House of Commons

Thursday 15th July 2010 Commons Chamber

Thursday 15 July 2010

The House met at half-past Ten o’clock

Prayers

Thursday 15th July 2010 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Thursday 15th July 2010 Commons Chamber

The Secretary of State was asked—

[Jessica Lee (Erewash) (Con)]

1. What assessment has been made of the effect on providers of home information packs of the suspension of the requirement for such packs to be produced.

[Mr Adam Holloway (Gravesham) (Con)]

3. What assessment he has made of the effect on the housing market of the suspension of the requirement to provide home information packs.

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

The suspension of HIPs has given a much needed boost to the housing market. Reports from the industry suggest that the number of new homes coming on to the market has increased by more than one third since HIPs were suspended. We have also estimated that abolishing HIPs could save consumers just short of £900 million over the next 10 years.

[Jessica Lee]

Estate agents in Erewash have conveyed to me their relief at the home information pack scheme being abolished. Indeed, one estate agent has just described the scheme to me as being a complete barrier to people selling their homes. Can the Secretary of State inform the House whether that sentiment is shared by other people working in the housing sector across the country?

[Mr Pickles]

I am delighted to inform my hon. Friend that joy and happiness among estate agents is not confined to Erewash. Throughout the land, there is a general understanding that the drag anchor that HIPs were is no longer a constraint on the housing market.

[Mr Holloway]

What further plans does the Secretary of State have to roll out that happiness and smooth the conveyancing process?

[Mr Pickles]

I am all for spreading as much joy and happiness, and indeed love, as I can, where’er I go. It was clear even from the trials that HIPs were going to be a real mess. We now need to look to the future and at what can be done to speed up transactions. I know that my right hon. Friend the Minister for Housing is looking at ways to speed up the introduction of e-conveyancing.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Why has the Secretary of State decided, alongside the abolition of HIPs, that energy performance certificates should no longer be required at the point when a house is initially viewed for purchase? Does he intend to downgrade the importance of those as well?

[Mr Pickles]

Gracious, no—indeed, under our green deal, energy certificates will perform a much more important role. They will be about bringing the price of energy down and ensuring that somebody with a house that has a good energy certificate does well, because we want to get houses on to the market. We will insist that the energy certificate be commissioned and in place before the sale takes place. It is about speeding things up—the hon. Gentleman is not familiar with that idea. We are in favour of house sales, not bureaucracy.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I am glad to hear that the right hon. Gentleman thought deeply about the consequences of removing the home information pack arrangement, but in his careful and calculated assessment, did he work out the number of people whose jobs might be affected? Clearly a number of people across the housing market professions have been gearing up to work in that area and will now no longer have that employment. How many people?

[Mr Pickles]

When the hon. Gentleman was in another job, during his brief interregnum between spells in this place, he used to advise me solidly to cut away waste and speed things up, and I have followed that advice. HIPs were just part of a service that was provided. We have just heard from the hon. Member for Southampton, Test (Dr Whitehead) about energy certificates, and a number of such services are available.

It has to be said that it is not as though the removal of HIPs came as a shock. It appeared clearly in the manifestos of the Conservative party and the Liberal Democrats, and in the coalition document.

[Chris Williamson (Derby North) (Lab)]

2. Whether he plans to introduce a national register of private landlords.

[Lilian Greenwood (Nottingham South) (Lab)]

14. Whether he plans to review the regulatory framework applying to managing and letting agents.

[The Minister for Housing (Grant Shapps)]

The current legislative framework delivers the right balance of rights and responsibilities between landlords and tenants, so, as I announced to the House on 10 June, we have no plans to add to it, whether through a national register for landlords or the regulation of managing and letting agents.

[Chris Williamson]

Why is the Minister so indifferent to the rights of private tenants? Is not he worried that weakening local authorities’ powers will give a green light to rogue landlords and lead to a surge in the number of houses in multiple occupation? I ask him in all sincerity to think again about ditching the plans to give private tenants greater protection—or is he happy to usher in a new era of Rachmanism?

[Grant Shapps]

The hon. Gentleman may not have been here when I last addressed this subject, but I am keen to protect tenants’ rights and to ensure that sufficient landlords can operate in the market and are not regulated out of it, thereby making rents more expensive for the very people who want to go into the private rented sector. I looked long and hard for and asked in the Department about the supposed landlords register that the previous Government announced. I could not find a scrap of paper about it, leading me to conclude that it was more a case of a press release than a policy on a landlords register.

[Lilian Greenwood]

There are almost 11,000 private tenants in my constituency, many of whom are students, including overseas students, who are particularly vulnerable to exploitation by rogue landlords—there are numerous examples of that. Does the Minister agree with the Association of Residential Letting Agents that tenants deserve protection, and that regulation is required to drive up standards?

[Grant Shapps]

I agree absolutely that tenants deserve protection and that regulations are, of course, required. However, perhaps the hon. Lady would like to reflect on the fact that we have been in government for two months whereas her party were in government for 13 years. There must be a good reason why the previous Government did not regulate the industry further in that time, and there is: many different powers are available to local authorities to ensure that they look after residents. Those powers now include HMO-ing, and we will ensure that they apply in areas where local authorities want them, but we no longer need the bureaucracy of their applying nationwide.

[Nick de Bois (Enfield North) (Con)]

4. What steps he is taking to assist small businesses with payment of business rate bills.

[Dan Byles (North Warwickshire) (Con)]

12. What steps he is taking to assist small businesses with payment of business rate bills.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)]

We are doubling the level of small business rate relief in England for one year, from 1 October 2010. More than 500,000 businesses in England are expected to benefit, with approximately 345,000 businesses paying no rates. That will be a valuable reduction in fixed costs for new and existing small businesses.

[Nick de Bois]

In Enfield North, we have been campaigning hard to bring in new businesses and start-ups and to encourage people to relocate to the area. What practical steps will the Under-Secretary take to allow my local authority to get behind that campaign?

[Robert Neill]

I am aware of my hon. Friend’s campaign and I pay tribute to his work for small businesses in his area. The Government propose to introduce a business growth bonus, which will reward local authorities for giving planning permission for new business premises. We are also examining ways to enable local authorities to discount the business rate, and we will ensure that in areas where business rate supplement is considered, businesses have a proper opportunity to vote on it in a ballot.

[Dan Byles]

Local councils’ powers to help small businesses in their areas and to help areas in need of economic regeneration, such as the town of Bedworth in my constituency, are limited. Does the Under-Secretary agree that local councils need more powers, such as the ability to vary business rates within a borough or district to create local economic regeneration zones, to help new and existing businesses invest in struggling towns and villages?

[Robert Neill]

That is precisely why the Government propose to introduce the opportunity to discount the rate, to consider the way in which business rate supplement operates in an area and, above all, to ensure that, at the same time as we create the ability to attract housing into an area through our council tax incentive, we give an equal incentive—the business rate growth incentive—to provide jobs and business in an area.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Given that, regrettably, the Government are downgrading benefits to the consumer prices index rather than linking them to the retail prices index, will they be helping small businesses by linking business rates to CPI rather than RPI?

[Robert Neill]

The most valuable assistance that we have given is ensuring an extension of the business rate relief. Moreover, we are assisting small businesses in particular and we have increased the threshold for empty property relief this year to £18,000—all of which the previous Government signally failed to do.

[Mr John Denham (Southampton, Itchen) (Lab)]

The Government often tell us that hard choices must be made in these difficult economic times. May I ask the Minister about port rates? The Labour Government recognised the difficult position of ports businesses that were faced with backdated rates by giving them eight years to pay. In those circumstances, how does the Minister justify spending hundreds of millions of pounds entirely wiping out the legal rates of those businesses, when other public services for which he is responsible are suffering? Is not that a pretty disgraceful piece of pork-barrelling, given that the measure is aimed at what were Tory target seats in the last general election? People up and down the country who face their services being cut will ask why that is a priority in these difficult times.

[Robert Neill]

I think it is a better use of money than £2 million for the furniture in Eland House, if I might say so. With respect, the right hon. Gentleman neglects the fact that his Government’s policy was roundly condemned by the cross-party Select Committee on Communities and Local Government as being wholly inadequate, and condemned by a number of his hon. Friends who represented port constituencies.

The right hon. Gentleman’s policy neglected to reflect the reality that a discount for eight years did not remove the book liability that fell on ports businesses. That drove a number of them into balance-sheet insolvency, which in turn created cash-flow difficulties with their banks and actually put some out of business. The Government are keeping jobs in port constituencies and communities, and I am very proud that we are doing so.

[George Hollingbery (Meon Valley) (Con)]

5. What guidance he has issued to local authorities on the procedure for re-examination of the allocation of strategic development areas and major development areas under former regional spatial strategies.

[The Minister of State, Department for Communities and Local Government (Greg Clark)]

The Government issued advice to local authorities on 6 July. Following the revocation of the regional spatial strategies, planning for major development areas is for local communities to determine, free from interference from unaccountable regional quangos. If local authorities wish to retain policies on strategic development areas, they are free to do so in their local plans.

[George Hollingbery]

I thank the Minister for his answer. As well as freeing local communities to make real decisions for themselves about where they live, will he also ensure that the time-wasting, box-ticking, intrusive and expensive, inspector-led and Government office-led compliance process that went with those central diktats, is also consigned to the dustbin?

[Greg Clark]

My hon. Friend is absolutely right, and for the benefit of Members, I am today placing in the Library of the House two items. The first is the documents associated with the south-east regional plan, which consists of 3,000 pages and weighs 2 stone. That has been replaced by the second item, which consists of six pages of guidance weighing 1 oz. If anything encapsulates the difference between this Government’s approach and the previous Government’s approach, it is that we are freeing local authorities from that burden.

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

Does the Minister recognise that under the Planning and Compulsory Purchase Act 2004, the local development plan, by which all planning decisions in an area should be determined, is defined as comprising two elements: the local development framework and the regional spatial strategy, which have equal status. Removing one at a stroke, as the Government propose, leaves most people who think about this subject very fearful that the Government are creating a situation in which the local development plans will be unfit for purpose and there will be litigation and protracted delay, all of which will lead to the halting of necessary development. How do the Government justify that?

[Greg Clark]

The right hon. Gentleman is behind the times. The regional spatial strategies have been revoked: they are not about to be revoked, they are no more, they are dead, they no longer exist, they are ex-strategies. When it comes to spatial planning—[Interruption.] The strategies have been revoked under current legislation. It is entirely possible for progressive local authorities to co-operate, as they are, for example, in Essex, Manchester and Worcestershire, to ensure that cross-border issues are properly dealt with. That is exactly what they are doing.

[Duncan Hames (Chippenham) (LD)]

I thank the Minister for that reply. Will he extend his guidance to planning inspectorates, so that emerging regional spatial strategies that have not yet been adopted, and indeed emerging core strategies that existed merely to comply with RSSs, are considered immaterial by inspectors?

[Greg Clark]

I am pleased to confirm to my hon. Friend that we have indeed done that. It is worth pointing out that because of that great panoply of regulation and imposition, only 18% of authorities had actually adopted a regional strategy, years after they were first required.

[Mr Clive Betts (Sheffield South East) (Lab)]

I do not know whether the Minister is aware of or concerned about the damage that his changes to planning policies are already causing, but has he had the chance to read a well researched article in the Financial Times at the weekend, which showed that 7,500 houses in various schemes have already been cancelled as a result of those changes? Is it not the case that the Government’s policies are already proving damaging to the house building industry and bad for everyone in desperate need of a home?

[Greg Clark]

I have great respect for the hon. Gentleman, who chairs the Communities and Local Government Committee, but I do not know where he has been for the past few years. He should know that the number of house completions has been at an historic low—the lowest since the second world war. Our intention is to increase house building by removing the imposition that sets people against development. It is a disastrous situation when people are against developments. By allowing people to create communities in the way that they want and to share in the economic benefits of that, we can take the poison out of the planning system.

[Jane Ellison (Battersea) (Con)]

6. If he will take steps to reduce the functions of the non-departmental public bodies for which his Department is responsible.

[Henry Smith (Crawley) (Con)]

16. What steps he is taking to reduce the functions of non-departmental public bodies for which his Department is responsible.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

We will definitely take steps to reduce the functions and cost of the Department’s quangos. We are reviewing each of our 27 quangos—a number that astonished me—in the context of the Public Bodies Bill. We are committed to increasing accountability and to reducing their number and costs and the overlap of their functions with local authorities. Announcements have been made on the Infrastructure Planning Commission, the Homes and Communities Agency, the Standards Board and the National Housing Planning and Advice Unit. A review of the Tenant Services Authority is also under way.

[Jane Ellison]

I thank my hon. Friend for that reply. When I am talking to the leader of my local council—Wandsworth, a top-rated council—one of the great frustrations expressed is about the number of plans and strategies that senior officers are compelled to write in areas such as youth offending and adult social services, when their time would be better spent delivering those local services. May I have some assurance that we will determine what strategies are needed locally rather than centrally?

[Andrew Stunell]

I agree with my hon. Friend. I was looking at some of the figures for the Homes and Communities Agency, which delivered—or at least assisted in delivering—55,000 houses at a cost of £80 million, which is £1,500 on the price of every house built. Local authorities have building inspectors, planning officers and auditors, and much of the activity is clearly duplicated and wasted. We have cut the comprehensive area assessment and the regional spatial strategies, and we are giving local authorities the opportunity to take the decisions themselves, with the experts that, in most cases, they already employ. We must cut out the duplication and nonsense that flows from the system set up by the previous Government.

[Henry Smith]

Can my hon. Friend outline briefly how he plans to democratise the decisions and functions currently undertaken by quangos that will shortly cease to exist?

[Andrew Stunell]

The whole point—or at least a significant part—of what we are doing is based on restoring accountability for the decisions that these bodies have been taking. In some cases, we are ensuring that functions return to the local authorities, where they should have been. If we take, for example, the Standards Board, it cost £8,000 per complaint upheld. We are saying that we can sweep that away completely and restore the monitoring of standards to local councils; in addition, we are getting support from our colleagues in local government to provide a peer review process at a much reduced cost.

[John Healey (Wentworth and Dearne) (Lab)]

The Department’s biggest agency is the Homes and Communities Agency. That has had not one, but two cuts to its budget this year in just two months—more than 10% of the money agreed and set aside to build new, affordable housing. Why was it that no Minister made a statement in public or to this House about those cuts? The details were snuck out on the HCA website. Will the Minister confirm now to the House that the £450 million cut in the HCA’s budget this year will mean that nearly 6,000 new affordable homes will not be built and 5,000 house building jobs will go?

[Andrew Stunell]

I have a lot of respect for the right hon. Gentleman, but when it comes to counting, he is not quite so good. We need to understand the dire situation this country was in. Emergency action was essential. However, my right hon. Friend the Minister for Housing will shortly be able to give details of all the developments that will go ahead, now that we have had a chance to assess the financial situation fully.

[John Healey]

I shall give the Minister the chance to put the record straight. There was no black hole and no house building commitments were made without the money having been agreed and set aside, as he and other colleagues have claimed. If there had been, I would have received an accounting officer’s letter, but I did not. Will he confirm, therefore, that there was £540 million in the Department’s budget last year that we planned and agreed with the Treasury to spend this year on affordable housing, and that it has been cut back by a further £220 million? Will he now admit that his Ministers and team have not had the strength to stand up to the Treasury and have not had the courage to come to the House to tell us about the cuts they are making?

[Andrew Stunell]

I read in the newspapers that it was the previous Chancellor who could not persuade the Prime Minister of the day that he needed to stop borrowing and start tackling the deficit—but of course, that might have just been a press report. As I understand it, the housing pledge that the right hon. Member for Wentworth and Dearne (John Healey) brought to the House was for £1.5 billion. We have now authorised the release of £1.25 billion of that pledge. There will be housing built on a scale that the Labour party never achieved while in power.

[Esther McVey (Wirral West) (Con)]

7. What plans he has for the future of the Government office for the north-west.

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

The coalition Government’s programme for government, published on 20 May, stated that

“we will abolish the Government Office for London and consider the case for abolishing the remaining Government Offices”.

We are currently discussing this with interested parties, including the trade unions.

[Esther McVey]

The north-west employs more public sector employees than any other region in the country apart from London. Although I welcome the Government’s plans to expand private enterprise in our local economy, assisted by the regional growth fund and local enterprise partnerships, will the Secretary of State explain how his Department plans to cushion that transition towards private sector enterprise, so that the people of the north-west and Merseyside can keep their jobs and continue to contribute to economic growth?

[Mr Pickles]

The north-west of England is, of course, a vibrant area full of people of enterprise. As my hon. Friend rightly says, the regional growth fund will provide targeted support to areas of deprivation, unlike the regional development agencies, which simply move one form of public money around to another public body. We will ensure that private investment is brought in and, in addition, we will have the local enterprise partnerships. She will also be aware that we will give national insurance incentives for firms in the north to create jobs, and extend small business rate relief to them. There will be diverse other measures.

[Mr Speaker]

Order. Today, questions and, in particular, answers are rather long, and need to get shorter.

[Yvonne Fovargue (Makerfield) (Lab)]

With the scrapping of the regional development agency and now—so we understand—the Government office for the north-west under threat, what voice will there be for the north-west to secure co-ordinated investment for the region, in both towns and the rural areas?

[Mr Pickles]

The Government offices for the regions are about the Government imposing their will on the regions. We will be giving power back to local councils, local community groups and local entrepreneurs.

[Mr Gordon Marsden (Blackpool South) (Lab)]

Would not scrapping the Government office for the north-west mean north-west local authorities having to go cap in hand to each Whitehall Department? Would not such a diktat be of a piece with the Secretary of State bludgeoning the Business Secretary over scrapping regional development agencies? What has he to say to the former Tory leader from Trafford, Councillor Susan Williams, who asked:

“Where is the voice of the NW to government?”

and then said that it was in “a void”? Would he not leave north-west local authorities swinging in limbo, with their economies disrupted by his cuts and no north-west body promoting major regenerational transport projects? Is not his localism just a fraudulent—

[Mr Speaker]

Order. The hon. Gentleman must resume his seat. That is now five questions. It is an abuse of the procedures of the House when Members, on both sides, ask questions that are simply too long. I want a short answer from the Secretary of State please.

[Mr Pickles]

No.

[Chris Heaton-Harris (Daventry) (Con)]

8. If he will bring forward proposals to ensure that people are able to prevent major planning proposals proceeding in their areas.

[The Minister of State, Department for Communities and Local Government (Greg Clark)]

All planning decisions should be democratically legitimate. Following the revocation of the regional spatial strategies, local communities will determine most planning applications. For major infrastructure projects, decisions will be taken on the basis of national planning statements, ratified by this House, by Ministers accountable to this House.

[Chris Heaton-Harris]

One of the things that have brought together communities in Daventry is their campaigns against wind farm developments. Does the Minister accept that disempowering local communities is profoundly counter-productive and actually deepens planning disputes, rather than helps to resolve them?

[Greg Clark]

My hon. Friend is exactly right. If we want to increase the contribution from renewable energy in this country—as we do—we should look at what happens on the continent, where they do not have the poison in the planning system I mentioned. Those countries have community-owned renewable energy developments and they allow people to share in the proceeds. That is exactly what we will do.

[Heidi Alexander (Lewisham East) (Lab)]

Anyone reading Question 8 on the Order Paper could be forgiven for thinking that what many Tories and Liberal Democrats would like is a never-build-anything-anywhere policy. What assurance can the Minister give me that the natural nimby inclinations of so many on his Benches will not result in fewer affordable homes and fewer jobs being provided in Lewisham East, where they are so desperately needed by my constituents?

[Greg Clark]

The hon. Lady may not have noticed, but the effect of the previous Government’s policy was to reduce housing development, so that virtually none happened. The strategies that we have talked about—the targets imposed—have deluded her into thinking that targets are the same thing as building. However, things have not happened that way and she should wake up to that.

[Gordon Birtwistle (Burnley) (LD)]

9. If he will take steps to reduce expenditure by his Department’s non-departmental public bodies on the housing market renewal pathfinder programme.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

The housing market renewal programme was included in the £6.2 billion of savings from Government spending in this year, as announced on 24 May. The Regenerate Pennine Lancashire pathfinder has been consulted on the reductions in my hon. Friend’s area.

[Gordon Birtwistle]

Although I welcome the HMR pathfinder programme, which has delivered massive housing regeneration in many areas across the UK, including my constituency, will the Minister look into both the system of passporting proposals for regeneration and the funding stream, following Government approval, from the HCA to the local authorities? The present delivery quango, which sits between the HCA and the local authorities, top-slices an average of 10% of the funds available, which equates to approximately £40 million for 2008-09, while delivering little benefit on the ground—

[Mr Speaker]

Order. I think that we have heard enough.

[Andrew Stunell]

I thank my hon. Friend, who I know has done a lot of work in looking at the administrative costs of the process. One of the things that we will be examining closely is how those costs can be reduced and how local authorities can have more control over the process.

[Mr John Denham (Southampton, Itchen) (Lab)]

The hon. Member for Burnley (Gordon Birtwistle) raises an important question, but what is the Minister’s answer to the current Lib Dem leader of Burnley council, who has said of this Government’s financial settlement:

“We are a deprived borough but once again we are suffering. I am disappointed and sick of us being kicked by budget cuts in Burnley”?

Is it not the case that the Minister has ensured that it is the poorest and most deprived councils in this country that are suffering the most?

[Andrew Stunell]

I am disappointed with that. What the Opposition have not appreciated is that my hon. Friend the Member for Burnley made the very fair point that far too much of the money is top-sliced and siphoned off, and does not produce the renewal that it is supposed to. That is what we are committed to putting right.

[Caroline Dinenage (Gosport) (Con)]

10. Whether he plans to bring forward proposals to facilitate local authorities in moving Travellers on from private and public property.

[Richard Graham (Gloucester) (Con)]

15. If he will take steps to accelerate the process for local authorities to gain possession of public land upon which there are unauthorised Traveller encampments.

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

The Government will ensure that, where local authorities have made appropriate provision for authorised sites in their area, reflecting genuine local need and historic demand, they will have stronger enforcement powers to deal with unauthorised encampments. We are reviewing how this can be achieved.

[Caroline Dinenage]

Under the last Government, illegal sites and caravans were increasingly tolerated, with councils deciding not to seek their removal. Will the Secretary of State please reassure me that Travellers will no longer be allowed to breach the planning rules that law-abiding home owners have to abide by?

[Mr Pickles]

We have to remember that a significant number of Gypsies and Travellers are themselves law-abiding citizens. What we want to see is fair play within our planning system. The overwhelming majority of Travellers abide by the rules, but we will ensure that those small minorities that do not are no longer encouraged to do so by the law.

[Richard Graham]

Twice in the last year, Travellers have smashed through gates to invade Plock court—an important green space on the edge of my Gloucester constituency. The process for moving Travellers on from public land is much longer than for moving them on from private land. Does my right hon. Friend agree that this disruption could be significantly reduced if the law for both were aligned?

[Mr Pickles]

We shall look towards speeding up the process, but it is important to understand that the operation of the law at the moment is predicated not on seeking easy resolution, but on conflict. What we are threatened with as a result of the planning laws having been allowed to slip is a genuine attack on social cohesion. Doing something about that is a priority for this Government; that is why we seek to ensure fairness for all.

[Kate Green (Stretford and Urmston) (Lab)]

Where are these families to move to, given that the Government are cutting funding for public travelling community sites by £30 million?

[Mr Pickles]

It was never intended under the previous Government and nor is it intended under this Government that all provision for Travellers should come out of public funds. I am more concerned, I have to say, about health and education issues relating to Gypsies and Travellers, which have been allowed to lapse so woefully under the previous Government.

[Philip Davies (Shipley) (Con)]

The Secretary of State said that many of these Travellers are law-abiding people. That may well be true, but many of them are not. I am not worried only about Travellers on illegal sites. What about the so-called Travellers—even though they stay in the same place all the time—on legal sites who still create a huge menace to the local community? What can my right hon. Friend do to make sure that local authorities have the power to deal with these people, rather than pussyfooting around with them as they tend to do?

[Mr Pickles]

It is certainly our intention to ensure that planning regulations are properly enforced, but we are also seeking to increase social cohesion so that people, no matter what their background, are welcome in all communities. A deal has to be struck whereby we can assure the public that everyone is going to be treated fairly, in return for which we expect people to be treated fairly.

[Ms Karen Buck (Westminster North) (Lab)]

13. What discussions he has had with the Secretary of State for Work and Pensions on the effect on housing and levels of homelessness of the proposed reduction in housing benefit levels.

[The Minister for Housing (Grant Shapps)]

Ministers from this Department regularly meet their colleagues from other Departments. We are looking closely with colleagues in the Department for Work and Pensions at how to support implementation of the recently announced changes to housing benefit.

[Ms Buck]

Given the enormous upheaval that is likely to accrue from the cuts in housing benefit, will the Minister give a guarantee to the House today that he will not weaken the safety net of homelessness legislation?

[Grant Shapps]

I acknowledge the hon. Lady’s considerable knowledge and interest in housing and matters of homelessness, which we have regularly debated. I can provide the assurance that this Government will take issues of homelessness and protection very seriously. I have recently set up a cross-ministerial working group for the first time to bring Ministers together, and we also have a discretionary fund, which we are expanding to £40 million to assist in this way.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Does the Minister accept that while we of course want to stop rip-off landlords from exploiting the state and tenants and to stop preventing people from getting back to work because their rents are too high making it impossible for them to come off benefits, we also need to ensure that no vulnerable person becomes homeless as a result of the changes? Will he and his colleagues in the Department for Work and Pensions meet a cross-party group of London MPs to ensure that the policy has the right objective and not an unfair one?

[Grant Shapps]

The hon. Gentleman is absolutely right that the policy needs to protect the most vulnerable and to introduce fairness into the system. The expansion of housing benefit to £21 billion—a 50% expansion in the bill—over just a 10-year period is unsustainable; it is more than the police and universities budgets put together and it simply has to be brought into line. It is not fair that people can be in receipt of £2,000 a week to live in areas of London that other people are unable to live in when they work. I am quite certain that Ministers will be very happy to meet such a group.

[Toby Perkins (Chesterfield) (Lab)]

19. What assessment he has made of the effect on third sector organisations of the reduction in local authority funding announced on 10 June 2010.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

Councils have complete flexibility in where they find savings to ensure that costs are reduced while they continue to support key front-line services. The voluntary sector is an important part of that.

[Toby Perkins]

I am grateful to the Minister for his answer, but is not the reality that, as in Chesterfield, many of our voluntary sector organisations rely on core funding from the local government sector, and that the cuts in the local government sector will inevitably lead to a reduction in that core funding that will fundamentally undermine any possibility that the voluntary sector can play a part in this big society?

[Andrew Stunell]

Well, it is not inevitable. I have just said that councils have complete flexibility in how they set priorities, and local authorities will need to prioritise. I say to the hon. Gentleman and the whole House that just as Ministers here have made sure that the £6.2 billion reductions hit just as hard at the centre as on local authorities, so local authorities need to have the same regard for the voluntary sector.

[Mrs Jenny Chapman (Darlington) (Lab)]

The voluntary sector in my constituency is, as I imagine is the case everywhere, extremely anxious about the impact that reductions in local government funding will have on the service they can provide, and nowhere more so than in relation to infrastructure. What is the Minister’s attitude to infrastructure bodies and how does he believe they should be funded?

[Andrew Stunell]

I certainly understand that anxiety. The whole country is anxious about the financial circumstances we face, both in the public finances and in the voluntary sector, and it will be extremely important for partners to work together, including local authorities and the voluntary sector, to overcome those difficulties in the very difficult circumstances we face.

[Stephen Mosley (City of Chester) (Con)]

20. What steps he is taking to reduce the administrative burden placed on local authorities by central Government.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)]

We have already scrapped the comprehensive area assessment and regional spatial strategies, as well as removing ring-fencing from more than £1 billion of local government spending. We are currently inviting local government to identify the statutory guidance, legislation and regulations that it thinks should be removed, and we will go much further by introducing a decentralisation and localism Bill later in the year.

[Stephen Mosley]

One consequence of reducing the administrative burden on local councils and freeing them to take more decisions locally will be to allow them to offer different levels of services from their neighbours. Does my hon. Friend agree that far from being a bad thing, that will allow good councils to differentiate themselves from bad councils and allow local council tax payers the ultimate decision on the type of council they desire?

[Robert Neill]

Freedom for local authorities to respond to the priorities and needs of their residents is absolutely a good thing and is a top priority of this Government.

[Fiona Mactaggart (Slough) (Lab)]

But what does the Minister say to local authorities such as mine that face a larger burden of in-year cutbacks than neighbouring authorities? What does he say about the additional burdens that he has put on to them by forcing them to cut previously agreed budgets with voluntary sector organisations and local services, meaning more expensive ways of managing their budgets?

[Robert Neill]

First, the hon. Lady forgets the financial situation that we inherited—that is fundamental. Secondly, because we have removed ring-fencing and reduced the percentage of ring-fenced funding, we have made sure that local authorities have more flexibility in how they save money. Thirdly, despite our dire financial inheritance, we have ensured that no local authority would have to make a reduction of more than 2%.

[Fiona Mactaggart]

Slough is facing a reduction of 3.19%.

[Mr Speaker]

Order. We cannot have these sudden interventions when not expected and not in order, however frustrated people feel—and they do.

[Harriett Baldwin (West Worcestershire) (Con)]

22. What recent representations he has received on the effects on local authorities of the abolition of regional spatial strategies.

[The Minister of State, Department for Communities and Local Government (Greg Clark)]

I have received a large number of letters and e-mails, the vast majority of which have welcomed the end of top-down targets and the return of planning decisions to local communities so that they can shape their own areas.

[Harriett Baldwin]

I thank the Minister on behalf of residents in West Worcestershire. I can assure him that councillors in my local area feel the same way. What advice would he give to them about developers who are now taking things that were rejected on the basis of the Pickles letter to appeal to the Planning Inspectorate?

[Greg Clark]

The Planning Inspectorate has received guidance that the policy of the Government is clear and needs to be taken into account in planning appeals.

[Mr Speaker]

Order. It is best on the whole to refer not to the Pickles letter but to the Secretary of State’s letter, and that is I think how we will do it.

[Tony Baldry (Banbury) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

I can assure you, Mr Speaker, that Mrs Pickles’ letters have far more impact.

I am sure that the whole House will wish to pay tribute to the two firefighters, Alan Bannon and James Shears, who gave their lives in April in the line of duty and whose memorial service was yesterday.

Since last month’s oral questions, I have waged war on the TLA—the Whitehall menace of the three-letter abbreviation. We have abolished the CAA, the IPC, the RDAs and the RSSs. We are giving powers back to local people, replacing bureaucracy with democratic accountability. We will be working with councils to deliver an era of town hall transparency. My Department will practise what it preaches and we will be publishing online our spending over £500. I am sure that the shadow Secretary of State will be pleased to know that we will be opening the books from April 2009.

[Tony Baldry]

When the RDAs are scrapped, will some of the money saved be available to help fund local enterprise partnerships? For far too long, Banbury has been at the edge of three RDAs. We want a local enterprise partnership which puts Banbury where it rightly belongs—at the heart of England.

[Mr Pickles]

I have always felt that Banbury was indeed at the heart of England. Of course, the local enterprise partnerships will give an opportunity for local authorities, business and academic institutions to coalesce around a genuine economic area. We will ensure that they have an opportunity to bring prosperity to that very fine town.

[Mr John Denham (Southampton, Itchen) (Lab)]

I start by thanking the Secretary of State for his recognition of the two firefighters, Alan Bannon and James Shears, who died fighting the fire in Shirley Towers. Alan Bannon was a constituent of mine, as the Secretary of State knows, and I am grateful to the fire Minister, the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), for attending the memorial service yesterday. It was appreciated by everybody connected with the Hampshire fire and rescue service.

On Tuesday this week, the Local Government Association showed that the arbitrary and incompetent decision to suspend the Building Schools for the Future programme has cost local council tax payers in England £162 million in spending on much-needed school projects which will not now go ahead. What efforts did the Secretary of State make to persuade the Secretary of State for Education not to cut that programme? How does he intend to stand up for local councils and prevent his Department becoming the ministry of waste—wasted council tax payers’ money on suspended schools projects, wasted council tax payers’ money as a result of the cuts that he has brought in this year, and wasted money on the opportunity to build new homes?

[Mr Pickles]

I hardly think that the former Secretary of State is in a position to talk about waste. We have already understood that he has virtually become the patron saint of internal decorators within the Department; £2 million was spent on furnishing at a time when councils were crying out for help. I did indeed speak to my right hon. Friend the Secretary of State for Education, and I was shocked to discover the amount of waste that was within that programme. I was shocked to discover that the achievement of that programme seemed to have made a single consultant a millionaire. Labour Members seemed quite happy to waste other people’s money, but I assure them that this coalition Government are about saving money and are on the side of local councils.

[Peter Aldous (Waveney) (Con)]

T2. What steps is the Department taking to ensure that the planning process not only responds to the demands of local communities, but provides an efficient supply of housing and employment land?

[The Minister of State, Department for Communities and Local Government (Greg Clark)]

We are getting rid of the Soviet-style planning system—repealing Gosplan—precisely so that local communities such as my hon. Friend’s can get together in the right way. For example, there is no sense in linking his area with Hertford because that is not a natural economic area and it is difficult to plan employment in such a way. His community is now free to liaise with neighbouring authorities, as it always should have been.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

The Government are already hitting hard new deal programmes that were designed to help some of our most deprived communities in areas such as Aston, which is in my constituency. Is it true that the plan is now to cut off funding from the middle of the financial year—from this October—thereby sacking staff and damaging some of our most deprived communities?

[Mr Speaker]

I call the Minister. Any Minister.

[The Minister for Housing (Grant Shapps)]

rose—

[Mr Speaker]

Order. That was very unsatisfactory; I think that I will have to add injury time. Let us hear it from the Minister.

[Mr Pickles]

I wanted to answer it all the time.

This is about ensuring that local government finance is delivered fairly and straightforwardly. Given that we have been a bit slow in answering the hon. Lady, it is incumbent on me to say that if she wants to come and see me—or I can come and see her—I will give her a full answer.

[Dr Sarah Wollaston (Totnes) (Con)]

T3. My constituency is home to Transition Town Totnes, which has a great interest in sustainable development. If the planning process for community land trusts is to be streamlined, provided that 90% of residents are in favour of a proposal, will the Department clarify how that 90% figure will be ascertained and how the low-carbon building agenda will be upheld so that we meet our commitments to cut emissions?

[Grant Shapps]

I will gladly answer my hon. Friend, Mr Speaker.

The 90% threshold is subject to a simple referendum of the people in the local community, parish or village. The idea is that the judgment should be made through the ballot box by those who go to vote. The buildings themselves will be judged against the criteria of sustainability codes 1 to 6, and the sustainability levels that will be required will be exactly the same as those for all buildings by 2016.

[Mrs Linda Riordan (Halifax) (Lab/Co-op)]

Will Ministers tell me what steps they are taking to ensure that local government regeneration projects in Halifax will still go ahead now that Yorkshire Forward has been abolished? How will the Department address that shortfall?

[Mr Pickles]

Of course, we will be bringing those regeneration projects closer to the decisions, so I hope that the hon. Lady will have a big say on them. We are kind of hoping that we will be able to involve the private sector so that we are not just moving one amount of public money across to another receiver of such money.

[Julian Smith (Skipton and Ripon) (Con)]

T4. Many of my constituents continue to be concerned that despite the exciting moves to localise planning decisions, developers and councils still will not listen to them. What reassurance can Ministers give to local communities that they are really back in the driving seat?

[Greg Clark]

They are back in the driving seat. Everything that is needed to make plans that respond to local communities is in place. The process will be buttressed by strong financial incentives. I would expect that councils such as those in my hon. Friend’s area will want to take up these powers in the interests of his constituents.

[Phil Wilson (Sedgefield) (Lab)]

Some 50% of the housing stock in several parts of my constituency is in the hands of private landlords. The previous Government introduced selective licensing and other regulations to try to clamp down on private landlords. Surely the next step is a national register for private landlords, so why will the Government not go ahead with that?

[Grant Shapps]

I have to say to the hon. Gentleman, if the next step was the registration of private landlords, why was that not done in the past 13 years? The simple answer is that many landlords in this country are just individuals who have literally one or two rooms to let. Introducing yet another database to try to regulate that would not have been the answer. HMO-ing is part of the answer. That need not be blanket HMO-ing across the whole country, as introduced by the outgoing Government on 6 April; we will make sure that HMO-ing is effective and used only where required.

[Mr Peter Bone (Wellingborough) (Con)]

T5. Today, ECPAT—End Child Prostitution, Child Pornography and the Trafficking of Children for Sexual Purposes—has, in association with The Body Shop, launched a nationwide petition calling for guardianship for children who have been trafficked. Does the Secretary of State agree that that would help stop the scandal of child sex slaves who have been put into local government care being re-trafficked?

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

My hon. Friend draws attention to a new and important responsibility that the Department is assuming. I am keen to work with Members across the House on developing appropriate policies. I look forward to discussing that with him.

[Julie Hilling (Bolton West) (Lab)]

It is always popular for any Government to say that they will have a bonfire of quangos, but does the Secretary of State realise that removing the Government office for the north-west removes support for the voluntary and community sector and centralises power in Westminster? That is hardly “big society”; it is much more “very big Westminster.”

[Mr Pickles]

I readily understand that the hon. Lady has the disadvantage of being a Labour MP and is therefore incapable of understanding that this Government will give away power, or of understanding that localism will involve a constitutional shift in this country. We aim to give the people in towns and villages in the north-west more power. We will not repeat the mistakes of the Labour party by taking more power into Westminster.

[George Hollingbery (Meon Valley) (Con)]

T6. In my conversations with planners and others over the past week, there seemed to be some question as to whether the recently announced changes to the definitions of brownfield land and densities in planning policy statement 3 prevent so-called garden-grabbing. Will the Minister please confirm that local councillors in Meon Valley and elsewhere are now free to amend their planning policies on garden-grabbing in any way that they want, in whatever time frame they choose?

[Greg Clark]

My hon. Friend is absolutely right. PPS3 has been revised with immediate effect, so those powers are now available to his authority and every other authority in the country; they can decide the status of gardens as they see fit.

[Natascha Engel (North East Derbyshire) (Lab)]

The Housing Minister has just put forward a written ministerial statement that allows the hundreds of park home residents in my constituency access to the Residential Property Tribunal Service, and that is very welcome. Will he meet me to discuss how he plans to implement the consultation outcomes, which specify that there should be a strict personal specification of “fit and proper person”, with regard to park home site owners? Will he meet me before the recess?

[Grant Shapps]

I will be delighted to meet the hon. Lady before the recess. She is right to say that the issue of park home regulation is complex. I did indeed put forward a written ministerial statement yesterday, which clearly outlined that we should be able to move to the tribunal service to prevent park home owners from having to refer to the courts, with all the cost and time that that entails. I share her concern and will be happy to meet her.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

T8. May I take my right hon. Friend the Secretary of State back to the issue of illegal Traveller sites? I face a real problem with such sites in my constituency of Stratford-on-Avon. I was pleased to hear him confirm that he will consider legislation to give councils more power to deal with that blight. May I push him a little further, and ask when the people of Stratford-on-Avon can expect that legislation?

[Mr Pickles]

Of course, the main proposals will be in the localism Bill, which we hope to bring before the House this calendar year. We will, of course, also look carefully at planning guidance, but as I am sure that you will appreciate, Mr Speaker, I want to try to tackle the issues together in one go, rather than in a piecemeal way.

[Barry Gardiner (Brent North) (Lab)]

What discussions has the Secretary of State had with his counterpart at the Department of Energy and Climate Change on who would trump whom when we fail to meet our renewables target over the reintroduction of fast-track planning?

[Greg Clark]

We constantly have discussions with our colleagues in DECC, and we are absolutely determined to meet those renewables targets. Unless we bring in a system whereby communities can share in the benefits, we are unlikely to meet those targets, so we are urgently changing the system in order to get communities behind these things.

[Martin Horwood (Cheltenham) (LD)]

The coalition’s policy of letting local authorities plan for local housing need is very welcome, but the previous Government’s requirement of them to display five years’ supply of land for housing need before they could fight off overdevelopment on green spaces was lopsided, unfair and unsustainable. Will Ministers meet councillors and campaigners from Gloucestershire to hear the case for abolishing it?

[Greg Clark]

I should be very happy to meet my hon. Friend and his colleagues.

[Diana R. Johnson (Kingston upon Hull North) (Lab)]

Can one of the Ministers explain to me why requiring local authorities to publish expenditure of £500 or more will help to ease the administrative burden on them?

[Mr Pickles]

We have decided to do so in the Department and, having gone through the process, I can say that it is easy to do and easy for local authorities. After all, Government Members are not frightened of the public, and it is the public who have a right to know.

[Mr David Burrowes (Enfield, Southgate) (Con)]

Is it not extraordinary that, although hon. Members started today’s proceedings with Prayers, as they have done for 450 years, the Labour council in Enfield has followed the Labour council in Leicester by banning council prayers? Will my right hon. Friend reassure me that, under this Government, we will not marginalise faith in general and Christianity in particular from the public sphere and the big society?

[Andrew Stunell]

There is a place for faith in our society, and if one looks throughout the United Kingdom one finds that people of faith have played a huge part in our society. As it happens, immediately after this Question Time I am going across to Lambeth palace to meet the Archbishop.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

One estimate is that 200,000 people will be made homeless as a result of the changes to housing benefit, and at the same time funding for social housing is being pulled from areas such as Sunderland. Will the Minister provide additional funding to local authority housing departments to deal with the significant increase in people who will be going to see them to register as homeless?

[Grant Shapps]

I thank the hon. Lady for that. She is absolutely right to point out that there are pressures in the system, which have been created by a £155 billion deficit and a housing benefit bill that has spiralled to £21 billion. Unlike the previous Government, however, we are taking steps to change that situation and, in particular, introducing a £40 million fund that local authorities will be able to use to ameliorate the effects of some of the changes that are now coming in.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Because there was a little delay a few moments ago, I did allow a bit of injury time, but I am afraid that all good things must come to an end.

Business of the House

Thursday 15th July 2010 Commons Chamber

11:32

[Ms Rosie Winterton (Doncaster Central) (Lab)]

Will the Leader of the House give us the forthcoming business?

[The Leader of the House of Commons (Sir George Young)]

The business for the week commencing 19 July will include:

Monday 19 July—Second Reading of the Academies Bill [Lords]. At 10 pm the House will be asked to agree all outstanding estimates.

Tuesday 20 July—Proceedings on the Consolidated Fund (Appropriation) Bill, followed by conclusion of proceedings on the Finance Bill (Day 4); to follow, the House will consider a motion relating to information for Back Benchers on statements. The subject for that debate was nominated by the Backbench Business Committee.

Wednesday 21 July—Proceedings on the Academies Bill [Lords] (Day 1).

Thursday 22 July—Proceedings on the Academies Bill [Lords] (Day 2).

The provisional business for the week commencing 26 July will include:

Monday 26 July—Conclusion of proceedings on the Academies Bill [Lords] (Day 3).

