House of Commons

Monday 11th October 2010 Commons Chamber

Monday 11 October 2010

The House met at half-past Two o’clock

Prayers

Monday 11th October 2010 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Monday 11th October 2010 Commons Chamber

The Secretary of State was asked—

[Jo Swinson (East Dunbartonshire) (LD)]

1. What recent representations he has received on the bullying in schools of children with allergies.

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

The Secretary of State and the ministerial team have not received any recent representation on the bullying of children with allergies.

[Jo Swinson]

I thank the Minister for that answer. I chaired a meeting of the all-party group on allergies at which a number of children spoke about their experiences of potentially life-threatening bullying in schools. For example, they had foods to which they are severely allergic forced upon them. Some schools’ response to that was commendable, but in others it was not taken seriously. Would the Minister be happy to meet me and a group of these children to discuss their experiences of that problem and potential solutions?

[Tim Loughton]

I am grateful to my hon. Friend for raising that point. I pay tribute to the good work that she has done with the all-party group. She secured a debate on the subject and has raised the matter on numerous other occasions. I would be delighted to meet a group of representatives. I met a large body of young people who have long-term conditions who came to lobby us about their circumstances at school. The problem affects 18 million people throughout the country and it shows no sign of abating among younger people, so I am more than happy to take forward her offer.

[Tony Baldry (Banbury) (Con)]

2. If he will discuss with Ofsted its arrangements for measuring value added by schools.

[The Minister of State, Department for Education (Mr Nick Gibb)]

The Department has regular discussions with Ofsted about its approach to school inspection, including its assessments of pupils’ educational attainment and achievement. That engagement will continue as Ofsted develops a new streamlined and refocused inspection framework built around the core areas of pupil achievement, teaching, leadership and behaviour and safety.

[Tony Baldry]

Can my hon. Friend assure me that the achievements of schools, such as Banbury school, which have challenging catchment areas will be fairly reflected in Ofsted inspection reports?

[Mr Gibb]

I can give my hon. Friend that assurance. Ofsted takes into account not just raw attainment at schools but the progress of pupils. Between September 2009 and March 2010, of schools in challenging areas, 10% were awarded the outstanding grading, compared with 11% of all schools.

[Toby Perkins (Chesterfield) (Lab)]

Two head teachers in Chesterfield told me how liberating it was for them when contextual value added measures were put in place and there was finally acknowledgement of the tough circumstances under which they performed their roles. Does the Minister agree that the CVA measures, as a key part of the inspection that assists parents, help parents to assess the strengths of teaching at a school, not just the strengths of an intake?

[Mr Gibb]

May I congratulate the hon. Gentleman on his appointment? I look forward to working closely with him to achieve our shared objective, which is to close the attainment gap between those from wealthier and those from poorer backgrounds. I assure him that, in Ofsted inspections, the progress of pupils is as important as the absolute level of attainment. Value added figures, whether the current CVA figure or a review figure that measures progress, are important in all Ofsted inspections.

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

4. What his policy is on the provision of support for children with special educational needs.

[The Minister of State, Department for Education (Sarah Teather)]

To deliver the Government’s commitments on special educational needs, I am publishing a Green Paper later this year to look at the wide range of issues concerning children with special educational needs and disabilities. To inform this important work, I have issued a call for views and have met parents, teachers, local authorities, charities and other groups. I am also considering the findings of recent reviews, including the recent report from Ofsted.

[Robert Flello]

I am grateful to the Minister for that answer and I congratulate the new Opposition Front Benchers on their appointment.

In some schools, support staff provided for statemented children are being redirected to other children by head teachers who use such staff almost as a floating resource. Can the Minister assure me that she will look into that matter as a great priority?

[Sarah Teather]

I thank the hon. Gentleman for raising that point. I understand from my discussion with him prior to questions that a specific issue is concerning him and has led him to ask that question. I wonder whether he will be good enough to write to me because it would concern me greatly if schools were redirecting to other children resources that were supposed to be allocated to children who have a statement in special educational needs. It would be useful to have his feedback in advance of the Green Paper.

[John Howell (Henley) (Con)]

I welcome the Minister’s commitment to children with special educational needs. My constituency has schools with well in excess of 50% of pupils on the special educational needs register. How will the Minister encourage Ofsted to look at the bigger picture when it comes to its assessments, because the problems are often complex?

[Sarah Teather]

My hon. Friend is correct to say that the problems are complex. It is absolutely right that school inspections take account of how well pupils with special educational needs and disabilities are provided for, as well as how well they learn and progress. That will be an important consideration for Ofsted as it develops new inspection arrangements focused specifically on the core areas of achievement, teaching, leadership, behaviour and safety.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Does the Minister agree that there has been a serious improvement in SEN children’s facilities and support up to the age of 16? However, does she further agree that the real challenge, as anyone who has looked at the matter in detail will know, is provision from ages 16 to 18, and that things get even more challenging for parents when their children are 18?

[Sarah Teather]

I absolutely agree with the hon. Gentleman, with whom I have discussed this matter before. I want the Green Paper to look specifically at that. He will be aware that there are a wide range of reports on what happens in schools and special schools, and on support for children in mainstream schools and in special units that are attached to them. However, there is very little research on transition. If one issue has come out clearly from my meetings with parents and voluntary sector organisations, it is the need to think about the whole of a child’s life—all the way through.

[Charlotte Leslie (Bristol North West) (Con)]

In my constituency, many parents, particularly those from less advantaged backgrounds, fight hard to get their children’s special educational needs recognised. Will my hon. Friend guarantee that she will look carefully at that?

[Sarah Teather]

My hon. Friend is correct to say that many families feel that they have had to battle to get their child’s needs recognised, let alone catered for. That is very much why we will produce the Green Paper later this year. We are looking at how we can make the system less adversarial and how we can focus more, for example, on outcomes, and how to make the process more transparent. I hope that any parents of SEN children in her constituency who have strong views will respond to our call for views. They can go to the Department’s website and submit them now to help to ensure that we frame the questions in our Green Paper correctly.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

Thank you, Mr Speaker. I am delighted to address you from the Dispatch Box for the first time.

I welcome the Minister’s commitment to SEN provision. However, there is significant feeling among the SEN community that the whirlwind pace of change within the Department for Education has left little time to consider the effect that the changes will have on SEN provision, and particularly the effect that academies and free schools will have on funding from local authorities. Will she reassure the House that those ideological experiments will not take money away from council budgets for providing support to the one in five children with SEN?

[Sarah Teather]

May I begin by congratulating the hon. Lady on her promotion? It will be a great pleasure to debate these issues with her. I am aware that she has a long-standing interest in special educational needs—she was responsible for the passage of the Special Educational Needs (Information) Act 2008. I am sure she will be a knowledgeable opponent over the next few months, which I look forward to.

On the hon. Lady’s specific question—[Interruption.] I am being heckled when I am trying to pay a compliment. Labour Members cannot even let me be nice to Opposition spokesperson. Goodness gracious! They should wait till next week—[Interruption.] There’s always a last time. I should like to answer the hon. Lady’s question. On academies and free schools, she would be aware, if she had been in the Chamber for the debate on the Academies Act 2010 before the summer, that an advisory group is looking specifically at funding issues.

[Greg Mulholland (Leeds North West) (LD)]

5. What recent representations he has received on educational provision for children with special needs in Leeds North West constituency.

[The Minister of State, Department for Education (Sarah Teather)]

There have been no representations received from Leeds local authority in relation to provision for children with special educational needs in the authority’s area. School organisation and special educational provision are matters for local consultation and determination, and where there are disagreements, they may be referred to the independent schools adjudicator for consideration.

[Greg Mulholland]

I thank the Minister for her answer. That there have been no representations contrasts with the fact that many representations have been made to Education Leeds and similar authorities. Lucy Holmes, my constituent, has finally, after a lengthy battle—10 years—had a review of her SEN statement, in which time, of course, her needs have changed substantially. What will the new Government do to ensure that children’s needs are met by reviewing statements far more frequently?

[Mr Speaker]

In the Leeds North West constituency.

[Sarah Teather]

The statement of needs is supposed to be reviewed annually, so it is a matter of concern if that is not happening and it has taken 10 years for such a review to take place. However, I should also say that too often a statement of needs is a static document that ends up in a drawer, rather than a dynamic document used as a basis for discussion and focusing on outcomes. Again, I hope that the Green Paper will begin to examine this issue.

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

6. What assessment he has made of the effects on children from the most deprived backgrounds of the changes to the Building Schools for the Future programme.

