner transfer agreement with Jamaica. I regret to say that it is a voluntary agreement, which was the limit of what was able to be negotiated at the time, and it has not yet been ratified. Changes to Jamaican legislation are necessary before ratification can proceed. I have asked my officials to investigate how we can work with other Departments here to help and encourage the Jamaican Government to progress with the agreement.
We will continue to press voluntary prisoner transfer arrangements where we cannot negotiate compulsory ones, and we will take action to encourage prisoners who could transfer but do not to apply for a transfer. I have asked my officials to look urgently at how prisoners can best be informed of the options available to them and encouraged to apply.
We are gradually increasing the number of prisoners transferred to countries outside the European Union. In addition to those seeking voluntary transfer to Nigeria, 25 prisoners have sought transfer to prisons in Pakistan. The transfer of the first four of those has been agreed and will take place in the next few weeks. Many foreign nationals in our prisons cannot be transferred to serve their sentence in their home countries, because there is no agreement in place. It is right that we seek to have prisoners who are subject to deportation action, or who have no entitlement to remain in the United Kingdom, removed as soon as possible at the end of their sentence.
We have inherited an overcrowded prison estate that is teetering on the edge of being able to keep pace with the demand created by those sent there by the courts. Moreover, one of the key factors is the large number of foreign nationals in our prisons, many of whom have no right to be in the United Kingdom. I therefore need no reminding of the importance of improving the situation by all appropriate means. At a time when we have been left with no money by the previous Government, we need to look carefully at how our resources are used and what can be done to target them more effectively. Our priority is to protect the public and focus our efforts on reducing reoffending. It is therefore right for us to consider how prison resources can be better focused on prisoners who will be released into the community in the United Kingdom, which will free up prison capacity currently taken by foreign nationals who will be removed from the country anyway. That is one way that we can help achieve our priority.
Provisions are already in place to help ensure that foreign national prisoners can be removed from the United Kingdom as early in their sentence as possible. The early removal scheme has been in operation in England and Wales since 2004 and gives the Secretary of State the power to remove eligible prisoners earlier in their sentence than would otherwise have been possible. Foreign national offenders who are serving a determinate sentence and who are liable to removal from the United Kingdom can be removed from prison and the country up to 270 days, or nine months, before the halfway point of their sentence, when they would normally be released. The period of early removal in each case varies depending on the length of the sentence being served, and the maximum of 270 days applies where the sentence is for at least three years. It will be proportionately less for shorter sentences. Prisoners must serve at least a quarter of their sentence before early removal can take place. In each case, removal is dependent on the UK Border Agency making the necessary arrangements. That can be affected if the prisoner appeals against removal or if there are difficulties in securing the necessary travel documentation.
The scheme does not apply to offenders serving life or other indeterminate sentences. However, all foreign national prisoners serving a determinate sentence who are liable to be deported by UKBA are considered for the scheme by the National Offender Management Service. It is important to remember that those offenders would be subject to deportation by UKBA on their release anyway.
Early removal under the scheme is not pursued for prisoners with outstanding criminal charges or further custodial requirements, such as an offender with an outstanding confiscation order. Such prisoners should not be permitted to avoid their liability by leaving the United Kingdom’s jurisdiction early. I would like to emphasise that foreign national prisoners who are removed or deported under the scheme are flagged on UKBA’s warnings index and can therefore be identified if they attempt to return to the United Kingdom.
UKBA will continue to seek to remove foreign national prisoners who have no right to remain here. Since 2007, some 15,000 foreign national prisoners have been deported. UKBA works closely with NOMS to ensure that prisoners can be removed at the earliest possible moment. In 2009, UKBA embedded immigration teams in nine prisons as part of the rationalisation of the foreign national prison population in the category C prison estate. The two hub and spoke prisons are Canterbury and Bullwood Hall, not Morton Hall, which was mentioned by my hon. Friend the Member for Kettering. This enables UKBA staff to gather nationality and identity information at the earliest opportunity with the aim of reducing the number of prisoners and increasing the removal and deportation of foreign criminals at the end of their sentence.
Police Funding (Greater Manchester)
(14 years, 5 months ago)
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Andrew Gwynne (Denton and Reddish) (Lab)
It is a pleasure to see you in the Chair, Mr Weir. I wish to pass on my thanks to Mr Speaker for ensuring that this debate can take place today. I would also like to put on the record my thanks and appreciation to all the police officers and staff at the Greater Manchester police, who do an absolutely fantastic job—a very difficult job in very difficult circumstances. I wish to put on the record my tribute to their work in making my constituency a safer place.
I would also, very briefly, like to congratulate the Minister on his appointment. Given everything that is facing the public services as we progress with the new coalition Government, I am sure that he will do his best, in very tight circumstances, for the police service in Great Britain.
It is, however, a concern that one of the first acts of the new Conservative-Liberal Government has been to introduce a cut of £125 million in police revenue, with a further £10 million from capital funding and £10 million from the counter-terrorism budget. For Greater Manchester police in my region, that announcement will mean a cut of just less than £7 million. That represents a reduction in grant of approximately 2% of total budget. Only Greater London, at £30.4 million, and the west midlands, at £7.5 million, will be harder hit.
Clearly, the Greater Manchester region will be hit harder than most. That has led to uncertainty, as the police had already set out their budgets for the coming financial year. That is why the reduction is so damaging to the efforts being made to tackle crime in my constituency and in other constituencies across Greater Manchester. Police authorities will now have to cut services that they have not planned to cut and there is the likely possibility that that will impact on front-line services.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Does my hon. Friend agree that local councillors in Manchester, of whom I am still one, have worked very hard in recent years, on a cross-party basis, to deliver precept rises that allow Greater Manchester police to have the resources to do its job, and that the least we could expect from the Conservative-led Government is a similar level of commitment at a national level?
Andrew Gwynne
This is the first opportunity that I have had to welcome my hon. Friend to the House. He will be a stalwart campaigner for his constituents, who are on the other side of the River Tame from my constituency. He is absolutely right. Although the police authority has had to make some difficult decisions about the police precept, a lot of hard work went into ensuring that the funding package for this financial year was robust and matched the needs of policing in Greater Manchester.
Of course, the previous settlement was made by the Labour Government before the general election. As a result, police authorities set their local budgets on the basis of that settlement and will now have to make difficult choices to bring their budgets into line with the new Government’s amended settlement. Greater Manchester police authority has already admitted that tough decisions will have to be made. There is a concern in my constituency about how that will affect policing in Greater Manchester.
Throughout the years of the Labour Government, we saw a real fall in the number of crimes that were committed. Overall, crime fell by 36%. That was, in part, thanks to the record investment in levels of policing. In 1997, Greater Manchester police employed fewer than 7,000 police officers. According to the most recent figures, from September 2009, there are now 8,148 police officers.
According to the House of Commons Library, in my constituency we now have 917 full-time equivalent police officers, as well as—a great invention of the last Labour Government—police community support officers. Across the same area, the boroughs of Tameside and Stockport, we now have 99 PCSOs committed to being a uniformed presence on the streets.
Barbara Keeley (Worsley and Eccles South) (Lab)
Like my hon. Friend, I would like to pay tribute, particularly to Inspector Kevin Mulligan and the Greater Manchester police force in Salford, who have done a great job, with the help of PCSOs, in bringing down crime—particularly antisocial behaviour, which was of great concern to my constituents. Does my hon. Friend share my concern that these budget cuts will really affect PCSOs and, in our case, the neighbourhood team work that can get crime and antisocial behaviour down?
Andrew Gwynne
I agree with my hon. Friend. It is crucial not to diminish the role of the PCSOs and to support the neighbourhood policing teams. Most people will recognise that neighbourhood policing teams, based on every ward in our boroughs, are one of the most successful recent changes to policing in areas such as Greater Manchester. That localism has made a big change to how the police are viewed by the general public, and it is important that we should maintain it.
Backed by that high level of investment, there have been some impressive results. In the borough of Tameside, during the period from 2001-02 to 2009-10, crime was reduced by a fifth. Crimes such as burglary fell significantly. Figures from the House of Commons Library show that the number of burglaries in Tameside fell from 6,084 in 2002-03 to 3,926 in 2008-09. There was a similar trend in Stockport: vehicle crime fell from more than 7,000 in 2002-03 to 3,746 in 2008-09. That shows that proper investment has an effect on crime. In Tameside, we know that effective crime-fighting has improved the quality of life for residents, both collectively and individually. That is why the cut of just under £7 million is of real concern.
Crime itself is not always the main threat to people’s sense of well-being: sometimes the fear of crime is just as, if not more, important, although it can be hard to quantify. Neighbourhood policing and bobbies on the beat have been a real reassurance to our constituents.
I am concerned about how many more efficiency savings there are in the police service in Greater Manchester. It has been streamlined over the past decade and it is not clear that there is now much spare capacity; it is a very lean organisation. In short, all the cuts will inevitably impact on front-line services, even if that is not the Minister’s intention.
Any plans to cut back office staff might not be as simple as they first sound. Some back-office positions are filled by officers who have been injured in the line of duty. If there are no roles for them, they might have to go on sick leave, which will not help to reduce costs. A key to freeing up police officers has been to have the necessary bureaucracy carried out by civilians in a back-office role, so that officers can spend more time on the beat, which is something my constituents will want to be continued and maintained.
We also have to bear in mind that a number of cuts have already been announced and reconfirmed in today’s Budget. The local crime and disorder reduction partnerships in Tameside and Stockport, and no doubt across the whole of Greater Manchester—partnerships involving various local agencies including the local council, housing associations and the NHS—have made a significant impact on reducing crime in my constituency. They have helped to reduce the rate of reoffending, especially in respect of key crimes such as burglary, car crime and antisocial behaviour.
Reducing the funding available to crime and disorder reduction partnerships will put all that good work in jeopardy. The ability to respond to complex issues in a multi-agency setting, which ensures a range of expertise, could no longer be relied on if agencies were stripped back even further. Agencies would go back to being able only to fire-fight issues, rather than take the current proactive approach to local concerns.
I give one example. In Tameside, alley-gates have had a huge impact in dealing with crime and making people feel safer. Since 2005, more than 1,300 households have benefited from the initiative. In a recent survey by Tameside council, 96% of people said that they had felt safer since the gates went up, and 42% felt that they had had an impact on antisocial behaviour. However, with local authority cuts on the way, there will be less money available for such crime prevention initiatives; that, along with further cuts in the police budgets, will have a knock-on effect.
I turn to another matter that I wish to highlight. There is a sense of irony in my constituency about the local Liberal Democrats in Stockport. I appreciate that the Minister may not have the authority to speak for his coalition partners on this matter, but we shall see. We have found out all too soon that the Liberal Democrats say one thing in opposition and quite another when in government.
In February, the Stockport Liberal Democrats put forward a council motion condemning the previous Labour Government and the borough’s two Labour Members of Parliament—myself and my hon. Friend the Member for Stockport (Ann Coffey)—for the 3% increase in the local police grant settlement, claiming that it would impact on front-line policing in Greater Manchester. How strange that they should have said nothing when the Tory-Liberal Government ordered the cuts. It is the height of hypocrisy, especially as it will mean a less effective police force in my constituency, in Tameside and Stockport and across Greater Manchester.
What objections have the local Liberal Democrats raised? The silence is deafening. [Interruption.] It so happens that the hon. Member for Manchester, Withington (Mr Leech) has just popped his head round the door; he has now left. Perhaps they are so mesmerised by their newly acquired Government offices that they are suffering from some form of political amnesia. They are certainly not putting the people of Stockport and Greater Manchester first. That is not surprising, given that every Liberal Democrat Member of the House today was elected on a pledge not to support the £6 billion cuts programme, although they now seem content to its being driven through at high speed. I hope that they recover their principles soon, and think once more about these damaging cuts to our police service.
I accept that people are generally suspicious of politicians using statistics, but it is worth repeating the point that when Labour was in government, we in Greater Manchester saw recorded crime fall by 36%, including antisocial behaviour and other more serious offences. We need to ask serious questions about the Government’s commitment to reducing crime and protecting British people.
Has the Minister given any thought to the effect that the cuts will have on local policing? What will be the effect on the fear of crime if the police are less visible in the community? In light of the cuts to local government announced in the Budget today, what will be the effect on the funding of crime and disorder reduction partnerships? A multi-agency approach has made a real contribution to cutting crime and the fear of crime.
The counter-terrorism budget, too, has been cut—by £10 million. Although no one wants to raise public concerns about terrorism, has any assessment been made of how the cut will impact on our effectiveness in protecting the public from terrorism? That question is particularly appropriate for Greater Manchester, as its police take the lead on such issues for the whole of the north-west.
We also need to consider grants for specific posts, such as drug-testing officers or school-based police officers. They are not funded out of the main police grant, but specific grants are given for individual posts. Given the budget tightening, those important and worthwhile posts could well be under threat too, putting more pressure on the remaining posts. What assessment has been made of the combined impact of the grant reductions made by the Minister’s Department and the council tax freeze, which will effectively eliminate Greater Manchester police authority’s ability to raise funds locally to support policing?