Tuesday 27 July—Business to be nominated by the Backbench Business Committee. The House will not adjourn until the Speaker has signified Royal Assent.

Colleagues will also wish to know that, subject to the progress of business, the House will rise for the summer recess on Tuesday 27 July and return on Monday 6 September.

The House will rise again for the conference recess on Thursday 16 September and return on Monday 11 October.

I should also like to inform the House that the business in Westminster Hall for 22 July will be:

Thursday 22 July—A debate on national lottery reform.

[Ms Winterton]

I thank the Leader of the House for the business and very much welcome the first debate that the Backbench Business Committee has initiated, on ministerial statements. I am very hopeful that it will provide an opportunity for Back Benchers to examine closely the right hon. Gentleman’s leak prevention strategy.

As the Leader of the House knows, we Opposition Members had high hopes that he would be able to solve the mystery of why Conservative and Liberal Democrat Secretaries of State seem addicted to leaking major announcements to the media rather than announcing them to the House. I had such confidence in the right hon. Gentleman’s investigative powers that I even likened him to Sherlock Holmes; after the events of this week, however, I am afraid that it is more a case of Inspector Clouseau than Sherlock Holmes.

I fear that the leak prevention strategy will have to be consigned to the dustbin of history unless drastic action is taken. After all, the Secretary of State for Health gave at least three interviews to the media, including an appearance on “The Andrew Marr Show”, before coming to the House to announce his £80 billion gamble with the NHS. This morning, we heard the Secretary of State for Business, Innovation and Skills making a major televised speech on the future of higher education policy. He did make an apology, it is true—not for ignoring the House of Commons, but for the fact that details of his policy had been leaked. He shrugged that off by saying that leaks are part of public life.

When the Labour Government launched a review of student finance, there was extensive involvement of the Opposition, including an agreement on the review’s terms of reference. We have seen none of that in the run-up to today’s announcement. The Business Secretary is trying to say that the policy is not really new, but the coalition agreement said explicitly that the Government would wait for the Browne report before reviewing future policy. Surely the future of student finance should be about what is best for students and universities, not what keeps the peace in the coalition.

Can the Leader of the House say when the Business Secretary will come here to tell us exactly what his proposals mean? Will he undertake to remind Secretaries of State that Evan Davis, James Naughtie and Sarah Montague, admirable though they are, are not Members of Parliament, and that John Humphrys is not the Speaker? It would be handy if Cabinet members understood the distinction between a BBC studio and the Chamber of the House of Commons.

I am not sure whether the Leader of the House is expecting to have to make time in the House for any more apologies over the next week or so, but perhaps he will consider dividing Prime Minister’s questions into 15 minutes for answering questions and 15 minutes for apologising for all the misleading statistics that the Prime Minister has been using and all the questions that he has been dodging. That could include, for example, apologising for using figures from the Office for Budget Responsibility, which Sir Alan Budd said was inappropriate. The Prime Minister could apologise for telling Parliament that violent crime had doubled under Labour, especially as Sir Michael Scholar, chair of the UK Statistics Authority, has made it clear that there is no basis whatever for that assertion. Today’s figures show that crime is at its lowest level since records began, thanks to the Labour Government.

The Prime Minister could also apologise for dodging the question—not once, but three times—on whether the Government were going to abolish the two-week cancer guarantee. Can the Leader of the House tell us when the House can expect a proper answer, in this Chamber, on that guarantee—not in interviews to the media or in unattributable briefings from Downing street, but in a clear statement to Parliament about a guarantee that he surely recognises saves lives? Patients, doctors and nurses need to know whether the guarantee is in place and they deserve an apology from the Prime Minister because he has kept them in the dark about it.

[Sir George Young]

There is quite a lot there to respond to. On the Backbench Business Committee, I welcome the debate that is taking place on Tuesday, but I have to say to the right hon. Lady that it is no thanks to the Labour Government that we are having that Committee at all. At the end of the last Parliament, they consistently refused to make the time available to establish the Backbench Business Committee. If we are in apology mode, it would have been appropriate for her to have apologised for the failure of the outgoing Labour Government to set up that Committee.

I welcome that debate and hope that it will be well attended. There is a serious issue for the House about how we get the balance right between what Ministers can say outside the House and inside the House. The motion rightly refers not only to the past few weeks, but to a period that includes the last Labour Government. I welcome the proposal in the motion that the process should be looked at by the Procedure Committee to see whether we can come up with a sensible concordat that is acceptable to the House and liveable with by the Government, and that enables us to have a set of rules that we can all observe.

On health, if the right hon. Lady looks at the coalition agreement, she will see that much of what was in the Health Secretary’s statement on Monday was in that agreement. The proposals had been been mentioned in Health questions and in debates in the House. There was no leak of the health White Paper.

As for the Business Secretary, he went out of his way to explain that there was no policy change. I watched his speech on television, and he made it absolutely clear that he wanted Lord Browne, who is conducting a review, and whose terms of reference were set up by the outgoing Labour Government, to include the option of a graduate tax. There has been no policy announcement. When the Government have a policy on how higher education is funded, the House will be informed and there will be an opportunity to cross-examine the relevant Secretary of State. However, there has been no policy announcement whatsoever on the funding of higher education.

I think that the right hon. Lady will find that Sir Michael Scholar has had an opportunity to admonish those on both sides of the House about misuse of crime statistics. My right hon. Friend the Home Secretary is considering how crime statistics should be collected and published in future, and we are working with the UK Statistics Authority and others to consider the matter carefully. I welcome the reduction in crime—a trend that started in 1995 and has been replicated in many other western European countries—but the level of crime is still too high, and we must drive it down.

The right hon. Lady asked about the cancer guarantee. The revision to the NHS operating framework in June removed targets on the NHS that were without clinical justification. The cancer waiting time targets are clinically justified and have been retained.

[Several hon. Members]

rose—

[Mr Speaker]

Order. A great many right hon. and hon. Members are seeking to catch my eye. In order to accommodate them, I require brevity, a textbook example of which will now be provided by Mr Lee Scott.

[Mr Lee Scott (Ilford North) (Con)]

Thank you, Mr Speaker.

Will the Leader of the House speak to the Home Secretary about bringing forward a Bill to stop illegal clampers, who are responsible for a blight on our country that is spreading like wildfire through all constituencies and causing great grief to constituents?

[Sir George Young]

I think that my hon. Friend speaks for Members on both sides of the House. At my advice bureau last Saturday, I discovered that the owner of an Indian restaurant who had advised his customers not to park in the car park, where they might be clamped, had been taken to court by the car-clamping firm and sued for loss of trade. Happily, the restaurant owner won the case, but it underlines the need to have another look at the regime that governs car clampers.

[Paul Flynn (Newport West) (Lab)]

When can we have a debate on the lamentable state of the Afghan national army to establish that the threat to the safety of our troops comes not from a single rogue soldier but from an entire rogue army?

[Sir George Young]

The Prime Minister made a statement on Afghanistan last week. We want to keep the House regularly informed on progress in Afghanistan, and I hope that there will be an opportunity, if not before the House rises, then perhaps when we come back, for a further update on the progress being made, including in relation to the hon. Gentleman’s point.

[Mr Greg Knight (East Yorkshire) (Con)]

Is my right hon. Friend aware that the coalition Government have cancelled the proposed 2010 review of the smoking ban? In view of that, may we have an early debate in Government time on the effects that the smoking ban, in its current form, is having on our pubs and clubs, which are still closing at an alarming rate?

[Sir George Young]

I should have known that that had been announced, but I have to say to my right hon. Friend that I was not aware of it. I will raise his point with my right hon. Friend the Secretary of State for Health and ask him to take the matter up in the appropriate place.

[Mr David Anderson (Blaydon) (Lab)]

Can the Leader of the House explain why we are rushing through the Academies Bill when no consultation has taken place with parents, with governor groups or, in particular, with staff? The consultation period will apparently be during the school holidays when people either will not be in the country or will not be getting paid. Surely there is no need to rush this through, so why is that happening?

[Sir George Young]

The hon. Gentleman is referring to the Academies Bill.

[Mr Anderson]

Yes, that’s what I said.

[Sir George Young]

I believe we have offered the House adequate time to deal with the Bill. It will be taken on the Floor of the House and additional time is being made available for Members to discuss it. It has also been through the other place, so there have been opportunities for the public to comment on it since its introduction there.

[Andrew George (St Ives) (LD)]

Will the Leader of the House require a Minister from either the Department for Business, Innovation and Skills or the Treasury to come before the House to answer questions about why the South West of England regional development agency, which is due to be abolished, has announced this week the halting of vital economic development projects in the European convergence programme in Cornwall in spite of the fact that no UK Exchequer money is required for those projects to proceed?

[Sir George Young]

I understand the importance of those projects to the south-west, and of course I will make inquiries as to why they have apparently been abandoned, particularly if, as the hon. Gentleman says, there was no call on Exchequer funds to enable them to go ahead.

[Ian Paisley (North Antrim) (DUP)]

Eighty hours of rioting; a pipe bombing; three police officers shot; 80 police officers injured; the attempted hijacking of the Belfast to Dublin express railway—when will the Secretary of State for Northern Ireland come to the Dispatch Box to speak about what he and the House can do to help bring calm back to the streets of Northern Ireland, and when will the Select Committee on Northern Ireland Affairs meet to help address those matters so that the House can play its part in the affairs of part of the United Kingdom?

[Sir George Young]

I understand the anxiety that the hon. Gentleman has expressed. The violence that has happened in the past three days is wholly unacceptable and has no place in a modern, progressive society, and the people responsible must not be allowed to drag Northern Ireland back into the past. Many of the issues that he refers to are of course devolved and not the responsibility of the Secretary of State. It is important that those who try to create and exploit community tensions are not allowed to put the future at risk. I welcome the statement made by First Minister Peter Robinson, who has said:

“There is no excuse and no place for violence in a civilised society”.

The hon. Gentleman will also have seen the statement by my right hon. Friend the Secretary of State, who said:

“The Chief Constable and the Justice Minister should be justly proud of the incredibly brave men and women of the PSNI who held the line last night in the face of a sustained and violent assault”.

[Tracey Crouch (Chatham and Aylesford) (Con)]

We recently had an excellent debate in Westminster Hall on supporting carers, but sadly had time only to touch on the important issue of dementia. Given that one in three people will die from dementia, will the Leader of the House consider holding a debate specifically on supporting the social care and welfare of those suffering from it?

[Sir George Young]

I am grateful to my hon. Friend and congratulate her on her election as vice-chair of the all-party group on dementia. Raising the quality of care for people who suffer from dementia is a priority for this Government. Some £8.2 billion is being spent, but we need to ensure that it is spent effectively and that we break down the barrier that has often existed between health on the one hand and social care on the other. We are in the process of scrutinising the provision of dementia services across the country. The results will be available in October, and those data will drive forward action to accelerate improvements in dementia care.

[Mary Creagh (Wakefield) (Lab)]

On 5 July, the Government announced through a written ministerial statement a further £1 billion of in-year cuts to education capital. I asked the Education Secretary about that on 12 July, and I have found out that last night, the Department published the detail of those cuts on its website. May we have a debate in Government time before the recess so that all hon. Members can work out and talk about the effects that those education capital cuts, which are being made to fund the free schools programme, will have on the education of the children in our communities?

[Sir George Young]

I understand that there will be a debate in Westminster Hall next Wednesday on Building Schools for the Future, so I hope the hon. Lady will have an opportunity to raise her concern. In the meantime I will alert Ministers in the Department for Education of the particular concern that she has mentioned.

[Dr Phillip Lee (Bracknell) (Con)]

May I ask the Leader of the House for a statement on the progress of clearing Parliament square of the demonstrations?

[Sir George Young]

I am grateful to my hon. Friend for that question. As he knows, the Mayor of London is taking action to clear the square, and I understand that the decision of the Court of Appeal will be announced tomorrow. Any enforcement action will then be down to the enforcement officers of the court. We have to strike a balance between the right to protest and the imperative to maintain what I think is one of the key heritage sites in the whole world, namely Parliament square, with the Houses of Parliament, Westminster abbey, Whitehall and the Supreme Court around it. My own view is that the square is defiled by a shanty town and we should try to restore it to the green that used to be there.

[Meg Munn (Sheffield, Heeley) (Lab/Co-op)]

Three weeks ago, in response to a question, the Leader of the House spoke about meetings between the Deputy Prime Minister and Sheffield Forgemasters. I have received a letter from the Deputy Prime Minister, who is keen to get rid of any confusion. Has he also contacted the Leader of the House to enable him to correct the record? When does the Leader of the House expect the Deputy Prime Minister to correct what he said about meeting the chief executive of Sheffield Forgemasters?

[Sir George Young]

I understand that there has been a meeting between the two. Next week there is an Adjournment debate on Sheffield Forgemasters, which would be the appropriate time to raise the concern that the hon. Lady has just uttered.

[Dr Julian Lewis (New Forest East) (Con)]

A few days ago, there was a report that a Cabinet Minister, no less, had compared the cost of Britain’s future aircraft carriers with the number of children who could be educated worldwide for that money. May we have a statement from the Secretary of State for Defence, explaining the role of Britain’s armed forces in general, and the Royal Navy and aircraft carriers in particular, in humanitarian intervention worldwide and the protection of our interests at home and abroad, and the fact that the Royal Navy has an important function to fulfil that should not be offset against other causes, no matter how worthy?

[Sir George Young]

My hon. Friend makes a forceful point. He knows that traditionally several debates take place about our armed forces, which will now be the responsibility of the Backbench Business Committee. He will have heard that I have not announced a debate on the particular important issue that he raised between now and the summer recess. Doubtless, the Chairman of the Backbench Business Committee has noted that as a bid and there will, of course, be opportunities to cross-question Defence Ministers, though I see that will not happen until 13 September.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Given that I failed to get an Adjournment debate, will the Leader of the House allocate time to discuss the widespread concerns raised by hon. Members about the structure, scope and future funding of the independent panel reviewing documentation about the Hillsborough disaster in 1989?

[Sir George Young]

I am sorry that the hon. Gentleman has not been successful in getting an Adjournment debate on that subject. I can only suggest that, if he continues to apply, his number may come up one week. I am afraid that I cannot find time between now and the summer recess, but if Tuesday 27 July follows the usual pattern, and there is an Adjournment debate during which various subjects are raised, he may find it possible to share his concern then and press Ministers for the information that he wants.

[David Tredinnick (Bosworth) (Con)]

Has the Leader of the House considered the possibility of legislation if the appeal about Parliament square fails? What will he do about the lone protester? Would not it be better if Parliament had authority over Parliament square?

[Sir George Young]

I think that somebody made the same suggestion 10 years ago, and we legislated but it did not work. That is why we are where we are. It makes sense to await the Court of Appeal decision before considering fresh legislation. In the meantime, Mr Haw is allowed to continue to protest, so long as—speaking from memory—he remains on the pavement. Whether it would be appropriate to legislate just to deal with Mr Haw is something on which the House would like to reflect.

[Mr Dave Watts (St Helens North) (Lab)]

Given that the Minister for Police told the House that he did not expect any police officers’ jobs to be lost through the cuts but that the former chief constable of Gloucestershire is reported to have said that thousands of police officers’ jobs will be lost as a result of the cuts, may we have a debate on the Government’s dodgy assessments?

[Sir George Young]

With respect to the hon. Gentleman, we had a debate yesterday on precisely that subject. My right hon. Friend the Minister for Police drew attention to the failure of the previous Home Secretary—now the shadow Home Secretary—to make any commitment about retaining police numbers. He was asked on 20 April if he could guarantee that there would no reduction in police numbers and he said no.

[Mr Edward Timpson (Crewe and Nantwich) (Con)]

So that areas already hard hit by the Labour party’s broken promises on moving public sector jobs to the north do not suffer any more, may we find time for a debate on the distribution of Royal Mail jobs, particularly when we have a melée of a debate about privatisation, so that the 600 workers for Crewe’s second largest employer get the attention that they deserve?

[Sir George Young]

I commend my hon. Friend’s actions to protect local jobs and I have read his comment on ConservativeHome, which records his concern about the Crewe sorting office. I have no time for a debate between now and the summer recess, but legislation about Royal Mail has been trailed in the Queen’s Speech, and that may give him an opportunity to press for the assurances that he seeks.

[Caroline Lucas (Brighton, Pavilion) (Green)]

There are growing concerns that, despite declaring himself the fourth Minister in the Department of Energy and Climate Change as a symbol of his personal commitment to tackling climate change, the Prime Minister is already looking for a pretext to row back from the obligation to get the renewable heat incentive up and running by next April. Will the Leader of the House ask the Prime Minister whether he will come to the House to make a statement to assure us all that there is no rowing back, and that the obligation will be fulfilled? It is crucial for our renewable energy target.

[Sir George Young]

I think that that question would be more appropriately put to Ministers at the Department of Energy and Climate Change, who, I hope, can give the hon. Lady the assurance that she seeks. They will be before the House on Thursday 9 September.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

May I ask my right hon. Friend for a debate, for which legislation clearly provides, but that he seems not to wish to have on the Floor of the House, namely on motion 16 on the Order Paper about the new members of the Electoral Commission? Motion 8 on delegated legislation in his name seems determined to remove the subject from the Floor of the House of Commons, where it was originally intended to be debated. May I invite him to reconsider so that we can have a debate about the new Electoral Commissioners?

[Sir George Young]

I am grateful to my hon. Friend. Clearly, we want to make progress on appointing the new members of the Electoral Commission. Of course, the House is entitled to scrutinise the proposals that are on the Order Paper, either by debate on the Floor of the House or through the appropriate Committee.

[Kate Hoey (Vauxhall) (Lab)]

Given that many people in the country are having to take a pay cut, and that the coalition Government wish to reduce the cost of politics, will the Leader of the House look at early-day motion 453?

[That this House recognises that the economic situation means that many people are taking pay cuts; acknowledges that the Government has stated that it wants to reduce the cost of politics; appreciates the work that Select Committees do but notes with alarm that there are 35 such committees where the Chair can receive £14,582 a year on top of their Parliamentary salary, a total of £510,370 a year; and believes that this cost is becoming untenable.]

Will the right hon. Gentleman consider holding a debate on the fact that Select Committee Chairs are paid £14,500 over and above their MP’s salary? No matter how good a job Select Committees do, that might be an opportunity to review whether such payments are tenable under the current economic circumstances.

[Sir George Young]

We had quite a long debate about that in the previous Parliament, and the House decided that it made sense to have an alternative career structure in the House so that the Government did not hoover up all the talent on the Back Benches. A salary for Select Committee Chairmen was seen as part of the development of an alternative career. We have no plans to change the remuneration of Select Committee Chairmen. Speaking from memory, I think that that is now a responsibility of the Senior Salaries Review Body.

[Elizabeth Truss (South West Norfolk) (Con)]

Will the Leader of the House find some way to mark the first motion that the Backbench Business Committee, which is an achievement of the Government’s, has tabled?

[Sir George Young]

I am grateful to my hon. Friend. I propose to respond to the debate myself—I am not sure that that goes quite as far as she hoped. It would be impertinent of me to suggest that you might want to be in the Chair to mark that historic occasion, Mr Speaker. If that is an impertinence, I apologise. However, it is important that Back Benchers of all parties show support for the concept of a Back-Bench Committee choosing its own subjects, and demonstrate that support by attending and seeking to take part in the debate.

[Mr Speaker]

The Leader of the House is never impertinent, and I can tell him and the House that nothing would more readily warm the cockles of my heart than being in the Chair for the debate.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

For understandable reasons, the Leader of the House may not be aware of the growing international concern about the health of democracy in the Maldives. Opposition Members of Parliament there have been arrested, the judiciary are on strike and the army has been deployed on the streets of the capital. Will he speak to colleagues in the Foreign Office and invite them to make a statement—written or otherwise—on what they are doing to encourage a return to proper democratic processes in the Maldives?

[Sir George Young]

The hon. Gentleman makes a serious point about what is happening in the Maldives. I will communicate with the Foreign Secretary and see whether there is any way he can communicate to the House the action that the Government are taking in response the serious concerns that he expresses.

[Robert Halfon (Harlow) (Con)]

Has the Leader of the House seen early-day motion 454 on the cost of Government conferences?

[That this House notes that the Department for Work and Pensions spent £115 million on management conferences and external meetings between 2000 and 2010; further notes that most departments have refused to supply similar figures in answer to written questions, arguing that statistics on conferences are not collated centrally and could be obtained only at disproportionate cost; believes that the British public have a fundamental right to know how their taxes are spent by Government departments, and that Freedom of Information requests are being sent to every department which has refused to answer; and finally notes that the £115 million spent by the Department for Work and Pensions under the previous administration on management conferences and external meetings appears to be a gross waste of taxpayers’ money, given that the public debt increased to over £900 billion in early 2010.]

May we have an urgent debate on Government waste, given that the Department for Work and Pensions revealed to me in a written answer that it spent £115 million going to conferences in the past 10 years?

[Sir George Young]

I am grateful to my hon. Friend for identifying areas in which central Government can reduce the cost of administration. I see that his early-day motion does indeed identify some very large sums of money that have been spent on conferences and external meetings. I will communicate with my right hon. Friend the Minister for the Cabinet Office and Paymaster General and get a response on the issues my hon. Friend raises.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

We have heard warm words from both coalition parties about mutualism and how to involve communities. Will the Leader of the House find time for a debate on the role of football and other supporters trusts, and the Government’s attitude towards them, given the uncertainty in the written answers I have so far received from the Department for Culture, Media and Sport?

[Sir George Young]

I am sorry to hear of the uncertainty to which the hon. Gentleman refers, and I will of course contact my colleagues at DCMS to see what they can do to resolve it.

[Mr Dominic Raab (Esher and Walton) (Con)]

The European investigation order would allow police and prosecutors throughout Europe to order British police to collect and hand over evidence. Fair Trials International and Justice are concerned that the measure would put great pressure on our hard-pressed police forces. Britain has until 28 July to decide whether to opt in or, like Denmark, to opt out. Will the Leader of the House indicate when the Government’s decision will be made, and will the House have an opportunity to debate the measure in advance?

[Sir George Young]

I am grateful to my hon. Friend. He says that the Government must decide by 28 July what action to take. I will certainly ascertain from the Foreign and Commonwealth Office or the Home Office, whichever Department is the appropriate one, what action they propose to take in response to my hon. Friend’s question.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

The Leader of the House may be aware of a campaign that I have been running for about 12 months on the need for a fair deal for service people returning from theatres of war. In that regard, the Government have acknowledged that much more needs to be done. I have applied for Adjournment debates, but so far I have been unlucky. May we have a debate in Government time on this very important issue?

[Sir George Young]

Again, I am sorry that the hon. Gentleman has been unsuccessful in the ballot, but he may have an opportunity on the last Tuesday before the recess to raise his concern. The Government take seriously our responsibilities under the military covenant. The issue that he raises may fall within that, and I will share his concerns with the Defence Secretary.

[Tony Baldry (Banbury) (Con)]

May we have a debate on the House of Commons Library? I understand that it intends to stock only one copy of Lord Mandelson’s new book, which I suspect will have to be chained to the wall. Many colleagues on both sides of the House will want to know which members of the Cabinet of the previous Labour Government thought which other members of the previous Labour Government were mad, bad and dangerous, so will my right hon. Friend ensure that the Library has a sufficiency of copies of the book so that we can all read it before the recess?

[Sir George Young]

I am grateful to my hon. Friend. We are of course trying to cut the cost of politics, and I am not sure whether buying many copies of Lord Mandelson’s book is compatible with that policy. I was interested to read today in The Guardian, which costs a lot less than Lord Mandelson’s book, this paragraph:

“Darling told…Brown…he was being ‘ludicrously over-optimistic, not only about growth prospects, but also about Britain’s ability to support such a large and expanding deficit’”.

I entirely agree that all Members of the House should be aware of that and other relevant paragraphs.

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

Yesterday during Prime Minister’s questions, the Prime Minister, in common with all Ministers in his Government, presented an image of housing benefit claimants living in vast properties and paying rents of £1,000 a week. He and the Government must know that nothing could be further from the truth. May we please have an urgent debate in Government time on the Government’s monstrous housing benefit proposals? If they are not reconsidered, they will not save any money but they will certainly put thousands of families on the street.

[Sir George Young]

I understand the hon. Lady’s concern. As a former London Member, I know the price of rents in the city. I am not sure whether she was at Communities and Local Government questions, which has just concluded, but I understand that London MPs have been offered a meeting with the Minister for Housing to discuss exactly the issues she raises. I very much hope that she can attend that meeting.

[Mr Mark Spencer (Sherwood) (Con)]

I hope the Leader of the House agrees that a modern Parliament should be family friendly. When will he be in a position to publish the dates of the Christmas and February breaks so that those of us who have children can align our breaks with school holidays?

[Sir George Young]

I am grateful to my hon. Friend. He makes an ambitious request, because it was only a few minutes ago that I announced the dates of the summer recess and that of our October return. I understand his impatience. We want to give the House and those who work here certainty on the dates, and I will announce the dates of the Christmas recess as soon as I can.

[Mr Phil Woolas (Oldham East and Saddleworth) (Lab)]

The Leader of the House is an admired Member of the House, and he acknowledged this morning that crime fell under the Labour Government. I am very grateful to him for putting that matter right, but he also said that Sir Michael Scholar had admonished the Prime Minister for misrepresenting the crime figures. What action does he intend to take on that? Is he embarrassed by the Prime Minister’s mistake, or are we to assume that there is a deliberate strategy to misrepresent independent statistics?

[Sir George Young]

I return the compliment: the hon. Gentleman too is a much-admired Member of the House. If he looks at exactly what I said in response to the right hon. Member for Doncaster Central (Ms Winterton), he will see that I did not use the words he says I used. He very much paraphrased what I said, if I may say so. I believe I said that Sir Michael Scholar had admonished both sides of the House for misuse of statistics.

In response to the hon. Gentleman’s question, I would say that the credibility of crime statistics is an issue. At various times, various parties have used whichever set of statistics has best suited their case. In order to bring that debate to a satisfactory conclusion, my right hon. Friend the Home Secretary is engaged in a dialogue to find an agreed set of statistics that commands public confidence and represents what is happening in the real world.

[Andrew Stephenson (Pendle) (Con)]

Will the Leader of the House grant a debate on companies that buy up freeholds for properties, and then use clauses within them to force all leaseholders to insure their properties through a sole provider at an extortionate rate, or buy out the freehold? That is becoming an increasing problem in my constituency, particularly in the town of Nelson, where companies are buying up old ground rents, invoking those clauses and sending threatening letters to my constituents.

[Sir George Young]

I am grateful to my hon. Friend, who raises an important issue. He will know that when leaseholders have reason to doubt the reasonableness of an insurance premium, they have a right to go to the leasehold valuation tribunal, which can resolve the matter. In the meantime, he might like to refer his constituents to Lease, which is an independent, Government-funded organisation that gives advice to leaseholders who face the sorts of problems facing his constituents

[Keith Vaz (Leicester East) (Lab)]

After the tragic events in Cumbria and Northumberland, may we have a debate on firearms? As the Leader of the House might know, this week the BBC obtained statistics showing that 1,000 under-18s have shotgun licences, and that people as young as 10 can obtain one. When can we have a debate on that important issue?

[Sir George Young]

After my right hon. Friend the Home Secretary made her statement on Cumbria, she indicated that it would be appropriate to have a debate on firearms legislation. I think it would make sense to await the outcome of the police report on the Cumbrian incident, but I hope a debate on firearms will be possible when we have all the relevant information.

[Mr David Davis (Haltemprice and Howden) (Con)]

Will the Leader of the House reconsider his answer to my hon. Friend the Member for Esher and Walton (Mr Raab)? The European investigation order allows foreign authorities to give instructions to the British police and allows foreign police forces to operate within the United Kingdom. That is a matter for decision by the House of Commons, not simply for notification by a Department of State.

[Sir George Young]

I understand my right hon. Friend’s concern. I think I said in response to my hon. Friend that I would contact the relevant Department and see what action the Government propose to take or recommend to the House before 28 July, which I understand is the operative date.

[Ian Lavery (Wansbeck) (Lab)]

The whole House is fully aware of the Government’s vehement opposition to quangos. Will the Leader of the House make a statement on how many quangos and super-quangos will be established as a result of the announcements on the NHS and education, and of all announcements during the Budget and since?

[Sir George Young]

I am not sure whether the hon. Gentleman is referring to quangos or commissions, but it is certainly the Government’s intention to end up with many fewer quangos than we inherited from the outgoing Government—and quangos that cost a lot less.

[Philip Davies (Shipley) (Con)]

May I echo the call from my right hon. Friend the Member for East Yorkshire (Mr Knight) for a debate on the effect of the smoking ban on pubs and clubs? The Government are pushing a freedom Bill through Parliament, and I hope that my right hon. Friend the Leader of the House will use his influence to ensure that the freedom of people to smoke in public places, and of pubs and clubs to allow people to smoke on what are their own premises, will be included in the Bill.

[Sir George Young]

I have to disappoint my hon. Friend. I supported the smoking legislation and I encouraged the Government to remove the exemption for pubs that did not sell food. It was a sensible thing to do and I stand behind that policy. The benefit to public health has been welcome. I will ask my right hon. Friend the Secretary of State about his intentions in relation to the specific issue that my hon. Friend mentioned.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

May we have an opportunity to debate the perplexing decision by the Minister for Housing to remove the powers of local authorities to regulate houses in multiple occupation? Many of my constituents in Nottingham are very worried that the freedom that local authorities have to grant planning permission will now be centralised in the Department—an odd attitude for supposedly localist Ministers to take.

[Sir George Young]

We have just had an hour’s worth of questions to the Minister responsible, and I understand that the issue was raised in that time. The hon. Gentleman may therefore have to wait for another round of DCLG Ministers in order to press the matter.

[Mr Peter Bone (Wellingborough) (Con)]

Motion 7 on the Order Paper invites the House to agree to a summer recess starting on 27 July, which means that we will miss Prime Minister’s questions on 28 July. I know that the Leader of the House was intending that the House should rise on 29 July. Has he been approached by the Opposition Whips’ office to adjourn on 27 July to avoid the acting leader of the Labour party taking another battering at PMQs?

[Sir George Young]

I agree with my hon. Friend that my right hon. Friend the Prime Minister is an outstanding performer at Prime Minister’s questions and regularly wins the exchanges. We are rising on 27 July partly because—as my hon. Friend will know—those who represent Scottish seats have a different configuration of school holidays, and it was our judgment that we had made sufficient progress to recommend rising on that date as opposed to the original, provisional plans for 29 July. I wonder whether my hon. Friend is planning to oppose the motion—

[Mr Bone]

indicated assent.

[Sir George Young]

I am dismayed to see that.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

May we have a debate on the role of the private sector in area-wide regeneration projects? In that debate we could discuss why Tory-Lib Dem controlled Birmingham council is spurning just such a project in the Stirchley area of my constituency, risking years of blight and costing us 300 badly needed jobs.

[Sir George Young]

It sounds to me as though that is an appropriate subject for an Adjournment debate or a debate in Westminster Hall. I believe in localism and local government, and if that is what the local authority wants to do, we should be cautious about second-guessing it here.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Will the Leader of the House find time for a debate following this morning’s Care Quality Commission report into out-of-hours GP services, so that we may learn the lessons from the unlawful killing of my constituent Mr David Gray and ensure that EU-qualified doctors working here are both medically competent to use NHS equipment and able to speak English to their patients?

[Sir George Young]

My hon. Friend raises an important issue, and I suspect that he may have seen the written ministerial statement this morning commenting on the CQC’s report. Out-of-hours care needs urgent reform and GPs are best placed to ensure that patients get the care they need when they need it. That is what our health reforms will deliver.

[Mr Wayne David (Caerphilly) (Lab)]

The Deputy Prime Minister has admitted that there was no prior consultation with the devolved Administrations about the date of the alternative vote referendum. As we know, it will clash with the elections for the devolved Administrations. May we have a debate on procedures that might be established to provide an effective dialogue between the Government and the devolved Administrations to ensure that such a mix-up does not happen again?

[Sir George Young]

I am not sure that it is fair to describe it as a mix-up. The Deputy Prime Minister has been giving evidence all morning to a Select Committee, and I am sure that there was an opportunity to raise this issue. When the AV and boundaries legislation comes before the House, there will be ample opportunity to explore these issues in more depth.

[Chris Bryant (Rhondda) (Lab)]

The Government have said that they want to raise 20% of the money to cut the deficit from tax rises and 80% from budget cuts. The Leader of the House has announced that on Monday at 10 pm without any debate we will agree all outstanding estimates, which is how we decide how much money we will give to each Department. If four times as much money is to come from cuts as from tax rises, will he ensure that we have four times as much time to debate those cuts, and on amendable motions? The experience of the last two weeks has shown that when cuts are pushed through with more haste than is strictly speaking necessary, the House does not carry the nation with it. Also, which estimates are yet outstanding and to be agreed on Monday?

[Sir George Young]

If the hon. Gentleman looks at Standing Order No. 55, he will see that that is the procedure under which we deal with all outstanding estimates. I agree entirely that the House should have adequate opportunity to question the Government on spending decisions. We have the Treasury Committee, the departmental Select Committees and debates on the Budget. We may also have debates on any public expenditure decisions that are taken. If the hon. Gentleman has better ways to hold the Government to account on financial measures, I would be interested to hear from him. In the past, we may not have spent enough time looking at such issues; perhaps we should refocus on them

[Diana R. Johnson (Kingston upon Hull North) (Lab)]

I am concerned about the hasty way in which legislation is moving through the House. Have the coalition Government now abandoned pre-legislative scrutiny and evidence sessions before Bills go to Committee?

[Sir George Young]

The answer is no, but, as she will know, if a Bill is taken on the Floor of the House, there is no slot for public evidence taking. I want to publish draft Bills in this Session to be considered in the next Session, but I hope she will understand that with a newly elected Government the opportunities for dealing with draft Bills in the first Session are not as much of an option as they will be later in the Parliament.

[Barry Gardiner (Brent North) (Lab)]

May we have a debate on sanctuary, so that Home Office Ministers can explain why Tamil Christians on pilgrimage to Walsingham on 11 July were targeted by the Home Office and arrested and detained, despite the fact that the individuals concerned had already been accepted under the legacy casework for consideration by the Home Office and that fact had been notified to their Member of Parliament?

[Sir George Young]

I am cautious about commenting on the particular incident to which the hon. Gentleman refers, but I understand his concern. I will contact Home Office Ministers later today to see whether I can get a reply to the issue he has just raised.

[Phil Wilson (Sedgefield) (Lab)]

As a result of all the changes in the Budget, and those announced over the last few weeks, to health, education and local government, how many commissions are being set up in the next few months?

[Sir George Young]

If the hon. Gentleman tables a question, I am sure that he will get an adequate answer—[Interruption.] I think I have already answered a question in relation to the coalition agreement, and he will find an answer that addresses the commissions set up there. If he tables an appropriate question about any commissions set up after that, I am sure he will get an accurate and prompt reply.

[Natascha Engel (North East Derbyshire) (Lab)]

Thank you, Mr Speaker, for giving me the opportunity briefly to respond to the bids for time made by Members to the Backbench Business Committee. We will shortly be producing an outline of how we intend to hear bids in public from Back-Bench Members for slots of time that the Committee has for them.

I want to mark the historic event next Tuesday and encourage all Back-Bench Members to put their names down to speak. It is historic, because it will be the first time that Back-Bench Members will have chosen a subject for debate in Back-Bench time. I hope that the hon. Member for South West Norfolk (Elizabeth Truss) will be the first to put her name down to speak, and I would like the Leader of the House to confirm his answer to her in which he said that he will be present at, and respond to, that debate, which will hopefully be opened and closed by Backbench Business Committee members. We hope to start at seven and finish at 10, but obviously that remains to be seen. We will be considering the pre-recess Adjournment debate and the defence days, which are now part of Back-Bench time. Again, however, I would be grateful if the Leader of the House could confirm that he will be present to respond.

[Sir George Young]

I welcome how the hon. Lady is approaching her new and important responsibilities as Chair of the Backbench Business Committee, and commend the way of proceeding that she has just outlined in encouraging Members to submit their suggestions to her Committee. I am more than happy to confirm what I said earlier—that I look forward to responding to the motion in her name and those of her colleagues—and I very much hope that this is the beginning of an important dialogue between the Government and the House and that the time will be used to enable the House to hold the Government to account more effectively.

[Mr Speaker]

I am grateful to the hon. Member for North East Derbyshire (Natascha Engel) and the Leader of the House.

Point of Order

Thursday 15th July 2010 Commons Chamber

12:21

[Fiona Mactaggart (Slough) (Lab)]

On a point of order, Mr Speaker. Is it in order for a Minister to mislead the House, as the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill,) did earlier when he claimed that no local authority had faced more than a 2% cut? Many authorities have done, including my own, and particularly Labour authorities.

[Mr Speaker]

I am grateful to the hon. Lady for her point of order. To accuse a Minister of misleading the House is usually a hazardous enterprise, and it would be advisable for her to add the word “inadvertently” before the word “misleading”. To charge somebody with deliberately misleading the House, which is the implication of what she said, is a serious matter. It might well be that—one must assume this—if there was any misleading, it was inadvertent. If she would add that in, I will happily respond.

[Fiona Mactaggart]

Mr Speaker, perhaps you would like to invite the Minister to explain to the House how the inadvertent misleading occurred. The House has been misled. I am sure that he did not intend to mislead it, but he said something that is factually not true.

[Mr Speaker]

I am grateful to the hon. Lady for accepting the amendment I tabled—by way of a manuscript amendment. She is a very experienced hand—I will not say she is an old hand, because that would be ageist, wrong, unfair and discriminatory—and she and I entered the House together. She has raised under the guise of a point of order an interesting point of debate, and I have a feeling that she will want to share it with the people of Slough.

Bill Presented

Superannuation Bill

Presentation and First Reading (Standing Order No. 57)

Mr Francis Maude, supported by the Prime Minister, the Deputy Prime Minister, Mr Chancellor of the Exchequer, Secretary Theresa May, Secretary Liam Fox, Mr Secretary Ian Duncan Smith, Mr Secretary Lansley and Nick Hurd, presented a Bill to make provision for and in connection with limiting the value of the benefits which may be provided under so much of any scheme under section 1 of the Superannuation Act 1972 as provides by virtue of section 2(2) of the Act for benefits to be provided by way of compensation to or in respect of persons who suffer loss of office or employment.

Bill read the First time; to be read a Second time on Monday 19 July, and to be printed (Bill 58) with explanatory notes (Bill 58-EN).

Finance Bill

Thursday 15th July 2010 Commons Chamber

[3rd Allocated Day]

Further considered in Committee (Progress reported, 13 July)

[Mr Nigel Evans in the Chair]

Clause 4

Rates of insurance premium tax

12:24

[Mr Christopher Chope (Christchurch) (Con)]

I beg to move amendment 18, page 2, line 23, leave out ‘“6 per cent”’ and insert ‘“5 per cent in the case of personal health insurance, and 6 per cent in any other case”’.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to discuss the following: amendment 19, page 2, line 23, leave out ‘“6 per cent”’ and insert ‘“5 per cent in the case of motor insurance, and 6 per cent in any other case”’.

Amendment 15, page 2, line 26, at end add ‘, subject to a report having been laid by the Secretary of State containing an assessment of the consequences of the changes in subsection (1) on consumers and the insurance industry.’.

Amendment 48, page 2, line 32, leave out subsection (4).

[Mr Chope]

The amendments aim to tease out from the coalition Government and, in particular, the Exchequer Secretary, who is responding to this debate, what the Government’s attitude is towards people who do the right thing and try to relieve the burden on the public sector and the national taxpayer. Although it would be wrong to suggest that the inspiration for the amendments came from the Secretary of State for Transport, he was on to an important principle recently when he said that if a pensioner has a bus pass but can afford to pay their fare, they should not use the pass but pay the fare themselves and thereby relieve the local taxpayer of the costs consequent upon the use of that subsidised bus pass. It is a subsidy of general application—it goes to people irrespective of their means and ability to pay.

We know that quite a lot of people choose to buy medical and personal health care in the private sector without burdening the state and the taxpayer. If those people choose to do that through personal health insurance, this Budget will increase the financial penalty on them. In other words, it will be a disincentive to people taking responsibility for their own personal health care through personal health insurance. Many years ago, it was the policy of the then Conservative Government that those who subscribed to personal health care insurance should have their subscriptions tax deductible. That was based on the worthy principle that, if we did that, we would encourage more people to take responsibility for their own health care. We have moved a long way from that now.

[Mr Peter Bone (Wellingborough) (Con)]

My hon. Friend is making a powerful speech, and I am grateful to him for giving way. Does he support the Government’s aim of coming up with suggestions that will reduce the charge to the taxpayer? Obviously, if more people take private medical insurance, there is less of a burden on the state and it is a win-win situation for the Government.

[Mr Chope]

Almost every contribution I make in the House is designed to try to help the Government and often to try to get better value for money for taxpayers.

If we were under any illusions about how important and critical the situation is in relation to health care, we should bear in mind that yesterday, in response to a question from my hon. Friend the Member for Pendle (Andrew Stephenson) about the NHS White Paper, the Prime Minister said that

“when we look at the NHS, we know that there are expensive drugs coming down the track, expensive treatments and an ageing population, and more children born with disabilities and living for longer. There are cost pressures on our NHS that mean that even small real-terms increases will be an heroic thing to achieve.”—[Official Report, 14 July 2010; Vol. 513, c. 950.]

My hon. Friend the Member for Wellingborough (Mr Bone) is making exactly the same point. I am trying to tease out from my hon. Friend the Exchequer Secretary whether it is the Government’s policy to try to encourage people to take responsibility for their own health care, if they can so do. This is not the subject of an amendment, but similarly, if people can afford to educate their children in the independent sector, should they not be encouraged so to do?

12:30

I am concerned that, in this country, we cannot afford to fund all our health care needs out of taxation. If we look at those countries that have better health care systems that are also better funded collectively than ours, we see that many of them—I am thinking particularly of Australia—are in countries where a high proportion of the money going into personal health care comes from individuals, rather than taxpayers. If we want more expenditure on health, why do we not incentivise people to take on more responsibility themselves?

It might be said, “Well, these are the services that are available, and people shouldn’t be encouraged to buy their way out of the queue,” but a situation is rapidly developing where what are described as low-priority health services are affected. For example, the local primary care trust in my area has refused to fund an operation—I think that it is called a grommets operation—for two young children who have difficulties with their learning as a result of their ear condition. The primary care trust has refused to fund those operations on the grounds that they constitute low-level care. Indeed, I met somebody during the general election who, according to the clinical advice that he had received, needed a cataract operation at the Royal Bournemouth hospital. However, that operation was not being funded, because the cataracts were not sufficiently severe.

What is happening now is that the public availability of health care that is funded by the taxpayer is being reduced. An increasing number of people may wish to insure themselves against the possibility that they might need access to such health care in the independent sector. Indeed, one might also mention physiotherapy. Any number of people who suffer sports injuries then seek to get physiotherapy on the NHS, but they find that if they can get it at all, the wait is likely to be so long that the benefit will be significantly less.