[The Secretary of State for Education (Michael Gove)]

The decision to end the Building Schools for the Future programme was designed to ensure that resources were targeted more effectively on the front line. It is deeply regrettable that the fiscal position that we inherited required projects to be stopped, but the capital review that we have put in place is designed to ensure that money goes to those who need it and schools are rebuilt in the areas of greatest need.

[Bridget Phillipson]

BSF cuts will hit deprived areas the hardest. Could the Secretary of State confirm that the poorest areas will receive the most help under the pupil premium?

[Michael Gove]

Yes, I absolutely can confirm that under the pupil premium the students most in need will receive the most help.

[Patrick Mercer (Newark) (Con)]

The Secretary of State will be aware of the Grove school in Newark, where many deprived children are educated. I am grateful to him for arranging a visit by Lord Hill, but things really are desperate there. The next flood in Newark, which will come at any time now with the next heavy rainfall, will mean that they will be unable to teach at the school. Would the Secretary of State therefore be kind enough to arrange a date for the noble Lord’s visit?

[Michael Gove]

I am grateful to my hon. Friend for the passionate way in which he makes his case. I am well aware that in Nottinghamshire, and in many other areas, schools that desperately need refurbishment and rebuilding have been denied resources. One of the reasons why we had to change the BSF programme was that it was behind on its timetable, it was inefficient in the allocation of resources and vulnerable children, such as those for whom he speaks so passionately, were losing out. I can guarantee that Lord Hill will be in touch later today to fix a precise date to see my hon. Friend.

[Mr Dennis Skinner (Bolsover) (Lab)]

Has the Secretary of State received a report of our meeting with Jonathan Hill regarding Tibshelf community school in my constituency? The school is 100 years old, it is being held up by pit props and the teachers are having to travel six miles back and forth from Tibshelf to Deincourt community school, which is being closed by the county council. We desperately need to get this job done. The Minister said that this is a compelling case. Does the Secretary of State feel compelled to replace the school and rebuild it?

[Michael Gove]

The hon. Gentleman always makes a compelling case for his constituents, and I am well aware that in the part of Derbyshire that he represents resources have not been devoted to the front line as efficiently as they should have been. One of the aims of the capital review that we have put in place and of the comprehensive spending review, which will report to the House next Wednesday, is to ensure that the schools in greatest need—both secondary and primary—receive resources as quickly and efficiently as possible.

[Andy Burnham (Leigh) (Lab)]

It is a pleasure finally to face the right hon. Gentleman across the Dispatch Box; he and I have not done this before. I hope that he will not mind my saying at the beginning that my observation of him so far in his job is that he has failed to understand the difference between being a Minister and being a journalist, displaying a fairly loose grip on the facts. He promised hundreds of free schools, but has signed off just 16; he promised thousands of academies but has so far signed up only 50; and his mistakes on the BSF programme threw schools into chaos and prompted four legal challenges from local authorities. Can he give the House a straightforward answer today? Can he confirm that he proceeded with his decision to scrap school building projects despite being explicitly warned by his civil servants that local authorities would have a “fairly strong legal case” against his Department?

[Michael Gove]

I thank the right hon. Gentleman for his question. First, may I congratulate him on his elevation to shadow Education Secretary? I admire the way in which he fought his leadership campaign. He was an advocate for both modernisation and aspirational socialism, which is why, of course, he came fourth out of five, neither of those values being entirely flavour of the month in the Labour party at the moment. May I also thank him for his reference to my past as a journalist? It was a pleasure to spend some time in a job outside politics before I came into this House—I recommend it to him. May I also say that, as the permanent secretary made clear to the Select Committee when I was answering its questions back in July, the advice that it was alleged I was offered was not passed on to me?

[Andy Burnham]

I thank the right hon. Gentleman for his characteristic graciousness. Today he is wearing something of the air of the self-satisfied teacher’s pet who has escaped the attentions of the biggest boy in the playground, but I say to him that my right hon. Friend the Member for Morley and Outwood (Ed Balls) and I are the strike force for the parliamentary football team—he softens up opponents and gives me the bullets to finish them off. I give that warning to the right hon. Gentleman.

The right hon. Gentleman’s answer is typical of the cavalier way in which he is running his Department. He has got himself into a mess because of his determination to inflict a political experiment on our schools, skewing the budget towards pet projects instead of helping all schools through tough times. We have already heard that he has wasted £260 million through his botched decision making—is that what Philip Green would call a shocking waste? Will the right hon. Gentleman now tell this House how much his Department has set aside to cover the legal costs and possible compensation to local authorities caused by the mistakes that he has made?

[Michael Gove]

That was a fantastic question—or series of questions. I am impressed that the strike force in the Labour party parliamentary football team comes, according to the right hon. Gentleman, equipped with bullets. It says something about the approach of the right hon. Member for Morley and Outwood (Ed Balls) towards playing fair that he regards a Tommy gun as an appropriate thing to bring on to the football field.

There was a certain element of the spraying of fire in the question asked by the right hon. Member for Leigh (Andy Burnham). May I say that we will vigorously contest the judicial review of our decision? It is really important that people appreciate that the Building Schools for the Future programme had failed. Unfortunately, in 2008, instead of 200 schools being built, fewer than 50 had been built. Under the Building Schools for the Future programme, £11 million was wasted on consultants. One consultant secured the equivalent of £1.35 million, while schools in my constituency, the right hon. Gentleman’s constituency and almost every hon. Member’s constituency needed that resource. We will make no apology for ensuring that in the education budget money goes not to lawyers and consultants but to the front line and that 13 years of Labour failure is at last reversed by a coalition Government committed to aspiration.

[Neil Carmichael (Stroud) (Con)]

7. What plans he has to increase the level of provision of vocational education in schools.

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

The coalition agreement committed us to improving the quality of vocational education. Alongside Professor Alison Wolf’s review of such matters, we aim to open at least 12 university technical colleges offering high-quality vocational learning to 14 to 19-year-olds—schools that put vocational training at the core of their curriculum offer.

[Neil Carmichael]

I thank the Minister for that clear answer, which underlines the reason why he is so popular in the further education sector and elsewhere, and as regards providing apprenticeships—

[Mr Dennis Skinner (Bolsover) (Lab)]

Get on with it.

[Neil Carmichael]

All right. What will be done to ensure that pupils are properly signposted towards and encouraged to take vocational training?

[Mr Hayes]

I think that my hon. Friend understated my popularity somewhat, but nevertheless he will know that we are entirely committed to ensuring that people get the right kind of advice about vocational options. Too often, people have lacked that advice and it is important that those with the aptitudes, tastes, talents and choices to take them down that road get proper advice and advice on progression, too.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

Does the Minister accept that young people from poorer communities are often put into vocational GCSEs as an easy option, as a result of which academic subjects such as history are becoming the preserve of the elite? What steps is the Minister taking to ensure that “academic equivalence” GCSEs are not becoming the default option for poorer communities?

[Mr Hayes]

As a qualified history teacher, I share the hon. Gentleman’s passion for the teaching of history, but I think he underestimates and undervalues—as do so many from the bourgeois class that he personifies—the significance of technical skills, craft skills and practical skills. They matter too, and the Government know it.

[Mr James Gray (North Wiltshire) (Con)]

8. What percentage of schools have (a) applied for and (b) been granted academy status.

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

Am I up? [Hon. Members: “More, more!”] I am intoxicated by the exuberance of the situation, one might say.

The Government are absolutely clear about their determination to deliver practical learning in the way that I have described, and—[Interruption.]

[Mr Speaker]

Order. The hon. Gentleman might be a tad confused—I hope not. We are on Question 8 from Mr James Gray.

[The Secretary of State for Education (Michael Gove)]

Thank you, Mr Speaker. The exuberance and enthusiasm of my ministerial colleague is something to behold.

More than 300 academy schools had been opened as of 1 September 2010, and since the Academies Act 2010 received Royal Assent two months ago we have received 189 applications to convert to academy status, or 5.9% of the outstanding mainstream schools that are currently eligible. Some 32 new academies opened on 1 September, and 23 more have opened since then, the equivalent of one nearly every working day.

[Mr Gray]

I had the good fortune to visit the Wellington academy in the constituency of my neighbour, my hon. Friend the Member for Devizes (Claire Perry), last Friday. It is an outstanding example of what an academy can do. It has gone from being the worst-performing school in Wiltshire to being one of the best on a like-for-like basis. GCSE passes have doubled and it is now offering A-levels for the first time, and its level of exclusions has gone from being the highest in Wiltshire to being the lowest. Does the Secretary of State agree that academy status can not only be of benefit to higher-performing schools but be of huge benefit to low-performing schools that wish to improve?

[Michael Gove]

My hon. Friend makes a compelling case. Academy status can benefit all schools, which is one reason why the former right hon. Member for Sedgefield argued that academy freedoms should be extended to all schools. What a pity that the Opposition have retreated from that high water mark of reform.