From the discussions that I have had with the local police and other agencies, I know that there is a real sense of concern about this issue, not just for Greater Manchester police, but police forces across the country. We need to have a more considered approach that takes into account what local communities want and need, particularly in relation to something as important as policing and community safety. I look forward to the Minister’s response.
The Minister of State, Ministry of Justice (Nick Herbert)
I congratulate the hon. Member for Denton and Reddish (Andrew Gwynne) on securing the debate on behalf of his constituents, and I thank him for his kind words about my appointment to the job. I welcome the opportunity to discuss the important issue of police funding.
I would like to say something about my recent announcement on the reductions in police funding for 2010-11 before turning to the specifics of Greater Manchester. My announcement on 27 May that we intend to reduce funding for the police service of England and Wales by £135 million may have been expected. Announcing reductions of any sort is not pleasant or easy, particularly when they relate to an important service such as the police service. However, given the size of the overall budget deficit, the police will need to make a fair share of the savings required.
As I said in my written ministerial statement, the Government’s priority is to cut the budget deficit and get our economy moving in the right direction. The proposed reductions to police funding are, in fact, spread equally across all forces and no one force will have its funding reduced by more than another—the hon. Gentleman needs to understand that point. That will mean that police forces have less money than they were expecting this year, but forces have already identified savings of £100 million for this year on areas such as better procurement and IT spending. I am quite confident that additional savings can be achieved by driving out wasteful spending, reducing bureaucracy and increasing efficiency in key functions, while leaving the front line of policing strong and secure.
In total, the Home Office has been asked to cut £367 million this year as a contribution towards the £6 billion of savings required. To minimise the impact on the police service, the Home Office has decided to cut a greater-than-proportionate share of its own central budget. In short, the Government intend to reduce police funding by a total of £135 million this year, which will be achieved by a proposed £115 million reduction in rule 2 grant, a £10 million reduction in capital grant and a £10 million reduction in counter-terrorism-specific grants. I should point out that even after those reductions, Government funding to the police service will remain at £9.6 billion in 2010-11, which is still £124 million more than last year.
Assuming that, following the consultation process, the House approves the proposed reductions laid before it on 10 June—there will be further opportunity for debate for hon. Members—Greater Manchester will receive £465.5 million in general grants and around a further £49.4 million in specific grants and capital provision. Again, that will still mean an increase of more than £6.6 million since 2009-10. In fact, between 2005-06 and 2009-10, central Government funding to Greater Manchester increased by £77.5 million, or 15% in real terms.
As I said, the Government have made it clear that tackling the deficit is the most urgent issue facing the country today, and the police need to contribute towards the overall reduction. That applies to every force. The package was the first step but, as I said, the reduction was shared across the service, so that each force will face a cut of 1.46% of its core funding. I think the hon. Gentleman suggested that the cut was 2%, but I should point out that that is incorrect. In fact, the reduction is 1% of the total estimated revenue spending by the force in 2009-10. The reduction itself is £7 million, and we have to see that in the context of total estimated revenue spending by the force of £681 million, £473.8 million of which comes from central Government. In fact, there will be an increase in the amount of central Government grant of 1.4% compared with last year.
The hon. Gentleman suggested that Greater Manchester was being hit harder than most areas, but in fact every force will see proportionately the same reduction, so it is not true to say that. Of course, if he uses a cash figure, it will be different; the Greater Manchester police force is a big force, and it will experience a bigger reduction in cash terms. But proportionately, it has been hit no harder than any other police force.
Andrew Gwynne
I am grateful to the Minister for giving way, and I suppose that I should also be grateful for the increase that he has managed to magic out of his speech. Of course, that increase is less than the Labour Government gave to Greater Manchester police when they set their budget earlier this year; we are not grateful for a few crumbs. Will he accept that Greater Manchester police have regional responsibilities, and that their resources are often used by other police forces, particularly those in the north-west of England? Sometimes we help out across the Pennines and across the whole of the north of England, too. The impact on forces such as Greater Manchester, which take the lead on issues such as counter-terrorism, is therefore greater than on other forces.
Nick Herbert
Of course, separate funding is made available for counter-terrorism responsibilities in the region, and all those responsibilities on forces are taken into account. I also accept that we are talking about an in-year reduction. The Government are not making any secret of the fact that, in order to pay down the deficit, we needed to find £6 billion-worth of savings. It is necessary for the Home Office and, in turn, the police, who account for well over half of Home Office spending—indeed, they account for half of all law and order spending—to find their fair share of savings.
I ask the hon. Gentleman to accept that we have a sense of proportion on the issue; he used quite strong language when talking about the implications of the cuts. Actually, I do not believe that his view of the implications of the cuts is shared by policing professionals, or those who are responsible for administering the budgets. Yesterday, my right hon. Friend the Home Secretary and I convened a meeting of chief constables; we invited them to come and talk to us about the challenge that they face. They are absolutely realistic about that challenge. The chief constable of Greater Manchester police was at that meeting, and I note that he has said, on the reduction in grant, that the force hopes to get officers on the streets by working more efficiently. I have also met the chairman of the Greater Manchester police authority on a number of occasions over the past few days to discuss wider issues relating to policing and, according to reports, he has insisted that the public would not see the effect of the cuts. He has said:
“Can I give an assurance to the people of Greater Manchester that we’re not looking at cuts in police or police staff? Currently the situation is difficult, we’ve had 10 very good years. Now the tough times are with us and we’re having to make those cutbacks—and considerable cutbacks they are.”
I believe that the chairman of the Greater Manchester police authority, who I understand is in the same party as the hon. Member for Denton and Reddish, is adopting a responsible attitude towards the savings that he has to make, and indeed a realistic attitude to the fiscal position that the last Government bequeathed to this Government.
It is, of course, for chief constables to use their expertise to decide what makes most sense for their force, but I am clear that the saving that we are discussing can be achieved by driving out wasteful spending on support functions, reducing bureaucracy and increasing efficiency in key functions, leaving the front line of policing strong and secure. I expect forces to be held to that, both by police authorities and by Her Majesty’s inspectorate of constabulary.
Keith Vaz (Leicester East) (Lab)
If police authorities find that their initial assessment is wrong and that they cannot make the required savings, will the Minister look sympathetically if they came forward with their proposals to ensure that officers remain on the beat? Visibility of officers on the beat is the bottom line, is it not?
Nick Herbert
I agree with the right hon. Gentleman. It is very important that police officers remain on the beat; that is what the public wants to see. It is the responsibility of chief constables, as the managers of their forces, to do everything possible to drive out costs, reduce bureaucracy, find the savings within their forces, and find ways to work more efficiently and share services so that they can protect the front line. That was very much the discussion that I had yesterday with chief constables. It is the collective ambition both of the Government and of the police leadership in this country that we should do that. There is also a great realism about the situation in which we find ourselves; to coin a phrase, there is no money. We were faced with having to make savings, and they are, I believe, of a relatively manageable size in the overall scheme of things.
The service is already working towards realising more than £500 million of savings by 2013 and 2014—that work was already in train—of which £100 million will be realised this year. Collaboration, including in the procurement of goods and services and with regard to information technology, will be important in improving both service delivery and value for money. It is vital that we drive down the costs of policing while maintaining the quality of the front-line policing services that the public receive.
Andrew Gwynne
Will the Minister move on to the issues that I raised about specific grants, separate from the police settlement, that impact on police posts, and to the knock-on impact of the tightening of local authority budgets, particularly given the council tax freeze?
Nick Herbert
On the council tax freeze, I should point out to the hon. Gentleman that that is something that local authorities, including police authorities, can choose to do if they want to participate in the scheme. That is the important thing to understand about it. We hope that council tax payers will be protected in that manner. If the authorities agree to participate, the funding will be available to them to freeze council tax. That is important for local taxpayers who have had to find a great deal more money for council tax over the past few years. As for the specific matters relating to the grant, the easiest thing would be for me to write to him about those.
I do not deny that tough choices have had to be made in trying to reduce the deficit, which is unprecedented in this country’s history. The Home Office is playing its part by putting together a total package of cuts that reflects a considered view of where efficiencies can be made. We have sought first to trim as much as possible from the costs of running the Department and its non-departmental public bodies. I walked to the House today to contribute, in a modest manner, towards the share of savings that we as a Department have to make. None the less, we are confident that forces can make this relatively modest level of saving without a reduction in the world-class service that they provide to the public.
Jonathan Reynolds
Will the Minister tell us whether any of the efficiency savings he just mentioned will involve offering early redundancy to some of our most experienced policemen who perform a role on the beat?
Nick Herbert
I congratulate the hon. Gentleman on his election to the House. His contributions are already proving effective. As for the choice of how savings are made, I should say that that is very much a matter for the operational responsibility of chief constables. The Government will not seek to interfere in that. We will seek to support, where we can, the decisions that have to be made, but there will be a fundamental difference between this Government’s approach and that of the previous one, in that we will not seek to direct chief constables so extensively. Chiefs must find the savings. It is for them to decide how to manage their work force and to provide the high-quality service that we and the public expect from them. I am confident that we can maintain front-line policing services, visibility and availability to the public.
Written Ministerial Statements
(14 years, 5 months ago)
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Anti Avoidance
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The Exchequer Secretary to the Treasury (Mr David Gauke)
The Chancellor of the Exchequer announced today as part of the Budget an increase in the standard rate of VAT to 20 % to take effect from 4 January 2011.
The Government have taken this step to contribute to tackling the deficit. To protect the public finances from artificial avoidance aimed at exploiting the change in VAT rate where there is no current economic activity, the Finance Bill 2010 will contain anti-forestalling legislation to ensure that the VAT rate change is fully effective.
Anti-forestalling legislation will apply from today to ensure that, in the circumstances specified, supplies with a basic time of supply after the VAT rate increase takes effect will be subject to the rate of VAT in force at that time. The provisions are designed to prevent artificial forestalling while not affecting genuine commercial transactions, and few businesses will need to operate them. The legislation is not intended to catch the normal commercial activity of providing goods and services.
The anti-forestalling legislation will apply from today, but any extra VAT arising from its operation will not become due at the earliest until the date of the VAT rate change. Until then, suppliers should continue to account for VAT as normal, applying the VAT rate at the time of the prepayment, VAT invoice issue or grant of the right or option.
Further guidance on the anti-forestalling legislation is available at www.hmrc.gov.uk. Copies of the guidance have been deposited in the Libraries of both Houses.
Double Taxation Agreement (United Kingdom and Hong Kong)
(14 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
A new Double Taxation Agreement with Hong Kong was signed on 21 June 2010. The text of the agreement has been deposited in the Libraries of both Houses and made available on HM Revenue and Customs’ website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
Education Spending
(14 years, 5 months ago)
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The Secretary of State for Education (Michael Gove)
The Government have today announced a two-year pay freeze for all public sector workforces from 2011-12, but remain committed to honouring in full the three-year pay award recommended by the School Teachers’ Review Body. I can therefore confirm that the teachers’ pay uplift for this year will be implemented from September 2010, marking the last instalment of their three-year pay award.
Agriculture and Fisheries Council
(14 years, 5 months ago)
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The Secretary of State for Environment, Food and Rural Affairs (Mrs Caroline Spelman)
My hon. Friends the Minister of State and the Under-Secretary of State for Environment, Food and Rural Affairs, the Minister with responsibility for natural environment and fisheries, the hon. Member for Newbury (Richard Benyon), will represent the United Kingdom at the Agriculture and Fisheries Council in Luxembourg on 29 June. Richard Lochhead MSP will also attend.
There are a number of items on the agenda relating to agriculture and fisheries which are of significant interest to the United Kingdom. Discussion will take place on the following:
Simplification of agriculture legislation;
Quarterly report on the dairy market;
Commission communication on the consultation on fishing opportunities for 2011;
Reform of the common fisheries policy.
In addition, Council will vote on six decisions relating to GM maize food/feed, and may adopt conclusions on the international competitiveness of the European agri-food model. There are currently two items under any other business—information from the Commission on the implementation of the European fisheries fund (EFF); and information from the Netherlands on the “Conference on Agriculture, Food Security and Climate Change”.
Finally Ministers will discuss the reform of the common market organisation (CMO) for fishery and aquaculture products over lunch.
General Affairs Council and Foreign Affairs Council
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The Minister for Europe (Mr David Lidington)
The General Affairs Council (GAC) and Foreign Affairs Council (FCA) were held on 14 June in Brussels. My right hon. Friends the Foreign Secretary and the Development Secretary represented the UK at the FAC. I also attended, and represented at the GAC.
The agenda items covered were as follows:
Foreign Affairs Council (Development Ministers)
The provisional report of the meetings of both Development and Foreign Ministers, including conclusions, can be found at:
http://www.consilium.europa.eu/App/newsroom/loadbook.aspx? BID=78&LANG=1&cmsid=1850
Development Ministers discussed the millennium development goals (MDGs), an EU gender action plan, and development and piracy in East Africa.