A large number of individuals in this country insure themselves with personal health insurance. If the Government think that that is a good and responsible thing to do—it is one way in which people choose to spend their money, perhaps instead of spending it on expensive holidays abroad or whatever else—we can perhaps hear about that today. However, if the Government’s purpose is to encourage people to supplement the health care that is available from the state, why are we proposing to increase the insurance tax on the premiums that they pay?

One might also talk about what happens in dentistry. It is almost impossible now to access free dentistry on the NHS. Indeed, I understand from the British Dental Association that, in terms of value, about half the dentistry in this country is practised in the private sector, and a lot of that is funded through insurance. If we want a nation that prides itself on having about the worst dental care of anywhere in the world, we are heading in the right direction. I am sorry that my hon. Friend the Member for Mole Valley (Sir Paul Beresford) is not here to supplement my points about that, but there is an increasing crisis in dentistry in this country, because of a lack of resources that are funded by the taxpayer. In moving the amendment, I am not asking that those taxpayer resources should be greater; rather, I am trying to ensure that proper incentives are in place to encourage people to take responsibility for such insurance themselves.

[Mr John Redwood (Wokingham) (Con)]

I am delighted by the case that my hon. Friend is making. As he is suggesting, people who insure for their health needs are paying twice, because they are also paying their contribution to the NHS, thereby helping doubly. Does he therefore think that keeping the tax rate at 5% is enough, or would he really rather it were lower?

[Mr Chope]

My right hon. Friend asks a pertinent question. I would prefer the tax to be much lower—indeed, perhaps there should be no tax at all—for particular insurance premiums. However, in order to try to carry as many people with me as possible in this debate, I thought that I would limit my ambition, by saying, “Why don’t we not increase the tax from 5% to 6% for specific types of insurance premiums?”

I have picked out a couple of examples of that, and I will come to another in a minute, but obviously the principles could apply much more widely. For example, many people are now taking out insurance against their long-term care needs. Indeed, the Conservative party said in its manifesto that for an £8,000 premium, a family would be able to secure themselves against the cost of having to fund long-term care. I do not know whether such a premium, if it were paid, would be subject to insurance premium tax, but perhaps my hon. Friend the Minister will be able to tell us about that. At the same time, perhaps he can let us know when he expects that part of the Conservative manifesto to be brought before the House for implementation in legislative form.

The principle of insurance is one that most Conservatives—most of my constituents—applaud. People can either self-insure, which means that they take the risks themselves, or they can pool that risk by buying an insurance policy, which many people do, by buying life insurance, pension insurance and so on. In the case of pension insurance, we are talking about incentives for saving; in the case of life insurance, we are trying to encourage people to ensure that if they die prematurely, their dependants have some support and are not wholly dependent on the state. Those examples do not fall within the scope of my amendments, but they would be covered by amendment 15, which goes rather wider. However, it is important that we should have this little debate, to try to tease out a bit more from the Government on these important issues.

Turning to my amendment 19, let me say that we have a real problem with motor insurance in this country. For young people, the price of motor insurance is almost prohibitive. Indeed, it is so high that people cannot afford to buy it. Instead, what happens is that young people might get their parents to put them on their policies, if they are lucky enough to have parents who will do so—sometimes in quite dubious circumstances, as we have been reading in the newspapers recently—but quite often they will take a risk and drive uninsured. I regard driving without insurance as an extremely serious motoring offence. It is reckless, and those who do pay for their motor insurance end up having to pick up the bill for those who cause accidents and injuries as a result of not buying insurance.

[Lorely Burt (Solihull) (LD)]

I am following the hon. Gentlemen’s argument, but when he says that the cost of insurance for young people is prohibitive, does he honestly believe that 1% either way is going to be a significant factor in a young person’s decision on whether to buy motor insurance?

[Mr Chope]

Well, 1% is 1%. I am sorry that the hon. Lady seems to be rather unsympathetic to the plight of people who are trying to get motor insurance. Lots of young people need a car to get to work. They find the cost of motoring increasing all the time and they find the cost of insurance also increasing, yet the proposal before us is to increase that cost further—not massively further, but to increase it nevertheless.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

As I hope to be able to say in my contribution later, I agree with the hon. Gentleman on this point. I am astonished to hear the comments coming from the Liberal Democrats that they do not care about the costs of motor insurance, which, especially to young people, can be £1,000 or more. Will the hon. Gentleman also note the perverse consequences for those who go uninsured? Yes, they might get six points put on their licence if they are caught, but the fine is often just £300 or £400, so they would almost be better off to take the risk and be fined rather than pay the cost of the insurance. That has to change.

[Mr Chope]

The hon. Gentleman is absolutely right. What he said is no great revelation for young people when they go out and party or communicate with each other via modern means of communication. They know that the risks of getting caught are not that great, and that if they are caught, the consequence will be penalty points on their licence and a fine. They will often be able to pay off the fine over an extended period.

Young people now face very substantial insurance premiums and those from the most deprived areas are often those with the highest premiums. One factor that is taken into account is the postcode. If the chance of someone’s car being stolen is high because of where they live or because they do not have garage, the premium will be higher than for someone who perhaps lives in a rural, perhaps law-abiding community. That is an additional problem that these young people face when it comes to motor insurance.

[Mr Greg Knight (East Yorkshire) (Con)]

This tax will hit not only young people, but people of all ages. Does he agree that those arguing that the motor car is a luxury and that taxes on luxuries are quite acceptable are ignoring the real problems that people in rural areas face? For them the motor car is not a luxury but a necessity.

[Mr Chope]

My right hon. Friend is absolutely right. What he and others are identifying in this debate is an element of confusion in public policy. Compulsory third-party insurance for people who drive cars is a matter of public policy. If such compulsory insurance is required by the law, we are effectively saying as law-makers that it is a good thing to have it. Are we seriously saying as law-makers, “Well, if you comply with the law, we are also going to charge you extra tax for your compliance”? It seems to me that we need more clarity of thought on the matter. If we do not think that insurance is important and necessary, we should remove the requirement for compulsory insurance. I think that motor insurance, and particularly third-party insurance, is not only desirable but essential. If we are to have it, however, why should we also have insurance premium tax on it? In particular, why do we need to increase the insurance premium tax at this time?

The yield from all the increases in insurance premium tax comes to some £400 million a year, but I suggest that the cost ramifications arising from uninsured driving, and the accident and injuries resulting from it, might be on a scale similar to the total yield of the entire increase in insurance premium tax. Because the current system imposes a flat rate on the level of the premium, the higher the premium, the worse the risk and the greater the penalty incurred.

12:45

When the Minister responds, I hope he will let us know whether he has considered alternative ways of raising revenue, if it has to be raised, from insurance premiums. It might be possible to do so by looking at each transaction, or we could have a fixed levy on every annual insurance premium. That would mean that people with the highest premiums would not have to pay the highest amount in tax. I do not know whether those options are being looked at. If the Minister is listening to what I am saying rather than coalescing with the coalition, I hope he will let me know whether any thinking has gone on in this radical Government along the lines that I have suggested—of having a fixed price tax on each insurance transaction rather than relating the tax to the cost of the premium, which, as I have said, militates particularly against the least well-off, living in areas where the premiums are higher because the risks are higher.

Without making a meal of it, I believe that we are debating an important matter of principle, and I am delighted that there are so many right hon. and hon. Members in the Chamber to hear it debated. We look forward to hearing more about amendment 15, which I believe is also a useful one. It is surprising that we do not have such a report as is suggested in the amendment before us now as we consider these issues.

[Mr Knight]

I do not think my hon. Friend should gloss over this point too quickly. As he has said, this is a percentage tax, so we are effectively saying that a young driver seeking to insure an Escort RS motor vehicle should pay more in tax than a 55-year-old driver of a Bentley.

[Mr Chope]

My right hon. Friend has particular expertise and knowledge about that particular end of the market. I am sure that the Committee is obliged to him for that information. The point he makes is absolutely correct. If we are thinking in terms of equity and fairness as the guiding words of the day, let us see if we can look again with radical eyes at this whole structure of taxing insurance premiums. Let us see whether the Government accept the amendment today; if they do not, let us see whether they have anything else to put on the table by way of responding positively to the points raised in the debate. We can then decide whether we wish to divide the Committee on this issue or just put down a marker.

[Mr Bone]

Before my hon. Friend concludes his opening remarks, will he clarify this? I assume that the amendment is not really about whether to have the tax rise or not to have it, because it is very small. Is it more about sending out a signal that the Government want to encourage people to take responsibility and take out insurance?

[Mr Chope]

Absolutely. I make no apology for declaring my own view, which is that if it could be afforded, it would be sensible to give tax relief on insurance premiums where we think those premiums are for the public good and will result in reducing the burden on the state and the taxpayer. I would like at least to bring in incentives in the form of tax relief, let alone eliminate the insurance premium tax. As I said earlier, I do not think that the latter is affordable in the present crisis. That is why I tabled this very modest proposal in the hope that it will get the Government thinking about alternative means of raising money from insurance policies.

[Stewart Hosie (Dundee East) (SNP)]

I rise to speak to amendment 15 in my name and that of my friends. At face value, the increase in insurance premium tax in the Budget did not cause a huge stir, but as its consequences began to be felt, many representations were made by consumers and the industry. On balance, it is wise that we should have a report on the likely consequences of this tax rise on individuals, families, consumers and the sector. A number of concerns and predictions have been voiced. Eric Galbraith, the chief executive of the British Insurance Brokers Association, said that its research

“demonstrated that businesses and consumers were reducing insurance cover as a result of the recession”

and that

“we are concerned that increases to insurance premiums as a result of IPT could lead to even further underinsurance or even a lack of insurance protection. The last thing people need in a financial crisis is a higher insurance bill”.

That makes sense, given that taxes elsewhere, not least VAT, are going up. The insurance industry is worried that increased premiums may tempt people completely to stop insuring their homes, holidays or travel. Already, according to research by moneysupermarket.com, only one in five travellers always cover every trip they take here or abroad.

One consequence of underinsurance or non-insurance is that the number of illegal uninsured drivers is on the rise. According to the Motor Insurers Bureau, they already push up the average car premium for everybody else by £30 a year. If more people are underinsured or have no insurance at all, the premiums of those who pay the minimum third-party insurance will be pushed up even further. That is another burden that people really cannot do with in the middle of this recession, when times are tough. As the right hon. Member for East Yorkshire (Mr Knight) has made clear, in certain parts of the country, where the car is a necessity and people are honest, such premiums will be paid again and again. There will be a lot of hits to the honest insurer as a result of non-insurance elsewhere.

The Association of British Insurers has responded to the Budget by saying:

“Raising IPT is a direct tax increase for the vast majority of people who sensibly protect themselves and their families with insurance. This is regrettable and could have serious unintended consequences if it puts off consumers from protecting their homes, cars, holidays and everyday living.”

On uninsured trips, apparently some 2.9 million trips are made each year without adequate cover. Peter Hayman, the director of P J Hayman, expects that number to rise as more people opt to economise and use “free” cover as the cost of IPT increases. Perry Wilson, the founder of Insure and Go, has said:

“Our research suggests that the UK travel insurance industry receives over half a million claims for medical problems a year and nearly 400 000 for lost or stolen baggage. This tax rise will only act as a deterrent to those who sensibly want to insure themselves against these risks”.

Of course, the cost of not having insurance in certain circumstances can be extraordinarily expensive.

[David Rutley (Macclesfield) (Con)]

The hon. Gentleman makes an important point about underinsurance, as have other Members. Does he agree that this should not be just about the potential increase in IPT, but should also be about what we can do in terms of product design? Surely the onus should be on insurers to come up with products that help people, particularly younger drivers, to avoid this challenge. For example, they should look at opportunities for pay-as-you-go insurance and other possibilities. The argument is not just about IPT, but is about other product-related challenges and what can be put forward to mitigate the problems of underinsurance.

[Stewart Hosie]

I am a great supporter of innovative product design, marketing and pricing strategies, and I hope that all those things happen, but we are debating an amendment to the Finance Bill in which the Government are putting up IPT. I shall not strain the limits allowed by the Chair, but shall stick to the amendment and what is in the Bill, while supporting any innovation that the insurance sector, which is massively important in Scotland, might bring forward.

There is a deterrent effect on those who wish sensibly to insure themselves against many risks, and that effect will be enhanced as the cost of insurance rises. There are also specific consequences for individuals. Some 1.2 million people—about one in 20 motorists—regularly drive uninsured, and honest motorists pay the £30 premium I have mentioned, which is likely to go up. If someone is caught driving without insurance, the police are entitled to remove their vehicle from the road and charge them for the cost of transporting, storing or scrapping it. However, some cars may be worth less than the cost of insurance and there will be a burden on the public purse as a result of that removal, storage and scrapping of vehicles if people choose simply to abandon them.

People might also cut corners and opt for the “free” travel insurance offered by credit card companies, which might leave some travellers without the necessary levels of cover and might be costly in the long term. I do not intend to take up much of the Committee’s time on this issue, as this is a probing amendment, but this issue is more serious than I had initially imagined. I look forward to hearing the Minister’s comments on that last point in particular, because if people decide not to pay insurance premiums and instead settle for the “free” cover offered by their credit cards, they might be underinsured in certain circumstances. Also, business might be driven from the traditional, successful, good insurance companies, and I am conscious of what the net loss of jobs, revenue and profitability in that sector might be. So, putting up IPT will have consequences for the sector, for individuals and for jobs. All these points need to be answered properly and considerable comfort needs to be given that we are not going to turn into a nation that says, “We can’t afford insurance; we’ll do without it and let other people pick up the tab.” I shall listen very carefully to the Minister’s reply.

[Mr Redwood]

My hon. Friend the Member for Christchurch (Mr Chope) has highlighted the two very important and different issues of health insurance and motor insurance. Let me start with motor insurance, which is a legal obligation that is imposed on everyone who wishes to own and drive a car.

Like my hon. Friend, and, I suspect, everyone else in the House, I think it quite right that there should be that obligation. It reminds people that driving a car is a serious business and that they could do considerable damage to others or themselves if they do it badly. It also means that, were someone to drive badly or to be involved in an accident that was not their fault, there would be redress and injured third parties who might need substantial compensation would not be left without it. For all those reasons, we think that car insurance is a very good idea and we accept that it should be a legal obligation.

The coalition Government think that one way of raising more revenue is to increase the tax on that compulsory purchase, but quite a lot of people in the House think it would be better to raise more revenue from the existing level of insurance tax on motor insurance by getting more people to be insured. We are rightly very concerned that, because of the way in which the insurance market works, a significant number of people, particularly younger people, may not be taking out any insurance or may not be taking out proper insurance for their circumstances, and that that places other people at risk and could mean losses that those young people could not afford to pay if they had an accident. That clearly means a loss of revenue for the Exchequer, because those people are not making their contribution by paying their share of insurance tax. We would like the Minister to consider whether better enforcement of the insurance rules could help with his task of filling the coffers and narrowing the deficit. That might be a better route than increasing the tax.

I am sure that the Minister will remind us that we are talking about a 1% increase and that it is quite a modest sum of money. We have been reminded a few times that young people with certain kinds of vehicles, or some young people with any kind of vehicle, can be required to pay a four-figure sum each year for their motor insurance, so we could be talking about £10 or more. The additional increase would not be welcome, because most young people find such sums of money quite large in the first place, and a further 1% would not be helpful.

13:00

The increase might only be a straw, but the camel’s back is already well and truly loaded. The poor old motorist is always at the top of any Government’s list when they are rattling the collecting tin and trying to raise more money for a variety of state purposes. I just hope that the Government will reflect on this matter. They will have other opportunities to look at the total burden on the motorist, and they might not wish to consider this particular burden today and therefore immediately grant my hon. Friend the Member for Christchurch’s request. I see no sign of the Minister leaping to his feet to welcome the proposal, just and fair though it might be. We know, for example, that the coalition Government are going to look at a fair fuel levy—an escalator that comes down when the price goes up and goes up when the price comes down, to keep fuel prices at a more realistic level.

[Claire Perry (Devizes) (Con)]

In trying to square the circle of how we can raise taxes when there is no money, it is interesting to note that we have not committed to Labour’s rise in fuel tax, which was going to add a further £425 million—[Interruption.] If you read the small print in Labour’s last Budget, you will see that there was a plan to raise an additional £425 million—

[The First Deputy Chairman]

Order. We are not referring to taxes that are not proposed in the Bill. We are talking specifically about the amendments to the Bill.

[Mr Redwood]

How wise you are, Mr Evans.

I was making the point that the Minister, in responding to this debate on the insurance premium tax, might assuage some of our grief if he were to say that the Government had looked at the total package of taxes on the motorist and that they were aware that this was yet another example of the piling high of taxes on the motorist. Although this individual tax increase will not be large for many motorists—it will be more penal for young drivers and high-risk drivers—it is none the less an additional burden. Even if the Minister cannot accept the amendment, I hope that he will look at other ways of dealing with the problem of fair motoring taxes.

Every time something like this happens to motorists—this time, it is the insurance tax levy—they say, “We are being sandbagged again. Where are those better roads? Where is that safer junction? Where is the wish to spend money on improving the flows on the roads so that we can travel in a more fuel-efficient, green manner of which the Environment Secretary would approve?” There never seems to be the money to do that. We know that this bit of taxation on the motorist, like most others, primarily goes not to making better roads but to a wide range of other purposes; it gets lost in the general coffers.

[Lorely Burt]

A number of speakers today have singled out specific kinds of insurance, but as I understand it, the Bill proposes to increase insurance premium tax on a whole range of insurance products, which we would encourage people to take in a responsible manner. I have every sympathy for young drivers and for other motorists, but why does the right hon. Gentleman feel that we should specifically single out motorists or people who take out private health insurance? Why should those people be specifically excluded?

[Mr Redwood]

That is what I am trying to explain, while remaining in order on this narrow amendment. The bottom line of my case is that motorists comprise a large category and, when polled, they say that they feel badly done by because they pay a disproportionate amount of tax and do not get much back. It is argued that motorists ought to pay more because they get the use of the roads, which are provided free at the point of use in most cases. It is not like that, however, because the bulk of the taxes levied on the motorist, including this insurance premium tax, are used for purposes other than roads and motoring. That is why motorists feel hard done by.

I hope that the Minister and his colleagues will consider carefully the general category of the motorist. I would love it if he could make a concession to my hon. Friend the Member for Christchurch, but if he cannot, it would help us and the people we represent if he could say that the Government were at least aware of the bad deal that the motorist has been getting in recent years, and that, where possible, they will do something about that. As we have heard, people in rural areas have no choice; they have to use their cars. People in urban and suburban areas also have no choice at certain times of the day or at weekends. People who work antisocial hours clearly need a car. Most MPs need a car, for example, because we still work antisocial hours.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I am following the right hon. Gentleman’s argument with some care. He said that motorists get only a limited amount back from the taxes that they put in. Does he therefore support arguments in favour of the greater hypothecation of taxes such as the insurance premium tax, to help to resolve that problem?

[Mr Redwood]

No, I do not. I am sufficiently in tune with Treasury thinking to know that all Treasuries under any Government hate hypothecation, and I understand the complication. Critics of motoring and cars often argue that motorists are walking off with all these free goods, but people have come up with lots of figures that show conclusively that, in a hypothecated way, motorists get a particularly poor deal. People now look at these issues in such a way partly because the green movement has made them do so. It has now been demonstrated that, calculated in a hypothecated way, motorists put in a lot more than they get back. I do not think that the Treasury should operate all its taxation on that basis, but it does need to take account of the mood and the politics surrounding this question, which we are here to represent.

The feeling of unfairness is now quite extreme among the motoring community, and motorists want to communicate through us the fact that they are often motorists because they have to be. There is no train to take them to the shops, for example. The train might be 2 miles away from their home so, unless they have plenty of time to walk to the station, they need to start their journey in the car and sometimes they might as well finish it in the car as well. There is often no alternative, which is why some 86% of our journey miles are carried out by car, and only some 6% by train. There is a basic necessity, which is why we need to be fair when making any tax proposals affecting motorists.

The case of private health insurance is somewhat different, as I am sure my hon. Friend the Member for Christchurch would agree. I make my declaration: I have no private health insurance, so I am not arguing my own case. I rely on the NHS, should ill health befall me, as I am sure do many other Members. However, I am not saying that some of my constituents are wrong to take out private health insurance. It is still a legal thing to do. Indeed, in a way, I feel that I am cheap-skating at their expense, because they are paying twice and I am paying only once. I pay my taxes, and if something happens to me, I hope to receive NHS care, whereas they contribute to everyone else’s NHS care through their taxes—they have no choice, of course, but some of them do it graciously—and then make the additional choice to pay for their own insurance. There is a double advantage: more money comes into the health sector, but when those people become ill they make no claim on the health service, even though they contribute to it.

My hon. Friend the Member for Christchurch is making a reasonable point. Given that it is not illegal to have private insurance, and that those who have it help to eke out NHS funds, should we be taxing it more? That is a very good question to raise. I shall make no stronger statement than that, but it will be interesting to see how the Treasury responds. After all, on this side of the House, we are all now big society fans and advocates—[Interruption.] Well, practically all of us, perhaps. There might be one or two of my right hon. and hon. Friends who are not so enthusiastic about it, but I am; I think it is a great idea. The essence of the big society idea is to harness private money, voluntary effort and charitable activity, and to understand that the state cannot solve all the problems. In a complex, difficult and expensive area such as health care and related social care, we need voluntary and private contributions as top-ups, or in addition to public sector care.

This issue poses a particularly interesting question for Ministers. If they are really serious about the big society idea, do they want to increase the taxes on people who make voluntary contributions and take some of the demand away from public services? Ought they not to be encouraging people to do such things? I look forward to hearing my hon. Friend the Minister’s reply to these nice philosophical questions in this wonderful caring, sharing age of coalition government, in which the big society will require some erosion of the old boundaries between public and private.

[Mr Byrne]

It is an enormous pleasure to follow the hon. Members for Christchurch (Mr Chope) and for Dundee East (Stewart Hosie) and the right hon. Member for Wokingham (Mr Redwood). The strength of their contributions was in illustrating that the proposals in clause 4 raise a wide range of policy concerns and debates. Hitherto, the House has not had much explanation of the logic or rationale of all the changes set out in the clause. The arguments for some of the proposals are fairly easy to deduce, but the core of the clause is the increase in the standard rate of insurance premium tax, which has not been explained.

The lack of explanation underlines the fact that the Bill is somewhat piecemeal. It is fragmented. It is not a whole Bill; it is not even a half Bill; it is a bit of a Bill. We were told with great fanfare a few weeks ago that the Government were introducing an emergency Budget. The Bill and the clause illustrate in our debate this afternoon that the only emergency was the need to get some pretty difficult changes on to the statute book by the summer, before Liberal Democrat members on the Treasury Bench got cold feet or had, dare I suggest, too many conversations with their constituents.

So the result of that emergency—something that some would uncharitably call a panic—is a Finance Bill with measures such as clause 4 that so far are bereft of logical explanation. The strategy has also produced clause 5, which we shall debate later this afternoon, which withdraws tax legislation without putting anything back in its place. Where there is certainty, the Government in their panic have decided to substitute mystery. So much for the simplification credentials.

The effect of clause 4 on one level, as I have said, is reasonably straightforward. It raises the higher rate of insurance premium tax from 17.5% to 20%. That would appear to be a fairly automatic consequence of the decision to raise VAT to 20%. The higher rate of IPT was introduced in 1999 to prevent a problem called value shifting, whereby some retailers and other producers tried to lower prices of goods and bundle them with insurance policies, for which they redeemed some of the value. I was not sure whether that was some of the financial innovation that the hon. Member for Dundee East was beginning to welcome in his remarks. Perhaps he will say more about that a little later.

[Mr Chope]

Does the right hon. Gentleman know what proportion of the £400 million yield from IPT proposals is attributable to the increase from 17.5% to 20% and what proportion is attributable to the increase from 5% to 6%?

[Mr Byrne]

The hon. Gentleman raises an important question. The answer is that I do not know. It is a mystery. The Budget scorecard has a certain number, but of course it has bundled together the revenue that is to be raised from the increase in the higher rate and the increase in the standard rate. I hope that the Minister will be able to enlighten us.

It is possible to deduce why the higher rate has gone up, but it is curious that the Government have chosen to increase the standard rate. We have to assess that decision alongside the decision to preserve exemptions and zero-rating from VAT on a range of goods and services. We were told on Tuesday night by the Economic Secretary that the existing zero ratings and exemptions would be kept in place for the course of this Parliament. That commitment was given to the House on Tuesday night, and we will all watch the Government’s adherence to it with a great deal of attention over the next few years. That decision to keep in place a series of zero ratings and exemptions just adds to the mystery of why this standard rate has been singled out for such an enormous rise.

13:15

The hon. Member for Christchurch raised an important point. The Budget scorecard shows that the overall increase in VAT brings about £54 billion into the Exchequer over the course of this Parliament. That is an extraordinary amount of money. Eight billion pounds of that will be paid for by our country’s pensioners. The scorecard also shows that a further £2 billion is brought in over the Parliament by the increase in IPT, but we are not told how much will come in from the respective increases in the standard and higher rates. True to form, the Government certainly have not told us what the impact of the IPT increase will be. I would therefore like to say a little about what the House of Commons Library and other sources are able to tell us about the impact of the increase.

I am afraid that one of the groups that will be hit hardest by the increase is, once again, our country’s pensioners. That was the group that Liberal Democrat and Conservative Members refused to protect when given the chance by Labour amendments on Tuesday night. We established in Tuesday’s debates that pensioners would pay £8 billion in extra VAT. The figure was not challenged by the Government. Today I can tell the Committee that it appears that pensioners will be hit by a further £355 million over the course of the Parliament. The House of Commons Library note—I am happy to release it more widely—allocates the revenue raised from the IPT increase between pensioner and non-pensioner households. I am grateful to the Library for this excellent work. It says that, according to Office for National Statistics figures, pensioners account for about 18% of spending on insurance in this country. The scorecard scores 115, 455, 445, 455 and 455 in increased revenue over this Parliament from the increase in IPT, so the Library estimates that £21 million will be raised from pensioners in 2010-11. Pensioners will pay that without any recompense in the form of extra pension credit or increased basic state pension; those increases do not kick in until a little later in the year.

In subsequent years our pensioners will pay about £84 million a year more in IPT—in total about £355 million over the course of this Parliament. Hon. Members will be concerned about that.

[Chris Leslie]

My right hon. Friend is making an incredibly important point. Many pensioners in my constituency will be oblivious to the impact that this stealthy tax rise from the Government will have on them, especially as they are diligent in keeping up with their contents insurance, buildings insurance and motor insurance. In many ways, the Government are grinding the burden of taxation on their shoulders. My amendment on advertising the increase in IPT was not selected. Does my right hon. Friend agree that the cost of the Treasury’s imposition should be more prominently displayed on policy documents so that at least pensioners are aware of what the Government are doing?

[Mr Byrne]

My hon. Friend raises an extremely significant point. I am sorry that his amendment was not selected. The insurance industry will almost certainly pass on the increased taxes directly to consumers. That has been the history of increases in this kind of tax. So there is a strong case for advertising the increase more widely. I am sure that all of us as politicians will do our level best to make the news known in our constituencies.

[Mr Bone]

Is the shadow Minister saying now that he would support the private Member’s Transparent Taxation (Receipts) Bill—something in which the First Deputy Chairman of Ways and Means had a slight interest in a previous life—which required that receipts showed how much tax and duty had been paid so that they were better advertised?

[Mr Byrne]

I have not studied the Bill, so I am grateful to the hon. Gentleman for drawing it to my attention. We have had good debates over the past two or three weeks about the need for greater transparency both in economic policy making and in tax policy. The Bill certainly sounds as though it would contribute to that agenda.

The hon. Member for Christchurch raised a number of public policy points. He did not dwell much on the impact of the new charges on low income groups, and I should like to touch on that different policy question. It is important that we debate it this afternoon. The Association of British Insurers has argued for a long time that the tax is regressive. IPT has been raised in the past by Conservative and Labour Governments, and the ABI has been consistent:

“IPT is a regressive tax. It imposes a disproportionate burden on the less well off individuals and the smallest businesses. These are most likely to need the protection of insurance.”

Given those arguments, we deserve a full and thorough explanation of the public policy rationale for introducing such taxes.

We have heard about the impact that the tax will have on consumers. The hon. Member for Christchurch did not remind us of his distinguished career as a Transport Minister, but he understands well the impact of higher rates on, for example, car insurance. In the days shortly after the Budget, The Guardian told us that the average car insurance buyer would pay about £18 a year more in tax. The AA said that the bill would be slightly higher—at least another 35 quid on an average insurance policy. The right hon. Member for Wokingham spoke eloquently about the impact that the increase will have on young drivers. Some press reports estimated that the bill would rise by only £15, but the intimation in the right hon. Gentleman’s remarks, and those of the hon. Member for Christchurch, was that it might be a little higher. Of course the increase comes at a time when car insurance premiums have been rising consistently for the last 12 months.

There will be an impact on travel insurance, to which Members have alluded, but many Opposition Members are particularly worried about increases in the cost of general household insurance. Many of us serve constituencies with high rates of poverty and worklessness and many areas, including some in my constituency, are also troubled by relatively high rates of crime, with drug use fuelling burglary. Over the short number of years that I have served in the House, I have seen many constituents who did not have insurance and lost everything in burglaries and had to rebuild their lives, sometimes from scratch. The ABI has told us that for the average household a 1% increase in IPT will put at least another £8 a year on the general cost of household insurance, taking it up to £850. For many of my constituents, £850 is unaffordable, particularly if they live in areas that attract premiums.

For those reasons, the director general of the ABI has described the move announced by the Chancellor as “regrettable”. Kerrie Kelly, in remarks to which the hon. Member for Dundee East alluded, was clear, saying that the change

“is a direct tax increase for the vast majority of people who sensibly protect themselves.”

The hon. Member for Dundee East also mentioned Eric Galbraith, who said bluntly:

“This is a tax on protection.”

That is a public policy concern which we need to hear more about.

We do not have a theoretical objection to insurance premium tax and, subject to a decent explanation from Treasury Ministers, I do not plan to put our amendment to a vote. The history of IPT is one of consensus. It was introduced by the right hon. and learned Member for Rushcliffe—now the Lord Chancellor—and increased in 1999 by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown). None the less, there are some important questions that it is important for the Government to answer this afternoon.

What assessment has been made of the increase in insurance premium tax? I should be grateful if the Exchequer Secretary would set out his assessment of the impact of that hike on Britain’s pensioners? What will be the impact of the increase on the availability of general household insurance for people on low wages? Why is he raising the rate from 17.5% to 20%? Is it to preclude the value shifting that was the inspiration for the rate change in 1996? Most important, why is he raising the standard rate from 5% to 10%? Can he confirm that it is not the Government’s policy to harmonise the standard rate with levels across Europe?

In 1999, when Labour raised the IPT rate, my right hon. Friend the Member for Bristol South (Dawn Primarolo), then the Paymaster General, was clear on the matter. She said:

“Rates vary tremendously across Europe, but they are significantly higher than in the UK, which has one of the lowest rates.”

It was put to her that the rise was part of a wider, hidden plan to increase the rate successively to levels in Europe, but my right hon. Friend was clear:

“The increase does not signal a future change.”—[Official Report, Standing Committee B, 15 June 1999; c. 642.]

I should like the same assurance from Ministers on the Treasury Bench this afternoon. Can the Exchequer Secretary confirm that the change is not part of a plan successively to increase rates of insurance premium tax to levels across Europe, which amount to 11% at the low end of the range in countries such as Austria and 22% at the higher end in countries such as Italy.

It is important that we have some assurances this afternoon that there will be no further rises in IPT in this Parliament. Subject to satisfactory assurances and explanations of the points I have raised, I would see no need to put the amendment to a vote. I very much look forward to hearing what the Minister has to say in reply.

[Several hon. Members]

rose—

[The First Deputy Chairman]

Order. It may be of interest to the Committee to know that I shall not be allowing a debate on clause stand part separately from the debate currently taking place.

[Mr Bone]

Thank you, Mr Evans. I am very grateful to have been called. It is a great pleasure to serve under your chairmanship for the first time since you have been elevated to your new role. I refer Members to my entry in the Register of Members’ Financial Interests.

The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) made an interesting and measured speech, which I hope my hon. Friend the Exchequer Secretary will respond to in due course. I could not agree more with the right hon. Gentleman’s last point. We should not be increasing insurance premium tax to anything like European levels. That is one thing we do not need to learn from Europe.

I support the two amendments tabled by my hon. Friend the Member for Christchurch (Mr Chope) and I warmly support the comments made by my right hon. Friend the Member for Wokingham (Mr Redwood). My remarks about relief on motor insurance will be brief. The arguments have been made powerfully and I entirely support them. The amendment about health insurance concerns me the most.

The coalition Government have three areas of protected spending, where public spending is guaranteed to rise: the health service, overseas aid and the European Union. I want to deal with the relationship of the proposals to the health budget. Each year, £100 billion is spent on the NHS and the Government rightly recognise that spending will have to increase. There is no way round it. Demand on the health service will grow and grow, so there will have to be a real-terms increase. Even allowing for that, however, there will not be enough money to do everything in the health service.

One of my constituents is suffering from cancer and needs cancer drugs. She has to sell her house to pay for those drugs. If she had been insured, that would not have been the case. I am convinced that that lady uses the NHS most of the time, so she has not chosen to opt out by insuring herself against everything, but there will always be aspects of health provision that the NHS cannot cover because of their cost. That will mean that people have to pay extra, as this lady is doing for her cancer drugs. If we are to encourage people to insure themselves against such risk, we need to send the right signal.

13:30

Amendment 18 does not address cost because the difference between rates of 5% and 6% does not represent a huge amount. However, if the amendment was accepted, it would send the country the remarkable signal that the coalition Government and the Prime Minister want people to stand up for themselves and take responsibility, as part of the big society, by insuring themselves.

I am in the wonderful position of being a Conservative Back Bencher who does not have to worry about the Whip in Committee. The Prime Minister has already said that he wants the Government to be held to account—[Laughter.] I know that this will be a shock to Labour Members, given that they are always whipped and centrally controlled, but Conservative Back Benchers have the right to hold the Executive to account. When we are in Committee, as is the case today, we are not subject to a Whip. We can vote whichever way we like in this Committee as long as the overall Budget gets through. Amendment 18 is such a small amendment that if it is pressed to a Division, I will support it, which is the sort of thing that the Prime Minister would welcome.

I have set out my basic argument about the tax increase on medical insurance, but perhaps I should draw the Committee’s attention to a private Member’s Bill that will be debated on 4 February 2011. That Bill would give tax relief to private medical premiums, but that wider debate is for another day. There is a question of whether such an approach would lead to more people insuring themselves, which would generate a saving because they would be less of a concern for the NHS, but today we are discussing only whether to impose a 1% tax increase. I hope that the Exchequer Secretary will be able to tell us how much revenue the Treasury would lose if the amendment were accepted and we did not have that 1% rise. If the increase discourages individuals from taking out medical insurance, more people will have to be treated by the state, which is why I argue that the tax increase from 5% to 6% on medical insurance premiums will cost the state more money.

[Mr Knight]

Is not the encapsulation of my hon. Friend’s argument that this is a tax on responsible behaviour? In the case of motor insurance, it is a tax on lawful behaviour.

[Mr Bone]

I agree entirely with my right hon. Friend’s point, but I want to draw a distinction between amendments 18 and 19. Amendment 18 addresses health insurance premiums, and the fact is that if someone does not take out health insurance, the state picks up the bill, because they will go to the NHS. When someone does not take out motor insurance, the responsible citizen picks up the bill through the Motor Insurers Bureau, but that is not quite the same as the position for health. It is clear that if someone might have paid for insurance so that they could go to an independent sector hospital but does not do so, they will be in the NHS and the state will have to pay. I argue that we could send a signal today to the citizens of this country, as part of the big society, that we want them to be responsible and to take out insurance, especially health insurance, which would save the Government money.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Labour Members do not have a philosophical objection to private health care, but does the hon. Gentleman accept that many people cannot afford such coverage? It is wrong to say that taking out private health care is a responsible option because that portrays those who cannot afford it as somehow irresponsible.

[Mr Bone]

I am grateful for the hon. Gentleman’s intervention, but I know that I will get into trouble if I respond to it in detail. I suggest that he turns up in the Chamber when my private Member’s Bill is considered on 4 February 2011, so that we can have that debate.

My hon. Friend the Exchequer Secretary has an historic opportunity today to stand up and make a name for himself and this Government by encouraging people to take out insurance.

[Chris Leslie]

I am glad that we have had the opportunity to debate these important tax changes. I have the greatest respect for all my constituents and the British public generally, but when we talk about financial matters such as pensions, savings and insurance, there is a tendency in the British culture for the fog to descend and for people to say, “Well, these things are very complicated and I don’t quite understand them.” A lot of people therefore get trapped by their own inertia in certain policies, bank accounts or pensions, and they do not necessarily shop around to get the best deal. I am afraid that insurance products are in the group of services to which our constituents sometimes do not pay attention. I urge members of the public to examine their policy documents and payments closely because insurance can represent a significant cost, although it is a merit good and something that we should encourage people to take out.

[Gordon Banks (Ochil and South Perthshire) (Lab)]

Some areas of the country, including part of my constituency, face significant flood risk. Does my hon. Friend agree that such a tax increase on insurance will mean that people who are already paying significant amounts to protect their homes and lives will face an even greater cost? If those people do not continue to insure themselves, however, it will wreak havoc on lives throughout the country.

[Chris Leslie]

My hon. Friend is entirely correct. It is important that we ensure that all our liabilities are properly covered, so that the cost of our individual failings or mishaps does not fall on the general taxpayer. Responsible individuals have to insure themselves.

[Mr George Mudie (Leeds East) (Lab)]

My hon. Friend says that people do not shop around. Does he agree that any process of shopping around is not helped by the way in which insurance companies sign people up to policies on standing orders with small print that allows that policy to be renewed without consulting the customer? Even if the customer wishes to change their policy because of a large increase in their premiums, they can discover that the small print means that they have to let the policy run because they are required to give notice.

[Chris Leslie]

That particularly pernicious practice merits much closer scrutiny. I do not know whether it is allowed to happen because of a legal loophole. People face dangers when they sign up to unending direct debits, especially if they have been attracted to an insurance policy because of a discounted initial arrangement but then discover that the payments have been ramped up. By the time they realise, from their bank statement or whatever, that the cost is so much more, it is too late to exit from the policy. I hope that any practices that tie customers in to such policies unnecessarily can be stopped.

Insurance premium tax was, of course, a Conservative initiative, introduced back in 1993, I think. We are all concerned about the deficit and revenues, so reluctantly we all have to accept the tax as part and parcel of our general revenue stream, but it is worth pausing to reflect on the impact of the charge on the behaviour of customers who want to take out insurance. Of course, there are different effects for different types of insurance. The amendments highlight both ends of the scale.

I am not sure that I share the sympathy for amendment 18 on private health insurance, because the general public already effectively pay for health cover through the tax that they pay towards the NHS; that is far and away the best health insurance that all of us could want. If we are all part of that, and pool our resources effectively, we ensure a better quality of health care for ourselves. I hear the points made by Government Members, who say that private health insurance removes the burden from the NHS, but if we are all part of the system together, and make sure that we all take part in it, we have a better collective service.

[Thomas Docherty]

Does my hon. Friend agree that people who have health insurance get fast-tracked, and receive a large benefit, in that they can jump waiting lists?

[Chris Leslie]

Thankfully, Labour has shifted the terms of reference for this debate, and not just in this country, where the Liberals and the Conservatives—the Conservatives in particular, to be fair to the Liberals—have now accepted that the NHS is one of the jewels in the crown of our welfare system. It is respected worldwide, and there is no longer any attempt, or at least no overt attempt, by the Conservative party to unwind the change that has been made, although having listened to Government Back Benchers, there may be some straws in the wind. I agree more with the hon. Member for Christchurch (Mr Chope) on amendment 19 on motor insurance.

[Mr Redwood]

Was the absence of support for amendments 18 and 19 from the Labour Front Benchers a sign that Labour will not vote for those two amendments?

[Chris Leslie]

I have absolutely no idea. As a humble Back Bencher, I simply make my comments and observations. Clearly, I will happily take a lead from our Front Benchers; they are immensely sensible individuals, and will make their arguments. But I have my own observations to make about the changes.

One of those observations is that there is a level of compulsion that distinguishes motor insurance. In a way, private health insurance is an entirely discretionary commodity, so I suppose one could argue that paying tax on it is a matter of choice, but that is not the case for drivers and for motor insurance. As the right hon. Member for East Yorkshire (Mr Knight) said, in the case of third-party car insurance we are talking about adding a tax on top of a charge that is effectively a requirement in law. That raises the hackles. It makes me feel aggrieved that there is a bit of opportunism on the part of the Treasury. It is a parasitical choice effectively to cream off more money from something that the general public have no choice but to get.

I suppose that those on the Treasury Bench might say that members of the public could give up driving and stop purchasing cars. Perhaps that would be good for the environment more widely, but in the real world, people have to get around, have to get to the shops and to school, and have to commute. It is part and parcel of ordinary life. I am very worried—genuinely worried—that ratcheting up insurance premium tax on motor insurance will create a disincentive for people to comply with the law, take out insurance, and ensure that the cost is covered if any accidents occur or harm is caused to other members of society and the wider public.

13:45

In my constituency in Nottingham, the road safety and casualty reduction budget has taken a hit as a result of the cuts announced by the Government parties. Something in the order of £350 million is being taken out of that budget in this financial year alone. Clearly, it would not be in order for me to refer to an amendment that I have tabled that would hypothecate the revenues from the motor insurance IPT increase and put that money towards road safety and casualty reduction. All that I would say is that there are concerns in my constituency and elsewhere that not only are we losing money for road safety, but if we discourage people from taking out motor insurance, and encourage them to go down the illegal route and to drive without car insurance, when there are problems and accidents, and individuals suffer trauma or are caused harm, they will struggle to recoup any compensation. That is especially regrettable.

As I said in an intervention on the hon. Member for Christchurch, some young people, who may pay £1,000 or even more for their insurance, may come to a rational yet entirely perverse judgment and say, “I’ll risk not getting that car insurance. I’ll drive uninsured.” They will risk getting six points on their licence, and a £300 or £400 fine—that is the typical amount that magistrates will impose—if they are caught driving without insurance.

Members on the Treasury Bench really ought to speak to the Justice Secretary, who introduced insurance premium tax in the first place, and make representations that fines for driving without car insurance should be at least commensurate with the cost of car insurance. That is an extremely serious point. I understand that in a magistrates court, if an individual is fined for driving without proper motor insurance and they are not earning and have a very low income, the fine can be as low as £80 or £90. That gives them an even greater incentive to chance their arm and to go without car insurance. There are some extremely serious points here.