[Kevin Brennan (Cardiff West) (Lab)]

For the avoidance of any confusion among those on the Treasury Bench, this is a supplementary question to Question 8.

In opposition, the Secretary of State said that in his first 100 days he would identify the 100 weakest schools and rapidly give them new leadership, and give hundreds of high-performing schools academy freedoms so that they could help weaker-performing schools. Can he confirm that he has so far failed to enforce any obligation whatever on the 50 or so new academies to help weaker schools, and that he has done nothing about his pledge to help the weakest 100 schools? Is he not just picking a few of the favoured and allowing the rest to drift?

[Michael Gove]

The hon. Gentleman will have to do better than that. All the schools that have been granted academy status either are helping or will help underperforming schools to improve. We have actively identified some of the weakest schools in the country and will shortly announce the partners, whether existing academy sponsors or high-performing schools, that will ensure that those schools raise their performance. It is a tragedy that under the Government of whom he was a part, the gap between rich and poor widened and we came near the bottom of the 57 most advanced countries in the world in educational achievement. It is a particular tragedy that the gap between private and state schools grew under his Government, testament to which is the fact that in the shadow Cabinet under which he serves, more members were educated in private or selective schools than in comprehensives.

[Liz Kendall (Leicester West) (Lab)]

9. What plans he has for the future of the primary school curriculum; and if he will make a statement.

[The Minister of State, Department for Education (Mr Nick Gibb)]

We have made clear our intention to review the national curriculum at both primary and secondary levels, to restore it to its original purpose—a core national entitlement organised around subject disciplines. We want to arrive at a simple core, informed by the best international practice, that will provide a minimum entitlement for pupils. We will announce more details about our plans later in the year.

[Liz Kendall]

I thank the Minister for his reply. Head teachers in my constituency are concerned that Government have still not come forward with their proposals for replacing the primary school curriculum, and that the delay is preventing them from properly planning for the future. Will he reassure the House that the Government’s plans will be published in time for primary school heads to get the staff, timetables and resources that they need to start the next financial year?

[Mr Gibb]

Yes, primary schools should continue with the current primary curriculum. The details and timings will be announced later in the year, but I assure the hon. Lady that there will be plenty of lead time available to schools to implement the new curriculum. We do not want what the previous Government had, which was “initiativitis”. Schools received new initiatives every two weeks, and lever arch files full of prescriptive instructions about how to teach were disseminated to all our schools.

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

Will the Minister comment on the fact that many primary schools appear to be teaching multiple methods for basic mathematical problems, which has been set out through the national strategies, rather than achieving fluency in key methods, which enables those pupils to go on and achieve and where countries such as Flanders and Finland have proved so successful?

[Mr Gibb]

I pay tribute to my hon. Friend for her passion about the way maths is taught in our schools. Of course, how children are taught is a pedagogical matter, which should be left to the professionalism of teachers, but what is taught and when will be matters for the national curriculum review.

[Bill Esterson (Sefton Central) (Lab)]

10. How many proposed play areas planned to be built under the playbuilders scheme after July 2010 will not proceed.

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

We believe that it is important that there are safe, free local places to play. However, the Department inherited unaffordable spending commitments for this year, and play has therefore had to make a contribution to the savings needed.

Local authorities will be told of their revised allocations within the next month, soon after the comprehensive spending review, and it will be for them to decide which play areas proceed, according to their own local priorities. Local authorities are not required to inform my Department of their decisions.

[Bill Esterson]

Aintree village is one of the areas in my constituency that was due to benefit from a new play area. One reason that residents and the parish council wanted the play area was to tackle childhood obesity. Does the Minister agree with me, and with residents in Aintree and across Sefton, that decent-quality play areas are a good way to tackle childhood obesity? What measures will he take to support local authorities and others who wish to see the kind of support needed to tackle childhood obesity?

[Tim Loughton]

I think we all agree with the hon. Gentleman about the importance of play in so many different areas. It can help to affect social divisions, obesity and other health measures. Of course, we fully share his aspirations and, I am sure, those of the people behind the project in Aintree village. I pay tribute to the people in his constituency and in other communities who have striven hard for those play areas, but I repeat that the play funding was based on the dodgy accounting of the previous Government’s end-year flexibility system. On that basis, I am afraid that it has had to be reviewed, but I hope that there will be money forthcoming in due course so that other projects can proceed. He will hear about that in the next few weeks.

[Andrew Percy (Brigg and Goole) (Con)]

The Minister may be aware that I have made several representations on this subject regarding a number of play parks in my constituency, including in Winterton, Keadby, Crowle and Burringham. What is now coming back from some of those is the fact that there have been several delays in the process, through the fault of the local councils over the years. May we have an assurance that the Department will look favourably on the cases of park bids that have been delayed because of problems within the local authorities?

[Tim Loughton]

Again, I pay tribute to my hon. Friend and his concern for that important matter, but it is not for the Department for Education to specify which particular play projects are to go ahead. That area is not ring-fenced; it is up to the local authorities. Once we make the further announcement following the comprehensive spending review, I very much hope that those projects that are to go ahead do so with all speed.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

11. What steps he plans to take to improve the educational achievement of children from the most deprived areas; and if he will make a statement.

[The Minister of State, Department for Education (Sarah Teather)]

Raising the attainment of children from the most deprived areas is a priority for the coalition Government. From September 2011, we are introducing a pupil premium, which will guarantee additional funding for schools with deprived children, and ensure that the poorest children, wherever they live, are able to receive the right support. Schools will decide how to spend the premium so as to achieve the best results for their disadvantaged pupils.

[Miss McIntosh]

I am grateful to my hon. Friend the Minister for that reply. Will she confirm that that premium will cover those living in pockets of rural poverty in Thirsk and Malton, which are particularly sparsely populated and rural in nature, to increase their chances of social mobility?

[Sarah Teather]

One of the points about the pupil premium is the fact that, because it targets the individual child, it has a much better chance of picking up those areas where there are pockets of deprivation, which have been missed by other ways of distributing deprivation funding. It does not matter whether children live in a wealthy area or not; unfortunately, the stats about their parents’ income are still the greatest predictor of how well they will do at school. I think that that is an absolute scandal. Unfortunately, it is the legacy of the previous Labour Government.

[Mr Iain Wright (Hartlepool) (Lab)]

The educational achievement of young people in deprived areas has risen highest for those in receipt of the education maintenance allowance. EMA is undoubtedly helping to break the decades-old link between deprivation, attainment and staying-on rates. That being the case, and given the comments made by the Minister, will she commit to retaining EMA in its current form?

[Sarah Teather]

The hon. Gentleman will be aware that we have made a commitment this year, and he will be perfectly well aware that future spending decisions are a matter for the spending review. He will have to wait with bated breath until next week.

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

Can the Minister tell the House what steps she is taking to ensure that children from the most deprived areas have access to the highest quality teaching, and to make sure that teaching in those areas is subject to the most effective performance management?

[Sarah Teather]

My hon. Friend will be aware that we have expanded Teach First, something that both the Liberal Democrats and the Conservatives feel strongly about. It was a Liberal Democrat manifesto commitment. I hope that will have a considerable impact on raising the attainment of children in deprived areas. Of course, pupil premiums will make sure that there are extra resources for schools to spend as they choose: they may be spent on one-to-one tuition, or on other things that schools feel are best for narrowing that attainment gap.

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

There are hundreds of teaching assistants working in primary schools in the most deprived areas of not just my constituency but the whole country. Many of them are fearful of the effect of the budgetary decisions that the Minister is about to make. Will she give an assurance that teaching assistant posts, which have had a massive impact on educational attainment, will be protected, and perhaps enhanced?

[Sarah Teather]

The hon. Gentleman will be aware—I have already said this to one of his hon. Friends—that future spending is subject to the spending review, which will take place next week. I cannot tell him what future spending will be until after the spending review next week. What I will say is that there is a clear coalition commitment to targeting extra resources on disadvantaged children through the pupil premium, which schools can spend as they wish to narrow the attainment gap between the richest and the poorest students in their school. They may well choose to do that by having more teaching assistants, but they may choose to spend the money on other things.

[Mr Philip Hollobone (Kettering) (Con)]

12. If he will reduce the volume of guidance and advice his Department issues to head teachers.

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

You can’t keep a good man down.

The Government are committed to reducing the amount of guidance and advice issued to schools. Our intention is to streamline and reduce schools guidance so that it is provided only where there is evidence of demand from professionals. We want to free up head teachers so that they have more time to focus on the important task of raising standards in our schools.