Ministers adopted conclusions on the MDGs (see web link above) which will form the basis for EU negotiations ahead of the New York UN MDG summit in September 2010. The Development Secretary strongly encouraged EU member states to uphold their collective commitment to provide 0.7% ODA/GNI by 2015, and called for annual leaders’ discussions on ODA.
The Development Secretary also stressed the importance of maternal and child health, two of the most off-track MDGs, and was supported in his recognition of the importance of policy coherence, aid effectiveness and transparency. The Development Secretary further supported the adoption of an EU gender action plan for 2010-15, and welcomed the High Representative’s (Baroness Ashton) aim to launch a comprehensive strategy for the horn of Africa to deal with the problems of piracy and development in this region.
Foreign Affairs Council (Foreign Ministers)
Gaza
Tony Blair, representing the quartet, briefed Ministers on Israel’s undertakings to ease the Gaza blockade and to hold an inquiry on the Gaza flotilla incident. Following a substantive discussion of the flotilla incident, Ministers set out their views on wider middle east process issues including Gaza access, and the helpful role played by other states in the region. The Council agreed conclusions that can be found at the web link quoted above.
Western Balkans
Ministers heard a presentation from International Criminal Tribunal for former Yugoslavia (ICTY) Chief Prosecutor, Serge Brammertz, on Serbia’s and Croatia’s co-operation with the court.
Ministers agreed to submit Serbia’s stabilisation and association agreement to their respective parliaments for ratification. They also agreed to return to the issue of Serbia’s accession application at a later time.
The Council agreed conclusions welcoming the outcome of the high-level meeting on the Western Balkans in Sarajevo on 2 June, which emphasised the EU’s commitment to the European perspective of the Western Balkans countries in line with the Thessaloniki agenda. Ministers also expressed concern about the political situation in Albania and discussed the situation in the former Yugoslav Republic of Macedonia.
Iran
Ministers discussed Iran following the adoption of United Nations Security Council resolution (UNSCR) 1929 concerning Iran’s nuclear programme. The Foreign Secretary set out his strong support for the UNSCR and advocated an endorsement of a draft declaration for the June European Council.
Ministers agreed conclusions (see web link above). They also agreed a draft declaration for the June European Council inviting the next Foreign Affairs Council to agree measures to implement UNSCR 1929 and a range of additional EU measures.
Child Labour
Ministers agreed conclusions on child labour (see web link above).
Somalia/Piracy
Over lunch, Ministers heard a presentation from Rear Admiral Hudson (UK), the outgoing operational commander of the EU’s counter-piracy mission (Atalanta) now replaced by Major-General Buster Howes RM (UK). The Council agreed that the EU should extend the operation for a further two years and the Foreign Secretary stated the UK would be willing to offer Northwood as the operation headquarters until the end of 2012. When the formal Council decision to extend is prepared later this year, it will be subject to parliamentary scrutiny in the usual way. Ministers agreed conclusions (see web link).
Cuba
Ministers discussed Cuba in the context of the evaluation of the EU’s common position. There were no conclusions, but Ministers may revert to the issue in September.
Haiti and Disaster Response
The Commissioner for International Co-operation, Humanitarian Aid and Crisis Response, Kristalina Georgieva, presented lessons learned on the EU’s Haiti disaster response. The Commissioner noted opportunities under the Lisbon treaty for better co-ordination and institutional management of responses and ensuring planned rather than ad hoc humanitarian, civil protection and military responses.
Corfu Process
Baroness Ashton set out priorities ahead of the informal OSCE ministerial in July which will discuss the Corfu process.
Kyrgyzstan
This was added to the agenda following recent violence over the weekend. Ministers adopted conclusions that stressed the need to restore public order and respect for the rule of law, to pursue the political process, and underlined the need for dialogue. The conclusions also reflected the EU’s readiness to respond to the most urgent humanitarian needs.
General Affairs Council
The provisional text of the Council’s discussion and agreed conclusions can be found at:
http://www.consilium.europa.eu/App/newsroom/loadbook.aspx? BID=72&LANG=1&cmsid=1851
European Citizens’ Initiative (ECI)
The presidency sought agreement for a revised “general approach” to its proposal implementing the ECI: an initiative from the Lisbon treaty that will enable EU citizens to ask the Commission to bring forward legislative proposals if there are at least 1 million signatories from a significant number of member states.
I supported the principles of the ECI, but expressed concern about the level of bureaucracy in the proposal; specifically, dual admissibility checks, verification processes and the lack of an impact assessment. However, I noted that this was only the start of a process, and that the “general approach” would evolve. As parliamentary scrutiny is still outstanding, I said that the UK would abstain from supporting at this time. The presidency concluded that it had sufficient support to proceed with the “General Approach”, but acknowledged the UK’s concerns and recognised that the UK had captured the mood of the Council.
June European Council (JEC)
Ministers examined draft conclusions for the European Council meeting to be held on 17 June. The discussion covered: jobs and growth and the adoption of the Europe 20202 strategy; preparations for the G20 summit in Toronto millennium development goals; and climate change. The Prime Minister will report to Parliament on the outcome of the JEC.
I set out the UK’s positions on MDGs, economic governance and education targets.
European External Action Service (EAS)
The presidency and the High Representative set out progress in the ongoing negotiations with the European Parliament on the establishment of the EAS.
The Council also agreed conclusions on:
economic and social cohesion in the EU;
the EU’s outermost regions;
common practices in consular assistance and crisis co-ordination;
maritime policy.
Court of Justice of the European Union (CJEU): Judicial Reappointments
(14 years, 5 months ago)
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The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
At a conference of representatives of Governments of member states on 23 June 2010, 11 sitting judges to the General Court are to be reappointed.
The judges to be reappointed are: Frimodt Nielsen (Denmark); Franklin Dehousse (Belgium); Heikki Kanninen (Finland); Irena Wiszniewska-Bialecka (Poland); Josef Azizi (Austria); Juraj Schwarcz (Slovakia); Küllike Jürimäe (Estonia); Marc Jaeger (Luxembourg); Maria Eugénia Martins de Nazaré Ribeiro (Portugal); Otto Czúcz (Hungary); and Savvas Papasavvas (Cyprus).
Following favourable opinions of the candidates from the Judicial Appointments Panel (Article 255 Treaty on the Functioning of the European Union) and having consulted with the Justice Secretary and Attorney-General, the Foreign Secretary agrees with the proposal to reappoint the 11 judges.
EU Transport Council
(14 years, 5 months ago)
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The Secretary of State for Transport (Mr Philip Hammond)
I will attend the second Transport Council of the Spanish presidency which will take place in Luxembourg on 24 June.
A wide-ranging EU-US air transport agreement came into effect in April 2008. Its provisions included removal of all commercial restrictions on flights between the EU and the US; and improved co-operation in safety, security, competition, consumer protection and the environment. Negotiations for “Stage 2” of the agreement began in May 2008. The negotiations have led to a solid outcome, which includes recognition of the importance of greater access for airlines to global capital markets and a widening of the reach of the agreement in environmental matters. I propose to agree to the signature of the Stage 2 agreement at the Council. A signing ceremony is planned for later in the day.
The Commission will present to the Council its report on the EU response to the consequences of the recent volcanic ash cloud on air transport. The Commission’s report was produced at the request of an extraordinary session of the Transport Council on 4 May. The Commission is expected to provide an overview of the technical work that has been taking place at national, European and global level to increase the understanding of safe flying in areas affected by ash and to examine how the rules and guidance might be improved. My intention would be to encourage further co-operation in this area in order to ensure that airlines and passengers are subjected to the minimum of disruption internationally should there be another eruption. The issue of financial assistance for companies affected by the ash disruption may arise. While recognising the significant financial impact of lost revenue and/or passenger assistance, I do not intend to raise any expectations and would propose to emphasise that budgetary constraints make any support from UK taxpayers unlikely.
The Council will be asked to adopt conclusions following the Commission Communication on Urban Mobility, which set out an action plan. We support the principles of the action plan, and the opportunity to spread best practice across the Community. The conclusions take a common-sense approach by making use wherever possible, of existing institutions, programmes and instruments. I welcome the recognition that intelligent transport systems offer strategic options for improving urban mobility as this is an area that the UK has focused on. I also welcome the focus in the conclusions on research of all kinds on clean and energy-efficient vehicles. It is important that the action plan does not lead to further legislation, and that cities and city regions retain the freedom to pursue and implement locally relevant solutions.
There will be a policy debate on the role of transport in the “Europe 2020 strategy for smart, sustainable and inclusive growth”. No conclusions are expected and no decisions will be taken. I will take the opportunity to highlight how EU transport policy can and should promote jobs and growth.
Notable among the AOB items is a report from the Commission on security scanners. This report concludes that security scanners at airports could help to reinforce passenger security and, where deployed, should be covered by common EU-wide standards covering performance, fundamental rights and health provisions. Scanners are currently deployed at several UK airports.
House of Lords
Introduction: Baroness Hayter of Kentish Town
Introduction: Lord McAvoy
Death of a Member: Lord Laing of Dunphail
The Lord Speaker (Baroness Hayman)
My Lords, I regret that I have to inform the House of the death of the noble Lord, Lord Laing of Dunphail, on 21 June. On behalf of the House, I extend our condolences to the noble Lord’s family and friends.
Northern Ireland: Public Expenditure
Lord Shutt of Greetland
My Lords, Northern Ireland, like the rest of the United Kingdom, will need to play its part in reducing the budget deficit, but as the Prime Minister said recently, it will not be targeted for cuts above any other part of the United Kingdom. The Government remain committed to working with Northern Ireland Minsters to boost the Northern Ireland economy and to supporting the devolved institutions provided for by the Belfast, St Andrews and Hillsborough Castle agreements.
Lord Rana
Does the Minister accept that, given the impending pressures on the public sector, it is essential to promote a much stronger private sector in Northern Ireland, with a solid core of high value-added jobs? I therefore ask the Government to implement urgently the pledge given by the Prime Minister before the general election to produce a government paper examining how the corporation tax rate in Northern Ireland can be changed to attract more investment to the region. In asking this question, I declare my interest as former president of the Northern Ireland Chamber of Commerce and Industry, when I campaigned for it, and as a businessman from Northern Ireland.
Lord Shutt of Greetland
My Lords, I thank the noble Lord for his supplementary question and acknowledge his experience in adding to the private sector in Northern Ireland. I can advise him that my right honourable friend the Chancellor of the Exchequer confirmed today in his Budget Statement in another place that the Government, in consultation with the Northern Ireland Executive, propose to publish a paper on rebalancing the Northern Ireland economy which will examine potential mechanisms for changing the corporation tax rate in Northern Ireland.
Lord Smith of Clifton
My Lords, when allocating resources in the future, will the Government take into account the recent recommendations of the Select Committee on the Barnett formula, which said that Scotland had far too much, Wales had far too little, Northern Ireland needed a little more and England needed some more?
Lord Shutt of Greetland
My Lords, the Government have no plans to review the Barnett formula until the fiscal stabilisation plans set out in the Budget have been worked through. However, that report is still valid and will be considered at the due time.
Lord Dubs
My Lords, further to the answer that the Minister has just given, does he agree that the problem with the Northern Ireland economy is not that the public sector is too large but that the private sector is far too small? Does he further agree that reducing corporation tax to the same level as that in the Republic may be a very sensible move, but that the private sector will need more to boost the economy than simply that?
Lord Shutt of Greetland
The noble Lord is right: the biggest problem is that the private sector is far too small. However, there clearly is a difficulty when the corporation tax rate in the Republic of Ireland is 12.5 per cent—a matter which has been steadily addressed here. Northern Ireland does need more private sector jobs. It is interesting to note that between 2002 and 2010, something like 7,500 jobs were created by businesses from the United States. I have no idea what footloose industry there is about, but Northern Ireland has nevertheless gained those 7,500 jobs, and that was only the top five in that period.
Lord Barnett
My Lords, the noble Lord said that the very important report of the Select Committee on the Barnett formula would be considered in due time. Would he care to define the meaning of “due time”? Does he appreciate that the Chancellor has just announced that in the autumn there will be departmental cuts in public expenditure of some 25 per cent? Does the noble Lord recognise that if this is not noted and taken care of, there will be very serious problems in England?
Lord Shutt of Greetland
My Lords, it is not for me to take a view on when that time will be. I am not able to indicate when it is—
Lord Shutt of Greetland
Because I don’t know. If I knew I would tell him—but there we are. The noble Lord, Lord Barnett, introduced his paper a third of a century ago and we are still talking about it. I accept and personally take the view that the Barnett formula should be looked at again. The present position is that it will be looked at again, but in due time.
Lord Forsyth of Drumlean
My Lords, can the Minister help me? I thought that the coalition Government’s policy was to implement the recommendations of the Calman report—which specifically said that we should move to a needs-based system of funding, in line with the unanimous recommendation of the committee of this House which looked at the Barnett formula in great detail not some time ago but in the last Session of Parliament.