Let me come on to the effects of insurance premium tax on buildings insurance and contents insurance. When times are tough, many of my constituents may well look at their outgoings and think: “What could I do without? What will go first?” Clearly, they know that there are legal obligations to pay council tax, utility bills and so forth. Those things that are on the margins, such as home insurance and contents insurance, tend to go first, and that is extremely regrettable. Of course, adding further tax to those items will speed up the decision for many of my constituents, who will say, “This is becoming unaffordable.”

[Gordon Banks]

My hon. Friend talks about house insurance. Has he considered that people might retain insurance, but end up being under-insured?

[Chris Leslie]

Absolutely. A lot of people, when they apply for insurance, will be asked what amount they wish to have—I am trying to recall the phrase—as the amount that one ends up paying before one can claim.

[Gordon Banks]

The excess.

[Chris Leslie]

I thank my hon. Friend for his assistance. On home insurance, the excess is typically £100 or £200. Those hon. Members who are IT-literate, and who use the interweb to purchase their insurance, will realise that on many sites there is a little bar that one can shift across the page to increase the excess to £400, £500 or more. It effectively means that people will rarely, if ever, claim against that insurance, and it thereby removes not only much of the cost of the initial premium, but the chances that they will ever use that product. Again, that will leave people under-insured, with poor cover, and with a poor product for what could be a great expense if they are broken into or have problems with internal flooding or other damage to their property.

In some parts of the country, particularly where there is a flood risk, far too many people are still uninsured, and the pressure that they put on the taxpayer more generally to pick up the tab will be great. In some ways, the measure is a false economy by the Treasury: it discourages people from taking out insurance, yet they will undoubtedly be under pressure to pick up the tab in flood-risk areas.

There is a rumour going around that the Treasury might also impose an extra tax on those who live in flood-risk areas in order to cover the extra costs to the taxpayer of flood-prevention work—yet another example of a crude and unfair measure. I am sure that the Minister will be happy to tell the House that that is not the case and to put our minds at rest, because it would be a shame if such a measure were to come forward.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will my hon. Friend give way on that point?

[Chris Leslie]

Happily.

[The First Deputy Chairman]

Order. Just before that happens, can we please restrict ourselves to the Bill and the amendments to it?

[Geraint Davies]

I shall bear that in mind. My hon. Friend will know that I had a previous responsibility for adapting Wales to climate change in terms of flood defences, and he will be interested to know that there are literally—

[The First Deputy Chairman]

Order. That is much wider than what we are discussing today.

[Chris Leslie]

Those who require insurance, on which the amendments would seek a report from the Treasury in order to reveal the impact not just on the Exchequer, but on individuals, will also be concerned about their contents insurance and buildings insurance, which are often where the cost of picking up reparations after flooding occur. It would be wrong of me not to pay tribute to my hon. Friend for his work before he entered Parliament.

[Geraint Davies]

On that specific point about the incidence of such insurance deals, the reality is that, as climate change progresses, the people who are caught by such costs will often be the poorest, who are closer to high flood-risk areas because of bad planning and the like. Does my hon. Friend agree that the impact of the measure will be increasingly regressive?

[Chris Leslie]

Absolutely. My right hon. Friend the shadow Chief Secretary to the Treasury made that point very forcefully earlier. The regressive impact of insurance premium tax is not widely understood, but, when our poorest constituents take out insurance, they are hit disproportionately hard, and unfortunately many of them will decide to go without that insurance altogether.

[Sammy Wilson (East Antrim) (DUP)]

I appreciate the hon. Gentleman’s point about a 1% rise being regressive, but, on his earlier point about it putting people off buying insurance, the average household insurance policy is £400 and a 1% increase will add £4 to the total cost. If someone who seriously wishes to insure their home is prepared to pay £400, is he really suggesting that an extra £4 will produce the result to which he referred, namely that many people will no longer purchase insurance?

[Chris Leslie]

The hon. Gentleman makes a reasonable point, and he is right that at that level the disincentive might well be marginal. However, my point is that there is a slippery slope, and, with 1% here and 1% there, before we know it we have 2% or more—3%, or even 4%. My right hon. Friend the shadow Chief Secretary asked about the potential risk of aligning our insurance premium tax arrangements with those of the wider European Union, and, if they are at 22% in Italy or wherever, there is a risk of a serious disincentive.

So, I regard this debate as a stitch in time to put down a marker and say to the Government, “Don’t chance it too far. This may well feel like a small amount of money. but £10 on a motor insurance policy of £1,000 is quite an additional burden and not to be sniffed at.” If the Government continued to ratchet up the costs in that way, that would be regrettable. Some of the amendments before us are very sensible, and, in asking for a report from the Treasury, I also urge it to consider in that document the merits of a requirement on insurers to advertise more prominently the yield from insurance premium tax and the rate of tax that customers pay, because it is exceptionally important that our constituents understand why they are asked to pay so much.

When I consulted the Association of British Insurers about that, its representatives said that they would welcome more information on policy documentation and be more than happy to work with the Treasury on those matters. If the amendment is carried, and there are good arguments for doing so, I hope that the Minister will consider that point seriously.

The impact on travel insurance will be even greater, given the costs for many people who travel abroad on, perhaps, their holidays. If those people are my constituents, they will often do so for one week a year, if that. However, all travellers are encouraged to take out travel insurance for such trips, and the rate is currently 17.5%, but it will go up by 2.5 percentage points to 20%, which is a significant amount of money, so, if we discourage our constituents from taking out insurance on their holidays or travel, there will again be consequences.

[Mr Kevan Jones (North Durham) (Lab)]

Does my hon. Friend agree that the measure will also have an effect on the wider economy? For example, Newcastle airport in the north-east is a huge economic driver, and East Midlands airport, near my hon. Friend’s constituency, is a huge employer. The measure could have an impact on the business of those two airports—and many others.

[Chris Leslie]

There will be consequences if, because of the extra cost of a family holiday, our constituents are disincentivised from going abroad or travelling. The Chancellor of the Exchequer’s imposition of a holiday tax is something that I hope many travel pages in the Sunday newspapers and supplements will focus on, perhaps by modelling the costs for a typical family. About £400 million of travel insurance business is carried out in this country each year, and that accounts for a significant part of not only the insurance industry, but the economy more generally.

[Mr Bone]

I am being won over by the hon. Gentleman’s speech. He argues very strongly against tax rises, and he has won me over on that. Indeed, I should be happy to vote against those increases, but, given the problem with the deficit, can he suggest some other public expenditure savings to make up for them?

[Chris Leslie]

That is a reasonable point, but I should not want to stray beyond the terms of the amendment, suffice it to say that the hon. Gentleman asks a reasonable question, because if we agree to the amendments we might be forgoing revenue to the Exchequer. My view, which he may have heard before but I am happy to share with him, is that the banks should not gain £400 million cash-back from the corporation tax reduction that they will enjoy.

[The First Deputy Chairman]

Order.

[Chris Leslie]

Mr Evans, I felt an obligation to help the hon. Gentleman and hoped that, with that short interjection, you would indulge me.

To return to my general point, insurance is not only a public good, but a necessity for many of our constituents. Our constituents also often make the choice to take out insurance. Although I would not say that all insurance policies are good value for money and although we want to see more competition, I feel uncomfortable about the constant ratcheting up of the costs to our constituents of compulsory insurance, particularly motor insurance.

14:00

We could see some policy initiatives on this issue. Why does the Post Office not consider advertising its car insurance offer more widely, given that the state and the Government play a part in that offer in some ways? It would be healthier for there to be greater competition. The Government—indirectly, through Post Office services—could create cheaper car insurance. Treasury Ministers could talk to their colleagues at the Department for Business, Innovation and Skills about that, to ensure that the insurance industry does not unnecessarily inflate the cost of insurance.

[Geraint Davies]

Will my hon. Friend give way?

[Chris Leslie]

I would like to make some progress, but yes, I shall give way.

[Geraint Davies]

My hon. Friend mentioned the issue of compulsion and rates. Does he agree that there is a case to be made for keeping the “holiday tax”, as he put it, lower, and paying for that by making it compulsory? One could argue that it is irresponsible for people to go on holiday without insurance and end up with all sorts of problems.

[Chris Leslie]

I hear what my hon. Friend says, but I am reluctant to extend compulsion in that regard. We should certainly encourage people to take out travel insurance and inform them of what might befall them should they not do so—they could be stranded abroad or find themselves without adequate medical or health cover, for example. I do not know whether hon. Members always remember to fill in their E111 forms when they travel to other countries in the European Union, but our constituents often do not. They can find themselves in significant jeopardy. In those circumstances, travel insurance is very useful.

Many people are employed in the insurance industry, and if there are disincentives against our constituents’ taking out decent, high-quality policies there will be an impact on the insurance sector and the financial services sector more widely. The financial services sector, including insurance, is one of the great industries of our country. It has been subject to a lot of criticism, and we can talk about that on another occasion, but it is important that we should not take steps that harm the products that we consume in this country and sell worldwide.

I conclude by reiterating to the Treasury the importance of assessing the impact of the insurance premium tax increase on our constituents and the Revenue. We do not know from the Red Book how the £455 million annual yield precisely breaks down between pensioners, young people and beyond. My right hon. Friend the shadow Chief Secretary says that the impact on pensioners will be significant and I take his word for that. That issue is a great worry. These are serious matters and I hope that the Treasury and other hon. Members will hear some of the points shared across both sides of the Chamber today.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

We have had a wide-ranging debate on clause 4 and the amendments tabled to it; I am sure, Mr Evans, that you want to hear its conclusion. I was grateful to hear the contribution made by my hon. Friend the Member for Wellingborough (Mr Bone), who highlighted the freedom given to Government Back Benchers in Committee debates. I hope that my remarks will persuade my hon. Friends not to make full use of that latitude. We shall see.

The amendments are concerned with the general impact of the rise in the standard rate of insurance premium tax, particularly in respect of its impact on personal health insurance and the motor industry. I will come to those issues in detail in due course. Before I do so, I propose to set before the Committee the reasons behind the course that we have chosen.

Reducing the deficit and ensuring economic recovery are the most urgent issues facing the UK and they are the Government’s top priority. In the words of the shadow Business Secretary, it is no good wishing the deficit away; it is only by acting quickly to tackle the deficit and restore confidence in the public finances that we will achieve economic growth. That has meant that we have had to take many tough decisions to ensure that everybody makes a fair contribution. Part of that contribution will come from increases to the standard and higher rates of IPT.

Clause 4 legislates for that by increasing the standard rate of IPT from 5% to 6% and the higher rate of IPT from 17.5% to 20%, both with effect from 4 January 2011. IPT is, of course, a tax on insurers, not on their customers; 80% of all the insurance sold in the UK is exempt from IPT. All long-term insurance, such as life insurance and pensions, is exempt from IPT. My hon. Friend the Member for Christchurch (Mr Chope) mentioned Conservative party policy on long-term insurance. If he is a little patient, I am sure that my right hon. and hon. Friends at the Department of Health will say more on the subject. I just underline the point that IPT is not levied on long-term insurance.

[Mr Chope]

Does my hon. Friend mean that if there was an opportunity for somebody to pay £8,000 for long-term insurance, that would not be subject to IPT in the circumstances set out in the original Conservative party manifesto?

[Mr Gauke]

What I can say is that given how IPT is currently structured and where it is levied, it does not apply to long-term insurance; the conclusion to be drawn about something that falls within the definition of long-term insurance is fairly logical.

However, in respect of the types of insurance that are affected, insurers have the right to respond to the tax as they see fit. They are not obliged to pass on IPT through higher premiums. [Interruption.] We recognise that many insurers will pass it on to their customers through higher premiums, but I will not be dragged into the detail of the amendment tabled by the hon. Member for Nottingham East (Chris Leslie).

The question was asked whether further regulation should be imposed on insurers, making them display prominently how much is being paid in IPT. Unlike VAT, IPT is a tax on insurance, so there is no obligation to pass it on or to recover it for businesses. We do not think that that would be appropriate. Insurers are, of course, perfectly free to display the IPT rate on documentation, and many do so. Requiring them to do so, however, would be burdensome and unnecessary.

[Mr Byrne]

Will the Minister remind the Committee of something? On the two or three previous occasions when IPT has been increased, how much of the increase was passed straight on to consumers?

[Mr Gauke]

I am not denying that we expect the increase to be passed on predominantly to consumers; we expect that the bulk of it will be. The analysis of VAT, another indirect tax, shows that two thirds tends to be passed on straight away and that much of the rest is passed on over the following 12 months. However, it is not always possible to predict and it partly depends on the level of competition.

[Gordon Banks]

I just want to make a simple point. The Minister is saying that he expects consumers to pay twice—once through increased premiums and once through increased IPT. Does he find that acceptable?

[Mr Gauke]

That is not what I am saying. I am saying that the increase in insurance premium tax, which is payable by insurers, is likely to be passed on to consumers. We are not denying that; in simple terms, we need the money.

Even if the increases to the standard and higher rates of IPT are passed on in full, the impacts will be very modest, costing households less than 20p a week on average and businesses an average of less than 0.01% of annual turnover, even for smaller businesses.

[Mr Kevan Jones]

I am not sure whether the hon. Gentleman has renewed his car insurance or household policy recently, but he will find that most insurance policies make it clear exactly how much tax is paid, so I do not think it is the case that they will withhold the increase and not pass it on to the consumer.

[Mr Gauke]

I am grateful to the hon. Gentleman for underlining an earlier point that I made—that it is not necessary to introduce regulation in this area. As I say, we anticipate that it will be passed on, but it is not mandatory. I am not denying that position.

Despite these modest impacts, the IPT rate increases will contribute more than £450 million a year to reducing the deficit. As I said, such decisions have been forced on us by the economic circumstances that the UK finds itself in, and they have not been taken lightly. We are confident, however, that this modest rise in IPT, which leaves the main rate of the tax significantly lower than that of many of our European competitors, is a means of raising much-needed revenue that will not have a significant impact on households, businesses or the insurance industry.

[Mr Byrne]

The Minister is making an argument about choices that are made in order to increase revenue, but I think the Committee is struggling to understand the reason for the increase in the standard rate of IPT. Other choices were available. Why have increases in cider duty been withdrawn, for example, while new taxes are being introduced on insurance?

[Mr Gauke]

The central point is that the country is in a very difficult position as regards the public finances. I hope that the shadow Chief Secretary is grateful for the fact that I have got this far through a speech without once referring to his letter. With another intervention, I may be tempted to do so. We have made a series of judgments. If he thinks that cider duty is the way to reduce the deficit, I suggest that he is somewhat mistaken.

Amendment 18 would exempt personal health insurance from the increase in the standard rate of IPT, and amendment 19 would do the same in relation to motor insurance. In effect, that would mean creating a new reduced rate of IPT that applied only to private medical insurance and motor insurance. Of course, the Government recognise the value of these types of insurance and, indeed, of insurance more generally.

I assure my hon. Friend the Member for Christchurch that we do not disapprove of people taking out private medical insurance—that is not something we wish to prohibit, either in law or by imposing enormous costs on it. In health policy, our focus is of course on improving the national health service, and we have this week set out important proposals on improving the quality of the health service and reducing expenditure on bureaucracy. We are also, as a Government, protecting the NHS from spending cuts, which is not, as I understand it, a policy endorsed by Labour. The purpose behind this tax increase is clearly to raise more revenue—it is not an attempt to try to dissuade people from taking out private health insurance.

[Thomas Docherty]

The Minister claims that the Government are protecting the NHS. Is he aware that all the health boards in Scotland have written to their employees to inform them that following the cuts that his Government are making, the NHS in Scotland will have significant job losses?

[Mr Gauke]

Of course health care in Scotland is a devolved matter, and you will not want me to digress on that, Mr Hoyle, but the fact is that health care spending will go up in real terms under this Government. That is not, as I understand it, a policy that is supported by the official Opposition.

14:15

[Mr Chope]

My hon. Friend framed his policy in rather negative terms by saying that the Government did not disapprove of health insurance and did not want to prohibit or deter it. Can he be a bit more positive and say that it is their policy to try to encourage people to take responsibility for their own insurance, on similar lines to the Secretary of State for Transport saying that he wishes people to take responsibility for paying their own bus fares, despite their having bus passes, if they can afford so to do?

[Mr Gauke]

As a Government—I am sure that this is a principle that my hon. Friend would support—we believe in giving people choice, and that is what we will do. We have set out our policies in that context, and I am merely underlining this Government’s commitment to the national health service.

The combined effect of the amendments tabled by my hon. Friend the Member for Christchurch would be to slow down fiscal consolidation. Through the Budget and this particular measure, the Government are trying to get our deficit under control, and slowing it down would not be an appropriate step.

[Chris Leslie]

Specifically in terms of the contribution to fiscal consolidation, how much of the yield from the increase in IPT will come from the motorist via car insurance?

[Mr Gauke]

If I may, I will provide a little more information breaking down the numbers in a moment or so, and we shall see whether that is specific enough for the hon. Gentleman.

Exempting motor insurance from the IPT rise would reduce revenue by £160 million a year, and exempting medical insurance would reduce it by a further £40 million. Taken together, those figures total £200 million—nearly £1 billion over the lifetime of the Parliament. That would leave us with quite a shortfall, and a couple of options. First, we could raise £1 billion from elsewhere. We have to be open about the fact that the purpose of the IPT rise is to raise revenue, and if we were to look to raise the outstanding £1 billion through IPT, that would mean increasing very considerably the rate of tax on the remaining classes of insurance. For reasons that I will set out, we do not think that that is the right way to go. The second option is to leave ourselves with £1 billion outstanding, which would leave us further away from plugging the deficit, with all the risks that that entails. We are certain that that is not the right way to go.

It has always been a principle of IPT that the tax applies to a relatively broad base of general insurance, with few exceptions. That broad base allows us to keep the standard rate of the tax low by international standards. Even at the new rate of 6%, the UK’s standard rate of IPT is far lower than in, say, Germany, where it is 18% for property and 19% for motor insurance, or France, where it is 9% for property and 18% for motor insurance. Narrowing the base of the tax through specific exemptions of the type that my hon. Friend the Member for Christchurch suggests would put that low rate at risk.

To respond to the perfectly fair question of the shadow Chief Secretary, the fact that we have announced the increase should not be taken as a signal that we intend to harmonise tax levels with those elsewhere. To quote what the shadow Chancellor used to say, we always keep taxes under review and it would be daft to rule things out, but this increase should not be taken as a signal of an ongoing programme of further increases.

We do not take any pleasure in introducing this tax rise, even though the reasons for it are clear. However, by keeping a broad base of tax within general insurance, we are able to raise revenue so as to cut the deficit, while keeping the increases at a level that will not have any significant impact on the number of people buying insurance.

[Thomas Docherty]

Has the Treasury done any work to enable it to hazard a guess as to how many people will not now take out motor or health insurance as a result of the rise?

[Mr Gauke]

We do not believe the rise will have a noticeable effect on the number of people taking out insurance, but I know that hon. Members are concerned about the impact of the IPT rises on households. I have already set out the average impact on households. Specifically in the case of the insurance covered by amendments 18 and 19, the IPT rate increase will add only about £6 a year to the average motor insurance premium, and for those who buy private medical insurance the rise will cost less than £10 a year on average. Consequently, it is difficult to make the case that the increase will prove much of a deterrent to people taking out motor insurance or private medical insurance. Consumers are well used to insurance premiums fluctuating, and the modest effects of the rise will not act as any significant deterrent.

[Mark Hendrick (Preston) (Lab/Co-op)]

The Exchequer Secretary says that the rise will not be a deterrent, but it will certainly provide an incentive to people who pass the tax on to the consumer to increase charges over and above the amount in question and then blame the Government for it, as we have seen with so many other taxes.

[Mr Gauke]

Let us see what happens. I am not sure that the evidence necessarily supports that concern, but I am sure that if it happens the hon. Gentleman will come back to the House to highlight it. Many within the insurance industry have themselves acknowledged that the rises are very modest and will not have a significant impact on households or on the take-up of insurance.

Amendment 15 would make the IPT rise announced in Budget contingent on the publication of an assessment of the effect of the rate rise on consumers and the insurance industry. We believe it is unnecessary. I have set out fairly comprehensively in this debate the expected impact on households and businesses—in broad terms, that impact will be minimal.

I should also point out to hon. Members the considerable amount of information on the impact of the Budget that we have already put in the public domain. In particular, for the first time the Government have set out their analysis of the distributional impact on households of the Budget measures, including the IPT rate changes, in annex A of the Red Book. Separately, other organisations such as the Association of British Insurers have given estimates of the impact of the rise on households, which are very much in line with our own estimates. Naturally, the industry and consumers do not like the rises, and we do not like having to introduce them, but the industry accepts that they are going to happen and is preparing accordingly.

Finally, I wish to address amendment 48 which, as the shadow Chief Secretary said, is a probing amendment aimed at exploring the reasons for the rise and its impacts. He asked a specific question about the balance between the standard and higher rates. For 2010-11—Members should remember that the rate increases will occur in January 2011—the revenue raised will be £110 million from the standard rate and £5 million from the higher rate. For the following years, the higher rate will raise £25 million each year, with the balance made up from the standard rate, which in most years raises £450 million.

The shadow Chief Secretary also asked about the reason for the increase in the higher rate from 17.5% to 20%. As he correctly surmised, it is to do with value shifting and the fact that travel insurance is often sold with other products on which VAT is payable. A discrepancy between the IPT on travel insurance and other rates may create dangers of value shifting, and that is the reason for the proposal.

[Mr Chope]

rose—

[Mr Gauke]

It is always a pleasure to hear from my hon. Friend.

[Mr Chope]

Will my hon. Friend spell out the yield from IPT on motor insurance and health insurance, which amendments 18 and 19 cover?

[Mr Gauke]

As I said earlier, the cost of my hon. Friend’s amendment to exempt motor insurance from the IPT rise would reduce revenue by £160 million a year, and exempting medical insurance would decrease revenue by a further £40 million a year. I hope that that is helpful.

The increase is necessary. It is an attempt to bring our deficit under control. We need to make some tough decisions, and that is one.

[Mr Chope]

It is my pleasure to respond to an excellent debate and I thank everybody who has participated in it. At the beginning, other hon. Members and I conceded that the sums of money involved were relatively small, but we were concerned about the messages that were being sent. I am rather disappointed by the Exchequer Secretary’s failure to engage with that part of the argument. It is one thing to say that the Government do not disapprove of health insurance, will not prohibit it and do not wish to deter people from taking it out, but all those who take out private health insurance help not only themselves but the country.

My hon. Friend kept saying that our commitment—meaning the coalition Government’s commitment—is to the NHS, but surely it should be to the health of the nation. That depends on money going into health care and health protection from a mixture of sources. Some will come from taxpayers, and an increasing proportion in my view should come from private individuals and companies—we are also talking about company health insurance schemes. My hon. Friend had the opportunity to say to companies that have health insurance schemes for their employees, “Thanks very much indeed for your contribution; that takes a burden off the NHS.” He had the opportunity to tell those who take out private health insurance or self-insure and pay for their health care, “Thanks very much; you are relieving the state of a burden.” He did not. I do not know whether that was a deliberate omission or unintentional.

I am concerned about the messages that are being conveyed about the direction of travel and I am slightly bewildered about whether the coalition Government are wholeheartedly enthusiastic about people taking responsibility for as much of their own lives as they can, depending on their financial ability. If we are trying to build a responsible society, we should encourage people to take responsibility for all aspects of their lives and should not force them to feel that they should depend on the state.

We should certainly not encourage a state of mind whereby people think that they are being antisocial by not depending on the state. We have almost reached a stage when, if somebody says that they have private health insurance or that they send their children to independent schools, while paying through their taxes for state education for everybody else, the Government frown on them. It is too late in this debate, but I hope that the coalition Government will send out a much more positive message about the virtues of self-help and responsibility and of people not being dependent on the state. There are many definitions of what may or may not amount to the big society, but if it means anything to me, it is encouraging people to do their own thing and having much smaller state involvement and, ultimately, lower taxes.

14:30

[Sammy Wilson]

I am listening intently to the hon. Gentleman. Would he extend his argument to, for example, household insurance and the whole range of insurance premium tax? As was pointed out earlier in the debate, people insure their houses against flooding and fire, for example. There is therefore no burden on the state in the event of flooding, because the insurance companies carry it, and if a house catches fire, people do not have to look for a loan from social security, because they are covered by the insurance. Does he accept that the amount of money involved is hardly likely to act as a disincentive?

[Mr Chope]

The answer is yes; I would wish to extend my argument. However, I tabled two specific amendments so that we could have a focused debate. It has become apparent in the course of the debate—I did not know this before—that about half the yield from the IPT increase will be from motor and health insurance premiums, and about half from other insurance, such as household insurance.

I am concerned that in my constituency, particularly as a result of the rather reckless behaviour of the Environment Agency, there is a blight on a number of houses, whose owners find either that they cannot access flood risk insurance or that that insurance is much more expensive than it used to be. Because of how IPT works, the state benefits from the latter outcome through extra income, and there is an extra burden on householders. Some very important points were made by Members who are concerned about household insurance. It was open to anybody to table similar amendments, but I tabled two to focus the debate. The hon. Member for Dundee East (Stewart Hosie) did the House a service by tabling an amendment that calls for a proper analysis so that the House can know the full implications of the proposals before we are asked whether we support them.

We have spent two hours discussing this matter, but we have still not really heard from the Government about the direction of travel. We certainly have not heard whether the principles so articulately described by my right hon. Friend the Transport Secretary—he spoke of people who can afford to pay their fare using free bus passes—apply throughout the coalition Government, and to those who take responsibility for their health care, education or other aspects of their lives.

[Thomas Docherty]

On private health care, does the hon. Gentleman accept that people receive a premium service, and that it is therefore only right that they pay a premium tax? Does he also accept that health care provides only 10% of the total IPT raised?

[Mr Chope]

People take out private health insurance, which might be through a scheme in their firm, because they want access to health care that is currently not available. I gave some examples in my opening remarks of people in my constituency choosing to take out health insurance. A very large number of my constituents pay for various procedures and operations. They insure themselves because they believe that they can access those procedures when they need them rather than when the state tells them they can have them.

The essence of the argument is that countries with the highest standards of health care are the ones that encourage higher non-taxpayer funded input into health care. That is what I am trying to get across. I might be unable to persuade the hon. Gentleman, but I hope that I might start to persuade members of the coalition Government on the virtues of people taking responsibility for their health care, thereby relieving the burden on the NHS.

[Mark Hendrick]

Does the hon. Gentleman accept that the private health system is not independent? It is actually dependent on the national health service, and the vast majority of private health staff were trained and qualified in the NHS. The 6% we are talking about is quite small when it comes to disincentives for people to use the private health system.

[Mr Chope]

The hon. Gentleman demonstrates his old socialist credentials and his prejudice. I shall not get into a full debate about the NHS, as I hope that we will have an opportunity to do so when the private Member’s Bill tabled by my hon. Friend the Member for Wellingborough (Mr Bone)—which I support—is debated on a Friday in February. Let us not forget that many of our top clinicians stay in this country because they can supply their services to the NHS—[Interruption.] Yes, they do so for money, but they can also top up their income by getting money for providing their services to private patients. That mixed market in health care provision, including the providers of health care, is healthy for our country and I am sorry that the hon. Gentleman does not support it. That is a philosophical divide, but I think that we need the best health practitioners in this country. The private health insurance companies make a significant contribution to the health of the nation.

I shall not go through all the contributions that were made in this debate, but I wish to touch on the motor insurance issue, which found most common cause across the Committee. Because the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) did not seem to be committed to the idea of protecting motorists—especially young motorists and those from areas with high insurance premiums—and did not say that he would support my amendment, he has created a slight difficulty for me.

[Mr Byrne]

My ambition this afternoon was simply to tease out from the Government the principle behind the increase in IPT. The hon. Gentleman may be able to help me with this, but I think that I detected that the ambition was simply revenue raising. Was that his interpretation too?

[Mr Chope]

The right hon. Gentleman has deployed an old trick. Instead of responding to my challenge, he has put a challenge back to me. He has listened to the same debate as I have, and the Government need to raise money because—as he so candidly recognised—there is no money left. That is one of the reasons behind the insurance premium tax.

[Mr Byrne]

The hon. Gentleman is being slightly unfair. We had a very different approach to introducing £19 billion of new taxes. The Government have chosen a different course, but they have had to raise so much in VAT and IPT because the Budget so slows down the recovery that £9 billion in extra taxes will have to be raised to make up for the lost growth.

[Mr Chope]

I shall not get involved in that debate now, because I want to keep the focus on the narrow issues in my amendments. I am disappointed that the Minister did not respond to my concern—echoed by the hon. Member for Nottingham East (Chris Leslie) and others—about the regressive nature of the insurance premium tax, especially on the motoring public. One suggestion I made was that instead of having a standard tax on insurance premiums, we could have an individual transaction tax so that every motorist would pay the same tax for his annual insurance premium.

[Mr Gauke]

My hon. Friend is right to return to this point, and I apologise for not responding to it in my earlier remarks. If we took that approach on a revenue-neutral basis, we would end up essentially with the same transaction tax level on a big and small car—whether a Bentley or a Skoda, we would have the same transaction tax. Is that what he is advocating? That itself would be regressive.

[Mr Chope]

I was not thinking about Bentleys versus Skodas; I was thinking about the student living in Liverpool trying to run a vehicle that is perhaps 10 or 15 years old and finding it hard to make ends meet, and about the person who might have several Bentleys in the garage covered under some collective insurance. I am concerned about those living in high-risk areas or who are in high-risk groups—because they are young drivers, for example—whose insurance premiums are significantly higher than those of, for example, the person whom my right hon. Friend the Member for East Yorkshire (Mr Knight) mentioned who is in their mid-50s and happens to own a Bentley. I do not think that, prima facie, that is fair. I was throwing out a challenge to my hon. Friend the Exchequer Secretary to see whether an individual transaction tax that is not related to the size of the premium might produce a fairer result. It seems as though it might not, but perhaps we can correspond on that so that we can take the matter forward.

We have covered a lot of ground in this debate, and I have already expressed my disappointment. The question now arises of whether we should seek to divide the Committee on the proposals. I live in hope—perhaps I am naive—that in due course we will get a better and more positive response from the coalition to questions of responsibility and encouraging people to do the right thing, and that it will send out those positive measures. To seek a Division would probably be counter-productive because, apart from anything else, I would have to pick one, rather than both, of my amendments, which would mean picking on one particular type of insurance premium tax as against another. I am not sure that that is necessarily in accordance with the will of the Committee, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Mr Chope]

On a point of order, Mr Hoyle. It seems as though right hon. and hon. Members in the Opposition did not realise that it was open to them to object to the withdrawal of an amendment if they wished to vote on it.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

It is too late to object now, so let us proceed.

Clause 4 ordered to stand part of the Bill.



Clause 5

Power to repeal high income excess relief charge

[Ms Angela Eagle (Wallasey) (Lab)]

I beg to move amendment 60, page 3, line 9, at end add—

‘(4) An order under this section may only be made once the Treasury has published a report, including—

(a) the outline for the proposed replacement arrangement for the provisions contained in Schedule 2 to the Finance Act 2010;

(b) a distributional analysis showing the likely impact of the proposed replacement arrangement; and

(c) the revenue implications of the proposed replacement arrangement.’.

[The Chairman]

With this it will be convenient to discuss clause stand part.

[Ms Eagle]

The amendment seeks to delay the making of any order under clause 5 until the Treasury has published a report that outlines the proposed replacement for the provisions in section 23 of, and schedule 2 to, the Finance Act 2010, a distributional analysis of the impact of the proposed arrangement and the revenue implications of the replacement provisions themselves. Clause 5 creates a power to remove the paving legislation that would have enabled the so-called high income excess relief charge to be levied in time to be collected in April 2011. That was legislated for in section 23 of, and schedule 2 to, what I suppose we must now call the first Finance Act of 2010, given that we look to be on course to pass three of them this year. I never thought that I would be comparing Finance Acts to buses—none come along for ages and then three come along at once—but it looks like 2010 is going to demonstrate the similarity. We are only in the middle of discussing Finance Bill issues in this Session, and obviously we will resume with part two later in the year.

14:45

However, back to the provisions before us. The original legislation, which was passed by the previous, Labour Government, was announced in the 2009 Budget and slightly extended in scope in the 2009 pre-Budget report. The idea was to have restricted tax relief on pension contributions for those earning £150,000 or over, who are the top 2% of earners in the country. The policy would have tapered that relief as earnings rose, so that by the time earnings were at £180,000, the relief on pension savings would be the same as that for a basic rate taxpayer, which is currently 20%. The measure was scored in the 2009 pre-Budget report as creating a total yield of £3.6 billion in 2012-13. It was calculated that it would affect 300,000 people at the very top of the income scale, leaving 98% of taxpayers unaffected.

In order to understand the effect of changes to pension tax relief, we need to understand how it has developed and how it is distributed. I propose to spend a little time outlining that, so that we can explore the precise effect of clause 5 as drafted, which completely takes away the previous policy. The tax relief available on pension saving in the UK is generous. As many hon. Members will know, it was originally introduced to support people seeking to produce an income for their retirement, in the recognition that these people are locking away resources in an inflexible way, which is obviously what pensions do. People cannot easily access those resources earlier than the retirement age, which is usually not for many years.

The tax treatment allows tax-free saving and tax-free investment growth, as well as the taking of a tax-free lump sum on retirement of up to 25% of the fund. There are also valuable tax incentives for employer contributions to pension saving, which is a recognition—long supported by Members in all parts of the House—that it is more efficient for pensions to be provided on a collective rather than an individual basis. The favourable tax treatment is also a recognition in wider society that pension saving involves a deferral of current income, which is always difficult to maintain in what is a consumer-oriented society, where all the temptations tend towards instant rather than delayed gratification.

[Chris Leslie]

indicated assent.

[Ms Eagle]

My hon. Friend responds to my mention of instant gratification, but obviously it is in all our interests as a society to recognise that there is merit in assisting people to save for their retirement, so that they can avoid being reliant on benefits in their old age. As a result of the welcome increases in longevity, which have been a feature of our success as a society since the war, the average period of retirement is becoming longer and longer. Indeed, history recalls that when old-age pensions were first created 100 years ago, the life expectancy of those due to access them was a mere one year after they had been lucky enough to qualify. Clearly, by the time pension saving and old-age pensions became more widespread after the second world war, the time had gone up considerably to seven or eight years. It is now 20-odd years for men and—gratifyingly for females—even longer for women.

That shows that there are issues about longevity in society and about how to adapt our pensions arrangements to recognise that we live in what is often referred to as “an ageing society”. I believe that it is a great triumph of our organisation of society. Although it presents us with some difficult issues of policy and affordability, it should not be seen or ever portrayed as a problem; nor should the fact that these days many more pensioners reach retirement age and live longer be seen as representing some kind of burden on our society. After all, we all aspire—as I am sure you do, Mr Hoyle—to reaching retirement age and enjoying an extremely happy, long and hopefully prosperous retirement. That is what we are dealing with when we tackle the issue of pension tax relief.

I was pointing out that pension tax relief is more generous than the relief in many other areas of saving. That is because there are great benefits in encouraging people to save for their own pension, despite the fact that they are putting money away to which they often cannot gain access for many years; and also because it is more effectively and efficiently done if it can be done collectively. That is why Government incentives, in the form of tax reliefs, have always featured in the system.

This form of tax relief is often referred to as EET. This is not a stuttering, Steven Spielberg sci-fi film; it stands for exempt, exempt, taxed. That means that as savings are put away from income, they are exempt from tax. Any investment growth that comes from investment in those funds is also exempt from tax—that is the second E. The T, of course, is the thing that many people worry about—the fact that as these savings are taken as an income stream when retirement happens, taxation applies again at that stage.

I doubt whether any Member on either side of the House would quibble with the very generous tax incentives put in place over many years by Governments of all hues, colours and sorts—whether they be coalitions or otherwise—to privilege such tax savings. However, as that has developed, certain features have brought about unforeseen consequences and have not proved to be in the best interests of fairness or equity.

To establish the size of the issue and to put into perspective the amounts of money that we are dealing with under this clause, let me reveal—although I am sure that many Members will already know—that the gross annual cost of pension tax relief for the financial year 2008-09 was £28.4 billion, which at a full 2% of gross domestic product is a not insubstantial amount. Net of the tax on pension income—the T part of EET—and also of the national insurance contribution relief for employers, which are also granted by the Treasury, the figure was £18.9 billion. Therefore, the net cost of that tax relief for pension savings is close to £19 billion. Again, that is not an insubstantial amount of money or revenue forgone by the Treasury.

Another feature of the net figure is how it has been growing in the past few years, having doubled since 1998-99. From being reasonably stable, it has gone up very quickly in a relatively short space of time when we think about life spans and the development of pensions policy in this area. That change has been accompanied by a change in the distribution of the beneficiaries of the tax relief, so there was a very strong case for taking action to put it on a more sustainable and fairer footing, and that is what we were doing with the tax law that clause 5 seeks to repeal by order.

It is a feature of the system, which I am not sure could be avoided without putting huge restrictions on it, that tax relief for pension savings is granted at a marginal rate. By definition, that means that it is more valuable for higher rate taxpayers than for basic rate taxpayers. Analysis has shown that the relief was increasingly benefiting those on the very highest incomes rather than just those on higher rates. So, paradoxically, over time, the very reasonable and logical policy of granting tax exemptions on savings for pensions meant that the incentive to save for a pension was being provided, at a cost to all taxpayers, to those who needed it the least because they were the most well-off. That is the definition of “regressive” in terms of how tax relief might hit. The fact that the system was becoming even more distorted, benefiting those in the very top income brackets, was illustrated by a distributional analysis of the benefits, which revealed that higher rate taxpayers received 65% of the relief but constituted only 19% of pensions savers.

The real distortions were at the very, very top, as those on the very highest incomes were benefiting even more disproportionately. Analysis shows that about 2% of savers currently receive a quarter—25%—of all the tax relief available. I hope that the Minister will agree that that is unjustifiable. It means that if a person is privileged enough to be in the top 2% of earners by income, they are entitled to an average of £20,000 of tax relief per year per person on their pension savings, whereas the average relief available for those who are on the basic rate of tax is just £1,000.

The way in which the relief is granted, its connection to the income tax system—the fact that it is at the marginal rate—and the introduction of the 50p rate for income tax mean that if action were not taken, this massively and already grossly regressive relief would become even more distorted. That is why my right hon. Friend the shadow Chancellor, in the pre-Budget report 2009 and the Budget 2009, decided that action had to be taken to deal with the relief, which had become unsustainable and extremely unfair. It was therefore necessary to have a policy response at the medium and low-earning end of the income scale as well as a policy for the very high end. It is the policy for the very high end that is being repealed in clause 5, but I want to spend a tiny amount of time dealing with the policy at the low and medium end.

The decision to create the national employment savings trust was an essential part of the rebalancing of pension tax reliefs to ensure that they could effectively stretch further down the income distribution. Members will recall that the creation of what is now known as NEST was the outcome of a great deal of work across party lines from 2004 to design a system of pension savings that would deal with the obvious market failure in the private sector of the ability to allow low and medium earners to save in a worthwhile way in a low-cost savings vehicle.

15:00

NEST was first brought into the structure of pension savings as a result of the work of the Turner commission. The commission sat for two years and produced huge reports. Anyone who wishes to inform themselves about the policy issues surrounding the thorny problems of increased longevity and the ageing of our society, and their implications for our policy approach as an advanced, sophisticated and modern welfare state, should read the evidence and pronouncements of the Turner commission. It is the best available analysis and narrative of those complex issues. It led to two pieces of pension legislation: the Pensions Acts of 2007 and 2008. They put in place a structure that will create automatic enrolment for people, a compulsory employer contribution and—importantly for the subject of pensions tax relief and to this debate—a Government contribution alongside the money that individuals put into the NEST or any other pension structure through which a company chooses to make provision for its workers. This is an essential part of rebalancing the pensions tax reliefs and the extremely regressive skew that I have identified as a feature of the present system.

Automatic enrolment in the scheme is due to begin in 2012, but that is subject to a review that was announced by the new Government. Given the approach to low-cost pension saving, the fact of automatic enrolment, and the creation of a low-cost vehicle that makes saving worth while and does not eat into the savings of people on modest or low incomes through commission and costs, I hope that Members on both sides of the House will still agree that this should go forward. A great deal of work went into creating that consensus, and it is important, given that pension policy has to be developed over many years, that we maintain it across party divides, however much fun they might be at whatever time of the day or night. It is important that we keep the big picture in mind and begin to develop a coherent approach to pension savings.

My firm belief is that the creation of the low-cost vehicle, the NEST, will go ahead, and I hope that this landmark reform will ensure that, from 2012 onwards, up to 10 million people will get the chance to save into a pension with a guaranteed employer contribution and Government tax relief available for the first time ever. By definition, that will begin to reduce some of the skewed and regressive distribution of pension tax relief that is a feature of our system at the moment.

The measure will also begin to build a robust savings vehicle, which will finally guarantee the end of the current market failure that locks those on moderate earnings out of viable opportunities to save in a pension. It will also ensure that access to appropriate tax relief can be more evenly spread. There remains an issue, however, over the distorted distribution of pension tax relief towards those at the very top of the income scale. That is what section 23 and schedule 2 to the Finance Act 2010 were designed to deal with. Those provisions were specifically targeted at those on the highest incomes who had done so well in the good years. We felt it right that those people should contribute most to the fiscal consolidation that we all knew had to happen in the aftermath of the credit crunch. This was a progressive measure that began to address the distortions that had developed in the system. It also explicitly and deliberately targeted the very richest to bear most of the burden of the redistribution of pension saving tax relief. That gives the lie to the propaganda and constant refrain from Government Members that the Labour Government had no plans for a fiscal consolidation. The measure was an important part of our plan to halve the deficit over the lifetime of this Parliament.

Clause 5 creates the power to repeal by order all the paving legislation put in place by the policy approach that I have described. Page 36 of the Red Book hints at the new Government’s intention to deal with this matter. It says:

“The Government will continue with plans it inherited to raise revenues from restricting pensions tax relief.”

So that much we can certainly welcome, and even agree on. The Red Book continues:

“The Government is committed to protecting the public finances by introducing reforms that raise no less revenue than existing plans.”

That amount, as I have already explained, is £3.6 billion by 2012-13. The yield is likely to be maintained at that level or even go higher in the future. From the scoring that we did in government, it had a slow start in the first year—£0.2 billion—while the system was put into place, and went up to £3.5 billion and would remain at that kind of level, but get gradually higher in the future. The Red Book does not feature any scorecard implications, I assume because the Government have said that they will be replacing our yield like for like. They have not predicted what the yield for its replacement policy, whatever that might be, will amount to. One would have thought that it would be at least maintained at £3.6 billion and probably go higher over time.

The sum of £3.6 billion is a significant amount of money to get in by 2012-13. The Red Book goes on to hint at, but gives no firm details of, the approach that might be in the Government’s mind as a replacement for the scheme for which we legislated. That approach, according to paragraph 1.118 on page 36 of the Red Book, is to guarantee the same yield by substantial reductions in the annual allowance. The ballpark area that it mentions for those reductions is between £30,000 and £45,000. That is a significant reduction from the current allowance, which is £225,000. No mention is made of the lifetime allowance. The Minister will be aware that there is the annual allowance but also the lifetime allowance for pension savings. I would be extremely interested in any observations that she may have on the Government’s attitude to the lifetime allowance. Is it to be kept the same, increased, or perhaps indexed in a different way to the one that we established?