[Mr Hollobone]

Head teachers in the Kettering constituency are absolutely fed up with the scale of guidance and advice that they receive from central Government. My hon. Friend has a deserved reputation as the enemy of red tape, so can he illustrate the scale and volume of the guidance and advice issued by the Department under the previous regime?

[Mr Hayes]

I can indeed. I have here the advice and guidance just on behaviour and attendance. It is roughly equivalent in length to the complete works of Shakespeare, which I also happen to have to hand. This Government are determined to reduce red tape and bureaucracy. We want teachers to be able to get on and teach, so that they do their best by our children.

[Margot James (Stourbridge) (Con)]

13. What recent assessment he has made of the effectiveness of school achievement and attainment league tables in providing information on academic standards in schools; and if he will make a statement.

[The Secretary of State for Education (Michael Gove)]

We plan to reform the school performance tables to make them more rigorous and to ensure that they focus on academic standards. We have proposed introducing a new measure, the English baccalaureate, that will recognise achievement in not just English and mathematics but the sciences, a modern or ancient foreign language, and humanities such as history or geography.

[Margot James]

I thank my right hon. Friend for his answer. The number of students studying history and geography at GCSE level in some schools in Stourbridge has fallen as low as 25%. That is partly due to schools encouraging the study of softer subjects to improve their league table positions. Does my right hon. Friend agree that that is an indictment of the current system, and has he any steps in mind to remedy the situation?

[Michael Gove]

I thank my hon. Friend for her question. She joins a growing cross-party consensus, led by the hon. Member for Stoke-on-Trent Central (Tristram Hunt), that we need to ensure that children up to the age of 16 follow a stretching academic curriculum, as they do in many other European countries. As a passionate pro-European, I would like to see us emulate those countries in that regard, and in many others.

[Nic Dakin (Scunthorpe) (Lab)]

14. What estimate his Department has made of the number of children who will be eligible for free school meals in September 2010; and if he will make a statement.

[The Minister of State, Department for Education (Mr Nick Gibb)]

The number of pupils of compulsory school age in maintained schools eligible for free school meals was 1,179,880 in January 2010. The Department has not produced an estimate of the number of pupils eligible for free school meals in September 2010; the figures are produced annually as part of the annual school census, completed by local authorities in January each year. Leaving time for compilation, the next set of figures will be available in May 2011.

[Nic Dakin]

I thank the Minister for his answer. He will note my interest as a former principal. Does he think it is fair that 16 to 18-year-olds attending colleges are ineligible for free school meals, when 16% in FE colleges and 10% in sixth-form colleges are from disadvantaged backgrounds, compared with only 7% in maintained schools?

[Mr Gibb]

I take on board the hon. Gentleman’s comments. I share his view. We have committed to maintaining spending on free school meals this year. Further announcements will be made after the spending review.

[Simon Kirby (Brighton, Kemptown) (Con)]

15. What progress has been made on his Department’s plans to help families with multiple problems.

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

The Government are committed to a new approach to supporting families with multiple problems. My officials are working with the Association of Directors of Children’s Services and voluntary organisations to encourage local innovation to tackle barriers. Since April, family interventions have supported 4,725 families with multiple problems, already exceeding the 3,518 supported in the whole of last year. Ninety-three per cent. of families completed or are still receiving support, and no fewer than 79% left with successful outcomes.

[Simon Kirby]

I am sure the Minister remembers visiting Whitehawk primary school in my constituency. With reference to families with multiple problems, does he agree that dealing with these complex issues early can often save the state money in the long run?

[Tim Loughton]

My hon. Friend makes a good point. I well remember my visit to Whitehawk primary school, which has done a fantastic job in joining up support services for many of the families living in the deprived area around that part of Brighton. Independent evaluations show the considerable savings of such intervention programmes, which can cost on average from £8,000 to £20,000 per family, but which save around £50,000 per family and much more for those with particularly challenging problems.

[David T. C. Davies (Monmouth) (Con)]

16. What his latest assessment is of levels of educational under-achievement among white working-class boys.

[The Minister of State, Department for Education (Mr Nick Gibb)]

White boys in receipt of free school meals are among the lowest attaining groups of students. In 2009, just 19.4% of white boys eligible for free school meals achieved five or more good GCSEs including English and maths, compared to 50.7% of all pupils.

[David T. C. Davies]

I am grateful to the Minister, who obviously recognises the problem, which was first raised by the National Union of Teachers in a report about two years ago. Can he assure us that, unlike the previous Government, he will not, for reasons of political correctness, try to brush it under the carpet, and that he will do something about it?

[Mr Gibb]

It is a concern when any particular group is significantly underperforming compared with the national average. One big priority for the Government is to close the attainment gap between those from the wealthiest and the poorest backgrounds. We are focusing on that in a range of education policies from academies to free schools, and also in our focus on improving behaviour in schools and reviewing the curriculum.

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

17. What recent assessment he has made of the merits of year 3 play pathfinder projects in Blackpool.

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

All local authorities, including Blackpool, have provided financial information on their 2010-11 play programmes and this is being considered by our Department. However, as I said earlier, the Department is not making judgments on the relative merits of individual sites, and does not hold this information. Local authorities will be notified within the next month of their revised play capital allocations. It will then be for local authorities to decide which play areas go ahead, based on local needs.

[Mr Marsden]

Eleven play pathfinder projects in Blackpool are waiting with bated breath for those allocations. That includes the Fishers Field project in my constituency, which is a highly imaginative but complex project involving new playing fields and a natural park. I hear what the Minister says, but his colleague the Secretary of State, in reply to me earlier in the summer, said he was clear about the needs of Blackpool in terms of deprivation, mobility and general problems in that area. Will the Minister pass on the message that the people of Blackpool would like to see such projects go ahead?

[Tim Loughton]

As I said before and as the hon. Gentleman would have heard, we are very much in favour of promoting play as much as possible because of the many social health benefits that it brings. When the allocations are determined after the spending review coming up, I hope the local authority in Blackpool will decide its priorities according to local needs—we have given local authorities that power—and proceed to promote the play schemes that it considers most appropriate for the local area.

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

18. What recent representations he has received on educational provision for children with special educational needs in Daventry constituency.

[The Minister of State, Department for Education (Sarah Teather)]

There have been no representations received from Northamptonshire local authority in relation to provision for children with special educational needs in the authority’s area. However, school organisation and special educational provision are matters for local consultation and determination, and where there are disagreements they may be referred to the independent schools adjudicator for consideration.

[Chris Heaton-Harris]

Will the Minister kindly accept a representation from parents in my constituency, who have visited my surgeries with various problems regarding special educational needs provision in Northamptonshire—especially the parents of a young lad called Joe, whom I met on Friday, who suffers from Down’s syndrome and is unable to get the regular speech therapy that he needs?

[Sarah Teather]

May I very strongly encourage the hon. Gentleman and his constituents to respond to the call to send in views for the Green Paper? The call closes on 15 October, so there are just a few more days to respond, and I should be very grateful if he made sure that that his constituents’ experiences were represented. If he wishes to meet me further, I shall be very happy to do so.

[Lisa Nandy (Wigan) (Lab)]

19. What arrangements his Department has made with the New Schools Network to provide a framework for the provision of services by the network on his Department’s behalf.

[The Secretary of State for Education (Michael Gove)]

The Department is working with the New Schools Network to finalise the specifics of the grant agreement in line with the activities and key performance indicators. Those have already been outlined in broad terms in the letter of 18 June from my Department to the New Schools Network.

[Lisa Nandy]

Does the Secretary of State understand the concern surrounding the level of transparency in the role of the New Schools Network? In particular, how can he be satisfied that there will be no conflict of interest between its role in providing advice to groups seeking to set up new schools and its other, undisclosed financial donors?

[Michael Gove]

I am reassured by the fact that the New Schools Network has as its chairman the former editor of the Financial Times, who employed the right hon. Member for Morley and Outwood (Ed Balls) before he became such a distinguished Member of Parliament. I am also reassured by the fact that among its advisers are Professor Julian Le Grand, who was an adviser to the former Prime Minister, and Sally Morgan, who was political secretary to the former Prime Minister. Those three distinguished figures, along with many others who support the New Schools Network, seem to be the sort of talented figures whom we should be encouraging to play a bigger role in state education, rather than, as was the case in the Brown years, saying to them that they are not wanted when it comes to improving education for the very poorest.