Lord Shutt of Greetland
My Lords, the need for “due time” is also apparent with the Calman report. It is a matter for consideration by the coalition Government.
Viscount Brookeborough
My Lords, in agreeing with the noble Lord, Lord Dubs, is the Minister actually saying that the public sector is not too large in Northern Ireland? Recognising that Northern Ireland is the same size as Yorkshire, and all the education boards and very high employment in the public sector, we in Northern Ireland believe that it is too large. Why does he not?
Lord Shutt of Greetland
My Lords, I am aware of the size of Yorkshire—and these sorts of comparisons are useful from time to time. I take the view that the public sector in Northern Ireland is too large when compared with the private sector, but there is no doubt that the private sector is far too small.
Disabled People: Independent Living
Lord Ashley of Stoke
To ask Her Majesty’s Government whether they have proposals for independent living for disabled people.
Baroness Northover
My Lords, we are committed to supporting people with disabilities to live as independently as possible. This Government intend to ensure that disabled people get the care they need, while assisting them to have control over their lives, with support tailored to their personal needs.
Lord Ashley of Stoke
My Lords, I thank the Minister for that response. It certainly seems to be promising. Is she aware that some will take a very dim view of any increased expenditure on disabled people—especially now—and say that the time is not right for giving more money to them? However, in view of recent announcements by Ministers on cuts, is she aware that this is precisely the time when we should be protecting and carefully guarding our most vulnerable people by providing them with the means of independent living?
Baroness Northover
I thank the noble Lord for his comments and pay tribute to him for his tireless work on behalf of disabled people. He kept the previous Government up to the mark and I am sure that he will do the same for us. We will listen hard to what he says. I am encouraged by his comments, and he might note that the Budget emphasised that the poorest and most vulnerable in the current financial crisis must be looked after first: that must be our priority as we seek to tackle the difficult financial situation. That came through overwhelmingly in the Budget that we have just heard.
Baroness Hollis of Heigham
My Lords, does the noble Baroness not agree that had her Government—here I refer to the previous Question—been willing to tackle the issue of the £4 billion overpayment to Scotland, we would not now need to contemplate cuts to disability living allowance that will affect disabled people right across the land?
Baroness Northover
My Lords, we face major financial problems way beyond the one that the noble Baroness has outlined and pinpointed. It is extremely important in this situation that what we do is fair; that we make sure that the most vulnerable in society are protected; and that we take forward the better protection of disabled people. One reason why we are setting up a commission on long-term social care is so that we can take this forward, building on what the previous Government did. I pay tribute to what they did in this field, and we will take that forward.
Baroness Wilkins
My Lords, given the coalition Government’s emphasis on localism and the three-year freeze on council tax, will the Minister explain how disabled people with high support needs will have their right to independent living met, in competition with other vociferous local groups vying for scarce resources in the local community and council?
Baroness Northover
We remain very committed to trying to ensure that independent living is taken forward. There is a strategy that we have inherited, and we will look at how best to take it forward. I realise that there is pressure on local government. At the moment, we are trying to ensure that this does not have an impact on the most vulnerable. That message has already come through from the Budget. A commission will be set up on long-term care. These are areas that must be urgently addressed because we realise that individuals and their carers and families are under a lot of pressure. We must take this forward in the most effective way possible.
Viscount Tenby
My Lords, the Government favour supported living as an alternative to residential homes. However, because there are quite a number of residential homes still in existence, will funds be made available to enable the transfer to a supported living pattern to take place? I declare an interest as chairman of a residential home for women with learning and physical disabilities.
Baroness Northover
It is extremely important that the kind of provision that best suits an individual is the route that we go down. We must look at what the individual most needs, what they wish to have and what their carers and family feel is most appropriate for them. A lot can be done in different environments. It is very interesting to see how new technology may assist people who wish to stay at home, by ensuring that they can do that safely. There are all sorts of possibilities for people and it is important that provision is led by the individuals concerned.
Lord Addington
My Lords, does my noble friend agree that one of the most important things that can be done is to make sure that when people ask for support and help, they get the right information? Government at all levels has a patchy record at best on this. What resources are being put in to make sure that when you ask a question, you get the right answer; and that the person who is asked the question is confident enough to go away and find someone who knows the answer if they themselves do not?
Baroness Northover
I could not agree more, from personal experience. It is extremely important that the right information is available. Certainly, the previous Government made progress in this regard, and we intend to take this further. It is extremely important that this is looked at from the point of view not of the provider but of the individual. Looking at it from their point of view will help to change the way in which these services are provided.
Baroness Thornton
First, I am sure that the whole House will wish to welcome the noble Baroness to her new position. I know how she must be feeling.
The Minister is concerned about individuals, but the recently announced cuts to local government grants will have a direct impact on the Supporting People budget and will make it more difficult for vulnerable people such as the disabled to live independently in their homes. Is the department monitoring this matter? Personal choice is fine but if your local authority has cut that budget, it does not matter what your personal choice is because the money will not be there to support you.
Baroness Northover
I thank the noble Baroness and tell her that it is very nice to be approaching 15 minutes on the Clock. I very much support what she says. That is one reason why we are setting up the commission, which must report within a year. It is extremely important that the approach in this area is integrated. We very much want to emphasise the individual and local provision. Obviously, we want to ensure that there are national standards and that unintended consequences do not undermine an individual’s experience.
Economy: Growth
Lord Roberts of Conwy
To ask Her Majesty’s Government what is their strategy for promoting economic growth.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, today the Government have outlined their plan to support a private sector recovery and create the right environment for enterprise and sustainable growth. It will restore the UK’s international competitiveness through lower and simpler business taxation, and through cutting red tape. Fundamental to this strategy is tackling the budget deficit and providing the stable macroeconomic environment needed to underpin private sector investment and growth.
Lord Roberts of Conwy
I am grateful to my noble friend for that reply, supported as it is by the eximious Statement by the Chancellor of the Exchequer earlier today. Does my noble friend agree that, as we cut the record deficit left to us by a prodigal Government, one of the first essentials is to restore the confidence of the private sector to encourage businesses to invest, create jobs and bring about the prosperity that the country really needs?
Lord Sassoon
My Lords, I completely agree with my noble friend Lord Roberts of Conwy. Business confidence will now be underpinned by a credible deficit reduction plan, which will see the current structural deficit in balance by 2014-15. The public expenditure on infrastructure, which this country needs to underpin growth, is being protected and not further cut. Corporation tax will fall from 28 to 24 per cent over four years; entrepreneurs’ lifetime capital gains tax relief is being increased from £2 million to £5 million; the national insurance contribution threshold will increase by £21 per week above indexation; the enterprise finance guarantee is being expanded by £200 million to ensure that credit flows to business; and a new regional growth fund will be established. It is estimated that these and other policies will increase business investment by an additional £13 billion up to 2016.
Lord Hunt of Kings Heath
My Lords, as a result of the Budget, how many jobs will be lost and what will the reduction in growth in the economy be?
Lord Sassoon
My Lords, the independent figures that have been published alongside the Budget by the Office for Budget Responsibility today show that employment will grow in every year of the forecast period from 28.8 million in 2010-11 up to 30.1 million in 2015-16. Growth will also grow from 1.2 per cent in 2011 to 2.3, 2.8 and 2.9 per cent and then, still above trend, to 2.7 per cent in 2015-16.
Lord Broers
My Lords, does the Minister not agree that, if we are to have industrial growth, it is essential that the Government strongly support research budgets in engineering and science? Does he also agree that the recent delay in the funding decisions on some of our largest and most powerful science projects is highly disruptive to those projects? I declare my interest as chairman of the Diamond Light Source, which is Britain’s largest science project and strongly supports industry.
Lord Sassoon
My Lords, today my right honourable friend the Chancellor of the Exchequer announced that the spending review will be presented on20 October. As we go through the spending review, it is clearly important that the long-term prosperity and growth of this country are underpinned by appropriate decisions. We have announced today, as I said, that infrastructure will not be cut further. I take the point, put by the noble Lord, Lord Broers, that science spending is also very important to underpinning the long-term growth of the UK.
Lord Newby
My Lords, the Chancellor of the Exchequer said today that he was establishing a large regional growth fund to provide finance for regional capital projects. Can the Minister give some indication of what is meant by “large”? Can he also say whether there will be some private sector involvement in deciding priorities under the fund, a principle that underpins the RDAs, and that such decisions will not be put purely in the hands of unelected regional bureaucrats?
Lord Sassoon
My Lords, I thank my noble friend for drawing attention to the regional growth package in today’s Budget announcement. It is intended that the regional growth fund will pump prime investments into projects with significant growth potential. There will be a consultation later in the summer about how we plan for sub-national growth, which will include local economic partnerships. A White Paper will follow.
Baroness Farrington of Ribbleton
My Lords, will the Minister please tell the House how many jobs in the public sector, particularly in local government, the Government anticipate will be lost as a result of the cuts in public expenditure? How many jobs in the private sector will be lost because those private sector companies offer services to local authorities and to the public sector?
Lord Sassoon
My Lords, I have given the total employment numbers, which will rise in every year of the forecast period. The issue of jobs in the public sector, and indeed in the private sector, has to be put in the context of the enormous deficit-reduction programme that we have. For example, by the end of this period, on the new projections resulting from my right honourable friend’s Budget today, there will be an annual saving of £4 billion in interest payments alone by the end of the period, so you can see how that will translate into increased jobs in the public and private sectors.
Lord Bilimoria
My Lords, I am sure that the Minister would agree, as many do, that cuts are essential. Are the Government worried that increasing tax rises could hamper growth and lead to a double-dip recession? Do they genuinely believe that they are doing enough to generate the growth, particularly among SMEs, that is desperately required?
Lord Sassoon
My Lords, I thank the noble Lord, Lord Bilimoria, for reinforcing again the importance of growth. I stress that the overall Budget package includes a substantial number of measures that are intended to encourage growth by taking nearly a million people out of tax at the bottom end of the income scale and therefore encouraging them into jobs; by substantial reversals of the previous Government’s package on national insurance contributions; by having a regional element to the holiday on national insurance for young businesses; by ensuring that the capital gains tax provisions are sensitive to the needs of entrepreneurship; and, fundamentally, by reducing the corporation tax burden on companies through our reform of corporation tax, which will enable us to have the most competitive corporation tax regimes in the developed economies.
Immigration: Deportation of Iraqis
(14 years, 5 months ago)
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Lord Dholakia
To ask Her Majesty’s Government whether they will suspend the deportation of Iraqis until the fate of those already deported is known.
The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)
My Lords, we have been informed by the Iraqi authorities that all those returned on 9 June have been released following routine identity checks. Of the 42 returnees on the flight of 16 June, 30 have been released and the remaining 12 are expected to be released soon. There are no plans to suspend enforced returns to Iraq, but we will continue to monitor the situation.
Lord Dholakia
My Lords, I thank my noble friend for that Answer. Amnesty International, the UNHCR and refugee organisations in this country are seriously concerned about the enforced deportation of failed asylum seekers. The UK Border Agency uses the in-country report that has identified at least five areas where there will be serious repercussions if deportees are sent there. In the light of what has been said, and bearing in mind the extent of violence being used in deporting people, will the Minister investigate precisely what happened in relation to those 42 deportees? Will he establish a system of monitoring to ensure that in future we know the fate of people? In the mean time, is not a moratorium necessary?
Lord Howell of Guildford
My Lords, I am grateful to the noble Lord. I am advised that the UK Border Agency’s professional standards unit is investigating what occurred on these occasions. There is no evidence of mistreatment: indeed, senior UK Border Agency officials were on the flight and saw everything that happened. We are satisfied that the position is being investigated and we believe that we should continue with both voluntary and enforced returns of those for whom no further protection is needed here.
Lord Alton of Liverpool
My Lords, will the Minister accept that members of religious minority groups such as the Chaldeans and the Yazidis who have been sent back to Iraq have faced assassination and kidnappings? Will he explain to the House what motivated his department to set to one side the evidence of the UNHCR and its statement, referred to by the noble Lord, Lord Dholakia, that at present it is not safe to return such people to Iraq?
Lord Howell of Guildford
There is a disagreement over this because the procedure we have employed is to study individuals case by case, each on its merits. We take extreme care to ensure that no mistreatment occurs—or if it does occur it is investigated. The UNHCR is starting from a different viewpoint: it is looking at the overall return of Iraqis from all over Europe, including from this country. It is looking at some of the central regions of Iraq, which are extremely dangerous. Most of our returnees go to Kurdistan where they are safe. Therefore, we are satisfied that it is safe for those who are here illegally, or are failed asylum seekers, or are convicted criminals, to be returned to the country from which they come.
Lord Eden of Winton
My Lords, while watching the fate of those deported to Iraq, will my noble friend keep a careful watch on those Iraqis who are incarcerated in Ashraf city inside Iraq to ensure that any who are forcibly moved from that location are pursued with the same vigour as he is demonstrating in this case?