The lifetime allowance is certainly an important part of any debate about these matters, yet the Government have gone all coy about it. They have mentioned a potential range for huge reductions in the annual allowance, but they have not been forthcoming about their plans to replace the high-income excess relief charges, which we legislated for in paragraph 23 of schedule 2 to the Finance Act 2010. The Government are not at all forthcoming about the lifetime allowance, which is why the amendment is trying to get a bit more information out of them.

[Geraint Davies]

In terms of the public finances, £3.6 billion is a massive amount to be raised in a very tight period, so given that there is so much uncertainty and change around the Government’s proposals, does my hon. Friend accept that they present an enormous risk? From the viewpoint of the industry, it appears that the Government are playing fast and loose and are undermining the confidence of the financial markets and credit rating organisations in their capability to manage our economy or their finances.

[Ms Eagle]

My hon. Friend raises an extremely important point and I obviously look forward to the contribution that he will make to our debate in due course. If he looks at the amendment he will see that the point of it is to try to get more detail about what is in the Government’s mind. The time scale for putting the provisions in place is extremely short in relation to the beginning of the new financial year—a point to which I shall return.

The amendment would provide that an order that completely repealed all the paving legislation and all the work to put into effect the higher earnings charge would not be allowed until Parliament has more idea of at least the outline for the proposed replacement arrangements. There are some coy little hints in the Red Book but not much else to go on—certainly no detail—if we are to repeal an already organised charge that has been well consulted on. The amendment also provides for a distributional analysis to show

“the likely impact of the proposed replacement arrangement; and…the revenue implications of the proposed replacement arrangement.”

I accept that the Government have said that they want to replicate the yield, but as my hon. Friend correctly pointed out, the yield is not an insubstantial amount and it rises quickly. In the tax year 2012-13, a yield of fully £3.6 billion for the replacement measure is already on the Budget scorecard.

The planned yield is a considerable sum and the Government need to reassure us that they are not putting it at risk by ripping up all the work that has been done to implement the original policy since it was announced in 2009. There are clear dangers in destroying all that work, wiping it off the statute book and starting again from scratch so close to when the change is meant to come in, not least because of the tight time scales as we approach the start of the financial year 2011-12, when collection of the revenue is meant to begin. The Red Book states:

“The Government wishes to engage employers, pension schemes, experts and other interested parties to determine the best design of a regime.”

That does not fill me with confidence that the Government have the first clue about how their policy intent can be changed into an actual tax change. It is a complex area and they have only a small period to get the measure right.

I assume that the powers will have to be legislated for in the September Finance Bill; perhaps the Economic Secretary can tell me when she replies to the debate. There is not much time—probably only the summer—so I hope she will have a holiday, but I am not sure quite how that will turn out if she is put in charge of sorting out the proposals in an appropriate time. Her officials could get no break at all. To be honest, as they contemplate their second or third Finance Bill of the year, her officials will probably need a break as much as she does. While there is not a lot of time left, there is an awful lot of yield at stake if the Government get this wrong, and that is what we are exploring through amendment 60.

15:15

Parliament deserves a much firmer idea of what is in the Government’s mind before it jettisons a well-prepared and well-signalled change that has already involved a good deal of consultation, design, and stakeholder and legislative work. The tax regime to collect the suitably named high income excess relief charge is to be abolished although it has already been consulted on and legislated for. There have also been impact assessments, stakeholder engagement and consultation documents, so all people concerned have prepared for the regime.

I am the first to admit that the charge was not universally welcomed or accepted, especially by those who would have to pay it. Many self-interested and somewhat bloodcurdling arguments were advanced about how trying to distribute the relief more fairly would destroy all pension provision in the UK because it was suggested that those who previously received a completely disproportionate amount of relief would close their employee pension provision out of spite if some of that relief was taken away. It was not surprising that there were howls of outrage from certain quarters when the policy was announced, but it is impossible to justify a system of tax relief that delivers a quarter of its £18.9 billion to just the 300,000 richest people by income in the country.

Unfortunately, it seems that that lobbying effort has paid off under a new Government. The throwaway comment in the Red Book that the policy would

“damage UK business and competitiveness”

is quite worrying because that is usually code for “would hit the very well-off the most”. The Government have obviously listened to those with well-oiled lobbying machines who, after all the years of largesse during which the vast majority of the pension tax relief came to them, did not want the party to end.

[Thomas Docherty]

My hon. Friend is probably aware of many people’s anger at the size of the pension pots of bankers such as Sir Fred Goodwin. Does she agree that when many people are struggling as a result of the bankers’ decisions, it is outrageous that the Government wish to reward those very bankers by giving them such big pension breaks?

[Ms Eagle]

I certainly understand that anger, and I suspect that there will be even more anger if the Government do not address the unfair way in which the distribution of the pension tax relief has developed, especially since the simplification from A-day in 2006. We tried to address the problem by targeting the people at the very top who had benefited the most from the relief in particular.

We received representations from stakeholders who called for a simpler system, and it would be wrong of me to try to claim that the system for which we legislated was simple—it was clearly complex. However, when dealing with people on very high earnings who use complex financial arrangements, we often find that that complexity must be matched to ensure that a fair amount of tax is taken from them. In tax and benefit law, as the Economic Secretary will know—she probably struggles with this every day—there is always a trade-off between simplification and fairness, as well as yield. We took the view that despite the complexities of the system that we were introducing, it was right to target very high earners in particular. I state the distributional analysis again: the top 300,000 people receive 25% of £18.9 billion. No right-thinking person in this country with any kind of understanding of what the term “fairness” means would want us to tolerate that kind of distribution.

Simplification is always a popular cry, but there are trade-offs, and it causes different problems if we create a simpler system. We did consider other options, but the trade-offs are inescapable. We want to explore in debate today how the Government are working their way through the trade-offs, so that we can try to assess whether the solution that the Government have hinted at, but have not put before us, is fair, or whether its outcome is less fair than the outcome of the system that we decided on.

[The Economic Secretary to the Treasury (Justine Greening)]

I can see that the hon. Lady and other Opposition Members are following a particular train of inquiry, and that is perfectly right—it is the purpose of this debate. I just draw her attention to the fact that the clause gives the Government the power to repeal the previous measures if we can find a better alternative. If we cannot, I assure her that we will leave what is in place. However, does she agree with the Institute for Fiscal Studies, which described the measures that the previous Government proposed as unfair?

[Ms Eagle]

It is up to the entire electorate to decide what is fair or unfair. I have set out some of the reasons why we approached what is a difficult problem in the way that we did, but I certainly welcome the Minister’s comment that if the Government cannot find a different way of doing things, they will leave the current structure in place. I was wondering about the reference in the clause to December this year. I suspected that that might be what we would call a backstop position. It is important that the hon. Lady has put her point on the record. Taking what she says at face value, I assume that the Government will do some work in the next period. I do not know whether a measure will be in the Finance Bill, or how quickly that work will be done, but certainly there is not very much time for a completely new system to be brought in.

[Justine Greening]

rose—

[Ms Eagle]

The hon. Lady may wish to deal with some of the points in her reply on the amendment, but I am more than happy to give way if she wants to intervene.

[Justine Greening]

The hon. Lady is very kind. Given that she raises the issue, perhaps it would be helpful for the rest of the debate if I set matters out. On the timelines, she is right; we clearly need to make progress quickly. The aim is to publish draft clauses in the autumn, and to legislate in the Finance Bill 2011.

[Ms Eagle]

I certainly appreciate the information that the Minister has put before us, and it helps us to get on with the debate. I suppose it means that she and her officials will have time for at least a little bit of a holiday this August. Under our plans, the yield begins to come in during the next financial year. I was under the impression that she would have had to ensure that she legislated for an entirely new system in the September 2010 Finance Bill. She now tells us that potential measures for an alternative system will be forced into next year’s Finance Bill, which means that an extra £0.2 billion of revenue that was scored for the next financial year will have to be raised. I assume that she will take account of that.

[Jon Trickett (Hemsworth) (Lab)]

The new regime comes in in April 2011. If, as the Minister said, the Government will not bring legislation forward until April 2011, does it mean that we will use the system that we introduced? That will be a second system. There is the current system; the one that we introduced, which will apply from April 2011; and a third one, which will be introduced subsequent to the Government’s Bill. Or will the Government abandon our system, and will there be a period of time in which we get less revenue as a result of the complex process that has just been announced?

[Ms Eagle]

There are issues of process on which I would appreciate the hon. Lady’s enlightenment in her response to the debate.

There is also an issue about the backstop position. The hon. Lady says that draft clauses might be brought forward, and, although I am sorry to go on about process, it is important when it comes to tax changes. We gave ourselves close to two years to do all the work to introduce the higher rate relief charge, because it was such a difficult and complex area. We wanted to ensure that those who were liable to pay had plenty of time to plan, understand their liabilities—even if they did not like them, which they rarely do in my experience—and get to know the system, so that there was certainty about it. It now seems clear that there is a degree of uncertainty, which those who would have been particularly badly hit by the high charges, the very richest in our society, might welcome. However, we felt that they should shoulder a fairer burden of the necessary fiscal consolidation, because they had done so well during the good times.

If the Government are serious about protecting the yield, there has to be a trade-off with fairness. The Government have hinted at using the annual allowances as a way of raising that money, rather than our way, and if they introduce that change those on incomes of less than £130,000 will be dragged into the tax net. We wished to avoid that with our solution, so, if the reduction in annual allowances that the Government are considering turns out to be their final decision, in response to the debate will the hon. Lady tell us how many people it will affect? The Government have hinted that that is their preferred way, but our amendment would ensure a distributional analysis of the measure’s effect. Given that we legislated for a particular approach to raising that yield, and given that the Treasury did a great deal of work on developing that system, it would be entirely appropriate for the Treasury to produce some comparisons between that and the preferred approach at which the hon. Lady and, certainly, the Red Book have hinted. How great will the sudden tax liability be of people who earned less than £130,000 a year and would not have been affected had our approach to raising the yield gone ahead? How low down the income scale will the restrictions on tax relief go?

[Geraint Davies]

For clarity, does my hon. Friend agree that the Government’s proposal consists of a multi-billion-pound giveaway for the richest 2% of people in this country at a time when the rest of the country faces massive financial penalties due to the actions of international bankers? Those very bankers will be given the extra bonus by this Government, and that is an absolute disgrace.

[Ms Eagle]

Again, my hon. Friend makes an important point in his characteristically acerbic way. I was going to ask the Minister, in a slightly more polite way, how much of the income that the very richest would have paid will now be paid, under the new plans, by those on lower incomes. I hope she can give us that figure.

The key issue with annual investment allowances is that they drag people into paying the extra tax regardless of income. For example, a modest earner might receive a bequest from a deceased relative and make a big payment into a pension, and under our system they would have been able to pay in up to £225,000 without incurring tax. Alternatively, a modest earner might receive a redundancy payment and wish to put it away, and we clearly want to encourage that if they do not have a pension. If the hon. Lady’s system is to be of the sort hinted at in the Red Book, that person would be much more affected, regardless of their ordinary income; they would be deterred from putting anything other than the annual investment allowance into a pension fund because of the nature of the tax. I hope she will at least admit that that is an implication. Has she any numbers that relate to this issue?

15:30

It is important that we should be able to compare the two systems. That is why the amendment calls for a distributional analysis to be laid before the House before the paving legislation is repealed by order. It calls for the Government to give the House more than a few vague hints about the shape of the new regime that they are planning to introduce.

Reading between the lines, it appears that the Government have chosen to pay a price for increased simplicity. That price appears to be that to reduce the tax burden on the very richest, those on lower—but still good—incomes will be hit. Once more, we see a Government choice that protects the very richest at the expense of those who are not as well off. The Liberal Democrat manifesto identified this regressive tax relief and pledged to restrict it completely to the basic rate. Somehow, through the mysterious and convenient process involved in the so-called coalition agreement, that manifesto pledge has been translated into saving the very richest—perhaps even bankers, as has been said—from large tax burdens and paying for that by clobbering those below them in the income distribution. That definition of “progressive” is even more peculiar than that applied to the VAT rise.

Will the Minister deal with a couple of other questions? There is only a short time before the new financial year. She has said that it is now anticipated that the measure will not be introduced until the Finance Act 2011. How will she protect the £3.6 billion yield, given that that will come in a year earlier? How will we avoid a situation in which the order has to be made before December this year? The new system will not be legislated for and might not even be designed. Surely there will be a space in which the £3.6 billion yield will be at risk, and there will be no approach to ensuring that we can maintain it.

Will the Minister also assure the House that the new regime will be put before us properly and in detail? Will there be consultations, especially with those lower down the income scale, who, it would appear, will now be affected by the changes? Will she also tell us what is happening to the anti-forestalling legislation, which is not repealed by the clause? Will the new regime put the burden of compliance on HMRC rather than on pension providers, which bore the brunt of the approach that we took on this issue? At a time when the Chancellor is boasting of very large cuts in departmental budgets, does the hon. Lady feel that HMRC can cope with the extra burdens that this very sudden, very late, policy change will impose on it?

Finally, what will happen if it all goes wrong? The Minister has hinted that if the Government feel that they cannot intellectually work something out between now and December this year to replace the yield, they will maintain the current system. My experience is that one can have an intellectually coherent approach to a tax change that looks fantastic on paper until one tries to turn it into actual approaches. That stage might well come after the stage that her new policy is able to reach by December this year.

What is the plan B if it all goes wrong? We spent nearly two years ensuring that we could turn our approach into a reality that worked, even though it was not popular among those who were going to have to pay it. The hon. Lady does not have that amount of time. Will she reassure us that the whole thing will not collapse in a heap? I look forward to her response on that point.

[Mr Kevan Jones]

Over the past few weeks since the coalition came into being and the announcement of the Budget, the rhetoric that we have heard has been all about fairness. The Prime Minister and the Chancellor have said on many occasions, “We’re all in this together.” The other phrase is, “There’s no alternative.” We have heard the accusation that the previous Labour Government did not have a deficit reduction strategy. Well, this element was a key part of that—£3.6 billion of it.

I am quite sad that only one Government Back Bencher is in the Chamber, and I notice that the Liberal Democrats have not been here throughout this debate. During the election, we heard nothing about the VAT rises, but we also heard nothing about the fact that one of the things that the Government would do in their first Finance Bill would be to give a £3.6 billion tax give-away to the richest 2% of pensioners. I am sure that that would have gone down very badly with the electorate if the Government parties had been honest with us at that time. During the past week, the Liberal Democrats and the Conservatives, in their great coalition together, have been arguing that VAT is not regressive, although a key exception is the hon. Member for St Ives (Andrew George), who has found this policy very difficult. However, one cannot say that the measure we are debating is progressive at all.

[Sammy Wilson]

Does the hon. Gentleman accept that if the amendment, which would require a distributional analysis of any changes, were accepted, we would be in a position to make a judgment on whether a system that is complicated, as the shadow spokesman said, was at least being replaced with a system that was fair and did not, as the hon. Gentleman says, give a huge amount of money to the very richest people?

[Mr Jones]

I entirely agree with the hon. Gentleman. There seems to have been confusion from the Minister in the sense that she is saying, “Nudge nudge, wink wink, say no more”—in other words, that the Government might not actually introduce this measure. If this change is to be made, we need to know who it will affect lower down the income chain. If the top 2% are not going to carry their share of the burden, people lower down the tax scale will be affected, such as pensioners, who are already being hit by VAT and other implications of this Budget.

This proposal affects 300,000 people—2% of pension savers and 1% of working age taxpayers. We are being told that it is fair, just and progressive to abolish what was put forward by the previous Labour Government, which would have raised £3.6 billion to help to reduce the deficit that was created because of the lending we had to provide following the economic crisis. I am sorry, but I do not accept that that is fair, and I think that if this were explained to most members of the public, they would agree. Currently, no one who earned under £130,000 a year would be affected by this measure. If someone is in a Cabinet packed full of millionaires, that perhaps skews their perspective on what poverty is and what income buys. However, the average member of the public, certainly in North Durham, would be appalled by the fact that we are going to let off people who are earning what is not just a good wage but, for most of my constituents, a fantastic, unimaginable wage.

[Thomas Docherty]

My hon. Friend is obviously very much in touch with the north-east of England. Would he care to speculate as to whether, among the 2% of the population who will benefit, there will be an equitable distribution across the UK, or whether the vast majority who will benefit will be located in certain parts of the country not too near his constituency or mine?

[Mr Jones]

My hon. Friend raises a good point. Clearly the net beneficiaries will not be in the north-east of England, Northern Ireland or Scotland. They will be those in the south-east of England. The disposable income of those individuals will be a lot greater than that of a lot of our constituents, who will be hit by the VAT increase.

We have seen that give-away, but there is something else in the Budget that I find absolutely amazing. We heard the other night that under the corporation tax proposals, the banks will be given a cash-back of £400 million. The same individuals will no doubt benefit from the proposals that we are currently discussing. We have been hearing the mantras in the past few weeks that there is no alternative and that Labour left the economy in the mess.

[Chris Leslie]

We’re all in it together.

[Mr Jones]

Let us not forget that one. However, the proposal in clause 5 will leave a big black hole in the deficit reduction strategy. The Economic Secretary hinted, “Well, we might not do it, or we might do something different.” I am sorry, but if we are to have a thought-out plan to reduce the deficit, that is not the way to approach the matter. What we need is firm figures that do not make the poorest in society pay, which the proposal clearly will. She needs to explain to the House why neither she nor the Liberal Democrats went into the election saying that they would make this change. A lot of pensioners will find it very difficult to stomach.

[Ms Angela Eagle]

Does my hon. Friend agree that neither partner in the coalition Government went into the general election telling pensioners that they would change the definition of indexation from the retail prices index to the consumer prices index, either?

[The Temporary Chair (Mr David Amess)]

Order. I hope that before the hon. Gentleman responds, he will reflect on the fact that the point that has just been made is not really relevant to the matter being discussed.

[Mr Jones]

I would not want to go against your judgment, Mr Amess, but may I say that my hon. Friend’s point is another example of how hard-working pensioners in my constituency will be affected by the Budget? However, I defer to your wise counsel and would not want to get on the wrong side of you.

Distributional analysis is needed before anything is done. We also need to know, if the relief charge is not going to go ahead, where the money is going to come from. It will affect pensioners lower down the income scale. Many on quite small incomes, who have saved all their lives for their pensions, will basically be paying for a give-away to the richest 2% in the country.

I hope that we can get the message out loud and clear from today’s debate that we have a Government who are clearly taking care of their friends, the top 2%. They have to start being honest with the British people—this Budget is not about deficit reduction. It is about an ideological approach to where the burden of taxation should fall and to the size of the state, and it will not help many of my constituents in North Durham.

15:45

[Geraint Davies]

It is a great pleasure to follow my hon. Friend the Member for North Durham (Mr Jones), who puts his finger on one of the key points. Obviously, the previous Government were attempting to raise £3.6 billion to tackle the budget deficit. They targeted the top 2% of people—those earning more than £150,000, including employer contributions. Those people anticipated that increase and budgeted for it and now, in the ashes of the economic downturn imported from the United States, the impact of raising the £3.6 billion is being spread across a much wider pool—10% of the people.

As has already been said, the suggestion that we are all in it together rings hollow. Public sector workers are on pay freezes and the incomes from their pensions, like those from private sector pensions, will be reduced by 16% over 20 years through the other change that has been mentioned—the link to the consumer prices index. On top of all that, the tide of the £3.6 billion will break over them. The impact will be great, and I very much regret it.

[Mr Kevan Jones]

Does my hon. Friend also agree that the 2% of taxpayers who will get the £3.6 billion cash give-away are also in a position to take tax and accountancy advice, which could reduce their tax liabilities? That will not be open to pensioners who are paying the VAT increases or the public sector workers to whom he referred.

[Geraint Davies]

My hon. Friend is right. The status quo proposal of getting the £3.6 billion from the top 2% was based on standing back and considering whether there should be greater tax relief for those who are already the richest. The answer was no. At difficult times, those with the broadest shoulders should bear the greatest burden, but now, the burden is being taken from them and placed on much weaker consumers. That will undermine the attractiveness of pension schemes among larger numbers in middle income groups.

In essence, the proposal is to reduce the tax allowance from £255,000 a year to some £30,000 to £45,000. That creates an enormous difference in how many and which people are captured, and generates great anxiety in the industry—the providers that it represents and consumers whom it serves.

[Justine Greening]

May I confirm that I have understood what the hon. Gentleman prefers? Would he rather have tax relief at 20% for people who can afford to pay up to £250,000 into a pension fund in one year?

[Geraint Davies]

The Economic Secretary knows that the distributional impact of the proposals is, as I have said, to spread the £3.6 billion burden from the top 2% to 10%. It is as simple as that. She knows that that is the case, and there is no way that she can wriggle out of that political and economic fact. Before the election, there was a promise that million pound estates would avoid inheritance tax—the top 5,000 households. At the last moment, the Chancellor stepped back and said, “Oh no, at such difficult times, we won’t give billions of pounds to the top few thousand households. Don’t worry. Vote Tory.” However, their secret plan was to have a word behind the scenes with their rich mates, telling them, “Don’t worry, we’ll reverse the Labour party’s old plan to make sure that the top 2% pay most.”

[Chris Leslie]

My hon. Friend is making several important points. The clause appears to reinstate an enormous tax relief capability for the wealthiest, yet the Economic Secretary guffaws at questions from Labour Members about taking it away. Surely the Treasury should clarify the position.

[Geraint Davies]

My hon. Friend is right. Only yesterday, he lucidly pointed out that, when we went into the election campaign, the Conservatives were saying, “We won’t help the rich with inheritance tax, and we’ll get those bankers with the bankers levy”, but that the levy of £400 million will be nullified by the corporation tax give-away to the bankers. On top of that, we hear not only that the bankers will not pay a levy because they get corporation tax back, but because of this proposal they will have the £3.6 billion in pension contributions. That is an absolute disgrace.

The Government argue that the measure is both fair and effective. I have already argued that it is clearly not fair and will not labour the point any longer, but is it effective? That the previous scheme was complex has been acknowledged, but the new system is also complex. There is enormous uncertainty within the industry, which is asking how pensions can be accrued in defined benefit schemes, how they will be valued under the proposals, and what will be the impact of the proposal on the provision of such schemes and what will be the impact on basic rate taxpayers. There are also compliance and delivery questions, and all sorts of other questions, and the measure must be delivered within a very tight time frame. We are therefore playing fast and loose with our economy and public finances, and with the confidence of the international community, in order that the Tories can bail out their rich friends. That is quite outrageous.

The Government say that the matter will not be done and dusted immediately, but that the measures give them various regulatory powers to withdraw Labour’s well thought out proposals and to leave a void. Specifically, it is said that there will be a discussion document in the summer of 2010, meaning that there will be a big discussion among the stakeholders on how the Government are going to recover the £3.6 billion that they would have made from the top 2%. The Government say, “We’d better not take that £3.6 billion because we’d be taking it from our friends, but we don’t know how we’re going to recover it, so we’ll have a stakeholder discussion in the summer,” which will presumably take place in the Maldives or somewhere similar.

[Chris Leslie]

Again, the Labour party was trying to close the loopholes for the very richest and to reduce some of the tax give-away for the millionaires. The Minister is asking the House to trust her while she shuffles the rules—that is what clause 5 effectively means—but does my hon. Friend think that the Government, given their track record, can be trusted on this matter?

[Geraint Davies]

I certainly do not think that the Government can be trusted but, more importantly, do the industry, consumers and the wider financial community trust them to get their ducks in a row and recover the £3.6 billion? Much was made of the Chancellor saying, “We’ve got to get all this money and get the deficit down, otherwise we might be re-rated,” but suddenly we do not know where a key component of that—£3.6 billion—is coming from.

I mentioned that there will be a discussion group of stakeholders in the summer. The previous Labour Government considered reducing the annual allowance and all the other options. It is on the record in Hansard that the annual allowance proposal was rejected partly because it was less well targeted—as has been said, we wanted to focus on those who are able to pay most easily and without great pain rather than make the weakest pay more—and partly because of its complexity.

Another key point I wanted to make—I do not think it has been made clearly enough—is that primary legislation is necessary to reduce the annual allowance. The proposal in the Bill is half-baked. It gets rid of a system of gathering £3.6 billion and the Government are incapable of replacing it with an alternative. I object to the clause not just because of the discussion with stakeholders and the uncertainty, but specifically because section 282(2) of the Finance Act 2004 states that the annual allowance set by Treasury order must not be less than the preceding year. Given that the allowance is £255,000, it cannot suddenly become £30,000 to £45,000 without changing that legislation. Such a measure is not included in the Bill, which is another indication of how half-cocked the proposals are. We are discussing a Finance Bill now, but we would need another one before April 2011 to change that allowance. The proposal is incomplete and will mean uncertainty; it demonstrates ineptitude and incompetence; and it undermines confidence among industry providers and consumers. After all, we want more people to save with certainty, so that they have comfort rather than hardship in what we hope will be their long and happy retirements. This will undermine those prospects. People will be less likely to subscribe to sensible, robust pension schemes for the future.

The Government are giving themselves the power to repeal primary legislation by order without knowing exactly what will be put in its place. That is a half-baked approach. Amendment 60 calls for an analysis of “the likely impact”. I tabled an amendment that was not selected, but it simply suggested that this clause should be scrapped. We have looked at the issue, and we know what the distributional impact will be, albeit not in detail. We know that the rich will be let off the hook, and more widely it will cause massive uncertainty about the future. There may also be a question mark over whether we can fulfil our financial obligations as set out in the Budget.

Towers Watson, which is a leading consultant on pensions, says that lowering the annual allowance to £30,000 would lead to tax charges for long-serving final salary scheme members. That means that employers would pull the plug on such schemes. That is not my claim, but that of industry experts. We have already seen across British industry the loss of reliable and robust final salary schemes. Towers Watson says that the changes will undermine final salary schemes because they will not be as useful in retaining staff if they have a tax bill attached. The Minister has not thought this through. If big employers have these final salary schemes, their staff stay with the company because they know that each year they gain a little more benefit, instead of going to a predatory competitor company.

Towers Watson argues that the Government can either introduce a simple system or a fair system, but not both. A rough and ready approach was fine when a few were worried about the annual allowance, but the Government’s proposals would have an impact on hundreds of thousands of people. All the stakeholders will be running around wondering what the changes will mean for them and providers will wonder whether they should provide a different scheme. I mentioned KPMG before, and I will not go through all the consultants in terms of their support for my position, but KPMG says that the number of pension savers affected has widened from 2% to 10%. PricewaterhouseCoopers says that the level will need to be £30,000—as opposed to £30,000 to £45,000—to raise the £3.6 billion needed. The movement from £255,000 to £30,000 is a radical change and we are still consulting on it.

PricewaterhouseCoopers says:

“Employers need certainty over the regulatory framework for pensions if they are to be remotivated to provide quality workplace pensions.”

The Government’s proposals are unfair, unclear, half-baked, fast and loose and a massive new multi-million pound bankers’ bonus to pay back many of the people who put us in this mess in the first place. They are disgraceful and should be withdrawn.

[Sammy Wilson]

I have only a few points to make. The Conservative party’s fortunes or misfortunes do not really affect us in Northern Ireland so I am not seeking to score political points or to say that the Tories are bad people, even though they may be considered to be so by many people. However, the basic issue that hits everyone in the face in considering this measure is how it sits with the claim by the Government that the Budget is fair.

16:00

The core of my argument is this: is this a fair way of dealing with this particular issue? Perhaps the Minister can confirm whether the Government have decided that the current system is so complicated that it needs changing to such a degree that the £3.6 billion will be unrealisable. If simplicity will result in less money, we are obliged to know where that money will come from. On the other hand, if the change is intended to raise the £3.6 billion—but not in the way that it is currently raised—logic dictates that it can be raised only by distributing its collection among people who are not currently paying towards it, which means going down the income scale. That is where the issue of fairness comes in.

The first question I want answered, therefore, is whether it is the intention to raise that £3.6 billion. If so, how will it be distributed? The shadow Minister admitted that the system put in place by the previous Government was complicated—that is probably one of the things exercising Treasury Ministers at present—but if there were a simpler method, I assume that it would have been tried already, because nobody wants to put in place an unnecessarily complicated system. It might well be that something that previously escaped the people who designed the pension tax relief has suddenly appeared to them. If so, perhaps a way can be found to keep the same distribution but collect it differently. Were that the case, however, I suspect that it would have been found already.

A second issue, on which the amendment is quite clear, needs to be addressed. The Minister indicated in an intervention that the power being asked for might never be exercised, but I suspect that it is being requested because it will be exercised at some stage. If that is the case, and if the Government have nothing to fear from the amendment, in the interest of ensuring a collective and positive response to the Budget, and so that it can be seen to be fair, a clear distributional analysis, which the amendment asks for, should not be something that the Government walk away from—the amendment should be easily accepted. I would be interested to hear from the Minister whether that part of the amendment will be accepted, or whether there is some fear about the Government’s doing so. In our earlier debate about insurance, the Exchequer Secretary said that the amounts are so minimal that we do not need a full impact assessment, but the amount here is not minimal—it is £3.6 billion—so a distributional analysis should be called for.

The third comment I wish to make has already been made by other Members. We are going to have the current arrangements until the end of the year, then we will have the previous Government’s amendments for the next year, and then we will have new arrangements for the following year. In this industry, people, including all of us as pension contributors, want some certainty about where our pensions are going, what kind of contributions we will have to make and so on. It therefore strikes me as odd that a Government who say they want to make the running of the economy more simple—by reducing red tape and bureaucracy for industry—should be having three systems in three different years. That seems to go against the arguments that the Government have put forward about how they wish to deal with industry and the economy generally.

For all those reasons, Opposition Members have legitimate grounds for wanting to raise their genuine concerns about the clause and move amendments to it, and are not doing so just as an exercise in political point scoring. I would prefer the clause simply to be removed, rather than the amendment be accepted, but I shall be interested to hear the Minister’s response to the points that have been made.

[Thomas Docherty]

I shall be relatively brief. It is perhaps worth noting that since my hon. Friend the Member for North Durham (Mr Jones) first commented on the lack of interest from those on the Government Benches, there has been a flurry of—I suspect—BlackBerry messages going out, so that we are now being treated to no fewer than five Conservative Back Benchers. They have joined us for the afternoon, yet not a single Liberal Democrat has arrived in the Chamber.

It would be wrong of me to suggest that the Liberal Democrats are simply uninterested in the Budget, so could it be that the Chancellor, having been thwarted in his plans for a millionaire’s inheritance tax break, came up with a new wheeze after the coalition deal? How could he help his friends in the City? Unsurprisingly, the Chancellor’s new wheeze is to reverse the previous Government’s policy of trying to find a more equitable approach to pensions. That, I suggest, is the reason why our Liberal Democrat colleagues have not been advised of the importance of this debate. For if they saw the skilful manoeuvre that the Economic Secretary is trying to perform on the Committee today, they would surely rush to the Chamber to show their outrage at this terrible scheme.

It is a slightly unusual situation when a Minister as artful and articulate as the Economic Secretary tells us this afternoon that the current system is terrible—that it does not work; that it is unfair and unclear—yet has not been able to articulate what would replace it. It strikes me, as a perhaps naive and innocent new Member, that the starting point for any Government—particularly a Government who are so terribly keen to reduce regulation and bureaucracy—should be as follows: rather than introducing legislation that has no purpose except to give them some wriggle room, the Government would have been better off spending their time coming up with an alternative proposal for the Committee to examine, instead of giving the Minister the opportunity to spend her summer and that of her civil servants coming up with a new scheme.

To conclude, although I look forward to the Minister’s reply, I suspect that we will hear no detail whatever about what the Government plan to replace the current system with, and that in six months’ time she will not have been able to find a suitable replacement.

[Justine Greening]

May I start by saying what a pleasure it is to serve under your chairmanship, Mr Amess?

We have had a wide-ranging debate today and I will do my best to answer a number of the issues that Opposition Members have raised. However, it would perhaps be best for me first to set out the background to this debate, as the shadow Minister did. This issue was first looked at by the previous Government, and we have returned to it as a new Government. The coalition Government inherited from their predecessor the largest budget deficit of any economy in Europe, with the single exception of Ireland. One pound in every four that we spend is borrowed. The gap stands at £149 billion for this financial year alone.

The previous Government had planned to raise extra revenue through the restriction of pensions relief for higher-rate earners. As we have heard, that approach was due to raise £4 billion to £5 billion a year by 2014-15. Given the appalling state of the public finances that we have been left as a new Government, it is something that we cannot ignore.

On Second Reading, my right hon. Friend the Chief Secretary set out our commitment to fairness. This is a progressive Budget that ensures that every part of society makes a contribution to deficit reduction, while protecting the most vulnerable, especially children in poverty and pensioners. The Budget has a number of measures to support pensioners, not least the triple lock guaranteeing an annual increase in the state pension in line with earnings, prices or a 2.5% increase, whichever is the higher.

[Ms Angela Eagle]

Will the hon. Lady give way?

[Justine Greening]

Let me make some progress.

That will benefit 11 million pensioners across the country. Through clause 6, which we will debate next, the Budget will enable individuals to make more flexible use of their pension savings.

Returning to clause 5, the Government have considered pension tax relief issues and believe that reform is a necessary part of their commitment to tackling the fiscal deficit. It is worth citing the views of Robert Chote, who heads up the Institute for Fiscal Studies, following the Budget. He spoke about this measure on 23 June:

“Perhaps the most welcome change was the decision to rethink the last Government’s complex, unfair and inefficient plans to limit pension contributions relief for high earners.”

That was what he thought about it.

[Ms Eagle]

On that point, does the Minister also agree with the IFS analysis of the Budget, which pointed out that it was not progressive, but regressive, and that the most progressive elements of it were those that she inherited from the previous Government’s Budget?

[Justine Greening]

Many people on the minimum wage will not view it as progressive for someone who can afford to pay upwards of £100,000 a year into a pension fund to be given a 20% marginal rate tax break. In fact, that was not the only problem. Having listened to the concerns of the pensions industry and employers, this Government have real reservations about the approach towards pensions tax relief that was adopted in the Finance Act 2010. We believe it could have unwelcome consequences for pension saving, bring significant complexity into the tax system and damage UK business and competitiveness. The director general of the CBI said of the previous Government’s measure, brought forward in the Finance Act 2010:

“This will have serious consequences—it will make it much harder for UK business to attract and retain global talent… In every way, it’s a bad move.”

In addition, a number of features of the approach adopted in the Finance Act 2010 were unfair. For example, it included a very complicated income test, which made it difficult for individuals and advisers to understand. It also made it difficult for individuals to plan, as they would not know their final income until the end of the tax year so they would not know until then whether or by how much they would be affected. The income test also created many perverse incentives, avoidance opportunities and anomalies. For example, different charges could arise, depending on whether an individual or their employer made the pension contributions.

Under the approach in the Finance Act 2010, individuals on the highest incomes, who are able to put in very large pension contributions—upwards of £100,000 to £200,000 in one year—would have continued to get pensions tax relief, as they would still have been able to get relief at the basic rate rather than the higher rate. That is worth up to £51,000 a year. Given our concern for fairness, we believe—

[Mr Kevan Jones]

Are you going to stop it?

[Justine Greening]

We are proposing a different approach, which would address that very measure. The decision for the hon. Gentleman to take tonight is on whether people who are able to pay £100,000 to £200,000 a year into their pension fund should be able to get tax relief at the basic rate. That is the question for him to answer.

[Ms Angela Eagle]

There are hints in the Red Book about the annual allowance taking the strain, so will the Minister tell us whether that is the only approach that is going to be looked at, or is she considering a range of different approaches? She is comparing a system that was legislated for and consulted on with a replacement about which the House has no real information. As I say, there is a hint in the Red Book, but nothing else. Will she help us focus on the comparison by doing us the courtesy of telling us what her Government are going to develop as an alternative?

16:15

[Justine Greening]

I was just about to come to that. One thing that we know right now about the existing plans is that if they came in from April 2011, they would curtail, but still give, basic rate tax relief to people who can afford to pay hundreds of thousands of pounds into a pension every year. Our alternative approach looks principally at significantly reducing the annual allowance to curtail that effect. We think that the annual tax relief available will potentially be restricted to less than half that available under the previous Government’s plan, significantly curtailing the ability of the super-rich to benefit from pensions tax relief. That alternative approach is supported by the pensions industry, including the National Association of Pension Funds, as well as employers and their representatives, including the CBI. The Government are keen to continue to engage with the pensions industry, employers and other interested parties to specify the level of the annual allowance, and other relevant design features.

Let me leave no uncertainty about our fiscal objectives. The Government are clear that a reduced annual allowance approach would have to raise no less revenue than the existing plans to restrict pensions tax relief in order to enable us to meet our commitment to deficit reduction. That is why we are not repealing the existing regime at this point, while we are finding a better way of achieving our objectives.

The hon. Member for Wallasey (Ms Eagle) asked for more detail. Our provisional analysis suggests that the appropriate level for the annual allowance could be in the region of £30,000 to £45,000 in order to deliver the necessary yield to the Treasury. However, the level required would be influenced by a number of policy design features in the revised regime. Once those have been decided, we can repeal the measures in the previous Government’s Finance Act 2010. Clause 5 therefore gives the Treasury a power to make an order repealing section 23 and schedule 2 in that Act.

Those measures, which are known as the high income excess relief charge, restrict pensions tax relief to the basic rate for high-income individuals, with effect from 6 April 2011. Let us be clear, however, that they still give basic rate tax relief to high-income individuals. The Government want to consult on a new approach. We want to discuss how best to design an alternative approach to make sure that it can operate fairly and effectively. The power to repeal is time-limited, because we recognise the need to resolve the design of the restriction of pensions tax relief as quickly as possible. We have already begun discussions with groups, which will continue through the summer.

Amendment 60 proposes that we should publish a report outlining the new arrangements and details of the yield implications and distributional impacts. I have some sympathy with the thrust of the amendment, but it will ultimately be unnecessary, because there will clearly be a chance for people to look over the draft legislation, and we will not repeal the high income excess relief charge until details of the alternative regime have been finalised and set out in public.

[Ms Angela Eagle]

I thank the Minister for giving way on this important point. Will she undertake to provide a distributional analysis so that we can compare directly the effects of the system that she wants to repeal, with the system that the Government finally settle on if she can find an alternative? That is the essence of the amendment, so her answer to this question is quite important.

[Justine Greening]

A whole range of analyses and impact statements will come out with the legislation. I suspect that, as my hon. Friend the Member for Chelsea and Fulham (Greg Hands) behind me is saying, any work that is done would give an answer that Opposition Members would not like, because it would show that we are no longer going to give basic rate tax relief to people who can afford to pay hundreds of thousands of pounds into a pension pot every year.

Let me address some of the issues that have been raised. I have set out the time frame within which we want to progress towards a better alternative to the current system. We all agree that, for pensions tax relief to remain affordable, we have to limit high levels of tax-privileged pensions saving, but we think that there is a better way of doing it than the one set out by the previous Government. We believe it is important to reduce the annual allowance to prevent people from saving £255,000 a year tax free.

The hon. Member for Wallasey mentioned instances of people suddenly being able to pay a large amount into a pension fund on a one-off basis. She was right to raise that matter, and we shall be looking at options for protecting basic rate taxpayers and supporting any hard cases caused by such one-off spikes in pension accruals. She also asked about the lifetime allowance being changed. We have not ruled that out, but it is obviously a key mechanism that sits alongside the annual allowance. We shall therefore have to look at it in the context of where we end up going with the annual allowance limit. I should say that all this is subject to being able to work with key stakeholders to get something that we believe we can rely on. That is why the provisions will give us the power to repeal that measure, if we can find a better way.

I particularly want to respond to the argument from Labour Members that our proposals would somehow give a tax break to the most well-off people in the country. Let us have a look at some of the figures involved. Of course, the minute I say that, I lose the relevant bit of paper. Ah, here it is. Under the terms of the Finance Act 2010, someone who is contributing £283,000 to their pension fund on an annual basis would have had a tax charge, net of pension relief, of £85,000. Someone making the same contribution to their pension pot under a potential annual allowance level of £35,000 would have a tax charge, net of relief, of £124,000. The reason for that is that they would get 20% tax relief on the income that they would otherwise have paid a much higher rate of tax on. That is why they would pay just under £40,000 a year more under our proposed scheme than they would have done under the previous Government’s arrangements.

I wonder whether those Labour MPs who are so concerned about the impact of tax policy on the better-off people in this country will go through the Lobby today and vote for a measure that means that people who can afford to pay £283,000 a year into their pension pot will pay £40,000 less tax than they would previously have done. I do not know what Labour Members think “good” looks like in relation to taxing better-off people, but I guess I will find out when we have a Division on this amendment shortly.

[Chris Leslie]

The hon. Lady is talking to us as though we were schoolchildren, but she will not publish her proposals. Will she now agree to place in the Library a copy of the table that she has in front of her straight away, or this evening, so that we can all share in this secret plan?

[Justine Greening]

I would have thought that the hon. Gentleman was so intelligent that he could do the maths himself. The calculation is pretty straightforward. It is a bit like doing a tax calculation where someone has an allowance and then a rate, and they apply it to the excess of the allowance that they are paying in extra.

[Matthew Hancock (West Suffolk) (Con)]

Does my hon. Friend remember a distributional table ever being placed in a Budget under the Labour Government?

[Justine Greening]

I have no recollection of that, but I will not take up more of the time of the Committee. The last figures that I set out probably spoke louder—

[Chris Leslie]

On a point of order, Mr Amess. Is it in order for the Minister to withhold information to which she has clearly referred in the debate from the rest of the Members engaging in the discussion?

[The Temporary Chair]

That was not a point of order.

[Justine Greening]

It seems that I’m damned if I give information and damned if I don’t. I was asked to provide some facts, and I made sure that I gave some facts and figures. Now that I have provided some to the Committee, apparently that is a bad thing to do too. I think the problem is that the figures I have just provided are not ones that Opposition Members want to confront. They are about to go through the Lobby and vote on people who can afford to put a couple of hundred thousand pounds into their pension pot paying more tax net of pension relief than less.

[Thomas Docherty]

I am grateful to the Minister for helping us to understand how much the Chancellor can afford to put into his pension fund. How can we confront figures that we do not get to see?

[Justine Greening]

I was asked for some figures and what the impact would be on the very richest. We can probably find in Hansard tomorrow that I have just provided the Committee with that information. That is probably the way in which debates are meant to work. Ministers have questions put to them and if they can answer them in some detail, they do. That is what I have done. I have set out in some detail why we are pursuing the clause. I hope that everyone realises that it is sensible and a pragmatic way to address the industry’s concerns. The industry faced a £1 billion bill for implementing excessively complicated and unfair tax changes on pensions tax relief. We hope that we can reach a conclusion with the industry and all stakeholders, but the key issue is to address the fiscal deficit, so any solution will have to bring in no less money than the mechanism intended by the previous Government.