[Andrew Bridgen (North West Leicestershire) (Con)]

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

[The Secretary of State for Education (Michael Gove)]

With your permission, Mr Speaker, I should like to reassure all those hon. Members who are anxious about the decline in the standards of education under the previous Government that two steps forward have been taken in the past week. First, we have reversed the policy, which was initiated under the previous Government, whereby marks for spelling, punctuation and grammar were removed from GCSEs. In future, GCSEs, according to Ofqual, will be marked in a way that pays proper attention to the need to spell, punctuate and write a grammatical sentence. Secondly, as I am sure the hon. Member for Stoke-on-Trent Central (Tristram Hunt) will be relieved to know, we will ensure that every child has a proper sense of the connected narrative of British history, and Professor Simon Schama has agreed to advise the coalition Government in order to ensure that every child grows up knowing the glories of our island story.

[Andrew Bridgen]

I have a case in my constituency, where the three mile limit rule for free school transport is so strictly applied, using new software mapping techniques, that half the local housing estate has lost its access to free bus passes. Owing to the two-tier secondary education system that operates in parts of Leicestershire, we have the ludicrous situation in which 11-year-olds are expected to walk three miles to school along a main road, whereas 16-year-olds travelling to the upper school, only 300 metres further on, have access to a free bus pass. Will the Secretary of State look urgently into the guidance notes for local authorities on that matter?

[Michael Gove]

I am very grateful to my hon. Friend for raising that case, and I shall certainly look into it. I know that Leicestershire is an F40 local authority, one of the least well funded in the country; I know, notwithstanding that, that Ivan Ould, the lead member for children’s services, does a fantastic job, as does my hon. Friend. I shall make sure that I talk to Mr Ould and my hon. Friend about how we can resolve that situation for his constituents.

[John Mann (Bassetlaw) (Lab)]

T4. Will the Secretary of State use his undoubted influence in government to get a decision—perhaps before 20 October—on the previous Prime Minister’s commitment to make a proper donation to the £100 million appeal for the Auschwitz-Birkenau Foundation, so that the very successful schools to Auschwitz project has buildings to visit in future decades?

[Michael Gove]

I am very grateful to the hon. Gentleman for raising that matter, and I must pay tribute, across the Floor of the House, to the fantastic work that he has done in the fight against anti-Semitism. I can reassure him that we have already committed to give the Holocaust Educational Trust the money that it needs. It is an issue of no contention, across the House, that we must ensure that as those who remember the holocaust fade from our lives, the memory of that unique evil never fades from the minds of any of us in this place.

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

T2. My local education authority of Cheshire West and Chester is one of the lowest funded in the country; like Leicestershire, it is a member of the F40 group. What measures is the Secretary of State taking to ensure that education funding will be more equally distributed across the country in future?

[Michael Gove]

I am grateful to my hon. Friend for making that passionate case, as so many representatives from F40 authorities do. In the context of the comprehensive spending review and the forthcoming schools White Paper, we are now looking at how exactly we can ensure that schools funding is more equitable across the country. We are of course looking particularly at how we can ensure that disadvantaged children, wherever they live, receive what they deserve.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

Back in January, one of the Ministers stated that there was a question mark over whether local authorities were the best people to run youth services. Given that, how does the Department now justify the removal of ring-fencing for the youth opportunity fund and youth capital fund and the cuts to Connexions and the youth sector development grants? Those cuts mean that many organisations that the Department would like to see running youth services, such as the excellent Soul project in Walthamstow, are facing a very uncertain financial future.

Will the Minister agree to visit the Soul project with me to discuss with the young people and volunteers who run it the contingency plans that he has in place to ensure that there is not a big voluntary sector youth-shaped hole in the big society?

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

I am grateful to the hon. Lady and am delighted to take up the invitation, as I have to many other youth centres and projects around the country; she may come to regret that invitation.

I am afraid that in this financial climate we have to think smarter about how we can provide services. In common with every Department and every other part of this Department’s work, the youth sector is under that scrutiny. My battle is to involve as many providers as possible from the voluntary sector, local authority and others in ensuring that we provide youth services to those most in need of them in the most imaginative way—with less money, because of the previous Government’s disastrous financial legacy.

[Stuart Andrew (Pudsey) (Con)]

T3. The Leeds and Bradford Dyslexia Association is applying to open a specialist school through the free schools initiative. Will my right hon. Friend agree to look at that application? Furthermore, does he agree that the application is a clear demonstration that, despite Opposition claims, free schools can not only help the brightest but be a real opportunity for groups such as the LBDA to help children and young people who need extra support?

[Michael Gove]

I am grateful to my hon. Friend for his question and the argument contained therein. He is absolutely right: many of those anxious to establish new free schools are motivated by the desire to help the very poorest or those most in need. As well as the case that he mentioned, in Yorkshire there is a talented young teacher, the son of a bus driver, who wants to open a free school in one of the most deprived parts of Bradford. It is the idealism of that young man, and of the dyslexia association activists my hon. Friend mentioned, that is an inspiration to us all on this side of the House.

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

The last Labour Government established three free school meal pilots in Wolverhampton, Durham and Newham. Will the Secretary of State give me an assurance that when the evaluations are complete, there will be full disclosure and that they will not just be scrapped as the Lib Dem council did in Hull when we had such a pilot? It did not wait for a full and proper consideration of the evidence.

[Michael Gove]

The hon. Lady was a distinguished Minister in the Department and I know that she shares with me a desire to ensure that policy is evidence-based. That is why I was surprised that the previous Government said they would definitely go ahead with the extension of free school meals before the evidence about whether the pilots were working was in. I was also particularly surprised that the previous Secretary of State committed to the extension of free school meals without there being sufficient funds in the Department’s spending envelope to pay for them. It was, I am afraid, another example of the recklessness with which he drove our finances and economy on to the rocks.

[Mr John Baron (Basildon and Billericay) (Con)]

T5. The Secretary of State is absolutely right to order a review of his Department’s capital spending. When he does decide how to allocate capital, will he look favourably on the schools that reached the very final stages of the BSF application process and suffer greatly from dilapidation, such as Mayflower high school and Billericay school in my constituency?

[Michael Gove]

As ever, my hon. Friend is a strong, powerful and fluent advocate for his constituents. It is important for us to make sure that the capital that we have goes to the schools that need it most. It is also critically important that we ensure that the one area that the previous Government overlooked—the significant expansion in demand for primary schools, particularly in the south and south-east—is addressed. I am sure he will agree that we need to address that along with the dilapidation in the secondary estate.

[John Cryer (Leyton and Wanstead) (Lab)]

On the vexed issue of BSF, I understand what the Secretary of State says about the capital review, but going hand in hand with that must be some sort of needs-based criteria. What progress has he made towards arriving at such criteria?

[Michael Gove]

That is a very good and characteristically shrewd point from the hon. Gentleman. We need to do two things. First, we need to ensure that whatever money we have is allocated in the most effective and efficient way, and we also need to ensure that as well as being efficient, it reflects needs. As regards needs, there are a variety of different criteria that we have to judge: first, so-called basic need—in other words, population growth—secondly, deprivation; and thirdly, dilapidation, or the actual fabric and state of the buildings. We have not had an accurate assessment of the fabric of the school estate since 2005.

[Mr Douglas Carswell (Clacton) (Con)]

T6. The policy of enforced inclusion pursued under Governments of both parties has played havoc with children with special educational needs in my part of Essex. It has meant the closure of special schools, increased pressure on mainstream schools, and pressure on remaining places in the special schools system. Can the Minister promise that under the review inclusion will be made a matter of parental choice, not an outcome arrived at through bureaucratic stalling and bullying?

[The Minister of State, Department for Education (Sarah Teather)]

Parental choice is absolutely at the heart of the themes of the Green Paper. It is essential that we try to come to decisions about a child’s future based not only on their disability but on understanding the particular needs of the child. Two children with the same disability may have very different circumstances and need different educational provision.

[Rosie Cooper (West Lancashire) (Lab)]

Will the Secretary of State please indicate the Government’s position on supporting parents in choosing denominational schools for their children? Would he oppose any measure that would reduce that choice—that is, local authorities charging a flat rate of £2 a day per child, which amounts to £180 that parents believe is a tax on faith? Lancashire county council is charging parents £2 a day per child for transport to go to a denominational school; does he approve of that sort of attitude?

[Michael Gove]

I am very interested in the case that the hon. Lady brings to my attention. In her constituency, in Skelmersdale and elsewhere, a great many people are benefiting from a Roman Catholic education. I would hate to see anyone unduly penalised for wanting their child to be educated in accordance with their faith, so I will look at the case she mentions.

[Mrs Helen Grant (Maidstone and The Weald) (Con)]

T7. Under Labour, social mobility stalled. What action will the Government now take to kick-start that vital aspirational process for our children, our teachers and our schools?