Lord Howell of Guildford
My Lords, I can reassure my noble friend that we are watching that situation very carefully. Obviously, our powers are limited, as are our powers over the Iraqi Government, who are a sovereign Government of a respected nation who we want to see recover, treat and deal with those returning to their country. They are entitled to their own procedures. However, as regards the Ashraf issue, which is a very difficult one, we will watch the matter very closely indeed.
Lord Dubs
My Lords, does the Minister agree that the concerns about the safety and well-being of Iraqis returned to Iraq is not simply related to what happens to them at the airport but whether their long-term safety can be assured? What steps are the Government taking to monitor the long-term safety of the people they have returned?
Lord Howell of Guildford
The answer is that we monitor it as closely as we possible can. The noble Lord will appreciate that there are bound to be some limitations on the detailed monitoring and tracking of every individual, but through the UK Border Agency and its standard procedures we seek to track the situation as closely as possible.
Baroness Afshar
My Lords, is it not the case that in the absence of the close monitoring of returnees, the UNHCR is one of the few organisations that is sufficiently well connected to follow up where people go, particularly in Kurdistan which is highly divided on a tribal basis and where it is almost impossible for any foreign agency to have enough information unless it comes internally? The inability to follow what happens to individuals who are returned means that all kinds of blood feuds that might have been quietened during the person’s absence rekindle and begin again. We need to know that there is long-term security for people who have sought asylum in this country.
Lord Howell of Guildford
Of course we appreciate the very difficult history of Kurdistan and the rest of Iraq, but it is the judgment of the agency and of the independent courts that, at this time, the signs are that Kurdistan is coming together more, that it is a less unstable country, that there is evidence of growth, peace and development and that it is safe to return people who no longer need our protection and should not have been here in the first place.
Lord Avebury
My Lords, my noble friend the Minister has mentioned Kurdistan twice. Am I correct in saying that of the 42 people on the recent flight which has been the subject of adverse publicity, 36 were Kurds, and the reason why they were sent back to Pakistan was the temporary suspension of flights to Erbil by the Kurdish regional authorities? Will my noble friend ask the Foreign Office to make inquiries as to why the KRG suspended deportations to Erbil, and will he attempt to get the resumption of those flights, as otherwise people of Kurdish origin will find themselves stranded in Baghdad and unable to get home?
Lord Howell of Guildford
My noble friend is absolutely right: normally, the majority of Kurds would have gone straight to Erbil. We have already asked why those flights were suspended and how they can be resumed at an early stage. In the mean time, the deportees were going through Baghdad and then on to Erbil. That is why some of them were delayed. It appears that although they were given money, they said that they did not have the resources to pay for the further flight. My noble friend is absolutely right: it is to Kurdistan that the majority were destined.
Communications Committee
Lord Brooke of Alverthorpe
My Lords, I apologise to the Chairman of Committees that I did not give him prior notice, but it is only when I saw the paucity of business on the Order Paper today that I felt moved to raise a question about the Economic Affairs Committee. It seems outrageous—
The Chairman of Committees (Lord Brabazon of Tara)
If the noble Lord wants to raise a question about the Economic Affairs Committee, I shall, if I may, first move the first two Motions standing in my name on the Order Paper.
Lord Dubs
My Lords, I apologise to the Chairman of Committees that I did not give him prior notice. It is not that I object to any name on any of these committees, but is there a likelihood that this House will move toward electing the chairs and members of our Select Committees?
The Chairman of Committees
That is another question. It has nothing to do with today's business, but it is being looked at. The Leader of the House has made an announcement about a review of our practices, and that will no doubt be included in that. Perhaps I can come back to the noble Lord, Lord Brooke of Alverthorpe, in a moment, when we come to the Economic Affairs Committee. I will answer his question then.
Earl Ferrers
Before we leave that point, if the noble Lord, the Lord Chairman, says that that is being looked at, will he ensure that what is looked at is whether they are chairmen of committees, not chairs?
Constitution Committee
Economic Affairs Committee
Lord Brooke of Alverthorpe
My Lords, I think that the Motion will be agreed to in due course. I do not raise a question about the names of those who are nominated; I raise a question about the terms of reference under which the committee operates. I find it staggering that we have such an assembly today with such a paucity of business on the agenda. We have a Budget announcement today. We have a new Leader of the House who, when he was in opposition, consistently argued that there should be an opportunity for a debate on Budgets. As budgetary issues will be the major topic that the country will face for the coming years, at least the Economic Affairs Committee should look at that topic to see whether there are means whereby the expertise, skills, knowledge and experience that we have in this House can be brought to bear occasionally with a debate on the Budget. I trust that the Chairman of Committees will take that back and, I hope, make an amendment in due course.
The Chairman of Committees (Lord Brabazon of Tara)
I am glad to say that the arrangement of business is not a matter for me, but I am sure that the usual channels will have heard the points that the noble Lord, Lord Brooke of Alverthorpe, made. I am only disappointed that the noble Lord, Lord Pearson of Rannoch, the leader of the UK Independence Party, is not here to raise a question on the European Union Committee. I am disappointed that he has failed to appear this year. Nevertheless, other noble Lords have made up very well for his absence.
With the leave of the House, I beg to move that the Motion be agreed to.
Motion agreed.
European Union Committee
Lord Stoddart of Swindon
In the absence of the noble Lord, Lord Pearson, I think I ought to act as his deputy, although I am not a member of his party. I am quite sure that he would want to ask whether the European Union Committee is not rather imbalanced in that it does not represent opinion in the country, which is relatively Eurosceptic, with 52 per cent of the population wishing to leave the European Union completely. However, my real question is whether, in these straitened times, we need so many sub-committees of the European Union Select Committee. Would the committee consider whether we could dispense with one of the sub-committees of the Select Committee and instead meet the demand from this House that we should have a Select Committee on foreign affairs? I think there is a demand for that, and if we cut down on the number of EU committees, we could have a Select Committee of real value to consider foreign affairs.
The Chairman of Committees
As I said, I am sorry that the noble Lord, Lord Pearson of Rannoch, is not here. I recognise that the noble Lord, Lord Stoddart, sympathises with him in his views. He said that 52 per cent of the population apparently wishes to leave the European Union. I do not think that the vote in the recent general election, where UKIP got 3 per cent, reflects that, but it is not for me to say.
The Chairman of Committees
I exceeded my brief in that case, and I apologise to the House. The noble Lord, Lord Stoddart, unfortunately must have missed the debate we had last week when I brought forward the Liaison Committee’s report, which looked at whether we should have a foreign affairs committee, and rejected that proposal. It also looked at the structure of the European Union Committee and decided that it does a valuable job and there is no need to change the main committee or the structures of the sub-committees. I think that, on the whole, that reflects the view of the House.
Lord Kilclooney
My Lords, in deciding the membership of this committee, were any members of UKIP consulted by the normal channels?
The Chairman of Committees
The noble Lord asked whether UKIP was consulted. The answer is no. I beg to move.
Information Committee
International Development: Universal Primary Education
(14 years, 5 months ago)
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Baroness Verma
That this House takes note of progress towards meeting the millennium development goal on universal primary education.
Baroness Verma
My Lords, I am delighted to address the House on such an important issue that affects the lives of millions of young people across the world. At the dawn of the 21st century, in September 2000, world leaders came together at the United Nations headquarters in New York to adopt the United Nations Millennium Declaration. In doing so, they committed their countries to a new global partnership to reduce extreme poverty, and they set out a series of goals that have become known as the millennium development goals. The stated aim of the second of those goals was to:
“Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling”.
That goal forms the focus of today’s debate.
We who have benefited from education know of its crucial importance, not purely in our personal development but in helping us to realise our full potential. Education is not only a basic human right; it is an investment in people and in future generations. For the millions of girls living in the world’s poorest countries, that investment is particularly important.
Education provides the skills and knowledge that allow people to help themselves. It stimulates growth within communities and contributes to a better future for all. It helps create more stable and prosperous nations, which are then better able to respond to global threats such as climate change. Education encourages peace, democracy, good government and international security, as well as providing the key to unlocking the potential within each and every child.
It is therefore clear that we and others must work together towards the attainment of the critical goal of universal primary education. In doing so, we will help to achieve the other millennium development goals. The multiplier effect of education is that it leads to better health and nutrition, social stability and lower rates of fertility.
To achieve universal primary education by 2015 was always going to be a challenge. Good progress has been made globally over the past decade, with some 47 million more children enrolled in primary schools. During this period, the number of primary-aged children out of school has fallen from 103 million to 72 million, and within these figures the proportion of girls out of school has fallen from 58 per cent to 54 per cent.
However, of those out of school, seven out of 10 live in sub-Saharan Africa or in south and west Asia. In addition, the global trend shows that we are currently not on track to get every child into school by 2015. As reported by the Education for All global monitoring report earlier this year, if we continue with business as usual there will still be an estimated 56 million primary-aged children out of education by 2015.
On current predictions, it is also estimated that 105 million 15 to 24 year-olds will lack basic literacy in 2015 and that, if we are to achieve universal primary education, 10 million more teachers globally are needed by 2015. Many of the 72 million children who remain excluded from school are, by definition, some of the hardest to reach. They include children living in rural areas, children with disabilities, children from minority- ethnic groups, children who live in fragile and conflict-affected states, and, of course, girls from all walks of life. The persistence of conflict continues to keep children out of school. About 40 million out-of-school children live in fragile and conflict-affected countries. Educating children in these states can help reduce tension, promote peace and rebuild lives and communities.
To get the hardest to reach children into school, we need a renewed effort by national Governments and donors, international organisations, the private sector, civil society and faith groups. Later this year, the international community will have the chance to reinvigorate action on this goal. In September, the United Nations will host a summit on the millennium development goals in New York. The coalition Government are committed to playing their part in the international effort to achieve the MDGs and will call for an action plan to re-energise efforts towards meeting those goals. We expect the summit to include a side event on education.
Some, both in developing and developed countries, might argue that we cannot afford to invest in universal education at a time of financial constraints at home. This Government disagree. We believe an investment in education for all will help to assure our common prosperity and security. A global economy such as ours needs the knowledge and skills that can come only from a solid base of education. Evidence from past recessions clearly demonstrates that maintaining investment in education helps to ensure rapid recovery. The amount of aid that we put into education in developing countries supports roughly the same number of children going to primary school as those who go to school in Britain, yet the cost is only 2.5 per cent of what we spend here.
DfID funds have supported some 5 million children in school, trained 100,000 teachers and built 12,000 classrooms. These are strong results, but we also want to ensure that they represent the best value for money. We are determined to spend British taxpayers’ money wisely, so we will focus rigorously on results and outcomes. We are also clear that we want demonstrable evidence of the impact that DfID’s work is having on education in poor countries: clear, hard evidence of real improvements being made on the ground to help get children into school. For this purpose, we want the new independent aid watchdog, which my right honourable friend the Secretary of State for International Development announced on 3 June, to lead to greater value for money and to ensure more transparency. Similarly, the UKaid Transparency Guarantee will ensure that information on all DfID’s spending is published on the DfID website, allowing British taxpayers the opportunity to see where our support for education is going.
The goal of universal primary education applies to girls and boys alike. Additionally, the third millennium development goal is specifically focused on gender equality and includes the target of eliminating gender disparity at all levels of education by 2015. For girls in particular, education beyond the primary level is extremely important in improving their life chances, in delaying early motherhood, in avoiding HIV/AIDS and in ensuring that in motherhood their own children are healthier and better nourished.
In discussing universal primary education, we must recognise that its achievement is supported by investment in the whole education sector. While our main focus is on supporting Governments in their efforts to provide all children with a good-quality basic education, we are also supporting and working with them and other partners to support the whole education sector. However, we want to be ambitious. Primary education itself is not enough. We need to raise our aspirations and to work towards the delivery of basic education, including junior secondary education for young adolescents. This is where the real benefits, such as to reproductive health, accrue. Just as the MDGs cannot be reached without adequate investment in higher-level knowledge and skills, neither can universal primary education be achieved without well trained teachers. Higher education is vital to train skilled professionals such as public sector managers, business leaders and health and education workers.
I am keen to hear noble Lords’ learned views on this subject. The coalition Government recognise the great depth and breadth of knowledge and experience of those in this House and want to listen carefully to noble Lords who can offer advice on this subject. Ultimately, it is the quality of learning, more so than the number of years a child spends in school, that matters. Good-quality learning will reduce drop-out rates and enable more children to complete their education—an important aspect of the education goal.
While we seek to ensure that the disadvantaged are given the opportunity to go to school, we must not lose sight of the need to see them receive an education that provides them with the skills to take them through to secondary level and beyond. Currently, many children who attend are failing to master basic literacy and numeracy skills, even when they complete a full cycle of primary education. That is not good enough. We are working with development partners to raise the quality of teaching and learning, particularly for basic literacy and basic numeracy. We will look to the UN summit in September not only to re-energise international efforts towards ensuring that all children complete their primary education but to ensure that schools and teachers improve the quality of learning.
This debate is timely and relevant and I look forward to noble Lords’ valuable contributions.