[Ms Angela Eagle]

We have had a long discussion, so I will be brief. I appreciate the information, such as it was, that the Minister was able to put before us about the shape of the alternative scheme. It is a bit like shadow boxing when one tries to compare a scheme that has already been legislated for with one that has been only hinted at in the Red Book. That has been the problem with this debate.

I was candid about the issues and trade-offs that we had to go through to come up with the structure for which we legislated in the Finance Act 2010. I hope that the Minister and her colleagues will be as candid as they try to develop this other method. She said that she was sympathetic, but she is still resisting the amendment to put a report before the House that will contain distributional analyses and much more information about this alternative system. That is a great pity. We shall divide the Committee on that amendment as the Minister has not given us an undertaking to provide that information. I also want a separate vote on clause 5.

Question put, That the amendment be made.

16:28

Division 26

Ayes: 196

---

Labour: 186
Scottish National Party: 5
Plaid Cymru: 2
Green Party: 1
Democratic Unionist Party: 1

Noes: 310

---

Conservative: 264
Liberal Democrat: 45

Question put, That the clause stand part of the Bill.

16:42

Division 27

Ayes: 310

---

Conservative: 264
Liberal Democrat: 45

Noes: 198

---

Labour: 187
Scottish National Party: 5
Plaid Cymru: 2
Democratic Unionist Party: 2
Green Party: 1

Clause 5 ordered to stand part of the Bill.

Clause 6

Treatment of persons at age 75

[Stewart Hosie]

I beg to move amendment 16, page 3, line 12, leave out ‘22 June 2010’ and insert ‘a date set by the Secretary of State by regulation.’.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to discuss amendment 17, in schedule 3, page 19, line 38, leave out ‘22 June 2010’ and insert ‘a date set by the Secretary of State by regulation.’.

Clause stand part.

Schedule 3 stand part.

[Stewart Hosie]

I do not intend to delay the Committee. By and large, I am very supportive of clause 6. The two-year extension for people reaching the age of 75 in order to allow them to buy an annuity when it is most effective for them is a good thing to do. The clause seems to be pretty well drafted and the description of it is extremely good. I am pleased about the protection in paragraph 8(2) of schedule 3, which provides that if a member dies before a year has passed since their 75th birthday, and at the date of death there are still funds held for the purposes of the arrangement that have not been designated as available to pay an unsecured pension, not paid as a lump sum, and not applied towards the provision of a scheme pension or a dependent’s scheme pension, those funds are treated as though they had been designated as available for the payment of an unsecured pension and will then be taxed on death at a rate of only 35%. That makes sense.

However, I am aware, through a constituent of my hon. Friend the Member for Angus (Mr Weir), that there are a small number of individuals who have already reached 75, or will hit 75 before 22 June, and who did not buy an annuity because it was not worth it or not effective. I want to describe the position of that person and then see what help the Minister might be able to provide, or hear her explanation of how the clause might assist.

As the rates for annuities were very low, this gentleman did not take up one on reaching 75 in 2007. Instead, he chose a scheme pension that allowed him, subject to pension regulation supervision—a specialist firm did that for him—to continue to manage his pension fund for a period of 10 years and take the actuarially calculated levels of income from it. That was very sensible and prudent. However, the downside is that on his death, if any of that fund is left, it will be subject to inheritance tax at a rate of 80% before it passes to a family member of his choice.

[Mr Mike Weir (Angus) (SNP)]

Indeed it was a constituent of mine who brought the matter to our attention. Does my hon. Friend think that a way round might have been for the clause to allow anyone to take the extra two years if they were to reach age 75 or were already in that position? I cannot imagine that the numbers affected would be huge, but it would have got round this particular problem.

[Stewart Hosie]

It may have got round the problem. That is one of the questions that I shall put to the Minister.

If the 80% IHT rate is correct, as I believe it is, the situation seems dreadfully unfair, although I recognise that it occurs because of the tax benefits of the pension saving over a person’s lifetime. Of course, people cannot benefit from the same tax twice; I appreciate that. However, I suspect that of the people over 75 who had the means to purchase an annuity but did not, very few would want to do so now. We may be talking about some very wealthy people who would always manage their own pension anyway. I welcome the protection for those who hit the age of 75 on 22 June or thereafter, but people aged between 75 and 77 will feel extremely hard done by if they just miss that cut-off date. There are also those who were already 75 a year or two before and chose not to buy an annuity but are managing their pension provision.

This is a matter of natural justice and fairness. I imagine that the numbers of people who are in this position and would want to buy an annuity are very small, so I am looking to see what protection there might be in the Bill. We may reach a situation whereby there is simply a cut-off, so that even if someone reached the age of 75 on 21 June 2010 and found it not worth buying an annuity, they would no longer be able to take advantage of the two-year gap, which would be a sensible thing to do.

I hope that the Minister can give us some comfort as regards the small number of people, all of whom are beyond the age of 75, who will pay 80% IHT on any remaining funds at the time of their death, compared with those who, within the provisions of the clause, will pay only 35% if they die at that time. I would like an assurance that the Bill and the clause will help that small number of people too.

17:00

[Justine Greening]

I am grateful to the hon. Member for Dundee East (Stewart Hosie) for his questions, and it is probably wise if I take this opportunity to set out to the Committee the background of clause 6 and address the issues that he raised. I am sure that he will be interested in the consultation document that has been launched today on a number of them.

The Chancellor announced in the Budget that the Government would end the effective requirement to purchase an annuity by age 75 with effect from April 2011. The reason why we want to do that is that it will provide greater flexibility and choice for the individuals affected. In considering the hon. Gentleman’s amendments, it is important for the Committee to understand why we are making that change and how we are going about it.

A consultation on the detail of the changes was launched earlier today by my hon. Friend the Financial Secretary, and our intention is to introduce any changes from April 2011. As set out in the consultation document, the Government will be guided by the following principles in implementing the changes: first, that the purpose of tax-relieved pension savings is to provide an income in retirement; secondly, that any changes to the pension tax rules should not incur Exchequer cost or create any opportunities for tax avoidance; thirdly, that individuals should have the flexibility to decide when and how best to turn their pension savings into a retirement income, provided that they have sufficient income to avoid exhausting their savings prematurely and falling back on the state; fourthly, that pension benefits taken during an individual’s lifetime should be taxed at income tax rates, with the tax-free pension commencement lump sum continuing to be available; and fifthly, that on death, as the hon. Gentleman mentioned, the pension savings that have been accumulated with tax relief should be taxed at an appropriate rate to recover past relief provided, unless they are used to provide a pension for a dependant. Those principles will ensure that the new rules offer maximum flexibility to pension savers, while avoiding undue complexity or incurring a cost to the Exchequer.

The proposals set out in the consultation document will create additional flexibility for anyone saving into a defined contribution pension. That new flexibility means that individuals will be able to decide for themselves whether and when to purchase an annuity. It will also allow them to leave their pension fund invested in an income draw-down arrangement beyond the age of 75, and to take benefits from their pension fund later than that age if they wish. In addition, individuals who can demonstrate that they have secured a minimum income will be free to draw down unlimited lump sums. The changes will also allow the pensions and annuities industry to consider more innovative products, giving consumers greater choice.

While the new rules are being finalised, it is important that individuals who are about to turn 75, and who have not yet made a decision about what to do with their pension savings, are not disadvantaged in the meantime. The changes set out in schedule 3 are the minimum necessary to enable those reaching 75 on or after Budget day to defer the decision on what to do with their pension savings.

The Bill achieves that by providing for the pension tax rules that previously applied to draw-down arrangements only up to age 75 to continue to apply up to an individual’s 77th birthday. That means that the higher inheritance tax charges that apply specifically to pension scheme members aged 75 or over will not apply to individuals who are about to turn 75, and who have not yet made a decision on what to do with their pension. They will not now have to make a decision until they reach 77, and in the meantime we will have worked through the consultation process. Clause 6 and schedule 3 will therefore ensure that they need make no decision until after new rules are finalised next year. To do otherwise would be unfair and confusing, and changing the rules retrospectively would add unnecessary complexity.

[Mr Weir]

I understand the Economic Secretary’s point and I am closely following her argument. Does she accept that many people did not get annuities in the past two or three years because the economic position meant that it was simply not a good time to buy them? Those people are effectively being penalised. Would it not be fair, as I suggested in an earlier intervention, to say that everyone had two years from now, while the consultation goes ahead and changes are being made, to consider their position? Perhaps some people will wish to continue as they are, but at least they would have the option, which is rightly being given to people who are approaching 75.

[Justine Greening]

I thank the hon. Gentleman for that intervention. I will set out our overall approach to the issue that he raised. In every individual case, there are specifics. I was not aware of the case of the individual whom he mentioned, and I would be happy to give him a more specific answer if he gives me details. However, in principle, he raises a difficult issue. It is doubtless hard for people who reached their 75th birthday before we got to Budget day when we announced the proposed changes. We had pressed the previous Government to take action earlier, but it was left to us, on coming into government, to start to take the steps that we all agree are important. We do not agree with making retrospective legislation, except in the most egregious cases. As he said, the provision affects only a few hundred people.

The inheritance tax charge of 80% would apply to estates over the inheritance tax threshold of £360,000 a year. On the face of it, I cannot give much comfort to the constituent of the hon. Member for Angus (Mr Weir). We are trying to improve the position of those who reached 75 on or after Budget day, but I have set out the basic principles, and the details of the constituent’s case may or may not fit them. If the hon. Gentleman provides the exact details, I will give him a more exact answer. I hope that I have provided some background and that we can find a way forward to clarify and resolve the specific issue.

[Stewart Hosie]

I thank the Economic Secretary for her response. Clearly, the way forward for people reaching 75 is sensible. The two-year deferral until the consultation is complete is right. It recognises the problem and ensures that no one else falls through the cracks between now and the end of the consultation. I am slightly disappointed that no hope was offered that the consultation could allow a slightly retrospective element to those very few people who have become 75 in the past few years, did not take an annuity and are managing their own funds. I will not press the amendment, but I will have another think about it before we reach Report next week, when I may revert to it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Ms Angela Eagle]

I beg to move amendment 61, page 3, line 12, at end add—

‘(2) Schedule 3 shall not have effect unless the Chancellor of the Exchequer has laid before the House of Commons a report on the implications of the abolition of compulsory annuitisation of pensions, including—

(a) the revenue implications of abolition; and

(b) a distributional analysis showing who would benefit from abolition.’.

The amendment would mean that the age at which compulsory annuitisation is required could not rise, as the Government announced in the Budget, from the current 75 to 77 until the Chancellor lays before the House a report setting out the implications of abolishing the compulsory annuitisation of pensions savings. That would include the revenue implications and a distributional analysis of who would benefit from the abolition, in the interests of transparency. It is important to explore in more detail the Government’s precise thinking and intentions.

Before I do that, I shall comment on the sudden appearance this morning of a written ministerial statement, to which the Economic Secretary referred, on the matter. It appeared without the courtesy of any warning before our debate on the subject.

I spent some time on the Treasury website trying to avoid the increasingly odious comments on the “spending challenge website”, which continues to publish offensive and outrageous suggestions for savings, such as sterilising the poor, reopening the workhouses and the forced repatriation of immigrants. It appears to be completely unmoderated by the Treasury, and I hope that the Economic Secretary will convey my strong view that something should be done about that thing on the Treasury website.

What I could not find on the Treasury website, right up to the point when I came into the Chamber for today’s debate, was a copy of the consultation document that the written ministerial statement said would be there. I have a copy of the complete list of Treasury consultation documents that was on the website at around 12.30 pm. It featured the bank levy consultation, but not the consultation alluded to in the written statement. I therefore had to go the Library and have it printed so that I had the chance to look at it before I dashed into the Chamber, but the Minister has been waving it about. Will it be the usual behaviour of those on the Treasury Bench to give Members of the House so little time to look at a 53-page document? There was no advance warning, and the document was unavailable on the Treasury website, even though the written ministerial statement said it would be there. The Minister should get her Department to do a lot better than it has done today. That the document was unavailable anywhere other than via a photocopying machine in the Library at the last minute is a discourtesy to the House.

When I had a look at the consultation as I sat on the Front Bench while other debates were going on, the first thing I noticed was that the consultation will be a mere eight weeks long. It starts today and will end on 10 September, which is four weeks shorter than is recommended as good practice in the code on consultation, the second criterion of which states:

“Consultations should normally last for at least 12 weeks with consideration given to longer timescales where feasible and sensible”.

The consultation is an eight-week, rushed consultation that includes the entirety of the August holiday, when many of the people who have expertise on this matter will be sunning themselves in very much nicer climes than most of us could probably afford to visit, before they come back to pronounce. That is a very peculiar way to consult on such an important matter.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Does my hon. Friend also find it a little strange that there is such a short consultation period when we are talking about a two-year extension? That seems contradictory.

[Ms Eagle]

I too wanted to ask the Minister this: what on earth is the rush about? One thing about annuitising and pension rules is that she has a little run-in time to consider—at some length—the implications of her proposals. I do not understand why there was such short notice and why the consultation is so rushed. I am forming an impression that the Government have already decided what they are going to do and that the consultation is a sham. If it is, they ought to have the decency to tell us what they have decided and not to consult at all. I would not have thought that the many experts who will be sunning themselves over the August holidays will thank the Government very much for giving them such a short time to respond.

The foreword of the consultation document states:

“The Government wants to foster a new culture of saving in the UK.”

We would all agree with that, and that a rebalancing towards saving is necessary. Therefore, it is important to prioritise large numbers of people saving appropriately. I had a look to see what the Government have done so far to encourage saving, particularly in pensions, which is what annuities are all about. Will the Minister explain quite how reducing public and private pensions by changing their definitions from RPI to CPI helps to increase pension saving? Yesterday, the Daily Mail and various other experts said that that is a raid on people’s pension expectations of more than £100 billion in the private sector, an amount that will accumulate year after year. Can the Minister explain how that encourages pension saving? Will she confirm that the impact assessment in this consultation lets the cat out of the bag when it comes to changing annuitisation rules? We have no particular problem, and certainly no philosophical problem with shifting the age of annuitisation from 75 to 77. Longevity has increased and the last rules—and the age of 75—were set in 1956. Indeed, annuitisation was first made compulsory in the Finance Bill of 1921, which was slightly before my time and I know that it was also before the Minister’s time.

17:15

I am reassured by what the Minister says about what might be called red lines in the Treasury’s view of the consultation. The first is that annuities should continue in order to provide an income in retirement rather than as a tax-privileged method of saving large amounts of money that can then be taken as a lump sum over and above the 25% that can already be taken tax-free. Others are that there should be no Exchequer costs and no tax-avoidance activities. The latter might be difficult to sustain if the Minister intends to make changes that introduce a minimum income requirement. Interesting attempts have been made to define a minimum income requirement to allow someone to take complete usage—with appropriate tax paid, I hope—of the rest of the money in their pension pot. I know that the Government are consulting on that point, but it is not going to be an easy thing to decide.

I notice also from the impact assessment that although the annuities market last year saw 445,000 people annuitise up to £11 billion of funds so that they could take an income until they required it no longer, the estimate of how many individuals will actually be affected by this change is a mere 8,000.

[Bill Esterson (Sefton Central) (Lab)]

At a time when we need to encourage more people to make pension provision, does my hon. Friend think that these proposals will help? My concern is that having a minimum might reduce the numbers of people providing for their retirement rather than increase them.

[Ms Eagle]

My hon. Friend raises a reasonable point. Changes in this area have to be made very carefully to avoid the law of unintended consequences, especially when large amounts of tax-privileged income are at stake. The Minister knows that, which is why she said that there would be no increase in tax-avoidance opportunities.

[Mr Redwood]

Can the hon. Lady remind the House how many private sector final salary pension schemes actually closed as a result of the taxes and regulations introduced by the last Government?

[Ms Eagle]

We would have to have a long debate about a range of issues to answer that, but I am happy to defend our record. The closure of defined-benefit schemes took place for a range of reasons and the closures began in earnest when I was still at school, so I do not take personal responsibility for that.

When we look at the impact assessment, we see that the changes will affect a tiny minority at the very top—a mere 8,000 people on the Government’s estimates, out of 445,000 people who annuitise every year. They will affect only those who can afford to live without touching their pension pot until fully 10 years after retiring. We know that two thirds of people take their annuity upon retirement and that only a much smaller number of people last beyond 70, so the flexibilities that the Government are looking for will be required by only a tiny number of very rich people. The Minister therefore needs to justify why this is a priority and why we need a rushed consultation of only eight weeks over the summer to bring it about.

[Mr Redwood]

I will be brief, Mr Evans, because I believe that some Members have other things to do later on. I also remind the House that in the Register of Members’ Financial Interests I have explained that I offer business advice to a couple of companies.

I would like to briefly praise the Minister and her team for their proposal. For many years, the Conservatives while in opposition urged the then Labour Government to allow people a bit more flexibility and freedom with their money in retirement. Even now, after the election defeat, the party does not get it. This was not the main reason it lost the election, but it was one of many things where it misread the public mood. People want more freedom and flexibility over their own resources and more control over their own lives, but Labour was always trying to stop them. This is a small but important move, and I think we might find that it affects rather more people than the hon. Lady says—

[Ms Eagle]

It is in the Government document.

[Mr Redwood]

The hon. Lady is protesting. I know it is in the Government document, but I am suggesting that the Government might be wrong and might have underestimated the number—it is extremely difficult to know how many people might take advantage of the provision. I also think it will not necessarily be only rich people who are affected. I know that Labour never wants any successful people to make money and be able to spend their money sensibly.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

It did a really good job stopping them.

[Mr Redwood]

Indeed, it tried to stop them on many occasions. If we do too much of that, however, we have a poorer country, a smaller tax base and all the rest of it. It is a pity that the Labour party still has such a downer on success, prudence and savers, but it might be surprised—hopefully, pleasantly surprised—in due course to find that people on more modest means take advantage of this flexibility as well. We no longer live in a world in which everybody retires at 65 and does no more work. I see around my constituency many people taking on paid work into their late 60s and early 70s, either because they want to or, in some cases, because they have to in order to supplement their resources. Why should we debar them from this flexibility any more than richer people, if they have savings?

[Bill Esterson]

The right hon. Gentleman mentioned the record of the last Labour Government on pensions, but what about the record of the previous Conservative Government when it came to the mis-selling of pensions? I trust he would accept that that was a serious problem.

[The First Deputy Chairman]

Order. That is much wider than the amendment.

[Mr Redwood]

I would love to deal with that point, but I shall take your advice, Mr Evans. The real sin was the tax and regulatory raid on pensions under the last Government, which led to the wholesale closures of final salary schemes, and as a result of which most people starting out in work today have no access to a final salary work-based scheme in the way that their parents’ generation did. That is a great tragedy. However, this provision is a small move in the right direction, so I hope that the House will warmly welcome it. Well done to the Minister.

[Justine Greening]

I thank my right hon. Friend for his kind words. This provision is a step forward. As he said, it might be a small one, but it is an important one that will open up a flexibility that many whom we want to encourage to start saving for a pension will value, which is why it is important that we take the time to make an early start on this matter.

I want to respond to a couple of the shadow Minister’s points, including the one about the consultation document not being published in good time. This clause allows us to engage in a consultation. It was not necessary to launch the consultation today, but as it was it was launched at 12.30 pm, and by the time we got to the clause it was 5 o’clock—several hours after the document became available—which has meant that we have had a more informed debate today.

[Ms Eagle]

I looked at the written ministerial statement at about quarter to 11 this morning, and it said that the document was available on the Treasury website, but it was not there.

[Justine Greening]

We are getting into the same sort of argument that we had in the previous debate, where if we had put the consultation document up and had not had a sentence on an earlier webpage saying that it was there, we would have been accused of hiding it away. I am afraid that we have to do one before the other, and clearly in this case we decided to put out the statement that the consultation was going up on the website, and then we put it there, which is where it has been since 12.30 pm.

Whatever the bluster from the Opposition Benches, it cannot mask the fact that we are taking a positive step forward on pensions today. We have launched what I think will be a landmark consultation. Clause 6 and schedule 3 will give us the time to get that consultation right over the summer and then bring forward legislation in the forthcoming Finance Bill to ensure that people have more flexibility in dealing with their pensions, because ultimately it is their money, which they have put aside for their retirement. We want them to be able to deal with the pot that they have built up in a way that suits them, rather than in a way that suits the country.

Interestingly, we had a brief discussion about the fact that 75 has been the statutory age for some time. It was first agreed in 1976, which is ironic, given the obviously parallels between Britain then and now, with the Labour Government then having to be bailed out by the International Monetary Fund and going on to leave a desolated economy. We are ensuring that we have sustainable finances in our country over the coming years, so hopefully we will reach a different end point from that of that Labour Government.

I very much welcome the fact that the shadow Minister nevertheless supports the consultation going ahead, and I can assure her that we are going to get on with it. We believe that eight weeks is plenty of time to get a response, given that the issue is one that people have been pressing Governments past—and now present—to address. We are a new Government, so we are getting on with adopting a new and improved approach to annuities and pensions, as we can see from today’s debate. I therefore very much hope that the hon. Lady will withdraw her amendment, so that the clause and the consultation can improve the legislation, creating more flexibility in pension law for the people who so badly need it.

[Ms Eagle]

I am not really that satisfied with the answers that the hon. Lady has given, as she will not be surprised to hear, after that brief reprise of the 1970s. My information is that the Finance Act 1921 introduced compulsory annuitisation and that the current age of 75 was introduced in 1956, which was a Conservative time, not a Labour time.

Regardless of the Minister’s point scoring, however, it is important that we take an appropriate amount of time to see how any changes to the annuitisation regime might work in practice. The Opposition have no objection to the idea of having a higher age. However, there is some scepticism about the practicality of having a minimum retirement income and how it might be worked out, although that is part of the consultation, which no doubt we will now all be struggling with over August. It is a shame that the information was not available in a more timely fashion, so that we could have done more preparation for this debate. Because the amendment seeks more information and because the Government seem to be rushing ahead so precipitously, we would like to press the amendment to a vote.

Question put, That the amendment be made.

17:29

Division 28

Ayes: 187

---

Labour: 177
Scottish National Party: 5
Plaid Cymru: 2
Green Party: 1
Democratic Unionist Party: 1

Noes: 313

---

Conservative: 263
Liberal Democrat: 39

Clause 6 ordered to stand part of the Bill.

Schedule 3 agreed to.

Clause 7

Expenses paid to MPs etc

Question proposed, That the clause stand part of the Bill.

[Stephen Timms (East Ham) (Lab)]

Schedule 4 provides for the exemption from income tax of expenses paid or reimbursed to MPs, following the introduction under the Parliamentary Standards Act 2009 of the popular new scheme for paying the expenses of MPs administered by the Independent Parliamentary Standards Authority. I understand that that will broadly have the effect of maintaining—[Interruption.]

[The First Deputy Chairman]

Order. Far too many conversations are taking place in the Chamber. Will those who are leaving please do so quietly?

[Stephen Timms]

I appreciate that the arrangements will broadly have the effect of maintaining the tax treatment that applied to similar expenses paid under the previous arrangements. Tax treatment of MPs’ expenses used to be dealt with by specific legislation or long-standing extra-statutory concessions. As hon. Members will know, a long-term project has been undertaken following the judgment in the Wilkinson case of 2006 to place all the statutory concessions on a proper legislative basis. Can the Minister confirm that the previous concession, which I think is numbered A.54—Members of Parliament: accommodation, allowances and expenses—has, with this legislation, been withdrawn, and whether any of the other extra-statutory concessions outstanding are affected by the Bill?

[Robert Flello]

My right hon. Friend said that schedule 4 was broadly neutral in terms of income tax. Has he noted paragraph 1(4) on loans for deposits payable on rented accommodation—perhaps our constituency offices or flats that we need in London because of the ridiculous IPSA rules on staying in hotels? It is common practice for landlords to charge a deposit on flats, something that we have to pay only because we are here representing our constituents. Has my right hon. Friend noticed that there is a tax implication for us in that?

[Stephen Timms]

I confess that when I read the legislation that point did not strike me, but it has been raised and I am grateful to my hon. Friend for putting it on the record.

[Stephen Williams (Bristol West) (LD)]

To be helpful, a loan is not subject to income tax whereas if the loan was interest free the difference between the interest rate that someone might be charged and what they are not charged would be.

[Stephen Timms]

I know that the hon. Gentleman is a chartered tax specialist, as was acknowledged at a reception last night, so I defer to his understanding of these matters.

The Bill is different from the IPSA scheme on a couple of points. The IPSA rules say that when Members are required to be at the House of Commons after 11 pm, non-London areas MPs who claim the London area living payment may claim for the cost of an overnight stay in a hotel, subject to an upper limit. Any MP, including London MPs like me and the Minister, may claim for the cost of an overnight stay in a hotel if it would not be reasonable to return to any residence, where they are required to be at the House of Commons because the House is sitting beyond 1 am. I do not understand the different tax treatment of those two situations. Under new section 292, liability for income tax is avoided only if the House sits beyond 1 am. That is fine for London MPs like me. If I made a claim for a hotel stay under the IPSA rules, the new section would exempt me from income tax on that payment. However, it seems a bit unfair to non-London MPs, in that the IPSA scheme allows them to claim for the cost of an overnight stay if the House sits after 11 pm, but the new section gives them an income tax liability on that claim unless the House sits after 1 am. I wonder why the rules have been drawn up in that way.

A second area where I am puzzled relates to travel expenses for children. I have no children, so I hasten to say that this has nothing to do with my personal arrangements. The IPSA scheme provides for travel and subsistence expenses in respect of travel for dependent children aged under 16, limited to 30 single journeys per child between the Member’s London area residence and the constituency residence in each year. The new section would exempt from income tax the cost of journeys by spouses or partners but not—as far as I can see—the cost of journeys by children. Why is tax payable on those expenses but not on the others?

[Justine Greening]

I shall briefly talk about what we seek to achieve with clause 7 and schedule 4, and then try to answer the specific issues raised by the right hon. Gentleman.

Clause 7 introduces schedule 4, which provides for the income tax treatment of certain expenses paid or reimbursed to Members of Parliament under the new MP expenses scheme introduced and administered by the Independent Parliamentary Standards Authority. For the main part, the changes introduced by the provisions are necessary to reflect the fact that expenses are no longer paid under a resolution of the House but instead are paid by IPSA under the authority of the Parliamentary Standards Act 2009.

As we are all aware, expenses paid to Members have come under close scrutiny over the past year, not just by the media and the public, but also by IPSA. In developing its new scheme, IPSA has taken account of the requirement of MPs to perform their duties both in their constituencies and in Westminster. It has decided that the expenses covered by the exemptions introduced by the schedule are necessary for the performance of an MP’s parliamentary functions.

The key provisions will broadly maintain the long-standing statutory exemptions for overnight accommodation and EU travel expenses that were introduced in recognition of the particular role of MPs. The provisions will codify elements of concessionary tax treatments that, because MPs are required to carry out their duties both in their constituencies and in the House, have applied for many years to certain UK travel expenses paid to MPs. Additionally, they will reflect IPSA’s decision to continue to reimburse some UK travel for MPs’ spouses and partners, albeit in more restricted circumstances. The schedule therefore puts the previous concessionary treatment on a statutory footing to allow those payments to continue to be made without tax being due. Finally, the provisions reflect IPSA’s decision to deal with payments for evening meals separately from general expenditure connected to overnight accommodation, and the schedule now introduces a specific exemption for the costs of meals reimbursed under IPSA’s scheme. Again, that maintains the previous tax treatment.

The right hon. Gentleman raised two issues—about late-night sittings and accommodation. He is right: there is indeed a difference. The IPSA and tax treatment is different for sittings that end after 1 am and for sittings that end between 11 pm and 1 am. For sittings that run after 11 o’clock, there is tax exemption for expenses incurred for overnight accommodation, because that is deemed by IPSA a necessary expense incurred in the MP role.

Non-London MPs who decide to take the London allowance—the London expense regime—are able to charge overnight accommodation if the House sits after 11 pm, as the right hon. Gentleman pointed out. However, that charge is not tax-exempt; it is deemed subject to normal tax treatment for any employee. A normal employee would not be able to claim a tax exemption if they chose to stay in a hotel because they had been working late. The rules for the House sitting past 1 o’clock are agreed with IPSA as necessary for the fulfilment of the MP role, so are tax-exempt. Before that, although MPs from outside the London area can get reimbursement for overnight costs, they are not tax-exempt. I hope that I have clarified the situation, even though some people might not agree that the tax treatment set out in the clause and schedule 4 is fair.

Children’s travel was not tax exempt under the previous scheme, and clause 7 and schedule 4 merely maintain the same tax treatment of children. However, the right hon. Gentleman was right to point out that the tax exemption for spouses will continue, albeit with some more restrictive conditions. Again, I hope that I have clarified the position.

As IPSA continues to develop its expenses regime over the coming months and perhaps years, we will obviously have to keep an eye on any changes and ensure that we determine whether we need to reflect them in tax law.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Schedule 4 agreed to.

Clause 8

Amounts not fully recognised for accounting purposes

Question proposed, That the clause stand part of the Bill.

[Stephen Timms]

Clause 8 and schedule 5 amend the corporation tax rules on loan relationships and derivative contracts that apply to amounts not fully recognised for accounting purposes. This is a good example of the way in which the obligations that the previous Government introduced in 2004 on the disclosure of tax avoidance schemes are bearing fruit by revealing forms of avoidance that represent loopholes that need to be closed, which is what the clause does. The intention behind the clause was announced by the previous Government at the time of the March Budget. The provision is tightly targeted. I am not aware of any adverse reaction, and I certainly support the clause, but will the Exchequer Secretary give us his assessment of how much tax avoidance will be prevented by blocking the loophole?

I was pleased that the coalition agreement included the commitment:

“We will make every effort to tackle tax avoidance”.

Clauses 8 and 9 are the first concrete signs of that commitment being delivered. However, will the Exchequer Secretary tell us a little more about how those efforts will be pursued and what is meant in the coalition agreement by the commitment to

“detailed development of Liberal Democrat proposals”?

If I understand correctly, Liberal Democrat proposals in this area include: changing the taxation of benefits in kind; increasing the proportion of HMRC time spent on income tax evasion; a new general anti-avoidance provision for corporation tax, with companies paying a commercial rate for HMRC pre-clearance—I imagine that that is being subsumed in the wider discussion about a general anti-avoidance rule; and legislating to establish the beneficial ownership of property that is sold to prevent the avoidance of stamp duty land tax. Will the Exchequer Secretary confirm what the coalition agreement meant? Are all those initiatives—

[The First Deputy Chairman]

Order. I think that the right hon. Gentleman is going much wider than the provision before us. Will he confine his remarks to what is contained in clause 8?

[Stephen Timms]

Of course I will, Mr Evans.

I accept that there will always be areas in which there is legitimate uncertainty among business and their representatives about how the law applies. However, I am pleased that clause 8 and schedule 5 are being brought forward to block one more unwanted loophole.

17:59

[Mr Gauke]

I thank the shadow Minister for his words of support. It would be somewhat surprising if he did not support the measure, as I am sure that he would have introduced it had he been in our position.

Clause 8 relates to corporation tax avoidance involving de-recognition. The corporation tax rules on financial instruments broadly follow the treatment of profits and losses recognised in accounts drawn up under generally accepted accounting practice. That applies to most financial instruments, including loans and derivatives. However, in certain cases where the terms of an asset and a liability are closely related, accounting practice may mean that neither the income nor the expenses arising on them are included in the accounts. For example, a company may have issued preference shares on which the dividends payable equal the interest received. As the company is economically flat in such cases, accounting practice allows it to de-recognise both the income and expenses. However, for tax purposes, that gives rise to a mismatch. The income is taxable, while the dividends are not deductible.

Unfortunately, avoidance schemes have continually sought to exploit the practice of de-recognising income. In 2006, legislation was introduced to block such avoidance by overriding the de-recognition for tax purposes. It required that where certain conditions are met, taxable profits are to be computed as if there had been no de-recognition in the accounts. It was necessary to amend the original legislation in 2007 and 2009 to block new schemes. Previous action has protected something like between £100 million and £150 million. To answer the shadow Minister’s question, it is anticipated that the measures in the Bill will protect £150 million per annum.

It is worth making the point that in addition to blocking the latest schemes, the Government intend to remove the opportunity for new abuse. We will amend the anti-avoidance rule in question so that it works in a more wide-ranging manner. Such a rule will make it unnecessary repeatedly to block similar versions of what is essentially the same scheme, and will allow us to address the matter more completely. HMRC will issue a technical note on the subject shortly, with a view to us making the amendments in the Finance Bill 2011. Any such changes would be effective from a date to be announced in the autumn, following consultation on the details of the proposals.

I note your earlier guidance, Mr Evans, and I will not go into detail on the points that the shadow Minister made, but we continue to look at the issue, and the Government take anti-avoidance measures very seriously.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Schedule 5 agreed to.

Clauses 9 to 11 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Bill to be read the Third time tomorrow.

Business without Debate

Thursday 15th July 2010 Commons Chamber

Adjournment (Summer)

Thursday 15th July 2010 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 25)

That this House, at its rising on Tuesday 27 July 2010, do adjourn till Monday 6 September 2010.—(Mr Newmark.)

Question agreed to.

Adjournment (Conference Recess)

Thursday 15th July 2010 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 25)

That this House, at its rising on Thursday 16 September 2010, do adjourn till Monday 11 October 2010.—(Mr Newmark.)

Question agreed to.

Business of the House (Academies Bill [Lords])

Thursday 15th July 2010 Commons Chamber

Ordered,

That, in respect of the Academies Bill [Lords], notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a second time.—(Mr Newmark.)

Business of the House (20 July)

Thursday 15th July 2010 Commons Chamber

Ordered,

That, at the sitting on Tuesday 20 July, notwithstanding Standing Order No. 14 (Arrangement of public business), the backbench business determined by the Backbench Business Committee may be entered upon at any hour, may then be proceeded with, though opposed, for three hours, and shall then lapse if not previously disposed of; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Mr Newmark.)

Sittings of the House (27 July)

Thursday 15th July 2010 Commons Chamber

Motion made,

That, on Tuesday 27 July,

(1) the House shall meet at 10.30 am;

(2) references to specific times in the Standing Orders of this House shall apply as if that day were a Thursday;

(3) the sitting in Westminster Hall shall begin at 12.30 pm and continue until 5.00pm; and

(4) the Speaker shall not adjourn the House until any message from the Lords has been received, any Committee to draw up Reasons which has been appointed at that sitting has reported, and he has notified the Royal Assent to Acts agreed upon by both Houses.—(Mr Newmark)

[Hon. Members]

Object.

Delegated Legislation

Thursday 15th July 2010 Commons Chamber

Motion made,

That the Motion in the name of Sir George Young relating to the Electoral Commission shall be treated as if it related to an instrument subject to the provisions of Standing Order No. 118 (Delegated Legislation Committees) in respect of which notice of a motion has been given that the instrument be approved.—(Mr Newmark.)

[Hon. Members]

Object.

Business of the House (Finance Bill)

Thursday 15th July 2010 Commons Chamber

Resolved,

That, notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions, more than one stage of the Finance Bill may be taken at any sitting of the House.—(Mr Newmark.)

Decent Homes (Hillingdon)

Thursday 15th July 2010 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Newmark.)

18:04

[John McDonnell (Hayes and Harlington) (Lab)]

In this Chamber we debate the main issues facing our country and the world, and we pass laws that affect the lives of millions, but as Members we also retain the centuries-old right and tradition, stemming from the earliest days of Parliament, to be able to raise the grievance of an individual constituent when all other routes appear to have been exhausted and the constituent considers that justice has not been done. Often the airing of an individual case can throw light on a more general malaise that needs to be addressed, so in that tradition I wish to raise today the case of one of my constituents, Mr Bernard Fagan, and the performance of Hillingdon council, its arm’s length housing management company, Hillingdon Homes, and its contractors and sub-contractors in the delivery of the previous Government’s decent homes programme.

The decent homes programme was a well intentioned attempt to bring all council accommodation up to a decent standard and modernise the housing stock by installing new kitchens, toilets, bathrooms, doors and windows and making other basic improvements. The programme was a welcome and desperately needed fillip for council tenants after years of neglect and lack of investment by past Governments. The overall cost of the programme was originally estimated to be £20 billion.

Unfortunately, because of a lack of confidence in local councils to deliver a programme of that scale successfully, the previous Government attached a number of conditions to the investment programme. If a local council wanted to receive a share of the capital investment, it was required either to transfer its stock to a housing association or other landlord, or to establish an arm’s length management organisation, or ALMO, and transfer its housing stock to that new body. The ALMO would undertake the day-to-day management of tenants’ homes and the area’s decent homes programme.

The local council and its tenants had to agree to the stock being transferred to the ALMO, and refusal to transfer would result, in effect, in their losing access to the decent homes investment programme for their area. In my constituency, despite many anxieties, uncertainties and worries, tenants were forced over a barrel to agree to the transfer; otherwise they would have largely had to forgo the opportunity to receive new kitchens, bathrooms and other improvements to their homes.

Despite some limited acknowledgement of the need for greater tenant involvement in the management of their homes, the setting up of the ALMO largely resulted in a transfer of staff from the council’s existing housing department, the production of a new logo, a wage increase for the senior officers of the new body and, I have to say, little else to distinguish the operation of the ALMO from that of the council’s housing department.

In my constituency, the new ALMO, Hillingdon Homes, was allocated about £60 million to undertake the local decent homes programme, and selected one of my local tower block estates, on Avondale drive in Hayes, for inclusion in the programme. I have worked closely with local residents and tenants associations in my town—in fact, I have set up many of them—and on the Avondale estate the residents association is chaired by my constituent, Mr Bernard Fagan. When the local decent homes programme commenced in 2005, I kept in close touch with local residents, through the association, to monitor its implementation.

I intervened at an early stage in 2005 because tenants contacted me and the local councillor Lynne Allen. They were fearful that the asbestos removal from individual apartments was taking place without the families being decanted from the properties by Hillingdon Homes, and there were concerns that there were not the appropriate protections for the tenants and indeed the workers involved in removing the asbestos. As a result of those concerns, the local councillor and I met the tenants, visited the estate and contacted Hillingdon Homes and the council, and gained assurances that proper procedures were being, and would be, followed.

Later, in December 2005, Mr Fagan contacted me again to seek an urgent meeting to discuss the problems he was experiencing with regard to the renovation of his apartment, under the Hillingdon Homes decent homes programme. When we met in early January 2006, Mr Fagan took me through the catalogue of errors, poor workmanship, delays and failures of performance that he had experienced at the hands of the contractors and subcontractors whom Hillingdon Homes had employed to install a new kitchen and bathroom in his flat. At that early meeting, he pointed out 19 specific examples of poor workmanship that he had identified.

I shall quote from Mr Fagan’s first detailed letter to me, in January 2005, that described his experience of the Hillingdon Homes decent homes programme:

“On 11th May, Bogdan Building Services, under the supervision of Apollo London Ltd”—

the contractors and subcontractors appointed by Hillingdon Homes to undertake the decent homes programme on his estate—

“carried out the gutting out phase of my flat refurbishment. They removed a perfectly functional hood extractor fan and its outlet, in spite of a signed and endorsed drawing clearly stating that this appliance should be refitted. I believe that this was done because the operatives involved had difficulties with interpreting the drawings and with written and oral instructions in the English language…On 12th May, an operative posing as a plumber began working in my home. He installed a toilet 10 mm above the floor, falling short of entering its outlet square and risking leakage…On 13th May, electricians began work on my kitchen and I was left without power in this room for 30 days…On 16th and 17th May, an inept operative masquerading as a carpenter began work on my flat. The standard he achieved over these two days was appallingly bad and he had to be removed from my flat.”

I should say at this point that Mr Fagan is a time-served retired carpenter; after years of extensive experience as a professional craftsman, he knows a professional job when he sees one. On one occasion, he felt so sorry for one of the Bogdan operatives that he had to show him how a particular tool operated so that the work could be completed.

I return to Mr Fagan’s diary of events:

“On 19th May, my new kitchen was fitted. The worktop that the kitchen fitter attached to the base units was butchered with a jig saw, short of the required length, with copious amounts of sealant used to disguise the mistake…On 26th May, a tiler achieved a standard close to acceptable in my kitchen, but the standard in my bathroom falls short of what one might reasonably expect.”

Overall, the work took nine weeks, more than twice the time mentioned in the information pack sent to tenants in preparation for the work by Hillingdon Homes. During this period, on 15 May there was a fire in Mr Fagan’s flat that had resulted from the cooking appliance that he had been supplied as a temporary replacement for his cooker while the work was carried out. The cooking appliance supplied was not the appliance promised by Hillingdon Homes, but a cheaper version. Mr Fagan suffered burns and some of his furniture was damaged. Eventually, he received some form of compensation.

From May until November of that year, Mr Fagan was in regular contact with Hillingdon Homes, seeking remedial action to tackle a litany of problems in his flat resulting from the poor workmanship. He was met by what he described to me as bureaucratic obfuscation, delays, procrastination, incompetence and mismanagement—those are just the repeatable expressions that Mr Fagan has for his treatment at the hands of Hillingdon Homes.

It took me several letters over a period of months to get any practical response from Hillingdon Homes. When the ALMO responded with offers to undertake remedial work, Mr Fagan had had enough and refused to allow the same unskilled and untrained operatives back into his home. He insisted on proper repairs to address the mistakes made and tried to insist on at least some direct labour operatives to do the work that was needed. Eventually, some remedial work was undertaken, but long delayed and after a lengthy struggle with Hillingdon Homes, and on two occasions with action only agreed on the steps of the court as Mr Fagan resorted to legal action.

As I said, Mr Fagan is an active member of Avondale residents association, and currently its chair, so he was concerned to discover whether other tenants had experienced similar problems. I therefore wrote to Hillingdon Homes to ask whether any other tenants had expressed concerns about the work undertaken in their apartments. I was informed by the surveying manager of Hillingdon Homes—I have never met a surveying manager before, but we now have one—that the contractor, Apollo, had undertaken a survey that recorded a 92% satisfaction rate among all tenants who had responded to the company’s survey from the 101 properties completed in the programme to date. However, it reported only a 42% satisfaction rate from the Avondale estate, with 38% dissatisfied.

At meetings with Hillingdon Homes and tenants, I urged the ALMO to undertake an independent survey. It refused, and instead sent round one of its own project team to visit the tenants—one of the very people who had been complained about. In the absence of an independent survey, I held a meeting with the tenants and conducted a written survey of my own, which reported overwhelming dissatisfaction with the improvement programme.

Let me outline the basic issues of concern with regard to our experience of the decent homes programme in Hillingdon. The first major concern is the poor quality of the work undertaken, as evidenced by the experience of Mr Fagan and his neighbours. Work on the programme was contracted to Apollo London Ltd, which in turn subcontracted much of the work to Bogdan Ltd. In one of its publications, Hillingdon Homes explains that Bogdan Ltd was set up by a Mr Bogdan Hrab, a carpenter who had worked on school projects for Apollo in Hillingdon. He recruited what is described as

“a core of Romanian tradesmen”,

chosen for their

“skills and competency, which he personally monitors.”