[Sarah Teather]

My hon. Friend is absolutely correct; I am afraid that the legacy of the previous Labour Government is that social mobility did stall. This Government believe that one’s birth should not equal one’s fate. That is why we want Sure Start to focus better on targeting the most disadvantaged families, why we are reviewing the early-years foundation stage to ensure that all children are ready for school, and why we are implementing a pupil premium targeting extra resources on the most disadvantaged children.

[Julie Hilling (Bolton West) (Lab)]

After 18 months of very hard slog, the 50 children and the staff and parents of Lever Park special school in my constituency raised the £20,000 funding needed to become a specialist school. In July, the Government promised them £100,000 to transform their facilities; in September, the Government cut it to £20,000. Will they please review their decision?

[Michael Gove]

I am very grateful to the hon. Lady. I will be speaking to people from the Specialist Schools and Academies Trust later this afternoon, when I will explain to them exactly the difficult circumstances that we inherited, which mean that unfortunately some tough decisions have to be made, but also point out that the fantastic achievements that have been secured so far by specialist schools and academies will be rewarded appropriately after the comprehensive spending review.

[Mary Macleod (Brentford and Isleworth) (Con)]

T8. What recent assessment has the Secretary of State made of the need for additional secondary school places in the Brentford and Isleworth constituency, and what advice would he give to parents who have been in contact with me to say how desperately they need a new school?

[Michael Gove]

My hon. Friend, like all those who represent constituencies in the west and south-west of London, will know that recent demographic changes mean that there is immense pressure on primary and secondary school places. I am particularly sensitive to the need for the resources to be there to ensure that the children who are now arriving at primary schools have the places that they deserve. We are also ensuring that some of the new free school applications that we have received are prioritised in those areas where the demographic need is particularly acute.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Does the right hon. Gentleman agree that it is a great disadvantage to return from school to a home where no English is spoken? Is it not time we had a campaign to make knowledge of the English language common throughout our country? Will the Secretary of State lead a cross-departmental campaign to deliver English speaking and knowledge across the country?

[Michael Gove]

Not for the first time—nor the last—the hon. Gentleman speaks for me. It concerns me that a grasp of proper spoken and written English, which is the key to enjoying full civic life in this country, is denied to far too many people. I will work with my hon. Friend the Minister for Education, Skills and Lifelong Learning to ensure that an ability to speak and write English clearly is at the heart of everything we do, whether in adult, secondary or primary education.

[Andrea Leadsom (South Northamptonshire) (Con)]

T9. In the wake of the Munro report, is the Minister as concerned as I am about the growing number of children being taken into care? Does he agree that the best way in which to stop more of those personal tragedies is to invest in prevention programmes for babies and their carers in the earliest years?

[Tim Loughton]

My hon. Friend makes a good point. Of course, the big increase in the number of children coming into care in the aftermath of the baby Peter case was alarming. It is therefore absolutely right that the ongoing Munro review makes suggestions for freeing up the bureaucracy, which holds back social workers from doing the sort of preventive work—keeping families together when possible and working with other professionals on an early intervention basis—that can be so profitable financially, but, more important, socially, for those families later.

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

The Secretary of State has just said that he is keen to promote initiatives in the study of history in schools. Does he remember the rather sterile debate in 1990, when Lord Baker introduced the national curriculum, between skills and content? Does he agree that skills Learned in the study of history are as important as narrative? We cannot have one or the other—we need both.

[Michael Gove]

I am grateful for the hon. Gentleman’s point. He was a distinguished editor of History Today, and his voice in these debates is important. It is critical that we ensure that every child has a proper spine of knowledge—the narrative of the history of these islands. Without that, the skills of comparison and of examining primary and secondary sources and drawing the appropriate conclusions, are meaningless. Without that spine, history cannot stand up and take its place properly in the national curriculum. One of the problems in the past 13 years—indeed, since 1990—is that national history has not been taught as it should be in our schools. Under the coalition Government, that will change.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

T10. I think that my hon. Friends are aware of my interest in and support for deaf education; I remain a chair of governors at a deaf school. What plans has the Secretary of State for deaf education and for ensuring that deaf children receive the same education as their hearing peers?

[Sarah Teather]

The Department currently funds the I-Sign pilot project, which supports our position of informed choice for parents by putting in place the British sign language skills infrastructure necessary to make a BSL choice viable. As I said in answer to several earlier questions, we will produce a Green Paper later this year on special educational needs and disability. I would be grateful if my hon. Friend made sure that his views on the needs of deaf children were inputted into the Department’s call for views. As I said, the deadline for that is 15 October.

Linda Norgrove

Monday 11th October 2010 Commons Chamber

15:33

[The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)]

With permission, Mr Speaker, it is with great sadness that I make this statement about the tragic death of Linda Norgrove, the British aid worker taken hostage in Afghanistan, who died during the course of a rescue attempt by US forces on the night of 8 October.

Linda was working for the non-governmental organisation Development Alternatives Incorporated when she was kidnapped along with three Afghan colleagues by insurgents dressed in Afghan national army uniforms as she travelled by car on 26 September in Kunar province in north-east Afghanistan. Immediately following her disappearance, a crisis management team began work at our embassy in Kabul, and the commander of the international security assistance force in Afghanistan, General Petraeus, was informed, along with the Afghan Government’s national security adviser. In London, Cobra was immediately convened. Intensive efforts to locate Linda began. Leaflet drops were carried out, offering a reward for information about Linda. Forces in the area began an increased tempo of operations in and around the area where she was captured, designed to limit the hostage takers’ room for manoeuvre.

Our objective throughout was clear: to secure Linda Norgrove’s safe release while continuing the long-standing policy of successive British Governments not to make concessions to hostage takers. From the very start Cobra assessed that Linda’s life was in grave danger, which is why I authorised from the beginning a rescue attempt to be made in the right circumstances. Linda’s captors were assessed to be representatives of a local Salafist group allied to the local Kunar Taliban, who have links higher up the Taliban chain of command to al-Qaeda and other insurgent groups operating in the Afghanistan-Pakistan border areas. We had information from the outset that the objective of Linda’s captors was to pass her further up the Taliban command chain and perhaps move her to yet more inaccessible terrain. On the basis of the information available to us, we were in no doubt whatsoever that there was a continual and real threat to her life and no credible option for a negotiated release.

Linda’s Afghan colleagues were released on 2 October, but at no stage was any serious attempt made to negotiate by those holding her. Afghan media reports purporting to convey demands by her captors, including the complete withdrawal of all UK forces from Afghanistan, were not judged to be credible. Nothing that happened between 26 September and 8 October caused me or anyone else involved to change our view that a rescue operation was the only realistic hope for Linda’s safe and secure release.

Linda was captured in the US area of operations in Afghanistan. We agreed at the outset that this operation would be US-led. The US has had forces in Kunar since 2006 and has excellent knowledge of the region. US special forces were therefore held on 30-minute standby to mount a release effort from the day Linda was captured. In the early days of her captivity, bad weather and storms in the region hindered attempts to get detailed information about her exact location, meaning that a rescue attempt was not possible in those early days.

After intense efforts by the UK and our allies to prepare for a rescue, US special forces attempted to rescue Linda on the night of 8 October. In the operation that followed, these special forces succeeded in reaching the right location and in shielding 10 women and children from the fighting that ensued. However, tragically, the operation still was not successful, as we did not succeed in saving Linda’s life.

Every indication that we had over the weekend suggested that Linda had been killed by the explosion of a suicide vest worn by one of her captors. Early this morning General Petraeus contacted the Prime Minister’s office to say that in the review of the rescue operation, new information had come to light about the circumstances surrounding her death. The review and subsequent interviews with the personnel involved indicate that Linda may not have died at the hands of her captors as originally believed, but may have died as the result of a grenade detonated by the taskforce during the assault. All such rescue operations involve a measure of risk which has to be weighed against a constant risk to a hostage and a risk that such an opportunity to undertake a rescue operation may not recur.

I wish to pay tribute to the US forces in Afghanistan who risked their own lives to try to rescue a British citizen. We should also remember that the responsibility for the loss of Linda’s life lies with those who took her hostage. The Prime Minister and I are utterly determined to do everything that we possibly can to establish the full facts and give Linda’s parents a full account of the tragic circumstances in which their daughter died. General Petraeus has personally assured the Prime Minister that ISAF will carry out a full investigation into what happened. The UK will be fully involved and the House will be informed of its outcome.