Baroness Falkner of Margravine
My Lords, I welcome my noble friend Lady Verma to the Dispatch Box and thank her for the opportunity to discuss this issue.
On a day when we have learnt of the gravity of the economic situation facing our country it would be too easy to concentrate on matters at home and the consequences for families up and down this country. However, it is a mark of a civilised people to recognise the bonds of a common humanity which transcends national borders to reach out to people in distant places. Looking at the challenges those people face in attaining fulfilment of their most basic rights is sobering indeed and will bring balance to our deliberations today. It is a brave and morally upright position for this Government to have maintained their commitment to meeting the UN target when so many other rich countries have not. It is a measure of this country’s intrinsic liberal internationalism that we do not forget those further away from our shores.
It is, of course, also a tribute to the previous Labour Government that we have achieved so much in lifting others out of poverty and made such a significant contribution towards the millennium development goals. There has been substantial progress across the board in the early years but the global economic crisis imperils many of the objectives in the period that we have now entered.
Before I move to that scenario, I want to concentrate on what has been achieved in the all-important area of primary education. In determining this goal in 2000, Governments were clear about the overlapping benefits to accrue from education overall. In countries which live in peace and security, it is an essential component of development. It undoubtedly lifts individuals out of poverty and increases their life chances. For girls, it increases their economic participation, improves their own and their children’s health outcomes and reduces their family size based on informed choices and consent. They are, quite simply, empowered individuals because of access to literacy and, hence, information. Education results in true sustainability as future generations will benefit from today’s investment.
In the developed world, universal and compulsory primary education has laid the foundations for secondary and tertiary education, which is now taken for granted by 40 per cent to 50 per cent of young adults. It is a legacy that has been built on by successive generations for more than 100 years. However, there are still large sections of the globe where it is only recently that children have had near-universal access to primary education. According to the latest UN MDG report in 2009, in developing countries overall enrolment had reached 88 per cent by 2007. Improvements were most striking in sub-Saharan Africa, where enrolment rose by 15 per cent in the period since 2000, and in southern Asia by 11 per cent. Hence the number of children of primary school age who are out of school has dropped by 33 million since 1999.
Nevertheless, despite these gains, statistics can tell the other side of the story as well. It now appears that challenges remain whereby we will not be able to meet the target of ensuring that by 2015 children are able to complete a full course of primary schooling. Even in 2007, 72 million children were denied the right to education, of whom nearly half live in sub-Saharan Africa and 18 million in southern Asia. UNESCO figures show that 29 million children will still be out of school in 2015—29 million too many.
The factors leading to this are several, and I will touch on just three: the reduction in donor support in the period ahead, the gender gap in education and the situation in the poorest conflict-affected fragile states. Financial support for attaining this MDG was always viewed as insufficient for the scale of the problem. Not only did it require investment in infrastructure for the poorest rural areas, where schools simply do not exist, it also required capacity-building in terms of teachers trained to adequate levels with adequate teaching aids and resources. Furthermore, the greatest barrier, that of school fees and other indirect costs, reduces enrolment. In some less-developed countries, children in the poorest 20 per cent of the population are three times less likely to be enrolled in primary school than children from the wealthiest 20 per cent.
Several countries have made progress in eliminating school fees, most notably India last year, which passed legislation to provide free and compulsory education for six to 14 year-olds, thereby aiming to lift millions of children out of illiteracy in the next decade alone. Among sub-Saharan countries going down a similar route, Tanzania, Kenya, Uganda, Malawi and Zambia have also moved to provide free education at primary level and there are others still in the pipeline. Nevertheless, the situation in conflict-affected fragile states is still dire and several streams of donor funding are simply unavailable to these countries due to their fragile governance arrangements. It becomes, therefore, a Catch-22 situation. The greatest need requires greater risk-taking on the part of donors and their accountability mechanisms militate against taking risks.
The impact of the global economic crisis should also not be underestimated in the period going forward. We know from UNDP figures that when oil prices increased in 2007-08 that was accompanied by higher food prices due to increased consumption in the more affluent parts of still developing countries such as China and India. The combination of the price of oil and food had an indirect impact on accessing primary education. With fiscal consolidation and reductions in the economic growth, it is inevitable that even in those countries aiming to achieve the target of 0.7 per cent of GNI the figure will fall in absolute terms as their economies shrink. The cake, in effect, will become smaller still. Does DfID have contingency reserves specifically dedicated to this possibility and will it be able to plug the gap in any meaningful way?
Gender inequality in south Asia and the Middle East is also of great concern. At the midway point in measuring progress toward this MDG in 2007, it was found that the target to reduce gender disparity in primary and secondary education by 2005 had already been missed. Several aspects affect the completion of primary education. In the case of girls, culture has a significant impact as well as geographical location, and rural communities have greater disparities than urban areas. It is also the case that social and economic constraints impact on girls disproportionately and that families and societies give a lower priority to girls’ education. This is when the importance of making primary education not just free but compulsory comes in. In Muslim countries, where this problem is particularly acute, waiting for cultural change will take too long and is of itself a by-product of education. One cannot come until we have achieved the other. This is when compulsion becomes necessary. We should welcome India’s move to make free education additionally compulsory so that all parents have to comply with the law irrespective of religion or values. Implementing that will be expensive; the estimates for India are $40 billion alone for the first tranche of children to go through school.
While the gender disparity figures for enrolment are improving slowly, the staying on and completion rates are not promising and the drop-out rates for girls, which is significantly higher than for boys, is worrying, with the resultant impact on secondary education as well. In sub-Saharan Africa, the ratio of girls’ to boys’ enrolment in secondary education actually fell from 82 per cent in 1999 to 79 per cent in 2007. Overall, only 60 per cent of countries have achieved gender parity in primary education, with a mere 30 per cent achieving it for secondary education. This gender gap is replicated through tertiary education, in stark contrast to the developed world, where women outnumber men in higher education.
I turn to the situation in conflict-afflicted, fragile states. Displacement is a major factor, with the average period in a conflict calculated to be some 10 years—in other words, potentially the entire period that a girl or a boy would spend in education. Hence millions of these children do not even have basic literacy. Therefore, there is a pressing need for the donor countries’ humanitarian aid policy to be revisited. Currently, the 2008 humanitarian consensus action plan does not even mention education, which is seen primarily as a development activity. What priority are this Government likely to give to education in conflict situations? We have amassed some considerable skill in this area in Afghanistan, and perhaps we need to build on this best practice to replicate elsewhere.
Finally, I draw the House’s attention to the critical recent report of the National Audit Office, which found that since 2001 funds spent by DfID have meant a positive contribution towards achieving this MDG, but it has not improved the quality of education or reduced drop-out rates. Its report recommends that funding should be better targeted towards improving people attendance and attainment—in other words, to deliver a more sustainable educational outcome.
We welcome the DfID review recently announced of bilateral aid. In seeking value for money, considering countries such as China for partnership agreements in this area may need revisiting. Such countries have growth rates and the ability to lift their people so dramatically out of poverty at a very different scale to those poorest and fragile states in sub-Saharan Africa and Asia.
This is a critical time for the world economy. The resilience of the developed world has been tested in the past three years and it has, on the whole, risen to that challenge. It has had the human capital and resources to do so. However, the poorest countries in the developing world do not have these levels of resilience, as we have seen from the rise in small-state conflicts. It is imperative that this country, the European Union and other developed countries rise to the challenge of international solidarity by meeting in full their obligations for these MDGs.
The Lord Bishop of Liverpool
My Lords, whatever reasons lie behind the scheduling of today’s debate, it is fitting that in these Houses of Parliament, while the other place is wrestling with the state of our finances and debating the Budget, this House should be addressing the millennium development goals. Whatever our straitened economic circumstances, in the context of the global picture and the parable of Dives and Lazarus, we are the rich, and we live under a moral imperative to consider the poor.
Therefore, I thank the noble Baroness for tabling this important debate. On behalf of these Benches, I welcome her to her post and look forward to working closely with her. I agree entirely with the analysis that she has offered your Lordships’ House this afternoon. I also pay tribute to DfID’s achievement in working towards the millennium development goals, in particular on primary education. I know that DfID has worked closely with many of the faith community NGOs. We welcome that partnership, too.
As we have heard, we have five years in which to achieve the aim of eradicating global poverty. The meeting of the G8 this week and the MDG summit in September are critical to this purpose, as the global community agrees what needs to be done in order to achieve the millennium development goals within the next five years. Millions of children are still living in poverty—a level of poverty that we in the developed world would struggle to imagine. Every day they face illness, hunger, violence and death as a result of this poverty. Nine hundred million people still go hungry every day in this world. That is surely a scandal of injustice.
Therefore, it is encouraging to hear of success stories as a result of the investment in the MDGs. We must remember that these stories take place locally, child by child and community by community—that is how they are experienced. As we have heard, the number of children in primary education has increased by 30 million since 1999. That is a great achievement. The number of people with access to treatment of HIV/AIDS has increased from 100,000 to over 4 million. That, too, is a great achievement. Figures also show us that the proportion of the world’s population living in poverty has fallen from a third to a quarter. That is another great achievement.
However, we cannot be complacent. At the current rate, as we have heard, many of the goals will simply not be reached by 2015, especially in areas such as sub-Saharan Africa. The UN recently reported that the 58 countries that still have not reached universal primary education are not likely to achieve it by 2015 given the current rate of activity and investment.
Therefore, it was good yesterday to hear in the Prime Minister’s Statement on the European Council the Council’s commitment to the millennium development goals. The noble Lord, Lord Hannay, pointed out that many of our European partners are reneging on their commitment to give 0.7 per cent of GDP, so it was encouraging to hear from our Prime Minister of the Government’s insistence that these goals be monitored annually.
As we know, we live in an interdependent world, with all these issues impacting on one another. The recent global financial crisis has shown how intertwined our economies and markets really are. Just as our world is interrelated, so, too, the millennium goals are interrelated. We turn our attention in this debate to primary education, but in so doing we cannot ignore the other goals.
This last week, I was at a conference at Liverpool Hope University sponsored by the Council of Anglican Provinces of Africa. It was led by the wife of the Archbishop of West Africa, who is herself a consultant anaesthetist. The members were all women in leadership in health, education and public service. Their unanimous view, which was expressed to me cogently, was that the empowerment of women in Africa is key to delivering the goal of universal primary education. Like pick-a-sticks, all these goals are interlaid. We could be tempted to duck our responsibilities. It has been encouraging to hear from the coalition Government that this nation will keep to its commitment of 0.7 per cent of GDP.
With regard to growth in primary education, significant progress has been made. For example, in many countries in Africa the children’s enrolment fee is paid through aid, making education free at the point of use. As a result, many more children now attend primary school, but there are still issues of sustainability and quality. Some countries struggle to find sufficient school buildings and teachers. In Ethiopia, one in five children leaves school in the first year. The children most likely to drop out of school are girls, who are responsible in that culture for collecting water, household chores and the care of family members who are ill. The standards of literacy and numeracy remain low, especially in sub-Saharan Africa, where more children of secondary school age are in primary education.
There is still so much more to do to achieve the goal of universal primary education by 2015. The noble Baroness, Lady Falkner, has already referred to the National Audit Office, noting the importance of concentrating not on spending but on results and output. Instead of measuring the amount of spending, we should assess the quality of the teaching and the recruiting and retaining of professional teachers. The United Nations recommends the elimination of school fees, particularly for the poorest families. It recommends provision of transport to school, particularly for the rural poor. It recommends free school meals and basic health services being made available in schools, and recognises the importance of adequate teaching materials and the distribution of free textbooks. It is a source of pride that investment in education has increased from $1.6 billion in 1999 to $5 billion in 2006, but the United Nations estimates that what is really required annually is a budget of $11 billion. That is why we need to monitor this annually, as the Government have proposed.
At the United Nations millennium development goals summit this September, it is vital that there is an agreement of a five-year plan to achieve all the goals by 2015. Accountability will be essential—accountability for the developed nations to ensure that they give the money to which they have publicly committed; and accountability for the developing nations, so that they are held to account for the way that money is spent and the outcome of the spending. Innovation is also essential. There must be much more sharing across nations and communities. Progress with each goal must be sustainable. Achieving those goals for 2015, but losing progress by 2020, would not be a success.
The Prime Minister has rightly made much of the big society. This is a vision that should be applied not just to these shores but to global issues. We cannot solve the problems that give rise to the millennium development goals by government alone. We need to activate the whole of civil society internationally. This is happening through the faith sector, NGOs and Comic Relief and other media ventures, but more people need to be mobilised. For example, what about the new academies and free schools? Should they not be encouraged to twin with villages in challenging parts of the world? There should be mutual relationships and parity of giving and receiving. Some of the schools in my diocese of Liverpool do this. Whereas we share resources, science and technology, we receive from the other schools supreme examples of motivation, music and rhythm, and lives lived closer to the earth and the realities of the changing climate. The developing world needs educating but so does the developed world. It needs educating in the realities of what is being called “one world living”.