Hillingdon Homes argues that the appointment of this company was

“not price-driven but on a tried and tested basis.”

The ALMO also implied in one of its publications that the demand for labour for major projects in my area, such as terminal 5 at Heathrow, meant that there was a shortage of skilled workers, and Bogdan and its Romanian work force met this need.

The poor workmanship of the operatives working on the Avondale estate led Mr Fagan to question whether these Bogdan employees were indeed the qualified tradesmen they purported to be. Although Hillingdon Homes sought to assure me that Apollo vetted its sub-contractors, to date no satisfactory evidence has been produced by Hillingdon Homes or Bogdan Ltd to confirm the qualifications of the Bogdan staff. In fact, Hillingdon Homes has now denied that it is its responsibility to ensure that the workers are qualified, and Apollo has refused to release details of the tradesmen’s individual qualifications.

Because at that time Romania had not acceded to the European Union, the visa requirements for entry into the UK for employment meant that workers recruited would have to demonstrate their qualifications. In February 2007, I wrote to the Home Secretary to clarify the visa arrangements and to seek an inquiry into the practices of Apollo and Bogdan Ltd. My letter was passed to the Department for Business, Innovation and Skills. The response I received from the Minister of State confirmed the following:

“Although Romania joined the EU on 1st January 2007, its nationals still need permission to take employment here. Authorisation would only be given if they met the skills and other criteria of the work permit scheme and applications require suitable evidence that the worker is suitably qualified. I understand that a work permit application has not been received from Bogdan Building Services. If a company employs a Romanian national without the appropriate authorisation, they and the worker may be committing a criminal offence.”

Different rules apply for workers who are self-employed, but it is difficult to see how the operatives employed by Bogdan or Apollo could in any way be classified as self-employed. The Minister advised me that the letter had been referred to the immigration service’s enforcement unit to consider what action was to be taken. That was 2007, and I have heard nothing since.

Interestingly, when it was asked whether there was a shortage in my area of the skilled contractors needed for such a contract, the Department for Work and Pensions confirmed that on the contrary, there were local building workers with the requisite skills looking for work in the area.

Questions were asked about the cost and value for money of the refurbishment work undertaken. The initial estimate of the unit cost for the refurbishment of the kitchens and bathrooms was put at £10,000 by Hillingdon Homes. Mr Fagan and his fellow tenants challenged that figure and undertook a costing of the work themselves, collecting samples of materials and sample costs for the workers’ time. They came out with a calculation significantly less than the official Hillingdon Homes estimates. At a later date, Hillingdon Homes reduced its costing from the original £10,000 to £7,900 per unit, but even at that level the tenants have questioned the rate of profit obtained by the contractor and the value for money achieved by the ALMO itself.

It is worth noting at this stage that Apollo was one of the companies that the Office of Fair Trading found to be guilty of price fixing in their dealings on local council contracts. It was forced to repay more than £2 million by way of fines only 18 months ago, one of the highest amounts of any company involved in the scam. Also, the Information Commissioner discovered that it had been involved in the blacklisting of trade union members, which may relate to the low rates of pay given to some of the operatives on the site in question.

Questions have also been asked about the insurance arrangements on the Hillingdon Homes programme after individual claims were pursued against Apollo, with one insurance assessor suspiciously withdrawing from claim negotiations and different dates being attached to the same insurance documents.

Throughout the implementation of the decent homes programme, Mr Fagan and other tenants have expressed strong concerns about the lack of accountability and responsiveness of Hillingdon Homes. Tenants have cited examples of the failure to undertake adequate and timely inspections of work, the reliance on the word of the contractor rather than listening to the tenants themselves, the delays in responding to tenants’ concerns, complaints often being ignored, the patronising manner in which the tenants have been treated and the fact that they have been provided with inaccurate and obscure information. All that has increased the level of frustration, because, to quote Mr Fagan again:

“Had this programme been implemented properly it would have been socially beneficial but unfortunately its management and execution have not lived up to its noble aspirations.”

With regard to the Romanian workers themselves, Mr Fagan wanted me to make it explicitly clear to the House that he is himself an Irish person who came here to seek work, so this is not an attack on the workers themselves but an attack on the company that may have brought them here without the appropriate skills and qualifications and put them in an impossible position to respond to the needs and demands of the contract. He believes that they may well have been exploited in the process.

Over the past three years I have raised my concerns about the decent homes programme in Hillingdon in direct correspondence with Secretaries of State and Ministers in the Department for Communities and Local Government. Apart from parliamentary questions, my last speech on the matter in this Chamber was in November 2007. I said then that there was a need for an investigation of the council’s performance on this matter, and that we knew of a number of examples of poor workmanship. I said that I knew of cases in which tenants had been injured as a result of the work, even following the resources that had been ploughed into the programme.

I feel that I have done my duty in raising this matter, but there has been a lack of response from Hillingdon Homes, the council and, I have to say, Ministers themselves. Despite getting local remedies to individual problems for tenants, I remain deeply concerned by how the programme was implemented in my area. I repeat my call for an independent investigation into the way in which Hillingdon Homes and the council undertook it.

The Hillingdon ALMO is to be scrapped and housing management taken back into the council in the autumn. I welcome that, but it should not be used to cover up the problems caused by the mismanagement of the decent homes programme. There needs to be a thorough and detailed independent investigation of Hillingdon Homes, and the abolition of the ALMO should not be used as an excuse for not holding that investigation.

My local experience naturally led me to wonder whether it had been replicated elsewhere. I know that the decent homes programme nationally has been criticised for overspends and delays, with more than 300,000 properties still not refurbished. I am aware of the National Audit Office January report, which states that it will be another eight years before the work is undertaken. There are criticisms in the report of the absence of monitoring and weaknesses in the information systems,

“which has reduced the Department’s assurance that value for money was being achieved and this in itself constitutes a risk to value for money, because the Department cannot establish definitively whether the Programme has delivered the required improvements at a cost that was considered reasonable.”

There is a need for a further review of the programme. I want the work to be completed to improve people’s homes, but at a time of limited resources, it behoves us to ensure that whatever resources are available are wisely spent and meet the needs of the tenants. That is why I feel that in my constituency there is a continuing need to review the decent homes programme and its implementation, and to ensure that the situation I have described is never repeated.

18:26

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on introducing the debate and bringing the subject to the House. He has a long record of diligent and assiduous research and work on behalf of his constituents, and today’s debate is a good example of that.

I agree that it is important that we get efficient and effective housing services, that we do not waste public money and that the people we serve actually get a service and are not treated merely as targets to fulfil. As well as ensuring that the workmanship is right, we must have the right standards of integrity, prudence and legality. The hon. Gentleman has raised some serious concerns about whether that is the case for Hillingdon Homes. He has also made a stout defence of his constituent, Mr Fagan, and the residents on the Avondale estate.

The hon. Gentleman painted a nightmare picture, which clearly needs to be considered carefully. He has outlined some concerns, which I will tackle shortly. First, let me provide some context. In Hillingdon, the council and its tenants chose to set up an ALMO. I understand his point that perhaps they had a financial pistol pointed at their heads by the previous Government through the suggestion that an ALMO was the way of accessing extra funding to invest in their homes. Indeed, Hillingdon Homes invested £59 million between 2003 and 2008 and reduced the number of non-decent homes from more than 3,000 to just 23. I understand that statistics show that current non-decency is limited to only 48 homes out of the borough’s stock. I hope that the hon. Gentleman agrees that that is a good record.

As the hon. Gentleman also reported, earlier this year, after a tenant consultation, Hillingdon council decided to take management of the homes back from the ALMO and to disband it, which is due to happen at the end of the year. The council claims that it will save £300,000 a year, which will be reinvested in services to tenants. Perhaps, therefore, the story will have a happy ending.

Let me deal with the hon. Gentleman’s points and questions. He made some important points about the poor workmanship, but I am sure that he accepts that that matter should be pursued elsewhere. I am sure that he will be diligent in doing that. He has brought to the House’s attention what he perceives to be irregularities about visa applications, or possibly the failure to make visa applications when they should have been made. He reminded us that the then Secretary of State was contacted and that a letter was referred to the immigration enforcement unit. Of course, that is not my ministerial responsibility, but I will ensure that his words are drawn to the attention of officials and the Department concerned.

The hon. Gentleman raised concerns about the cost and value for money of the installation. He said that the initial price quoted was £10,000 that not until tenants started to get stroppy did a new figure of £7,900 emerge, and that even now, there is a belief that that figure may be seriously over the top. He also drew attention to the record in the courts of Apollo London Ltd on price fixing. Those matters should concern the House. We need to be satisfied that public money has been properly spent and that a good service has been given.

The hon. Gentleman also reported that he debated the matter in the House back in 2007, when he asked my predecessors to carry out an investigation. I am sure he will understand that it is more his job than mine to defend the record of the outgoing Administration, and I am not going to take a rap for their performance, but I would welcome the opportunity to meet him with my officials to discuss some of his concerns. He feels that his constituents have been let down by Hillingdon Homes, the council and Ministers, but I should make it clear that up to now, I have not let him down, and I will see what we can do in future.

The hon. Gentleman asked a broader question about whether the problem he described is universal and whether it applies in many other areas. That is not our experience in the borough of Stockport, which also has an ALMO. He is right to ask that question and to draw attention to the NAO report on the problems.

I conclude by saying to the hon. Gentleman and the House that the Department and this Government are very strongly committed to ensuring that we get value for money. We all know that resources will be even tighter in future, and that it is estimated that £3.2 billion will have to be spent to get the remaining housing stock to a decent homes standard. There are many other calls on Government money, so we support anything that will weed out inefficiency or anything worse than inefficiency, which is what he hinted at. I look forward to the opportunity of discussing with him how we achieve that in Hillingdon. If there are broader lessons to learn, I am sure that my Department and the Housing Minister will be very willing to do so.

There seems to a rule that we speak right up to the bell, but I think I have covered the main points and I hope that that is satisfactory to the hon. Gentleman. I look forward to taking the matter forward in due course.

Question put and agreed to.

18:33

House adjourned.

Westminster Hall

Thursday 15th July 2010 Westminster Hall

Thursday 15 July 2010

[Mr Joe Benton in the Chair]

Defamation Law

Thursday 15th July 2010 Westminster Hall

[Relevant documents: Second Report from the Culture, Media and Sport Committee, Session 2009-10, HC 362-I, and the Government response, Cm 7851.]

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Djanogly .)

14:30

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

I am delighted to open today’s debate on an issue that the Government regard as being of great importance to our country. As the coalition agreement made clear, we are firmly committed to reviewing the law on defamation to protect free speech. That commitment was reflected in the announcement made last week by my noble Friend Lord McNally, on behalf of the Government, that we will be publishing a draft defamation Bill for consultation and pre-legislative scrutiny in the first Session of this Parliament, with a view to introducing a substantive Bill as soon after that as parliamentary time allows.

That decision stems from our recognition of the concerns raised over recent months about the detrimental effects that the current law may be having on freedom of expression, particularly in relation to academic and scientific debate, the work of non-governmental organisations, investigative journalism and the extent to which this jurisdiction has become a magnet for libel claimants. In reviewing the law, we wish to focus on ensuring that freedom of speech and academic debate are protected and that a fair balance is struck between freedom of expression and the protection of reputation. We want to ensure that the right balance is achieved, so that people who have been defamed are able to take action to protect their reputation where appropriate. However, that should be done in such a way that free speech is not unjustifiably impeded.

That will help to ensure that responsible journalism and academic and scientific debate are able to flourish, and that investigative journalism and the valuable work of non-governmental organisations are not unjustifiably hampered by actual or threatened libel proceedings. Ensuring that the right balance is struck is a difficult and sensitive exercise. It raises very complex issues, on which a wide range of differing views are likely to be held. In recognition of that, any proposals for reform will need to be the subject of extensive and thorough consultation. With that in mind, publication of a draft Bill for pre-legislative scrutiny represents the most effective approach to achieving fully considered legislative proposals that focus on core issues of concern where legislation can make a real difference.

Alongside our considerations on the substantive law, we are also determined to ensure that costs in all civil proceedings, including defamation, are proportionate. The Government are very grateful to Lord Justice Jackson for his comprehensive report, “Review of Civil Litigation Costs,” which makes a broad range of significant and positive recommendations for reducing high costs in the civil justice system. We are urgently assessing Sir Rupert’s main proposals on the reform of conditional fee agreements and how they could be taken forward.

Sir Rupert’s recommendations apply to all categories of case where CFAs are used, and that includes defamation cases. I am aware of the significant concerns in some quarters about the costs in defamation cases, but it is important that any changes in defamation are considered alongside those in other areas of civil litigation where high costs are a concern. We are committed to addressing those issues in the round and to dealing with the problems created by high costs while also ensuring that there is appropriate access to justice for claimants.

The previous Government attempted a rushed and rather limited reform to limit costs in defamation cases only. As hon. Members may know, that measure was not recommended to the House by the Committee that considered it on 30 March. We must tread carefully. We will consider all the options for addressing high costs, including those proposed by the previous Administration and, as I am sure my hon. Friend the Member for Maldon (Mr Whittingdale) will be pleased to know, by the Select Committee on Culture, Media and Sport in its recent report, “Press Standards, Privacy and Libel.” We will consider those proposals alongside Lord Justice Jackson’s recommendations in determining the next steps. We hope to announce the way forward as soon as possible.

It is not possible for me to indicate today exactly what provisions may be included in the Government’s draft Bill on defamation. However, a number of areas have already been the subject of much discussion and debate, and I can confirm that we will be giving further consideration to them with a view to including provisions in the draft Bill. In particular, we recognise the strength of the calls that have been made for a statutory defence relating to the public interest and responsible journalism. As hon. Members will be aware, a common law defence has been developed by the courts in recent years—initially in the case of Reynolds v. Times Newspapers Ltd and Others, which offers a defence that may be relied on even where the defendant cannot prove the truth of what has been published, provided he or she acted responsibly in all the circumstances.

However, concerns have been expressed by non-governmental organisations, the scientific community and others that there is a lack of certainty over how the Reynolds defence applies outside the context of mainstream journalism, and that that has a somewhat chilling effect on freedom of expression and investigative reporting. This is a complex area of the law, and we want to give further consideration to whether and how a statutory defence can be framed in a way that is beneficial and appropriate for a range of different contexts.

We also recognise the criticism that English defamation law has received as a result of the perception that libel tourists are issuing proceedings in London, rather than in other jurisdictions with which their claim may have a significantly greater link. Differing views have been expressed about the extent of problems in that area, and whether the threat of libel proceedings by wealthy foreigners and public figures is used to stifle investigative journalism, regardless of whether actual cases are ultimately brought. A number of proposals have been made on how that issue can be tackled, and we will be examining those carefully. We want to make sure that the concerns raised in that area are addressed in an effective and proportionate way.

We are also aware of the concerns that have been expressed in the media and elsewhere about the difficulties of the so-called multiple publication rule, whereby each publication of defamatory material gives rise to a separate cause of action subject to its own limitation period, which causes problems in relation to online material. The effect of the multiple publication rule is that publishers are potentially liable for any defamatory material published by them and accessed online. The rule applies however long after the initial publication the material is accessed, and whether or not proceedings have already been brought in relation to the initial publication. We will be considering how best we can frame a single publication rule to remove the threat of open-ended liability that currently exists.

In addition to the areas I have just mentioned, the private Member’s Bill introduced in another place by Lord Lester of Herne Hill contains provisions on a substantial number of other issues. In particular, Lord Lester’s Defamation Bill takes in provisions on renaming and codifying the existing defences of justification and fair comment; the basis on which an action for defamation can be brought; the ability of corporations to bring defamation actions; trial by jury; defamation in the context of internet publication; and issues relating to absolute and qualified privilege, including parliamentary proceedings.

Those important issues merit further consideration in the context of the Government’s review of the law. However, it is important to ensure that the views of a range of interested parties are taken into account before deciding whether it is appropriate to include such provisions in the Government’s draft Bill. We therefore intend initially to conduct informal discussions over the summer with interested parties to ensure that we can reach a fully informed assessment of the merits of reform in those areas, and on any other issues that may be of concern. In the light of those discussions, we hope that it will then be possible to move towards publication of a draft Bill in the new year.

As part of that process, the views of those within Parliament are obviously of considerable importance. Lord Lester’s Bill has provided an important, timely and well reasoned contribution to the process, although the Government’s draft Bill may, of course, not necessarily reflect all the issues he has raised, or indeed be restricted to them. The views of those within Parliament are obviously of considerable importance to us in reviewing the law.

The Second Reading of Lord Lester’s Bill last week provided an opportunity for those in another place to make their views known, and an extremely helpful and wide-ranging debate took place. I hope that the Government’s decision to secure today’s debate will provide an opportunity for hon. Members to express their views on those important matters, so that we can consider them when deciding how best to move forward.

14:40

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

I congratulate the hon. Member for Maldon (Mr Whittingdale) on his re-election as Chair of the Culture, Media and Sport Committee, from a shortlist of one. I thank my Labour colleagues for re-electing me, in a rather wider exercise of democracy, to the Committee. I also thank Mr Speaker for agreeing to the debate. He was forthright in his defence of free speech during the Trafigura affair last autumn, in which I played a walk-on part. If I may indulge in a plug, Mr Benton, only last Sunday I gave a talk with David Leigh of The Guardian on Trafigura and the wider issues of libel and media law reform at the excellent centre of investigative journalism at City university London.

The debate is certainly timely, allowing us to discuss for the first time the Committee’s report on press standards, privacy and libel, which the general election interrupted. It also keeps up momentum for reform in the House of Commons, following the excellent debate last Friday on Lord Lester’s private Member’s Bill in the other place—the House of Lords, to adopt modern terminology in libel. I shall refer to that at greater length in a moment.

We published our report on 24 February. It was a marathon effort, as I am sure the Chair of the Committee agrees, having lasted from autumn 2008. That hints at the complexities and the sheer range of issues involved in reforming that area of law. I was certainly not the only member of the Committee who was glad to clear the decks for the general election, which was looming over us.

There was much unfinished business in the field as the general election became all-consuming, such as taking forward in law Sir Rupert Jackson’s wide-ranging report on civil litigation costs, to which the Minister referred, which was published in January. There was also the review by the former Justice Secretary, my right hon. Friend the Member for Blackburn (Mr Straw), on libel and the internet. He also produced proposals for reform of conditional fee agreements, about which I shall say more later. We also followed up on the conclusions of the report from the Ministry of Justice’s libel working group, which was published at the end of March, just as we were about to go to the polls. The previous Government’s response to that included a commitment to a draft libel reform Bill, and the House should give a strong vote of thanks to my right hon. Friend for all his work and effort in that area. I was glad that that work was acknowledged by Lord McNally, the new Minister, in last Friday’s debate.

I am glad that the coalition agreement included the following single-line commitment:

“We will review our libel law to protect freedom of speech.”

However, there is always a danger after an election, with so many competing interests, that action might be stillborn, despite the fine words. The danger of a lack of progress was highlighted before the election by the fate of the statutory instrument that was intended to address the matter of costs in conditional fee agreements. It was mauled in Committee by Members from all parties. It is not necessary to dwell on the ins and outs of that, as it is better in the cause of reform to make as many friends and as few enemies as possible. The proposal was to limit success fees in conditional fee agreements in defamation cases. That was certainly a blunt instrument. In our report, we said that recoverability from the defendant should be limited, meaning that lawyers and clients could haggle. The instrument that came forward, which would have limited that across the board, was always open to the attack that it would give renewed carte blanche to unscrupulous tabloids to print yet again what they liked and that it would limit access for ordinary people without the means to try to salvage their reputations.

It was made clear before the election that that instrument was intended to be an interim measure that could be achieved quickly without primary legislation, and in anticipation of wider reform of libel law and costs following the Jackson review. While the newspapers drowned their sorrows after the statutory instrument went down, I suspect that the biggest bar bills were run up by the likes of Carter-Ruck and Partners and the so-called Lawyers for Media Standards—I suspect that it was a good day for those other well known firms: Krug, Bollinger and Dom Pérignon.

At the weekend, those of us at the City university London summer school wanted to raise a glass to Lord Lester for keeping up the pressure for reform through his excellent private Member’s Bill, and to all the organisations involved in crafting and supporting the Bill, including Index on Censorship, English PEN, Sense About Science and The Guardian, the BBC and The Times from the media community. We also wanted to raise a glass to Lord McNally, who confirmed on Friday that the Government would pick up the ball left by my right hon. Friend the Member for Blackburn and produce a draft Bill for consultation. Furthermore, he set out a timetable: a draft bill will be published early next year for pre-legislative scrutiny; and, I hope, a substantive Bill will be included in the Queen’s Speech setting out the 2011-12 legislative programme. That is the yardstick for reform that has been clearly set out, and by which progress will be measured. Little wonder that Lord Lester’s reaction on Friday was so measured:

“when I hear my noble friend...speak as I did now, I wonder whether I am alive at all or whether I am in heaven.”—[Official Report, House of Lords, 9 July 2010; Vol. 720, c. 483.]

I first met Lord McNally shortly after my election in 2001 when we sat together on the Joint Committee on the Draft Communications Bill, the so-called Puttnam Committee. I was aware of his good work on the Labour Benches in Harold Wilson’s day, before wrangles with the left in our party led him to his current berth. He is a sound man and we look forward to working with him on reform. We look forward to the Minister today confirming the Government’s intentions and perhaps giving more detail on what is proposed.

I will not discuss all the complexities and controversies involved in defamation reform today, but I will single out a few areas. The devil will, of course, be in the detail. Despite the forces of reaction gathering to oppose reform—it reminds me of a scene from “The Lord of the Rings” in which Sauron summons his “Carter-U'Ruck-hai” and the Orcs, those “Lawyers for Mordor Standards”—a great deal of consensus has built up on the way forward in several areas, which is encouraging. For example, with regard to libel and the internet, the previous Government, the Select Committee, the Ministry’s libel working group and Lord Lester’s Bill have all agreed that the measure should relate to single publication, limited to a year after appearance, aligning the online law with the law dealing with publication in print and giving more certainty to people who maintain online archives and databases. Libel tourism is another area on which there is increasing consensus, and that is increasingly connected to the law on the internet. The consensus from all those bodies is that we should tighten the legal procedure rules and throw out the abuse of our courts and laws.

The role of parliamentary privilege in protecting free speech is also an area of consensus. That was highlighted in the Trafigura affair, and not for the first time, but nothing was done on each occasion. Lord Lester’s Bill addresses that simply and agrees with the Select Committee that we need a modern statute. We also look forward to the conclusions of the review of practices on super-injunctions being carried out by the courts.

Where there is disagreement, it seems to centre, refreshingly, on not rushing to judgment and instead consulting, as our report recommended, so that changes in the law do not have harmful, unintended or unforeseen consequences. I will mention a few major examples. We should consider statutory backing for the public interest defence to protect decent investigative journalism while maintaining the protection needed for individuals whose reputations are wrongly and irresponsibly traduced. The Committee was inclined first to put into statute a widened definition for court decisions on responsible journalism—the so-called Reynolds defence. I took the precaution of consulting former newspaper colleagues who are at the coal face of investigative journalism, and they advised taking care and consulting. That was our recommendation. That caution on getting the change right was reflected in the debate on clause 1 of Lord Lester’s Bill last Friday.

However, there is an urgent need to protect legitimate scientific and medical inquiry and honest opinion and comment. It was good to see the Court of Appeal in the Simon Singh case recently decide that libel courts are not the forum in which to settle issues of scientific or medical proof or controversy.

The other major area on which we urged wide consultation was that of corporations and defamation. There was a concern that deep-pocketed litigants could afford to mount libel cases—it is of little consequence to major corporations that the costs could run into millions. In part, the actions were designed to chill investigative journalism and take good journalists out of the game—it takes so much time and effort to counter libel actions. In our report, we highlighted what I describe as the most flagrant abuse of libel laws in recent years in this country: the case that Tesco brought against The Guardian. The substance of The Guardian’s allegation about tax avoidance was true, but the newspaper made mistakes along the way and, even though it was later proved that Tesco was avoiding the tax in question, The Guardian felt compelled to settle out of court simply because the costs were mounting inexorably.

In his Bill, Lord Lester does not propose any reversal of the burden of proof for corporations, but requires them simply to demonstrate likely financial loss, which they do not have to do now. I, and I think many people who were in the debate in the House of Lords, do not believe that that goes far enough. Determining what constitutes likely financial loss might, in itself, be a recipe for more costs. For example, should that include shareholders? In the Select Committee report, we made recommendations, and urged the Government to consult widely and consider the experience of other countries, such as Australia, where the law in this respect has been reformed in recent years.

The big elephant in the room, which Lord Lester’s Bill does not address, is cost. Cost is the overriding issue. Many of the problems with our libel laws would not be so pressing if it were not for the cost. We are aware that the Government are considering taking forward the Jackson review, but that might take years. We need some indication from the Government as to when the cost issues will be addressed. They are deliberately not addressed in Lord Lester’s Bill, but they are the major issue for responsible investigative journalism in this country. My right hon. Friend the Member for Blackburn tried unsuccessfully to achieve progress in the previous parliamentary Session. It is imperative that we get some progress now.

14:53

[Mr John Whittingdale (Maldon) (Con)]

It is a pleasure to follow my Select Committee colleague, the hon. Member for Newcastle-under-Lyme (Paul Farrelly), who played a very substantial role in the Committee’s inquiry, both because of his background as an investigative journalist and as a strong proponent of the reform of libel law.

I am extremely pleased to have this opportunity to debate the Select Committee report. It occupied more than a year of our time, and the coming of the general election prevented it from getting the debate that I felt it merited. At the start, it was not the Select Committee’s intention particularly to focus on libel law. We realised that it was part of the agenda, but it was not the main issue. We were especially concerned with two things: the behaviour of the press in their reporting of the McCanns case, and what appeared to be the growth of a privacy law in the UK, particularly as a result of the judgment regarding Max Mosley. We devoted a lot of time to both those issues and were then slightly sidetracked into another important matter: the behaviour of the News of the World and one of its journalists in intercepting telephone calls. I do not wish to talk about that this afternoon; we spent a lot of time on it in the Committee. My main concern is to highlight the fact that, in my view, the report’s most important recommendations, which did not get the attention they merited because of the distraction caused by those other issues, were on libel, and on the concerns that are now widely felt, both in this country and around the world, about how UK libel laws operate.

I would like to put on record a few words of thanks. My thanks go to the staff of the Committee, who had to work very long hours over a lengthy period—not just the staff of my own Committee under Tracey Garratty, our principal Clerk, but Hannah Stewart, who was seconded to us from the Justice Committee. We also had the benefit of the advice of Professor Brian Cathcart and Sara John. We also had a lot of help from lawyers. None of the members of the Select Committee were lawyers and we were dealing with very technical and often complicated legal issues, which required several towels around the head on many occasions. We had a lot of advice particularly from people who came and gave up their time: Sir Charles Gray, recently retired from the High Court, Alasdair Pepper of Carter-Ruck, Andrew Caldecott QC, and Desmond Browne. If they had billed us at their normal rates, the House of Commons would probably have been bankrupted. They gave advice as part of a pro bono publico exercise, which was greatly appreciated.

[Joan Walley (Stoke-on-Trent North) (Lab)]

Members of Parliament who do not have the time to sit on a Select Committee or who are not appointed to one owe a debt of gratitude to those who do serve. As a Member of Parliament who is not on a Select Committee, I should like to say that many of us have really valued the very detailed, technical and legalistic work that has been done by this Select Committee. Does the hon. Gentleman agree that that makes it all the more important that the Minister, in his response, should recognise that these are not just the recommendations of this particular Committee as a result of the work done by people such as my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) and others, but that this is the Select Committee speaking on behalf of the whole of Parliament? That is why it is important that the Government respond to the individual detailed recommendations.

[Mr Whittingdale]

I entirely endorse the hon. Lady’s comments. That is exactly the value of Select Committees, and I am pleased to say that they are becoming more widely recognised. When we set off, we did not anticipate that the inquiry would be quite as long and detailed as it was. It was, however, one of the most fascinating and satisfying inquiries in which I have participated. At the same time as we were having the debate in the House, there was a substantial debate and a growing clamour outside the House. I should pay tribute, as my colleague from the Committee has already done, to the work of Index on Censorship, English PEN and Sense about Science. As part of their campaign they mounted a petition, which I think received 52,000 signatures, and I imagine that every Member of the House will have received e-mails from constituents expressing their concern about the operation of the libel laws. It is not an immediately obvious subject for generating great concern, but it is becoming such an important issue that a lot of people feel very strongly about it.

The two principal conclusions that we reached—I will go into a little detail in a minute as to why we reached them—were that, in this country, the way the libel laws are balanced and the costs attached to going to court in a libel action are having a seriously damaging effect on investigative journalism, standards within the press and legitimate scientific debate. As a passionate believer in freedom of speech and in the essential role that a free press must play in a healthy democracy, I believe that that matter should be of concern to every Member of the House.

However, as if that were not enough, the Committee also discovered that Britain is now cited alongside authoritarian countries as a place where the press is being suppressed because of the actions of the state—in this case, the libel laws. Committees are sometimes criticised for going on foreign trips, but, in this example, it was immensely valuable that we were able to go to America and talk to some of the people who were directly affected, including authors and journalists. We also discussed with the American judiciary how they viewed our system, and we spoke to legislators at state and federal levels. I shall deal later with libel tourism, which is very important.

A host of different issues affect the operation of our libel laws. Some of them are being dealt with, or at least addressed, in Lord Lester’s Defamation Bill, and I was pleased to hear my hon. Friend the Minister speak about the Government’s intention to examine all the issues and, in due course, to produce a draft Bill that we can debate at length. It is reassuring that they have taken on board the necessity of addressing the matter urgently. However, as the hon. Gentleman said, probably the biggest issue affecting the whole libel system in the UK—how much it costs for somebody to defend a libel action—is not covered by Lord Lester’s Bill. None of us imagines that lawyers are ever cheap, but, in the case of libel, trials are often very long, no legal aid is available, and solicitors and barristers charge, frankly, eye-watering sums.

We had a slightly surreal debate in the Committee between various lawyers as to whether the average was £400, £500 or even £600 an hour. To most people, any of those three figures is extraordinary, and, given the time that can be taken, it is easy to see how the clock ticks quickly and the amount of money increases rapidly, to the extent that it is now said that the cost of a libel case in the UK is some 140 times the European average.

[Paul Farrelly]

Does the hon. Gentleman agree that the hourly rates actually double in many of the cases that are brought under conditional fee arrangements? The record shows that the so-called no win, no fee scenario is, as one would expect, nearly always a case of always win, double the fee.

[Mr Whittingdale]

The hon. Gentleman pithily encapsulates the situation, which I shall come on to later. He is absolutely right, and that makes the situation even more damaging for any defendant facing a libel action.

My hon. Friend the Minister referred to the work of Lord Justice Jackson, who gave evidence to the Committee alongside the Master of the Rolls and addressed the broader question of costs in all civil litigation. I know that the Government have listened to his advice, which was that we should not pick out one particular branch of civil law and address that, but address the whole thing together. As my hon. Friend said, that was not the view of the previous Government, and I have some sympathy with their position. The matter is urgent, which is why the then Justice Secretary, the right hon. Member for Blackburn (Mr Straw), decided to move on defamation cases ahead of the rest of civil litigation. I hear what the Minister says, but I hope that there will not be further delay—we must address the matter quickly. By all means, let us address it in the round and look at all the costs involved in civil litigation, but let us not spend a long time doing so.

Various solutions have been advocated, and we probably need to adopt a combination of them. The first thing the Committee considered was the suggestion simply to cap costs—to set a limit beyond which one should not be able to go. We accepted the evidence we received that that is a blunt instrument. It is difficult to predict the direction of a case, so capping is probably not a realistic solution. However, various solutions undoubtedly could be introduced: greater cost budgeting and case management, and a pause every now and again to see how costs are progressing. Those are sensible options, but the real problem, as the hon. Gentleman said, is conditional fee arrangements, which were introduced with wholly good intent. I absolutely accept that the wish to make the legal process available to people who would otherwise struggle to afford it is an entirely worthy objective. The intention was that a legal practice would be allowed to charge a success fee if it won a case, in recognition of its risk in taking on a CFA. If it lost the case, it would not get any money, so the fee was a return for the risk.

The problem we discovered fairly rapidly was that the practices that specialise in CFAs are very thorough and do not actually take any risks. They go through the cases that are put to them for potential CFAs and accept them only if they are almost certain that they will win. We struggled to get the exact figures for the proportion of CFA cases that were won and lost, but it was clear that, overwhelmingly, cases taken on a CFA were a pretty safe bet. On that basis, we found it difficult to understand why firms needed a 100% success fee on top of their costs. As I said, the costs are astronomical to begin with; they then double them, as the hon. Gentleman indicated, by imposing a success fee.

That is not the end of the story. An additional cost is after-the-event insurance, which is a premium taken out by the claimant in case they do not win, and which is chargeable to the defendant in the event that they lose. Such insurance can cost anything up to £65,000 plus tax for every £100,000 worth of cover, so we are now talking about almost 270% of the costs that can be awarded against a defendant in a libel action. The extraordinary thing about after-the-event insurance is that if the defendant loses, obviously he will have to pay the claimant’s premium, but if the claimant does not succeed, he does not have to pay the premium. The insurance is marketed on the basis that one can take it out but not have to pay for it at all. It is simply another cost imposed on the defendant, and, because there is really no incentive for a claimant to keep costs down, it is a licence for companies to set their own sums and print money.

The effect of those three things taken together is that now many newspapers will not seek to defend a libel action, even if they are convinced that they have a strong case. They will regard it as quicker and cheaper to settle out of court. Perhaps even more worrying is that often they will not print the story in the first place, simply because of the danger that they might get sued. That chilling effect on press freedom and journalism causes great concern.

[Paul Farrelly]

The hon. Gentleman mentioned cost-capping and the importance of speedy reform. Does he agree that costs have become so surreal that when capping is mentioned as a measure to try to reduce them, a great number of the legal fraternity argue that it could increase costs because of the cost of cost-capping meetings, and that, as a consequence, nothing happens?

[Mr Whittingdale]

I entirely agree with my hon. Friend—I call him my hon. Friend in the spirit of the Select Committee. What he describes introduces another legal argument, which is, of course, billable. I will not say that this is a racket, but the lawyers do very well out of the process.

The Committee came up with a couple of recommendations to address these problems. The previous Government suggested that a 10% cap be set on success fees, but as my hon. Friend the Minister rightly said, the proposal did not find favour in the House when it was introduced before the election. The Committee’s solution was not quite to introduce a straight 10% cap, but to say that the success fee that could be recovered from a defendant should be set at 10%. We did not feel it right to interfere with the arrangement between the claimant and their legal representatives; if the claimant wishes to pay a proportion of their damages in the form of a success fee, that is a matter for them. However, we said that the legal entitlement to recover from the defendant could be capped at 10%. Furthermore, for the reasons that I have set out, I view after-the-event insurance with some scepticism, and the Committee said that it should be made irrecoverable in its totality. I remain of the view that those two measures are sensible and would go a long way to removing the sting in conditional fee arrangements. Obviously, that will be a matter of great debate over the coming months, and I leave it to the Minister to ponder those issues.

The issue is not just costs; there is a whole variety of other issues, many of which Lord Lester’s Bill addresses. One issue is the multiple publication rule. Libel laws were written when the internet did not really exist, and its advent has changed everything. That is true of the permanence of articles and statements, which can now be found on Google at the press of a button. The old Duke of Brunswick case also becomes much more serious in the age of the internet. Clearly, it is widely recognised that that should be addressed.

There are a couple of defences that must, on the face of it, make sense, but which are slightly unclear in legal terms at the moment. One is the defence of fair comment, and I want to say a quick word about the impact of libel law on proper scientific debate, an issue on which Sense About Science has done a lot of work. I pay particular tribute to Simon Singh, who is a very brave man for deciding not take lying down the legal action brought against him by the British Chiropratic Association after he suggested that there might be some debate about the medical effectiveness of chiropracy in treating certain conditions. He was willing to put up a great deal of money from his own account to appeal the judgment. Several scientific journals now say that they hesitate before carrying perfectly legitimate scientific papers that contribute to debate, because of the potential for organisations, and particularly big corporations, to bring libel actions. Libel is about whether someone is defamed; it should not be used to interfere with scientific discourse, which is important if scientific knowledge is to advance. The fact that Simon Singh was willing to defend himself and proved triumphant in the end was important and drew attention to the fact that the issue needs to be addressed.

The other defence that the Committee looked at, and which the hon. Gentleman mentioned, is the Reynolds defence of responsible journalism. The two landmark cases of Reynolds and then Jameel set out the hurdles that a defendant must demonstrate they have got over before they can use the defence of responsible journalism. There is some debate about the difficulty of meeting each of those tests, with the result that few defendants have used this defence, which has been a cause of concern to us.

It was drawn to my attention not more than two hours ago that the outcome of the Flood v. Times Newspapers case has been published. This is the first occasion on which the Court of Appeal has overturned a Reynolds defence. Times Newspapers used a Reynolds defence in an action brought against it by a Metropolitan police sergeant. It said that what it had published was in the public interest and that it had met the relevant tests, but the Court of Appeal overturned the initial judgment on appeal. I do not want to say anything about the merits of the individual case, but I imagine that the fact that there is a further constraint on using the Reynolds defence will mean that adopting it becomes even less attractive to serious newspapers. I share the view of the hon. Gentleman that putting these things into statute carries a risk as well and that it might not be the most sensible way of strengthening them. However, it is important that it should be a legitimate defence for journalists investigating stories that are plainly in the public interest—we are talking not about muck-raking, but about serious investigative journalism—to show that they have used their best endeavours to meet all the various tests. We may need to look at that again in the light of certain developments.

[Paul Farrelly]

Does the hon. Gentleman agree that the conclusions of the libel working group also highlighted the danger that a codification in law could become a rigid checklist in itself? It would also be very costly to mount a defence. However, the group was more sympathetic to statutory backing for the principles that underlie a defence of responsible journalism, which have already been developed in common law. That might be a fruitful way of proceeding.

[Mr Whittingdale]

The flexibility that that might provide is clearly better than having a very detailed set of boxes, each of which has to be ticked. The hon. Gentleman’s suggestion is probably a sensible way to develop things.

Taken together, all these issues would go some way towards not weakening our libel laws, but restoring people’s absolute right to defend their character and reputation. The other side of that coin, however, is the right of the press to investigate and to expose, and the right of scientific journals to carry out legitimate debate. I hope that all those things will feature in the Government’s draft Bill.

I turn now to the way Britain’s libel laws are viewed overseas, because that should be of huge concern to the Government. The issue is encapsulated in the case of Rachel Ehrenfeld, whom the Committee met when it went to the States. She wrote a book in which she suggested that a Saudi Arabian business man, who has Irish citizenship, was in some way providing financial support to al-Qaeda and terrorism. An action was brought against her in the UK on the basis that 23 copies of the book had been sold here. Obviously, it was also accessible on the internet, so there was publication in that sense as well. However, the book was not widely available in the UK, and it is fairly clear that the case was brought here not because this was where the damage was done, or because Rachel Ehrenfeld or the Saudi Arabian had British citizenship, which they did not, but because the libel laws here were seen to favour claimants. On the back of that, we discovered that there are now widely shared fears in the United States. The Association of American Publishers submitted a statement to the Committee on the Judiciary of the US House of Representatives, which described libel tourism as

“the cynical exploitation of plaintiff-friendly foreign libel laws as a weapon to intimidate and silence U.S. authors and publishers.”

There is no doubt about which foreign libel jurisdiction it had in mind.

[Dr Julian Lewis (New Forest East) (Con)]

I am not an expert in the area in question, although I have more than once had to bring a libel action. I think I am right in saying that in America pretty much anyone in the public eye can falsely be accused of quite serious wrongdoing but will have no recourse to a defamation suit. I acknowledge that the case that my hon. Friend used as an example is worrying, but I hope that he will not argue that we should adjust the libel laws in this country to prevent people who are defamed from taking action, just because in America people who are defamed are not allowed to take action. It would be a retrograde step to allow open season on reputations to the extent that that is allowed in the USA.

[Mr Whittingdale]

My hon. Friend raises an important point, and I agree. My hon. Friend the Member for Shipley (Philip Davies), who sadly cannot be present, thinks that we should move towards the American system, where two things apply. First, the burden of proof is reversed and it is up to the people concerned to prove that they did not do what is alleged, whereas here a newspaper or journal must demonstrate that they did. Secondly, in America the first amendment trumps virtually everything. It is essentially impossible to get a pre-publication injunction. The Committee was told by people in public life that for such people there is essentially no defence against libel other than to make their case in public and try to convince people that what was said was wrong.

I do not go that far. Some of the criticism of the UK’s libel laws in America is based simply on the fact that they disagree with our stance and think that we should adopt their system. That is not the reason I am concerned. I am concerned about the use of the UK courts by people who have no connection with the UK; it is the tourism aspect. That is a much narrower, but nevertheless very important, issue. As an example of the consequences I want to quote a joint submission to the Select Committee by Advance Publications Inc., the Association of American Publishers, Associated Press, Bloomberg, CBS television, Global Witness, Human Rights Watch, the Los Angeles Times, Macmillan, NBC, The New York Times and others. Perhaps the most important passage reads:

“Leading US newspapers are actively considering abandoning the supply of the 200 odd copies they make available for sale in London—mainly to Americans who want full details of their local news and sport. They do not make profits out of these minimal and casual sales and they can no longer risk losing millions of dollars in a libel action which they would never face under US law. Does the UK really want to be seen as the only country in Europe—indeed in the world—where important US papers cannot be obtained in print form?”

[Paul Farrelly]

I do not want this to become a conversation between members of the Select Committee, but does the hon. Gentleman agree that in the internet age matters go rather further than that? We received evidence that aggressive firms in the field of so-called reputation management—the two names that came up most frequently were Schillings and Peter Carter-Ruck and Partners—were finding so-called defamatory articles on the internet and scouring the world for potential plaintiffs on whose behalf they could act, simply because the article was accessible from the UK. They could point out to such people the fact that they might well win under Britain’s libel laws and say, “So bring an action.”

[Mr Whittingdale]

I think that there is evidence of that. I hesitate before accusing the two firms that the hon. Gentleman named, although they happened to crop up time and again in evidence. Concerns have been expressed about the way CFAs are used in ambulance-chasing cases—with ads on television saying, “Have you fallen over? Ring up this lawyer, because you can win thousands of pounds.” This is basically the same thing, so there is a legitimate concern.

I think that what should really make the Government concerned, in relation to attitudes towards the British system, is the fact that it is not only publishers and newspapers that are making such comments. The UN Committee on Human Rights, members of which we met, has been very critical of the UK system. In addition, the US Government, at state and federal level, is taking action in response. We went to Albany, where New York state has passed what is called the Libel Terrorism Protection Act. The title is intended to suggest that we have been giving active succour to terrorism through our libel laws. The Ehrenfeld case was the cause of it; indeed, Rachel Ehrenfeld went to the New York state legislature to press for action to be taken.