The taking of hostages and the targeting of civilians, including aid workers, is morally indefensible under any circumstances. We did all in our power to rescue Linda from the appalling circumstances in which she found herself. She was a dedicated professional doing a job she loved in a country she loved, helping a people who have borne the brunt of conflict and poverty for decades. For Linda’s family, this will be the most painful loss it is possible to endure. Our thoughts are with them as they come to terms with the death of their daughter and the whole House will be united in sorrow for them.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

May I join the Foreign Secretary in sending our deepest condolences to the family and friends of Linda Norgrove at such a difficult time? Linda Norgrove did vital work towards ensuring a stable and secure future for Afghanistan, and the House will want to pay tribute both to her work and to her courage. But although we all know the bravery of our aid workers and the risks that they take, it was still shocking for all of us to hear of Linda Norgrove’s death this weekend, after she was taken hostage two weeks ago. That shock will be compounded by the distressing information this morning.

The House will know that we support our military and civilian effort to create the conditions for a political settlement that can bring the war in Afghanistan to an end. We condemn utterly the actions of the hostage takers throughout the events to which the Foreign Secretary has referred today. Operations such as the one launched by the American special forces this week are incredibly challenging. They require immense bravery on the part of the armed forces involved, and success can of course never be guaranteed. We understand, too, the intricate and complicated web of intelligence required for such an operation, and nothing can ever be certain. The Foreign Secretary will appreciate too, however, that important questions now arise as a result of these events.

First, could the Foreign Secretary tell us more about the Government’s role in the planning and authorisation of the operation? When we spoke, I asked him to tell the House as much as he could about his assessment of the risks to Linda’s life that made the rescue operation the best opportunity to save her life, and I am grateful for the additional information that he has provided to the House today. Could he also tell us about the nature of the authorisation that he gave the rescue operation, and say how much information he was given about the rescue attempt before it began and the level of UK involvement in the planning of the rescue operation?

The Foreign Secretary will be aware, too, of the concern that has arisen about the potentially inaccurate information that was disseminated over the weekend. I thank him for the briefing that the Foreign Office provided me at the weekend. I know that it was provided in good faith, but does he share my concern that the information that people received over the weekend is now cast in serious doubt? The Government and ISAF appeared to be certain over the weekend that the hostage takers had killed Linda Norgrove during the operation. Given the uncertainty that inevitably surrounds such a difficult and complex operation, may I ask him on what basis that was believed to be the case? We agree, too, with the Prime Minister’s statement this morning about the importance of avoiding inaccurate information in such a sensitive and complex case. However, can the Foreign Secretary tell the House why it appeared that Government and military sources gave the impression of such certainty about events in the briefings over the weekend? Can he also tell the House about the new information from General Petraeus? Has he spoken to General Petraeus, and has the evidence—including, perhaps, surveillance footage—on which the new conclusions are based, been shared yet?

I welcome the investigation into the operation and the Foreign Secretary’s statement that the UK will be involved. Can he tell us to whom the investigation will report? Will its findings be made public? Who will be entitled to see its conclusions and its evidence? Can the Foreign Secretary give us some guidance on how long he expects the investigation to take? Can he also reassure the House that Linda Norgrove’s family will be kept informed throughout? The House will appreciate that the focus of the investigation will be on the events during the operation, but can he also tell us whether there will be a review into the way in which information on the issue was disseminated over the past 48 hours?

Finally, the safety of our aid workers has always been a matter of concern for our forces on the ground, which is an issue that I know the Government take extremely seriously. Aid workers play an essential role working to establish the conditions that will allow our forces to leave Afghanistan. Clearly we all want to avoid a situation where aid workers are unable to help the Afghan people because of a minority who want to terrorise the country. Could the Foreign Secretary therefore tell us what advice the Government are giving to British aid workers, particularly taking into account the fluid security situation? Linda Norgrove’s work was extremely important for the future of Afghanistan. We need to ensure that her work can continue for the future.

[Mr Hague]

May I begin by congratulating the right hon. Lady on her appointment as shadow Foreign Secretary? I wish it were in happier circumstances that we were meeting across the Dispatch Box for the first time. We share across the House the condemnation of the taking of hostages and the concern for aid workers that she has just expressed. Many of them work in difficult and dangerous circumstances. Our travel advice is against all travel to Kunar in Afghanistan, but Linda Norgrove was working for a US non-governmental organisation, knowing that she was working in very dangerous circumstances. Nevertheless, that is known by many people who work in those places and conditions.

The right hon. Lady asked about the authorisation given by the United Kingdom and the knowledge that we had. I mentioned in my statement that we were aware that this was a group with links to al-Qaeda, to the Taliban in many different forms and to other terrorist groups operating on the Afghan-Pakistan border. I cannot expand in enormous detail on the precise intelligence, for reasons that the House will understand, but everybody concerned—in the military command, in the British embassy and in the British Government—agreed, from what we had seen, that there was a continual threat to the life of Linda Norgrove, and that we could not be sure that the opportunity to rescue her would come again, either because of weather conditions, or because we would not know her location again or because she might not survive for us to attempt a rescue. The specific authorisation to take such action was given by me on that first day, within a few hours of her being taken hostage. That authorisation was supported by the Prime Minister, who was of course kept informed throughout.

The role of the British special forces was to supply a liaison officer. Contrary to some media reports that I have seen this afternoon, it was not to take part in the planning—and certainly not in the execution—of the operation. The operation was planned by the US special forces, and it was carried out by them. We must remember that, after their experiences in Iraq and Afghanistan in the past nine years, the US and UK special forces are now extremely well practised in their operations and extremely skilful at what they do. That does not mean, however, that every mission succeeds.

The right hon. Lady rightly raised the question of the inaccurate—or likely to be inaccurate—information that was given out at the weekend. Of course we regret that; any Government would regret that inaccurate information had been given out on such a matter, or on any matter, particularly one of such importance. There is a balance to be struck between transparency and certainty, and at the weekend—and, indeed, today—we have erred on the side of transparency. We give the country the information that is available to us. Certainly, the initial viewing of the various videos that were taken during the action suggested that it was an explosion caused by the hostage takers that had cost Linda Norgrove her life. It was on a second viewing by different US personnel that it appeared that there was another possibility. We must not rush to judgment about that possibility, however.

There will be an investigation to try to establish exactly what happened. That investigation will take place as rapidly as possible, but I cannot give the right hon. Lady a precise timetable for it at the moment. Clearly, however, General Petraeus and ISAF command attach enormous importance to this matter. It is something that they have focused on at the very top level of the military command over the past two weeks. As I mentioned in my statement, General Petraeus spoke to the Prime Minister today, and the Prime Minister has been able to view some of the evidence involved. We hope that the investigation will be completed as soon as possible. Given that we will need to design a new form of investigation, the precise form that it will take is now being discussed with ISAF command.

We will certainly keep Linda’s family as fully informed as possible. We did so during the hostage taking. Our ambassador in Kabul visited the family last week, and the Prime Minister has spoken to Linda’s father today. I spoke a few hours ago to our colleague, the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who is the constituency Member of Parliament involved. He could not make it here for logistical reasons this afternoon, but he obviously had questions to raise. We will keep them fully informed of what is happening, and we will look to have a report, the conclusions and every significance of which can be fully described to the House and to the country.

[Mr Philip Hollobone (Kettering) (Con)]

All of us hope that Linda is the last overseas aid worker to be captured by the Taliban, but sadly she may not be. What protocols are in place involving our military and the US military in terms of the nationality of any captive? For example, were an American aid worker taken captive in territory in which British forces predominate, would it be our decision to go in to rescue them, or would it be the Americans’ decision? At what level are these decisions taken?

[Mr Hague]

Decisions about what can happen militarily are taken by ISAF command. The commander of ISAF is General Petraeus, the US general. The deputy commander is a UK commander, so these decisions are taken together. They require the political authority of the Government of the national concerned. In the case of a US citizen who is held hostage, the US Government would have to give their authority for such an operation. Could it involve British special forces? Absolutely. We would treat an operation involving a US citizen as if they were one of our own, just as the US in this case treated Linda Norgrove as one of their own.

[Mr Jack Straw (Blackburn) (Lab)]

May I first add my very sincere condolences to the family and friends of Linda Norgrove following the terrible tragedy that has befallen her? In saying that, may I offer my full support to the Foreign Secretary and his colleagues on the excruciatingly difficult decisions that they have had to make, as I know only too well from my own experience? I ask him to confirm that, although it is correct that there should be an investigation, any investigation that looks at the circumstances that faced the decision takers and participants should take them forward, and should not, from the languid luxury of hindsight, seek to second guess those incredibly fast decisions that they had to make?