As I close, I call on the Prime Minister, through the Minister, to attend the summit himself in September, and convey to that meeting the priority that he and the British Government place on achieving the millennium development goals and lifting millions of people across the world out of poverty. The Prime Minister’s own leadership on the international stage is important as developed nations are called on to redouble their investments and efforts over the next five years.
Baroness Goudie
My Lords, talent is universal but opportunity is not. I welcome the Minister’s statement that the coalition Government will continue to support the millennium goals. The coalition Government and the opposition need to put pressure on Governments, as did our former Prime Ministers, Mr Blair and Mr Brown. We need to have the political will to do this. Our political will and that of the countries we are trying to assist is important in this regard. We have to put pressure on those countries in many ways.
I will not go through the disgraceful World Bank statistics on sub-Saharan Africa, which I have seen many times, but I was disappointed when I looked at them earlier this week. Those countries could assist the girls in their populations if they wished to do so, but they do not. We have to put pressure on them in every way that we can.
I wish to tell noble Lords a story. A friend of mine, Wenchie Yu Perkins, works for the American State Department. Before that, she was a colleague of mine in Vital Voices Global Partnership. She visited a 12 year-old girl in Nepal involved in a Room to Read project who had a scholarship at an elementary school. Her mother is illiterate and makes less than $2 a day. Her father is a migrant worker in Qatar. However, he never sends money home because he is still repaying the fee to the agency and to his employer, who has his passport. The girl lives in a hut—I was sent photos—filled with chickens, goats and small mountains of potatoes. She dreams of becoming a doctor and improving her family’s situation. My friend told her to study very hard to become a doctor so that she could make her mother proud. However, as Wenchie says, and as I know, the real problem is whether the girl can finish secondary school before she is married off or sold off to pay for a new roof for the hut. We know that these girls are sold for all sorts of reasons.
I welcome the coalition, but between now and the meeting in September and the other G8 and G20 meetings, I ask it to get our people who work behind the scenes to put together an agenda that can bring about change. This change involves money, auditing that money and getting civil society and Governments to work together, but more importantly it should aim to bring on board the corporate sector working in these countries. That sector is taking away minerals and other products from them but is not giving anything back. It gives back a small proportion of its profits, but not much more than that. I have gone through the CSR reports of companies working in these countries. Pressure must be put on China to give back. We know that some oil refineries in Nigeria and Chad are owned by China. I am not attacking China, I am just saying that we need to put pressure on China. We also need to put pressure on American companies that have taken huge stakes in sub-Saharan Africa but pay small lip service to CSR.
India has been mentioned. Many charities are working in India, putting their money into the Government and civil society. They are educating children before they go to work. We know that, unfortunately, children in rural areas have to work. The charities run a number of schemes through the CAP Foundation which can educate children for £89 a year and can keep a child in school in the mornings. These projects are there. Although the money we send is very important, it is not just about money. Increasingly, we have to audit it, put it through NGOs and other organisations, and see where it is going. Just giving money in flat donations from country to country is not working. The United Nations is full of talk, but it does not actually deliver, because it is not on the ground.
The work of Prime Ministers Blair and Brown should be continued by this new coalition Government—and I am pleased that they are doing so. They should work behind the scenes to get real results and value for money, because I can give many examples of where money is wasted and not used properly.
Lord Freeman
My Lords, I and my colleagues on these Benches warmly welcome my noble friend Lady Verma to her new position. We wish her well. I am sure that all your Lordships will agree that her speech was full of assurance, with a comprehensive and attractive style.
I want to concentrate on the benefits of primary education, particularly in Africa, and the consequences for health. The right reverend Prelate the Bishop of Liverpool put his finger on one of the most important issues in education in Africa—reaching women, girls and, in particular, mothers, because they provide the leadership and encouragement for children to learn the importance of health and proper nutrition. In rural areas in sub-Saharan Africa, there remains a major problem with the supply of clean water. Unclean water can lead to not only high child mortality but a sense of depression—a circular depression—in terms of trying to improve the living standards of the communities.
I declare an interest; for the past 10 years, I have been chairman of a Christian charity, the Busoga Trust, which operates principally in Uganda, but offers advice in Kenya and Tanzania. It was the Bishop of Busoga, when he came to preach to a rather affluent community in one of the Kensington churches 25 years ago, who called for a more coherent effort in dealing with sanitation and water supply in Africa. It is a great tribute to him that 25 years later we have built more than 1,000 wells, principally in Uganda. We teach to women and children the importance of using clean water.
Perhaps I may paint a pen picture for your Lordships. In northern Uganda, next to the border with Sudan and the Congo, in many rural areas where there are no towns but small villages, children are still walking between three and five miles a day with jerry cans on their heads to collect impure water. The problem with impure water, when it comes from a well used by cattle, is that you get malaria from mosquitoes, and many other diseases that are often fatal. Child mortality falls where clean water has been introduced as a result of building a well and by providing education about proper sanitation and the use of that clean water. Typically, compared with the situation 10 years ago in the north of Uganda, when a clean well is constructed, the mortality rate falls; the women need to produce fewer children because more of them survive. It is as brutal as that.
I am glad that there is all-party support for what my noble friend outlined in terms of the importance of education. I must say also that there is all-party support for the 0.7 per cent target for international aid. It took some courage from both the previous Administration and the coalition to stick to that, because all the opinion polls were telling us that that was one departmental budget that should not be sacred. I am glad that it is.
I sense that there is all-party support, so I am sure that noble Lords will allow me to compliment colleagues in my party on an excellent document, One World Conservatism, which is available in the Library. It is not a party-political document. On page 38, it states that,
“60 per cent of Africans do not have proper access to sanitation … Moreover, safe drinking water is the development priority of poor people”.
This is bound up with what my noble friend on the Front Bench talked about, namely better primary education.
The coalition document, which noble Lords will have read, is also impressive. Page 22 deals with international development. The first of the two paragraphs that I will quote states:
“We will support actions to achieve the Millennium Development Goals. In particular, we will prioritise aid spending on programmes to ensure that everyone has access to clean water, sanitation, health care and education; to reduce maternal and infant mortality; and to restrict the spread of major diseases like HIV/AIDS, TB and malaria”.
We all support those aims. The document goes on to state:
“We will support innovative and effective smaller British non-governmental organisations that are committed to tackling poverty”.
Perhaps I might conclude by making a special plea to the Minister to convey to her colleague the Secretary of State the wisdom of turning back the clock. I make no criticism of the previous Labour Administration for the amount of aid that was distributed. However, there is one small aspect of policy that we need to change. Clare Short in her wisdom decided to withdraw the direct grant to non-governmental organisations, principally charities, of 5 per cent of total aid spent, and to spend 100 per cent through the Government. That may seem a modest change, but it had a dramatic effect on charities such as the Busoga Trust. The aim of the coalition to support innovative and effective smaller British NGOs is wise because it can be cost-effective. I very much support auditing how aid is spent. The coalition document and my noble friend on the Front Bench are absolutely right: we must have value for money. That means checking that money is spent correctly, without corruption and in the most effective fashion.
I conclude by paying tribute to DfID staff. Many noble Lords who travel, principally in Africa, have met many of them. It is often a very hard and unrewarding job that is not fully appreciated by politicians who travel from the United Kingdom. DfID staff are at the sharp end and I am sure that all noble Lords will join me in thanking them, and all Ministers, for their hard work.
Lord Brett
My Lords, I begin by joining noble Lords who have congratulated the noble Baroness, Lady Verma, on her appointment. She is already an impressive Dispatch Box performer. She has great commitment to international development and I am sure that she will bring great distinction to her role. I also compliment the coalition Government on retaining the 0.7 per cent aid target, and will compound that by congratulating them on ring-fencing the DfID budget. Of course, three compliments in a row in your Lordships' House are usually followed by a “but” or a “however”, and I will provide both.
This is the wrong debate at the right time. It is wrong only because it is far too narrow. The case for primary education is powerful; I know that because I sought to widen the agenda and was told that it was set because primary education feeds into other areas. However, there are eight millennium development goals. We could have had a debate on health that would have included child mortality, improved maternal health and combating AIDS. Each year, two million people die on the day they are born, 500,000 women die in childbirth and 72 million children miss out on education as a result. Those facts are connected to international aid, but these are powerful health issues in their own right.
We could have discussed the new threats to development from the global downturn, including the recession, which is forcing 90 million people back into poverty, and perhaps the fact that investment in developing countries is predicted to fall by 80 per cent over the next few years. I am quoting from a fascinating document that has already been complimented in this Chamber—namely, One World Conservatism. I part company with the noble Lord, Lord Freeman, in his argument that it is not a party document, given that it lends two pages to what it calls “Labour’s mistakes”. That, to me, suggests that it may well be just a party document. It says:
“Internationally, Labour’s failure to focus on outputs and outcomes means that our aid has not achieved all it could”.
I am more than happy to accept that we can always do better, that aid can be better spent and that we have to learn the necessary lessons, but essentially I believe that we should have had a debate today not on a single millennium development goal but on the task of achieving the MDGs by 2015.
I note that every speaker in the debate other than the Minister has gone beyond the subject of primary education. I do not disagree with a word that the Minister said, or indeed with what others have said, but the matter that I have to deal with goes beyond primary education. Although we have heard about the funding, my question is: what are the Government’s intentions on the broader front?
We also heard—I think that it was in the Conservative manifesto—that there would be a legally binding commitment on the figure of 0.7 per cent within the first Session of Parliament. A draft Bill was certainly produced by the previous Government, and the Prime Minister said yesterday:
“As for making it legally binding, we agree with that, and will produce plans to make it happen”.—[Official Report, Commons, 21/6/10; col. 39.]
The coalition document talks about a parliamentary resolution. I therefore ask the Minister—I did not give her notice of this question, for which I apologise, although I gave her notice of a whole raft of questions to come—how and when the Government intend to make that legally binding declaration, through an Act of Parliament or whatever.
The subject of education will be coming up very soon, on 7 July, at an education summit in South Africa. Another question that I wish to ask the Minister is: who will represent the UK Government at that meeting? Will it be someone at Secretary of State level—the Secretary of State for International Development or the Secretary of State for Education?
I also want to refer to the two major reviews that are taking place. Again, that tells me that this is the wrong debate at the right time. This would have been a great opportunity to have some input into those reviews. We have a whole day for an international development debate—a luxury that we have rarely had before. There are six speakers and we will have finished by five o’clock. That does not do justice to a question on the MDGs. However, it is not the fault of the Minister or of noble Lords; it is simply that we had a very narrow agenda and a very short period of notice. Because we are not discussing the broader church of the MDGs, it is a bit like Hamlet without the prince, or perhaps I should say that it is a debate on international development without the earl—the noble Earl, Lord Sandwich, who brings major expertise to our debates. I think also of the noble Lord, Lord St John of Bletso, and, on my Benches, my noble friend Lord Judd. In addition, from the Bishops’ Benches several right reverend Prelates have given us very wise counsel. All those people could have taken part in a debate leading into, and assisting the Government in, the two reviews that they are seeking.
One of those reviews—on bilateral aid—was always going to take place; the previous Government had planned that. A more recent element is looking at the money that we invest in the international community via the United Nations and the EU. Here I take some issue with the development matters set out in One World Conservatism, which I quoted earlier, and I declare an interest. For four years, I was director of the London office of the International Labour Organization, which covered the United Kingdom and the Republic of Ireland. Before that, I was vice-chairman of the governing body for nine years, and latterly I was chair of the ILO.
During that decade it was very clear that the Government who put the greatest pressure on reforming United Nations agencies’ efficiency was the UK Government. DfID was very helpful in that; it developed the partnership arrangement. That was not just signing cheques and nothing more; it was a very interrogative process, where, over the lifetime of the project, you would have to show not only that it fits in with the core mandate of the UN agency and that there is no overlap but that you can achieve milestones. Money is not paid up front or at the end but on the basis of achievement. In that sense, one of the weaknesses in the document that concerns me is the idea that you will pay at the end for the number of people put into a school, so you pay a Government a fee if they have 20,000 more children in school. That gives rise to three questions. Where do the schools come from in the first place? Who is training the teachers? Where do the teachers come from? An investment is required up front, and it is not simply a payment-by-results system. I think that the DfID partnership arrangements, which were anything but a signing-of-cheques-without-questions system, was a very good approach and one that I hope will not be abandoned. Clearly, it is right that the Secretary of State, in saying that we are ring-fencing the money, can also say that we have to examine the value. I am sure that greater clarity and perhaps greater purpose will come out of that.
I have declared my interest but I should also regale the House with what it is like to be a director of a United Nations agency’s office. I was tasked by my director-general with reducing the budget of the office in London, which had about eight staff. I finished up recommending that we should close the office as I believed that, in relation to Europe, the money could be better spent in eastern and central Europe or, in relation to the rest of the world, in sub-Saharan Africa than in London. In that task, I was aided by the fact that the partnership arrangements that we had with DfID meant that we could pair DfID’s technical departments in Scotland with our technical departments in Geneva, and that could be done more efficiently than going through the conduit of what you might call an embassy in London. That would not necessarily apply in other parts of the world, but it shows that within the UN system we are not wedded to simply maintaining offices for reasons of prestige or for anything else.