The Act allows a judgment against an American citizen to be ignored or overturned in America if it is shown to be a breach of his or her first amendment rights. However, that has happened not only in New York state; such legislation is appearing in other states and has also passed into Congress. I have the report of 13 July—two days ago—stating that the Senate Judiciary Committee unanimously passed bipartisan legislation aimed at protecting authors and journalists from libel law suits filed abroad. Essentially, the New York Bill has now been taken up, and it looks as though it will pass into federal law.

When the previous Lord Chancellor, the right hon. Member for Blackburn, gave evidence to the Select Committee, he said first that he was not convinced that the situation was a great problem. Secondly, he did not seem terribly fussed even if foreign Governments were taking the attitude I have described. He said that we had learned that there had been no representations from the British embassy to defend our system; those concerned had sat by and let these things go on. I find it profoundly worrying that Britain’s closest ally—the country that, whatever one thinks of America, is regarded as a bastion of free speech—should regard us as so restrictive and hostile to the principle of free speech that it feels it necessary to pass an Act such as I have outlined. Although that Act does not specifically refer to the UK, it is perfectly clear that it is directed at this country. I hope that, given that the Bill is now actively passing through the Senate and Congress, the Minister will start to talk to American legislators as a matter of urgency, and perhaps reassure them that the Government intend to deal with the issue.

[Paul Farrelly]

Does the hon. Gentleman agree that, very soon after making those statements to the Select Committee, the previous Lord Chancellor was open-minded enough to change his mind completely? He added the issue of libel tourism firmly to the remit of the libel working group, and one of the four main areas on which it reported at the end of March was libel tourism and reforms to court procedures to stop abuse of process and abuse of forum.

[Mr Whittingdale]

Indeed, that is right, and the hon. Gentleman is correct to draw attention to it. I am delighted that the right hon. Gentleman came round to our view that the matter was a serious one, that needed to be addressed.

One or two other matters occurred to the Committee, one of which was referred to in passing by the hon. Member for Newcastle-under-Lyme, although, perhaps out of modesty, he did not devote as much time to it as it deserves. That is the issue of this place and the reporting of our proceedings. It is well known that the hon. Gentleman uncovered the existence of a super-injunction taken out on behalf of Trafigura and tabled parliamentary questions about it, which led to a spat between Carter-Ruck and The Guardian about whether it was legitimate to report the fact that those questions had been tabled. There is no question about where parliamentary privilege lies: the hon. Gentleman is completely protected under parliamentary privilege in tabling those questions.

The situation becomes a lot less clear—this was news to me—in respect of a newspaper’s right to report the fact that the hon. Gentleman had tabled the questions. Previously, I had the impression that the reporting of responsible activity was allowed, under the Parliamentary Papers Act 1840, but Carter-Ruck argued vigorously with The Guardian that the super-injunction prevented the newspaper from reporting the questions. The Guardian’s in-house lawyer confirmed that that was her view as well. It later became apparent that the House authorities probably shared Carter-Ruck’s view. In my view, that is a profound threat to this place.

In a way, there is no point in our being able to say things in Parliament or table questions if nobody is allowed to report them. In the Select Committee’s view, any uncertainty about reporting parliamentary proceedings and the extent to which privilege allows Members of Parliament to raise matters with a degree of protection against libel action needs to be addressed quickly and removed. Lord Lester has included this in his Bill.

The two last things that I will mention are not principally about libel, but touch on it. We Committee members spent a lot of time considering privacy, and the balance between articles 8 and 10 of the European convention on human rights, which has been used to bring in a privacy law in this country. That matter touches on libel because some people now choose to use privacy legislation rather than libel legislation. Those two kinds of legislation are not separate. Under privacy legislation, people do not necessarily have to say whether the story is even true—they can just use such legislation to prevent it from being published. That needs to be borne in mind if we are going to have the thorough overhaul that I hope the Minister intends.

The last area that I should like to mention, which is complementary to libel law, is the self-regulatory mechanism adopted by the press—the Press Complaints Commission—which the Committee supports. There is a lot of debate about the effectiveness of the PCC, but it offers an alternative. If people choose to go to court and mount a libel action, it can take a long time and cost a lot of money, but at the end they might get a definitive statement that they have been defamed—and they may get a lot of money as a result. The PCC can take action quickly and is free, but people do not get any money: the most that they can hope for is a judgment by the PCC that the newspaper was wrong to carry a story. Each option has alternative attractions; each mechanism is useful, and one cannot substitute for the other.

The Committee was concerned about the most serious serial libel that has taken place in the past 50 years—perhaps within memory—which is that suffered by the McCanns, who were subjected to libel not once, but day after day, and not just in one newspaper, but in newspapers across Fleet street. That was eventually recognised and a lot of apologies were made, and payments were also made, but it cannot have made up for what they suffered at what was already a terribly distressing time for them. We were concerned that the self-regulatory mechanism of the press appeared to have failed in that instance, and we made a number of recommendations about how it should be strengthened. The role of the PCC needs to be borne in mind when looking at libel, because it and the courts deal with similar problems, but perhaps from different ends.

I think that I have spoken for long enough, but I have spoken for so long because we in the Committee spent a great deal of time on this serious issue. I am pleased that statements in the manifestos of all three parties, and in the programme of the coalition Government, are now being progressed and that the Government have made it clear that they are determined to take action in this area. I hope that we, as a Committee, have helped that process and that we will continue to do so in the debate on the draft Bill when it appears.

15:35

[Helen Jones (Warrington North) (Lab)]

It is a pleasure to speak under your chairmanship, Mr Benton.

We have had an interesting debate. I congratulate the members of the Culture, Media and Sport Committee on their contributions to the debate; they have done an enormous amount of work on this issue. I was pleased to hear the Minister set it out clearly that, although he wants to take action to reform the libel laws, that is a complex matter and a delicate balance that has to be struck. He set out clearly the need to protect academic and scientific debate and investigative journalism, and the problems in respect of the costs in civil proceedings, particularly libel proceedings.

My hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) also stressed the need to get the change right, and I think all hon. Members would agree. He also touched on the role of corporations in defamation cases and the possible damage to investigative journalism that can result from that.

The Select Committee Chair, the hon. Member for Maldon (Mr Whittingdale), set out clearly the state of the law and the damage that can result from that, particularly the problems that we are dealing with in respect of success fees and costs.

All the contributions to the debate reflect the real concern about the state of the law and the complex nature of the reforms that are needed. The Select Committee report on press standards, privacy and libel made a useful contribution to the debate. Others have made useful contributions, too. For instance, a number of early-day motions have been tabled in the House, and English PEN and Index on Censorship produced reports, leading the then Secretary of State for Justice, my right hon. Friend the Member for Blackburn (Mr Straw), to set up the Ministry of Justice working group on libel, which produced a report last year.

We all face the problem that any reform of the law needs to do a number of different things: protect the right of free speech, particularly following the Singh case; protect that right in free scientific debate and inquiry; and protect the rights of campaigning investigative journalists who publish articles that are in the public interest. But it also needs to ensure that those who are defamed, particularly those of modest means, have recourse to the law to protect their reputation. The hon. Member for Maldon mentioned the libels suffered by Mr and Mrs McCann. I do not think that any hon. Member in this Chamber would suggest that people in such a position ought to be debarred from having recourse to the law because they are not wealthy.

We face difficulties in drawing up a new law, but I am pleased that all parties are now committed to doing so. The Labour party manifesto for the election committed us to changing the law to protect the right of defendants to speak freely. The Conservatives and the Liberal Democrats also committed themselves to reform. I genuinely do not believe that this is a party political issue and I say that as someone who is normally a tribal politician. The House needs to scrutinise this issue carefully to get the balance of the law right.

It is clear that so-called libel tourism is causing real concern. In fact, English PEN and Index on Censorship argued that English libel law imposes unnecessary and disproportionate restrictions on free speech, and that the effect reaches throughout the world. Many of us might not go as far as that, but it was clear when the Select Committee considered the matter that restrictions may be necessary on claimants whose primary place of residence or business is not in the UK, and that they should perhaps face additional hurdles before being able to bring a case here.

It is also clear that the scope of the defence of public interest set out in the Reynolds and Jameel cases needs clarification. I hear what hon. Members have said about the risks of putting that defence into statute—I am minded to go down that route—but we must consider the rule on multiple publication, particularly in the age of the internet. The Select Committee suggested a limitation period of one year, with the courts having discretion to extend that. Again, it was clear that a balance must be struck between allowing individuals to protect their reputation, and ensuring that newspapers and other organisations are not forced to remove articles from the internet simply because the passage of time made it difficult and costly to defend them.

The report for the Ministry of Justice set out two options: a one-year limitation rule, or retaining the rule on multiple publications but allowing exceptions—perhaps the extension of qualified privilege or a similar freestanding defence.

[Paul Farrelly]

Lord Lester’s Bill addresses qualified privilege. Does my hon. Friend agree that the law on qualified privilege is not now working to provide protection as it should and was intended to do, particularly of the work of non-governmental organisations? They often feel constrained, for example, in referring to United Nations reports or reports from overseas bodies that make allegations because they fear a libel suit in which they must prove all the allegations themselves rather than relying on the report of otherwise august bodies?

[Helen Jones]

My hon. Friend makes a valid point, and I hope that we can examine the issues in detail when the draft Bill is before us. I want to state clearly that by focusing on, for example, libel tourism and cases brought by wealthy individuals, we are sometimes in danger of forgetting that others must also have access to the law. We all agree that justice is not justice unless everyone has access to it.

That leads me to what is frequently described as the elephant in the room—costs and conditional fee agreements. The Constitutional Affairs Committee considered the matter in the previous Parliament, and received a large number of submissions from media organisations indicating that they are particularly affected by the use of CFAs. The Committee said that one of the main issues for defendants in libel cases is costs. When Lord Phillips of Worth Matravers gave evidence to that Committee, he highlighted the problem of costs in defamation actions, and expressed many people’s concern that fighting and winning a case could incur substantial costs that a defendant might not be able to recover. That is a valid point, but the Committee pointed out and we must bear it in mind that while it received many submissions from media organisations, it is much more difficult to receive submissions on behalf of claimants because they are not in organised groups that can give evidence to Select Committees.

We all know that the balance is delicate. The previous Government sought to deal with the costs of defamation actions before taking action on Lord Justice Jackson’s report by limiting the uplift in CFA cases to 10%, but that did not find favour with the Committee that scrutinised it in the House. I remember that very well because I was the Whip on the Committee, and it was the only one I have ever lost. Since then, some wise heads have suggested slightly higher limitations and other ways of capping costs.

[Paul Farrelly]

As other hon. Members have said, we made a distinction between limiting the uplift in defamation cases and limiting recoverability. Does my hon. Friend agree that in such cases the issue is reputation, and that damages should be secondary? It should be possible for claimants to share damages with solicitors in part to contribute to their costs. That would not be limited by capping recoverability from the other side.

[Helen Jones]

My hon. Friend highlights an interesting suggestion by the Select Committee, but the issue that we must grapple with is whether solicitors’ firms would be prepared to take cases in those circumstances. That is why I welcome the Minister’s commitment to publishing a draft Bill, and to having pre-legislative scrutiny of the issue. I do not believe that there is a debate between us about what we want to achieve, but there is and must be a debate about how we achieve it. The law in this area, as has been said many times, is extremely complex and difficult, so it is right that the House examines it in detail, goes through the process of pre-legislative scrutiny—the previous Government also intended to do that—and comes to a proper conclusion.

We certainly want to protect the media’s right to publish articles that are in the public interest—we all know that that is slightly different from being interesting to the public—and we all want to protect the right of scientists to engage in proper scientific debate and discussion. That is vital. It is also important that people can protect themselves from malicious and untrue attacks. I was pleased to hear the Minister and others accept that we must get the balance right.

[Dr Lewis]

I totally agree with the hon. Lady’s measured approach. On a couple of occasions when I was defamed, I knew that the sources were malicious opponents, and in a recent case a political opponent at a general election. Such people do not have the guts to publish the libel; they go to a newspaper, which then publishes it, and the malicious source is protected by the newspaper, which says that it must guard its sources and never reveal them. Before we lose too much sleep over the plight of newspapers when attacking individuals’ reputations, let us remember that, to some extent, they bring much of it on themselves by happily recycling malicious falsehoods put forward by people who do not have the guts to say it for themselves.

[Helen Jones]

Unfortunately, the hon. Gentleman has far more personal experience of defamation actions than me. It is important to stress that it is fundamental to free society that we protect the rights of investigative journalists to publish comments that may be uncomfortable for people and which they may not want published, but which it is in the public interest to publish. At the same time, we must protect individuals from malicious and untrue attacks. How we engage with the draft Bill when the Government publish it will be a test of the House’s seriousness. It is true—we have experience of this—that pre-legislative scrutiny improves legislation. This time, we have a chance to get the laws on defamation right for a generation.

Hon. Members who have spoken in the debate and the various Select Committees that have looked at this subject have made valuable contributions, and I look forward to discussing the issue further. The House should engage in that complex process and draw on the valuable experience that is provided by a number of hon. Members, either through the Committee or, as was unfortunately the case for the hon. Member for New Forest East (Dr Lewis), through personal experience. I am sure that there is good will in all parts of the House to ensure that the legislation works.

15:50

[Mr Djanogly]

With the leave of the House, I thank the hon. Member for Newcastle-under-Lyme (Paul Farrelly) and my hon. Friend the Member for Maldon (Mr Whittingdale) for the interesting and helpful views that they have expressed during the debate. I recognise that the co-operative approach taken by the hon. Member for Warrington North (Helen Jones) is the best way to help the Bill to become law.

The wide range of issues that have been raised and the strongly held opinions that exist serve to illustrate the complexity of this debate. They also show the importance of finding solutions that are workable in practice and will achieve a fair balance that preserves and upholds the right to freedom of speech, while not preventing people from taking action to protect their reputation from defamatory material where appropriate. The views that hon. Members have put forward will be of considerable help to the Government in developing proposals for a draft Bill that will endeavour to strike the right balance on those important and sensitive matters.

As I said at the beginning of the debate, I am not in a position today to indicate exactly which provisions may be included in the draft Bill, or to set out conclusively the Government’s position on all the individual points raised. However, I assure hon. Members that I will take all the views that have been expressed fully into account, together with those views that have emerged from the recent debate in another place and the outcomes of the informal consultation with interested parties that will take place over the summer. A large number of points have been raised, and I would like to expand on some of them. I do not wish to restrict the consultation process in any way but, I repeat, today is about the Government encouraging debate, not about providing conclusions.

In that vein, let me congratulate my hon. Friend the Member for Maldon on his re-election as Chair of the Culture, Media and Sport Committee, not least because he can now see through his Committee’s valuable work on defamation. In a report published earlier this year, the Committee made recommendations on a range of issues relating to the law of libel. Those included proposals on a responsible journalism defence, libel tourism, the defences of justification and fair comment, the ability of corporations to bring libel actions, the early resolution of meaning and issues relating to the internet, and the multiple publication rule.

On CFAs, the Committee agreed that costs were too high and that reform was needed. As my hon. Friend said, the Committee also recommended that in defamation cases, CFA success fees should remain at 100% of base costs, but that only 10% should be recoverable from the defendant. The Committee’s approach therefore differed from both the previous Government’s proposal to impose a maximum success fee of 10%, and from Lord Justice Jackson’s recommendation to abolish the recoverability of the success fee and the after-the-event premium.

I am grateful to my hon. Friend and the members of his Committee for the valuable contribution to the debate made by that report. As the hon. Member for Stoke-on-Trent North (Joan Walley) noted, many of the issues raised were also included in a report entitled “Free speech is not for sale”, which was published by English PEN and Index on Censorship last autumn, in a report by the Ministry of Justice’s libel working group in March this year, and in Lord Lester’s private Member’s Bill. I would like to extend the Government’s thanks to all those involved in considering those important matters. I confirm that their views will be taken into account both in our review of the substantive law and in how we progress the issue of CFA reform.

[Paul Farrelly]

Will the Minister give way?

[Mr Djanogly]

I am moving on to CFA reform, if that is what the hon. Gentleman wishes to speak about.

[Paul Farrelly]

It is.

[Mr Djanogly]

Then the hon. Gentleman should listen—I knew that I would not get away by saying just that. He addressed the issue of cost and mentioned the statutory instrument produced by the previous Government at the end of the previous Parliament. I would like to explain our thinking on that issue. I confirm to him and to my hon. Friend the Member for Maldon that we are firmly committed to taking timely action to reduce the high costs under CFAs, while ensuring appropriate access to justice. As my hon. Friend spelled out in great detail, the high cost of CFAs is a concern not only in defamation proceedings, but more widely across other areas of civil litigation. I was pleased that he thought it important to look at the issue in the round, and I confirm that we will not delay the process as a consequence of that.

I am conscious that, as the hon. Member for Warrington North said, the attempt by the previous Government to limit CFA success fees in defamation cases through the Conditional Fee Agreements (Amendment) Order 2010 was not recommended to the House of Commons by the Committee. The Labour Government seemed to believe that by reducing the success fee mark up on CFAs and defamation cases, the problems that we are debating today would simply go away. It is true that those who were not rich would have been denied access to justice, but that would not have been the case for a wealthy individual or a corporation that wanted to suppress academic or scientific research, because they would not have wished to use CFAs in the first place. That blundering piecemeal approach is exactly what the Government intend not to pursue, and we will be looking at the issue in the round. I was pleased to hear the hon. Lady agree to that.

[Paul Farrelly]

The issue is complex. One person who was relieved that the statutory instrument did not succeed was Peter Wilmshurst, who is a consultant cardiologist at Shrewsbury and the University hospital of North Staffordshire. He is being sued by an American company, NMT Medical, and is being defended under a CFA. His problems are that there is one-way traffic. There are costs and delays and ultimately, he has no guarantee of getting his costs back if he is successful in countersuing for libel, or if NMT Medical loses the case. That is an example of the complexity of the issue, and the way that the libel laws urgently need to be reformed because of the costs and complexities involved, and the ability of companies to silence scientific debate.

[Mr Djanogly]

I disagree that the proposed order would have had the immediate impact that the hon. Gentleman suggests. However, we are moving on and the process is under way. That order sought only to reduce success fees in defamation-related proceedings. Although those proceedings are important, we know that CFAs have been a cause of major concern in other areas such as clinical negligence cases against the NHS, or in the context of the compensation culture debate.

The change that the order sought to achieve was inconsistent with more considered proposals in the field, which were known to the Government at that time. Lord Justice Jackson spent a year considering those proposals and wider issues, and made recommendations in January this year for the reform of CFAs across all areas of civil litigation. In addition, the report by the Culture, Media and Sport Committee entitled, “Press Standards, Privacy and Libel” was published under the chairmanship of my hon. Friend the Member for Maldon. The Government recognise the urgency and the complexity of these issues, but we strongly believe that it is important to consider the case for potential reform across all areas of civil litigation, rather than confine it to individual areas. Lord Young of Graffham is conducting a review into health and safety law and the compensation culture, and we await his report with interest. We are examining the options for reform and will announce the way forward as soon as possible.

My hon. Friend the Member for Maldon discussed funding litigation in a wider context, and I should add that Lord Justice Jackson is persuaded that solicitors and barristers should be permitted to use so-called contingency fees in litigation, subject to appropriate regulation and arrangements for costs recovery. Contingency fees are a type of no win, no fee agreement, under which the lawyer’s fee is payable only if the client wins, and is calculated as a percentage of the sum recovered. Importantly, the lawyer’s fee is a percentage of the damages, rather than being fee-based. That type of funding is widely available in other jurisdictions, but is not permitted in civil litigation in England and Wales. Lord Justice Jackson considers that contingency fees could increase access to justice. We shall also need to consider his recommendations on that issue.

My hon. Friend also expressed concern on libel tourism. There is a widespread perception that the English courts have become the forum of choice for those who want to sue for libel and that that is having a chilling effect on freedom of expression in other countries. For example, in the USA, a number of states have introduced legislation to prevent foreign libel judgments from being enforced there. I understand that legislation on the issue completed one of its stages in the US Senate this week. My hon. Friend mentioned that.

Although we need to review the implication of that possible law and other laws, such as those coming from the EU, as far as they relate to English jurisdiction, I am concerned that we should not be stampeded into basing our laws on an American world view of free speech. My hon. Friend the Member for New Forest East (Dr Lewis) expressed that point very well in his strong and valuable intervention.

There are mixed views about how far libel tourism is a real problem. A wide range of interesting views were expressed in the Second Reading debate on Lord Lester’s Bill in another place on 9 July, including by Lord Hoffmann, who in his speech and in a very interesting lecture earlier this year was extremely sceptical about the extent of any problem in that area. The problem with the Ehrenfeld case, for instance, is that she did not defend the action, so it is difficult to draw conclusions from it. Lord Hoffmann suggested that Dr Ehrenfeld could have relied on the Reynolds defence. I make no comment on that, but those issues will need to be reviewed.

Research that we conducted in the context of the Ministry of Justice libel working group’s consideration did not show any significant number of actual cases involving foreign litigants in the High Court in 2009. However, non-governmental organisations have said that a major problem arises from the threat of libel proceedings by wealthy foreigners and public figures, which is used to stifle investigative journalism, regardless of whether cases are in the end brought, so the number of cases alone may not accurately reflect the extent of the problem.

A number of possible approaches have been proposed to deal with any problems that exist. For example, the libel working group proposed procedural steps to tighten the rules and practice to head off inappropriate claims at the earliest possible stage in cases in which court permission is required to serve a defamation claim outside England and Wales. Lord Lester’s Bill has adopted a different approach, which focuses on whether the publication in England and Wales can reasonably be regarded as having caused substantial harm to reputation, having regard to the extent of publication elsewhere. We shall consider those proposals and other possible options carefully in reaching a decision on the way forward. In doing so, we will of course have to keep it in mind that there is relevant European legislation—in particular, the Brussels I regulation on jurisdictional matters—with which we shall need to ensure compliance.

The hon. Member for Newcastle-under-Lyme discussed the timing of our considerations of the Jackson review. I can advise him that we intend to revise the relevant cost-related recommendations in conjunction with our review of legal aid. That will be consulting in the autumn of this year, which he will appreciate is before the draft defamation Bill is to be tabled for consultation.

[Paul Farrelly]

May I come back on that, as the Minister might have expected? I think that I noticed the quizzical brow of my friend the Chairman of the Select Committee, the hon. Member for Maldon (Mr Whittingdale). The Minister’s statement on going ahead and more consultation in line with the reforms to legal aid has left me none the wiser as to when that process will come to an end.

[Mr Djanogly]

As I said, I cannot at this stage give a firm date for when a draft Bill will be published or for when the legal aid consultation will finally be settled. However, I can tell the hon. Gentleman that those matters are moving forward at speed. The legal aid consultation will be published in the autumn. I hope that he will take some comfort from the fact that we are not pushing the issue into the long grass.

[Paul Farrelly]

With respect, I think that comfort will be taken in certain quarters—I can hear the Bollinger corks popping as we speak.

[Mr Djanogly]

Given the time for which the Government have been in office, the hon. Gentleman should appreciate that we are moving fairly quickly, despite his suggestion of Bollinger corks popping.

The hon. Gentleman mentioned super-injunctions. In the light of recent concerns highlighted in the Trafigura case and the John Terry case, the Master of the Rolls has established a committee to examine the use of super-injunctions, the principle of open justice and other issues relating to injunctions that bind the press. As the concerns are largely procedural, relating to notification, service of documents and the application of the civil procedure rules and practice directions, it is appropriate for the judiciary to take a lead in that matter. There was a meeting of the committee at the end of June, so I can confirm that the matter is proceeding.

My hon. Friend the Member for Maldon discussed the important issue, contained in Lord Lester’s Bill, of parliamentary proceedings being protected by privilege. I agree that that will need to be reviewed carefully, and possibly in the context of a wider parliamentary privilege Bill.

The hon. Member for Newcastle-under-Lyme asked whether restrictions should be placed on the ability of corporations to bring claims for libel. I think that he was referring to clause 11 of Lord Lester’s Bill, which would require a claimant corporation to show that the publication complained of had caused or was likely to cause it substantial financial loss. English PEN and the Select Committee suggested that restrictions should be placed on the ability of corporations to sue and that key elements should be a requirement for a corporation to prove actual damage to its business, and the burden of proof being altered.

The introduction of reforms to restrict the circumstances in which corporations could bring a claim would certainly be controversial and would raise a number of legal and practical issues—for example, whether claims between competing companies should be treated differently from those where a company is suing an individual or a newspaper, and how any provisions would affect corporate bodies that were not businesses, such as academic institutions. Also unclear is the extent of any problem in that area and how any difficulties could best be addressed. We would need to consult on and consider the issue most carefully.

As I said, we aim to publish our draft Bill for formal consultation and pre-legislative scrutiny in the new year. I am sure that all the issues raised today will be the subject of extensive further discussion both within and outside Parliament in the context of that consultation and more generally. It is of great importance that we ensure that the law achieves a fair balance between freedom of expression and the protection of reputation. I thank hon. Members again for the valuable contribution to the ongoing debate on these issues that they have made today.

Question put and agreed to.

16:08

Sitting adjourned.

Written Ministerial Statements

Thursday 15th July 2010 Written Statements

Thursday 15 July 2010

South West and Yorkshire and Humber Regional Committees

Thursday 15th July 2010 Written Statements

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

This statement provides a Government response in relation to the following reports:

Introduction

South West Regional Committee inquiry into the prospects for the South West Economy published on 31 March 2010.

Yorkshire and the Humber Regional Committee inquiry into the Work of Yorkshire Forward published on 16 March 2010.

The dissolution of Parliament in April 2010 did not allow sufficient time for a formal Government response to be sent to these Committees, which following a statement by the Leader of the House on 26 May 2010 will not be re-enacted.

The Government’s response

The creation of the coalition Government has meant that the policy context has changed significantly for some issues, which the Committees have highlighted. The “Coalition: our programme for Government”, outlines the Government’s position on these and other relevant issues. As a consequence the Government do not intend to respond in detail to each of the recommendations. The Government acknowledge the reports of the Committees and thanks the Committee members and witnesses for their contributions.

The South West Regional Committee report—Prospects for South West Economy

The South West Regional Committee report made 15 recommendations and looked at:

The opportunities that green industries might provide for the people of the region in terms of jobs, skills, supply chains, investment, and the quality of life.

The importance of small and micro businesses, and social enterprises, for the region and the remarkable resilience they have shown through the recession.

The need for greater broadband coverage across the region (especially in rural areas).

South West strengths in advanced manufacturing/ composites, creative industries and tourism.

Potential vulnerability of the region's dependence on public sector employment.

The Government share the Committee’s conclusions that a green industry provides enormous opportunities for the whole of the United Kingdom. The new green economy, including a green investment bank, is at the heart of this Government’s commitments on energy and climate change alongside its role in the wider economy. This Government have also made commitments to increasing opportunities for small businesses both start up and growth and emphasised its desire for an enterprise-led recovery.

The Government notes the Committee’s comments on the vulnerability of areas outside of London that are heavily dependent on public sector jobs. To help areas and communities particularly affected by reductions in public spending make the transition to private sector-led growth and prosperity, the Government will create a regional growth fund in 2011-12 and 2012-13. This fund will operate in England only and support proposals from private and public-private bodies that create sustainable increases in business employment and growth. A White Paper later in the summer will set out details of these proposals.

The Yorkshire and the Humber Regional Committee report—Work of Yorkshire Forward

The Government agree with the Committee that Yorkshire Forward has played a part in tackling structural economic problems in Yorkshire and the Humber. However, the Government also note the Committee’s concerns that the Regional Development Agency has moved away from its core role and has taken on too many diffuse responsibilities.

The Government are committed to renewing and strengthening local economies and reorganising the delivery of economic development to ensure a focused, targeted delivery of services in areas where it can have the most benefit.

The Government intend to abolish Regional Development Agencies through the Public Bodies Bill and enable elected local authorities, working with business, to lead economic development through new Local Enterprise Partnerships. A White Paper later in the summer will set out details of these proposals.

London Development Agency (Savings 2010-11)

Thursday 15th July 2010 Written Statements

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I have written to the Mayor of London to confirm that the London Development Agency will provide £40 million in savings from their budget for 2010-11.

This follows the announcement by the Chief Secretary to the Treasury on 24 May 2010 that the other eight regional development agencies would contribute savings of £270 million in 2010-11.

A copy of my letter addressed to the Mayor of London dated 6 July 2010 has been placed in the Libraries of both Houses.

Terrorist Asset-Freezing

Thursday 15th July 2010 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Following a ruling by the Supreme Court and the passage of temporary asset-freezing legislation in February 2010, the Government are today introducing the Terrorist Asset-Freezing etc Bill in the House of Lords to put the UK’s terrorist asset-freezing regime on a secure legislative footing. The Bill will be published tomorrow.

The Bill has been informed by a public consultation exercise on draft legislation that was launched by the previous Government. The Government are today publishing by Command Paper the consultation responses received and the Government’s response.

The payment of state benefits to the spouses of designated persons

As a result of concerns raised in consultation responses and in Parliament during the discussion of emergency asset-freezing legislation and in the light of a recent European Court of Justice ruling, the Government are from today removing restrictions imposed by the previous Government on the payment of state benefits to the spouses of people who are subject to an asset-freeze (designated persons).

This Government do not believe that the asset-freezing regime should affect state benefits paid to the spouses or partners of designated persons. They do not believe that such restrictions are necessary to prevent terrorist finance and they are concerned at the impact they may have on other family members and on family life.

The Government are embedding this change in law by including a provision in the Bill to clarify that payments of state benefits to the spouses or partners of people designated by the Treasury under the UK’s domestic asset-freezing regime are not caught by asset-freezing provisions. These payments will therefore no longer have to be made under licence from the Treasury.

The Government believe that this approach will ensure that the asset-freezing regime is fairer and more proportionate, while remaining effective in preventing terrorist finance.

Annuities

Thursday 15th July 2010 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

As

announced at the emergency Budget, the Government will end the effective requirement to annuitise by age 75 from April 2011. The Treasury has today launched an eight-week consultation on the details of this change. This consultation document sets out proposals that will simplify the treatment of retirement savings and reduce complexity for individuals as well as for pension and annuity providers.

This consultation is being conducted in accordance with the code of practice on consultation and will run from 15 July 2010 until 10 September 2010 inclusive.

Copies of the document are available on the live consultations page of the Treasury website and have been deposited in the Library of the House.

East Midlands, South East and West Midlands Regional Committee

Thursday 15th July 2010 Written Statements

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

Introduction

This statement provides a Government response in relation to the following reports:

East Midlands Regional Committee inquiry into “Does the East Midlands get a Fair Share of Funding” published 26 March 2010 (HC 104-I, Session 2009-2010).

South East Regional Committee inquiry into “Housing in the South East” published on 7 April 2010 (HC 403, Session 2009-2010).

West Midlands Regional Committee inquiry into “Planning for the Future: Housing and Economic Development in the West Midlands” published 8 April 2010 (HC 421, Session 2009-2010).

West Midlands Regional Committee inquiry into “Making the Voice of the West Midlands heard: the Work of the Committee, and the future for the Region” published 8 April 2010 (HC 528, Session 2009-2010).

The dissolution of Parliament in April 2010 did not allow sufficient time for a formal Government response to be sent to these Committees, which following a statement made by the Leader of the House on 26 May 2010 will not be re-enacted.

The Government’s response

The Committees’ reports were written against the backcloth of the previous administration’s priorities. The creation of the coalition Government has meant that the policy context has changed significantly for some issues, which the Committees have highlighted. “The Coalition: our programme for government”, outlines the Government’s position on these and other relevant issues. As a consequence the Government do not intend to respond in detail to each of the recommendations. The Government acknowledge the reports of each of the Committees and thank the Committee members and witnesses for their contributions.

The East Midlands Regional Committee report—Does the East Midlands get a fair share of funding.

This was a cross-cutting report and key themes were:

Review departmental funding formulae, especially health and police.

Review transport funding and push for rail electrification.

Review timeliness of population statistics used in funding allocation methodology.

Encouragement of continued partnership working.

The report claimed that the East Midlands did not get its fair share of funding and the coalition is concerned about fairness. However, the Government believe that the most urgent issue facing the country is tackling the budget deficit and therefore all Government funding will be closely scrutinised and public expenditure will reduce over the next five years. The announcements in the Budget on 22 June were an important part of that process; in addition, the Government have published their proposed approach to the Spending Review 2010. The spending review, due to conclude in the autumn, will set spending limits for every Government Department for the period 2011-12 to 2014-15. To ensure that resources are prioritised within tighter budgets, Departments will be asked to prioritise their main programmes against a tough set of criteria to ensure value for money in public spending. The Government are determined to take decisions in a way that is in line with their values of freedom, fairness and responsibility. Therefore the Government will:

Deliver its guarantee that health spending will increase in real terms in each year of the Parliament, and that 0.7% of GNI will be spent on overseas aid by 2013;

Limit, as far as possible, the impact of reductions in spending on the poorest and most vulnerable in society, and on those regions heavily dependent on the public sector;

Protect, as far as possible, the spending that generates high economic returns;

Make further savings to fund the priorities set out in their programme.

As part of the spending review process the Public Expenditure Committee will ensure the Government take the time to consider collectively the effect of different options on its agreed priorities, and on different groups of society. Over the summer, the Public Expenditure Committee will test and challenge Departments’ plans, and ensure that they respond to external engagement.

The South East Regional Committee report—Housing in the South East.

The Government share the Committee’s conclusion that housing is crucial to the well-being of the economy and population of south east England. They further believe that development is necessary if it is to help people meet their aspirations to own their homes. That is why the Government intend to provide incentives for local authorities to deliver sustainable development, including for new homes and businesses.

The Government do not agree however that an appropriate level of development is best achieved through the use of Whitehall-imposed targets, a belief which underpins many of the report’s conclusions and recommendations. That is why we are taking steps to abolish regional strategies and regional housing targets. The Government believe that, rather than their prescribing the number and location of homes or requiring reviews of the green belt where there is no local desire to do so, local people in villages, towns and cities should be able to develop their own vision for the places in which they live. It is committed to working with local people to achieve this by, for example, enhancing community involvement in drawing up local plans, allowing local authorities to benefit financially when they facilitate new housing and enabling community-owned local housing trusts.

The West Midlands Regional Committee report—Planning for the Future: Housing and Economic Development in the West Midlands.

Most of the Committee’s recommendations relate to regional strategies and the Government consider that housing and planning decisions are best made at the local level. Consequently, it is returning decision-making powers on housing and planning to local councils by abolishing regional strategies through the Decentralisation and Localism Bill announced in the Queen’s Speech on 25 May 2010.

The Government have a vision for a simpler more efficient and transparent planning system which will support and enable the investment, economic growth and housing that the country needs to take us out of recession. A framework of incentives will ensure communities receive a share in the benefits of housing development and not just the costs.

Future public expenditure for housing will be considered in the spending review, but the Government will provide mechanisms to bring empty homes back into use and create new Local Housing Trusts that will make it simpler for communities to provide homes for local people. They also intend to explore and promote a range of measures to meet housing needs including the promotion of shared ownership schemes and helping social tenants and others to own their own home.

The Government encourage all local authorities to share best practice in developing innovative approaches to attracting new investment in housing. It also encourages all local authorities and sub-regional partnerships to engage with their partners, residents, and other interested parties when making decisions about future plans and investment.

The West Midlands Regional Committee report—Making the Voice of the West Midlands heard: the Work of the Committee, and the future for the Region.

The Government have confirmed that they do not intend to re-establish Regional Committees. The Committee considered regional governance structures and further consideration of these issues will take place through the fundamental review of the role of Government, which will be completed as part of the spending review.

Broadband Industry Day

Thursday 15th July 2010 Written Statements

[The Secretary of State for Culture, Olympics, Media and Sport (Mr Jeremy Hunt)]

On 8 June 2010, Official Report, columns 5-6WS, I set out a number of actions the Government are taking to promote rapid roll-out of superfast broadband. As announced on 8 June, I am today publishing a discussion paper setting out our thinking on broadband providers gaining access to other utilities’ infrastructure and inviting views on the most effective ways to achieve it. This coincides with an Industry Day being organised today by Broadband Delivery UK.

At the Industry Day, Broadband Delivery UK is providing further details of the Government’s approach to delivery of the commitment to make a service level of 2Mbps available to those parts of the country still without a basic level of access and the approach to the selection of the locations for the three rural market testing projects that will bring superfast broadband to rural areas.

A copy of the discussion paper will be deposited in the Libraries of both Houses.

Draft Energy National Policy Statements (Consultation)

Thursday 15th July 2010 Written Statements

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

Today, I am announcing that the Government will be launching a re-consultation in the autumn on the draft Energy National Policy Statements following the consultation undertaken by the previous Administration earlier this year, and in particular due to changes which have been made to the Appraisal of Sustainability for the Overarching Energy National Policy Statement. The revised statements will give investors the certainty they need to bring forward proposals to maintain security of supply and ensure progress towards decarbonisation and plans for the first new nuclear power station to begin generating electricity by 2018 remain on course. We intend to present the finalised statements to Parliament for ratification next spring. A detailed implementation plan for planning reform on major infrastructure—including transitional arrangements and a revised timetable—will be published later in the summer.

Centre for Environment, Fisheries and Aquaculture Science

Thursday 15th July 2010 Written Statements

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)]

The 2009-10 Annual Report and Accounts for the Centre for Environment, Fisheries and Aquaculture Science was laid before Parliament today.

European Union: Explanatory Memoranda 9 June 2010 - 9 July 2010

Thursday 15th July 2010 Written Statements

[The Minister for Europe (Mr David Lidington)]

Further to my written ministerial statement of 21 June, Official Report, columns 4-5WS. In the interest of the House and on behalf of Government I am depositing in the Library a full list of explanatory memoranda submitted by the Government from 9 June to 9 July. The House of Commons European Scrutiny Committee has yet to be established and has not met during this period. Meetings of the Lords Select Committee on the European Union commenced on 29 June 2010.

I would invite Members to examine this list and to raise any questions of policy in the usual way or via correspondence. It is vital that the House have a chance to scrutinise the work of Government and to consider policy. This is particularly true of our EU business.

Overseas Doctors (Out-of-hours Services)

Thursday 15th July 2010 Written Statements

[The Secretary of State for Health (Mr Andrew Lansley)]

I have today laid before Parliament the Government’s response to the House of Commons Health Committee’s report “The use of overseas doctors in providing out-of-hours services: Fifth Report of Session 2009-10” which was published on 8 April 2010.

This Government are committed to ensuring that foreign healthcare professionals are not allowed to work in the national health service unless they have proven their competence and language skills, and we are working with the General Medical Council and others to explore a number of options to put a stop to foreign doctors slipping through the net.

In particular, we plan to explore how the proposed NHS Commissioning Board could oversee a more effective system for undertaking checks on language knowledge of primary care practitioners to address the historic lack of consistency in the application of checks by primary care trusts.

The Government also share the concerns raised by the Committee that since 2004 there have been serious failures in out-of-hours services, both on the part of the Government of the day to secure good value for money from the 2004 reforms and on the part of some primary care trusts to monitor the quality of out-of-hours services effectively since then. This situation has been compounded by a lack of clarity on responsibility between commissioners and providers and little or no integration of out-of-hours care with urgent care.

The Government are committed to providing universal access to high-quality urgent care services 24 hours a day, seven days a week, including out-of-hours services. Our vision for urgent care will be to replace the ad hoc unco-ordinated system that has developed in England over the last 13 years.

We will help the public to better understand what urgent care services are available to them by improving information to support choice and accountability and introducing a new single telephone number to provide consistent clinical assessment at point of contact and direct patients to the right service, first time. The proposed new NHS Commissioning Board will also have a role in ensuring that those commissioning out-of-hours services ensure that contracts with out-of-hours providers detail rigorous standards in respect of the recruitment, induction and training that doctors should receive and that there is more effective contract monitoring.

Immigration Rules

Thursday 15th July 2010 Written Statements

[The Minister for Immigration (Damian Green)]

On 28 June 2010 the Home Secretary set out our proposals for an annual limit on the number of non-EU economic migrants admitted into the UK to live and work, including an interim limit for the tier 1 (general) and tier 2 (general) categories of the points-based-system.

On the same date we laid a Statement of Changes in Immigration Rules (HC 59) to implement the interim limit for the tier 1 (general) category, the category for highly skilled workers who do not require a job offer before coming to the UK.

In the case of tier 2 (general), the category for sponsored skilled workers with a job offer, the interim limit will be applied by limiting the number of certificates of sponsorship which licensed tier 2 (general) sponsors are authorised to issue. We previously considered that this does not require changes to the immigration rules. However, subsequent legal decisions have made the position less clear. For the avoidance of doubt, I am laying changes today which make explicit provision for the Secretary of State to limit both the number of certificates of sponsorship that may be assigned to points based system sponsors overall during any particular period, and the number of certificates of sponsorship that may be assigned to individual sponsors.

As the Home Secretary set out in her statement on 28 June 2010, the total number of certificates of sponsorship that sponsors are authorised to issue under tier 2 (general) will be set at a level that achieves a reduction of 1,300 in the number of migrants admitted under this category in the equivalent period a year previously. The tier 2 interim limit will not apply to intra-company transferees, ministers of religion or to elite sportspersons, nor will it apply to dependants of tier 2 migrants.

The UK Border Agency’s sponsor management team has already contacted sponsors in connection with the implementation of this interim limit, and will be writing to each sponsor individually to advise them of how the interim limit affects their allocation of certificates of sponsorship.

Crossrail: Annual Update

Thursday 15th July 2010 Written Statements

[The Minister of State, Department for Transport (Mrs Theresa Villiers)]

During the passage of the Crossrail Act through Parliament, a commitment was given to Parliament that a statement would be published at least every 12 months until the completion of the construction of Crossrail, setting out information about the project’s funding and finances.

In line with this commitment, I am therefore publishing this statement within 12 months of the previous statement, which was published on 16 July 2009, and set out below the information required to fulfil the commitment to Parliament:

Social Fund Reports (2009-10)

Thursday 15th July 2010 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I am pleased to announce the publication of the annual report by the Secretary of State for Work and Pensions on the Social Fund 2009-10 and the Social Fund Commissioner’s annual report 2009-10.

The Secretary of State’s annual report on the Social Fund for 2009-10 was published today and has been laid before Parliament. Copies are available in the Vote Office and the Printed Paper Office.

The report records that total gross expenditure in 2009-10, excluding winter fuel payments, was over £1.3 billion. This figure included over 263,000 non-repayable community care grants and almost 4 million interest-free loans together worth £850 million. Also, cold weather payments worth £290 million, funeral payments worth £47 million and sure start maternity grants worth £139 million were paid.

In addition an estimated 9.1 million households benefited from a winter fuel payment at an estimated cost of around £2.7 billion.

The Social Fund Commissioner’s report has also been published today and copies are available in the Libraries of both Houses.