This interesting document—One World Conservatism —fails the test of the noble Lord, Lord Freeman, for not being totally independent. Mario Cuomo, the governor of New York said:
“You campaign in poetry. You govern in prose”.
Parts of this document relating to DfID lead me to think that we should change that to, “You campaign in fiction but govern in fact”. I hope that the reviews will be evidence-based and not based on prejudice or the ideology of authors of any political party’s campaign propaganda before an election.
I have given the Minister notice of a few questions. I do not expect that she will be able to answer them all today, but perhaps we may have answers in writing. They touch on some points made by other speakers in the debate. Looking at the review of DfID spend in international organisations, what consultation will take place with EU partner Governments? The EU is an important component; sometimes it is criticised and sometimes applauded. What about the non-governmental actors—a question that was asked by the right reverend Prelate? Some non-governmental actors hold formal governance positions. The ILO, the CBI and the TUC have elected members of the governing council. What plans do the Government have to ensure interaction with other government departments that deal with the UN agencies, the FCO, the Department for Work and Pensions, the Department for Education and so on? What about consultation within the wider NGO community? The faith groups are very important, as are the agencies, many of whom are based in this country, from Oxfam to War on Want and Feed the Children? They can all tell you what it is like dealing with UN agencies on the ground. Furthermore, what consultation is there on the bilateral spend within Whitehall and with the wider NGO community comprising faith groups, trade unions and charities?
I have been privately somewhat critical of DfID because I do not think that it has understood or taken on board sufficiently the role of the private sector in development. Not all the multinationals in Africa lack a sense of conscience. In many cases, and if given an opportunity that makes economic and social sense, they are prepared to assist. Therefore, what consultations are we going to have with those groups?
I suggest that it might be useful for the Government to consider a consultative conference with those NGOs to get their input while the review is taking place and to get an interactive response. If I give your Lordships my view on the situation in Tanzania, I may give it from the Facebook point of view, the trade union point of view or a charity point of view, but if we are in the same room we can interact, and that can be very helpful indeed.
I also seek a couple of assurances in relation to fears that have been raised with me, some of which I share. Will the Minister reassure us that the Government remain committed to ring-fencing 0.7 per cent of gross national income and that that money will be spent on poverty alleviation? Will she assure us that it will not be transferred to other budget heads required for dealing with other important issues such as climate change? There were proposals to increase spending on that, but I hope that it will not be at the expense of poverty eradication. I do not expect all those questions to be answered today.
Finally, I draw the Minister’s attention to a point made by the right reverend Prelate. There are five years in which to seek to move towards meeting the millennium development goals and I echo the question: who will represent us at the major summit in September? I, too, believe that it should be the Prime Minister. On 17 June, the UNDP produced a report, having taken evidence from 50 countries, that makes several proposals. It looks at what has in their view been successful and what needs to be done. This is therefore an important document, but I do not expect that the Minister has yet read it or that DfID officials have yet given it all their forensic examination. However, what is the Government’s intention in taking that report on board, and how will they prepare for and deliver a view at the summit in September?
Baroness Verma
I thank noble Lords for all their thoughtful and helpful contributions to the debate, and for their warm welcome and kind words. As I set out in my opening remarks, the new coalition Government recognise their responsibility to ensure that every aspect of our UK aid budget both delivers and demonstrates value for money. Programmes supporting access to education, among other key services in developing countries, will be prioritised in aid spending. We will do so in ways that are appropriate to the country context and in ways that will deliver results, whether it is through state or non-state providers, or, indeed, through a combination of both. Our approach to supporting education will be based on what is best for the children in developing countries and one which ensures that the British taxpayers’ money is well spent.
Before responding to points raised in the debate, I want to make some additional points about access and quality. A good school is one that is accessible to every child in the locality; distance and cost should not prevent children from attending regularly year on year. Classrooms should be well equipped places, safe and free from harassment or discrimination.
Girls and boys should have equal rights. The same goes for those children living with disability or HIV/AIDS. Each classroom should have a well trained and committed teacher. Learning materials should be made available. The school should be well led, managed and governed, supported by an efficient education system that strives for education excellence at all levels, assures standards and is responsive and accountable to the public. Children should be supported to reach their full potential. We expect this for our children here in the UK. We should expect no less for children everywhere.
The National Audit Office’s report on DfID’s bilateral support to primary education, published on 18 June 2010, showed that in DfID’s 22 priority countries for education, there has been significant progress on enrolment, improving the balance between boys and girls. The same report also acknowledged that DfID policy advice and financial support has been instrumental in helping partner Governments to boost enrolment. The report states that 14 of those 22 priority countries are on track to achieve the enrolment goal by 2015. It also records that progress on gender parity has been good, with eight of the 22 having already achieved the goal.
Although such progress is not exclusively due to DfID, the report recognised the importance of the role that the Government have played in facilitating change. It has done that by giving prominent advisory support to Governments, by linking its budget support to those aims and by soliciting further support from other donors, typically leveraging funding at levels of two to three times that of the department’s investment.
Governments have also responded with increased national funding. It is this partnership with developing country Governments, together with other donors, civil society, faith groups, the private sector and foundations, that will meet the challenge of delivering universal primary education. The NAO report shows that progress is being made, but it also shows why the Government are right to focus on results: concentrating on outputs and outcomes, not just inputs.
The high cost of education is the biggest deterrent to poor families educating their children, particularly girls. Support to poor and marginalised children to have access to basic services needs to be part of a comprehensive programme, combining system reform and quality improvement. However, we must recognise that in some countries, managing and sustaining increased enrolment can be difficult. That is particularly true where schools have been ill prepared for sudden class size rises and have found themselves without enough teachers, infrastructure or learning materials. There is also an issue of affordability of expanding access to secondary education. The response may involve partnerships with the private sector and targeted subsidies for girls and poor families.
Poor health and nutrition can also seriously undermine school attendance and achievement. Evidence from India and Vietnam indicates that children who are stunted at the age of one will have a lower cognitive ability at the age of five than that of their peers, regardless of their socio-economic background or their parents’ levels of education. While education outcomes support other development outcomes, investments in nutrition and health likewise improve education outcomes. The work that DfID is doing in Bangladesh, Ethiopia, India, Nepal, Nigeria and Zimbabwe to improve the nutrition of at least 12 million children over the next five years amounts to 10 per cent of all undernourished children around the world. That is vital. It will help to ensure that when they start their primary education, their cognitive ability is not already impaired.
The millennium development goals cannot be reached without adequate investment in higher education and skills. Good quality universities and further education colleges are needed to train skilled professionals, the public sector managers, business leaders, and health and education workers of tomorrow. Investment in higher education also drives the science and innovation necessary for economic growth. In sub-Saharan Africa, a student who spends one extra year in higher education has been found on average to increase average annual growth by 0.39 per cent. Through the Development Partnerships in Higher Education programme, we are working with the British Council to support up to 200 partnerships between higher education institutions, and we are supporting education research through three consortia looking at education access, quality and outcomes.
The new Government are reviewing the aid programme to ensure that we target UK aid where it is needed most and where it will make the most significant impact on poverty reduction. We are determined to ensure that the aid budget is used effectively and delivers value for money for the world’s poorest people.
I now turn to questions raised by noble Lords. I will endeavour to answer as many of them as I can, and where I cannot I will provide a written answer. My noble friend Lady Falkner talked about gender inequality. While we all agree with her desire to see the disparity in access to education between boys and girls removed, it is crucial that we work in ways that encourage states to engage with achieving the MDGs. That is why we are carrying out these reviews to see what works and what does not. We owe it to the poorest and to those who give funds that we can guarantee the best value and best outcomes for all those whom we try to reach. The noble Baroness asked about the impact of food prices on education. DfID has provision for contingency funds to meet unexpected needs and has specific provision for humanitarian support.
I agreed with almost everything that the right reverend Prelate the Bishop of Liverpool said. The empowerment of women is key. That is why maternal and child health will be one of our key priorities and why we want to ensure that we look not just at the outcomes for those who are enrolled in the programmes for education but at the quality of the education. I completely agree that the big society should not be constrained to these shores and that we should see ourselves as part of a global big society. My right honourable friend the Secretary of State spoke eloquently in a speech to Oxfam on 3 June when he said that we are part of a much bigger picture. That is why I agree that our duty is not just to young children here but to all children across the globe.
The noble Baroness, Lady Goudie, raised a number of important points about China. In developing global partnerships with China, we can make progress in achieving positive outcomes. Noble Lords all agree that we need to have better audit trails, so that is why we are carrying out reviews of all programmes funded or supported by DfID. We will bring the China aid programme to a conclusion as soon as practicable, but in the mean time we will look at other ways in which we can work more closely with China in the work that China is doing in Africa.
I thank my noble friend Lord Freeman for his kind, warm words. The coalition programme states that we will use the aid budget to support the development of local democratic institutions, civil society groups, the media and enterprise. We must support efforts to tackle corruption. My noble friend highlighted the document to which the noble Lord, Lord Brett, referred. I agree with my noble friend—I do not think that it is a political document. It highlights some of the excellent work being done, and some of the work that needs to be looked at again and, perhaps, be done better. Where there have been problems, we sometimes need to be big enough to say that mistakes were made so that we can reconcile that with improvements and better outcomes.
I thank the noble Lord, Lord Brett, for his kind welcoming words. However, I was waiting for the but, and I got it. I know he agrees that this debate unites the House. I do not agree with him that the narrowness of the debate is the reason why there are so few speakers today. As he will be fully aware, the reason for the number speaking in this debate is the short notice for it rather than the narrowness of its focus.
Lord Brett
I recognise the short notice of the debate. One of my sub-questions was whether we will have an opportunity for that wider debate at a later stage.
Baroness Verma
My Lords, as the noble Lord is aware, I do not schedule debates. That will be for the usual channels and I am sure that the noble Lord will have his influences there.
As regards the questions raised by the noble Lord, Lord Brett, we routinely meet EU partner Governments in a variety of fora to discuss development issues and we use these discussions to raise the multilateral aid review. We are committed to being open and transparent about how British taxpayers’ money is spent in the developing world. DfID is considering how best to most effectively engage the public in this process.
On interacting with the UN and other agencies, we have already informed our counterparts in other government departments of the purpose of the review. When we make our assessments of the relevant agencies we will do so in close co-operation with those departments with which we are working on funding and policy. We will of course consult widely with other government departments as we take the bilateral aid review forward.
The Government want to engage and involve the whole country in the difficult decisions ahead. The spending review framework published by the Treasury sets out how we will do this across government. This includes a series of events over the summer where a range of groups will discuss various aspects of public spending. DfID is considering how to most effectively engage the public in this process.
The Government are committed to honouring the 0.7 per cent commitment on overseas aid from 2013. We will enshrine this commitment in law. We are committed to keeping both Houses informed and to consulting fully with both Houses. The views of your Lordships’ House are of great interest to the consultation and it is crucial that noble Lords take the opportunity to be part of the consultation process.
The UK’s £1.5 billion commitment to fast-start funding for climate change between 2010 and 2012 is drawn from the UK’s aid budget. We have reaffirmed the UK’s commitment to giving 0.7 per cent of GNI as ODA and are on track to get to 0.7 per cent by 2013. I will have to write to the noble Lord on a number of his questions because I do not have the answers at hand.
I should like to return to what children learn. Improving the quality of education is complex and multidimensional, but we have a good idea of what works. Key strategies associated with success include more and better trained teachers; increasing time on tasks for teachers and children in school; effective leadership in schools; establishing and measuring standards; having structures that empower people and hold them to account; challenging inequity in access; and rigorously monitoring outcomes.
To achieve the goal of universal primary education, the international community needs to address equity, put teaching and learning at the heart of policy and practice, invest in good quality education, and inspire collective action. The United Nations millennium development goals summit in September is the moment for the international community to show that universal primary education by 2015 is a challenge that it will not abandon and to make clear that to achieve that goal we need even greater collective action.
I can assure the House that this Government will give their support to more concentrated action by developed and developing countries, so that those children who are missing out on education—both today’s generation and tomorrow’s—finally get the education that is their right.
I conclude by repeating the five key points made in a speech at the Royal Society on 3 June by my right honourable friend the Secretary of State for International Development: first, that global poverty both affronts our moral conscience and is a direct threat to Britain’s vital national interests; secondly, that well spent UK aid is among the most effective of the instruments we can use, but that radical steps must be taken to ensure that our aid achieves all it can; thirdly, that transparency, accountability, responsibility, fairness and empowerment will be our watchwords; fourthly, that two new concrete steps have been announced to achieve this—the creation of the independent aid watchdog and our commitment to a UK aid transparency guarantee; and, fifthly and finally, although aid is important for development, we must use the whole of the British Government’s policy spectrum to tackle global poverty.