[Mr Hague]

I am grateful to the right hon. Gentleman, who having served for five years as Foreign Secretary is familiar with these dilemmas and difficult decisions. Let me stress that this is an investigation into the military circumstances and what happened in the actual incident. However, it is important to remember, when looking at the decisions that we have made, that we had to bear in mind what might have happened had we not made the decision to mount a rescue operation. We might not have had the opportunity again. We know from experience that a hostage held by the Taliban can be murdered in cold blood and that Linda Norgrove would probably have been taken into yet more inaccessible terrain. That is why we concluded from the beginning that the best option would be to take the earliest opportunity for a rescue operation if the conditions were right for that and if the military assessment were that there was a good chance of success. Clearly, the view was—a view confirmed by General Petraeus in his telephone conversation with the Prime Minister this morning— that there was a good chance of success. General Petraeus would not have wanted to send his troops into action without that good chance of success. All those things must be borne in mind.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

To return to the question of the investigation, will it be conducted under the auspices of ISAF or under the auspices of the US military?

[Mr Hague]

As I mentioned in answer to the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), the shadow Foreign Secretary, we are still designing the form of the investigation because this is a new set of circumstances. The UK will certainly be fully involved in the investigation. General Petraeus proposed that from the beginning and the Prime Minister was absolutely clear about our wish to see that in his conversation with General Petraeus this morning. Therefore, we will have to sort out in the coming hours whether that takes place under ISAF auspices or under the auspices of the US military with UK involvement. I will let the House know in the appropriate form, perhaps through a written statement, how that has turned out.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I add my sincere condolences to the family and friends of Linda Norgrove at this very sad time. It is evident from the tributes being paid to her that she was a very exceptional person who dedicated her life and considerable talents to helping other people and the peace efforts in Afghanistan.

I welcome the Foreign Secretary’s commitment to establishing what has actually happened and I also welcome his statement. This tragic incident is a salutary reminder of the risks that humanitarian aid workers face in Afghanistan and other dangerous parts of the world, yet their contribution to those efforts is indispensable. Can he assure us that assessing the safety of the circumstances in which humanitarian aid workers and NGO staff are working in Afghanistan will be a priority for the Foreign Office in the weeks and months ahead?

[Mr Hague]

Of course we want to see whether any security lessons can be learned, but let me stress that very many steps are taken to try to ensure the security of people working in Afghanistan by our military, by ISAF—and therefore by the military of other nations—by the Afghan security forces, and sometimes through the operations of private security companies. A great deal of security is provided, but that is not a guarantee against murder or kidnap. We will all remember the tragic case of Karen Woo earlier this year—another aid worker who was murdered in Afghanistan. The House must recognise, as indeed it has in the comments that have been made today, that people often take considerable risks in order to deliver humanitarian aid and development to difficult parts of the world. We should salute the efforts of those people.

[Bob Stewart (Beckenham) (Con)]

I am mindful that the people who went in on this exceptionally difficult operation were as brave as they could be, but I am also slightly worried because helicopters were used. Sometimes, helicopters are heard from a long way away, so there was warning, and one of the first principles of war is surprise. I hope that the investigation will look at the reason for using helicopters.

[Mr Hague]

It is very important for Ministers and those responsible for giving a general authorisation for such an operation not to interfere too much in the military aspect of it, which must be left to the military experts on the ground. Of course, my hon. Friend speaks with military experience and will know a thing or two about such matters. The terms of the investigation are still being drawn up, but I am sure that it will be able to look at all the military circumstances surrounding the operation. However, he should bear in mind that operating in Afghanistan, in mountainous and inaccessible regions, very often requires helicopter-borne operations, including if there is to be any surprise. Land forces making their way over mountains and through valleys over a long period of time may find it more difficult to achieve surprise than helicopter-borne troops.

[Mr Denis MacShane (Rotherham) (Lab)]

This awful tragedy, like the one of Dr Woo to which the Foreign Secretary referred, reminds us of the rising death toll of civilians in Afghanistan as the Taliban target civilian administrators, mayors, justices and anybody whom they can kill as part of their campaign of intimidation. I wonder how much longer our strategy should be maintained. When he came to office, the Prime Minister indicated a change of thinking on Afghanistan, and I hope that that new thinking continues to be thought, as it were.

[Mr Hague]

We have been very clear about our approach to Afghanistan, and on giving all the necessary support to our troops. Indeed, we announced in the early stages of the new Government a doubling of the operational allowance for our forces who are fighting there. We have greatly increased development aid to try to assist the Afghan Government in building their own capability and the speed of development in Afghanistan in future. We have also lent our strong support, as the previous Government did, to the political process, to which the shadow Foreign Secretary, referred. That adds up to the right strategy for Afghanistan, and it is important that we are not diverted from it by events, including military encounters and tragic events such as the one that we have experienced and that we are discussing today. Such events do not invalidate the overall strategy that we are pursuing.

[Mark Pritchard (The Wrekin) (Con)]

May I join the Foreign Secretary in paying tribute to Linda Norgrove and to the grace and dignity shown by the Norgrove family? Is it not the case that the ultimate responsibility for Linda’s death lies fairly and squarely with the evil and cowardly Taliban?

[Mr Hague]

That is absolutely right—my hon. Friend reminds us of that extremely important point, which the whole House must always remember.

[Paul Flynn (Newport West) (Lab)]

On Friday, in my constituency, I attended the funeral of Sergeant Andrew James Jones, the 339th British hero to die in Afghanistan. Of course, the responsibility for his death and Linda Norgrove’s death lies with the Taliban, but does this House not have a responsibility to bring this increasingly futile conflict to a swift conclusion?

[Mr Hague]

The hon. Gentleman is right to remind us of the scale of the casualties, of the names that we have so often heard read out in this House and of the fact that his constituent was the 339th of our servicemen and women to die in Afghanistan. The hon. Gentleman has a long-held different view about the merits of what we are doing in Afghanistan. What I can say is that this Government will, as we have pledged, present a regular review—a quarterly review—to the House of what we are achieving in Afghanistan, or what we are not achieving, what our immediate objectives are and what resources are required to attain those. I hope before the end of this month to be able to make a statement to the House with the latest such review, which will enable hon. Members of all views on this issue once again to take part in reviewing what we are doing and questioning the Government.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

The Foreign Secretary referred to the long-standing policy of successive Governments not to make concessions to hostage takers. The international security assistance force troops comprise soldiers from more than 30 member states, and those states do not always take the same view in their responses to hostage taking. Is he having any discussions with some of those member states to ensure that, at least when we are in the same theatre of operations, we take the same approach?

[Mr Hague]

Yes, and the hon. Lady makes an important point. I have raised this issue with Foreign Ministers of other nations during bilateral discussions in recent weeks, because clearly if one nation is prepared to pay or to sanction the payment of ransoms, that can undermine the international position. I also raised this very strongly in the discussion on terrorism at the United Nations Security Council in New York, which I attended in late September, during the United Nations General Assembly. I particularly stressed the point that it is against not only international practice, but international law for such ransoms to be paid, and I will regularly reinforce that point to other nations.

[Mike Gapes (Ilford South) (Lab/Co-op)]

In his opening remarks, the Foreign Secretary said that the hostages—Linda Norgrove and her colleagues—were taken by people wearing Afghan national army uniforms. Has he made any assessment of how many similar events have taken place in the past year in Afghanistan and of whether there is a problem with regard to the security of uniforms and other material from the Afghan national army?

[Mr Hague]

The hon. Gentleman raises an entirely legitimate point, which deals with one of the issues that we will need to follow up after this incident. As far as I am aware, this is not the only incident in which Afghan national army uniforms have been abused. It is not easy in the circumstances of Afghanistan, and with an army that now numbers well over 100,000 and has a relatively high turnover rate, to control the uniforms available around the country. This may therefore be a difficult problem to address going forward, but we will certainly want to do some additional work in ISAF and with the Afghan Government on how to tackle it.

Welfare Reform

Monday 11th October 2010 Commons Chamber

16:04

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

With permission, Mr Speaker, I should like to make a statement on welfare reform.

Let me start by welcoming the right hon. Member for Paisley and Renfrewshire South (Mr Alexander) to his new post as shadow Secretary of State for Work and Pensions. We have already had a conversation in the last week. I extend that welcome to all members of his new shadow Front-Bench team.

The statement today is in three parts. First and foremost, today—as everyone in the House may well now know—we launched an approach to those on incapacity benefit under the work capability assessment, and it is necessary for the House to hear this directly from us so that Members can question me. Secondly, I want to use this opportunity to set out more detail on the new Work programme, which is very much related to the work capability assessment. Thirdly, the House has a right to know more about our plans for wider benefit reform as we look ahead to a White Paper and welfare reform Bill, although I would add the caveat that greater detail will be contained in that statement.

The economic backdrop is severe. We have the largest deficit in the G20 at £155 billion—the largest in peacetime history—with debt interest of £120 million a day, or £43 billion in 2010-11. Under the previous Government’s deficit reduction plan, which the Opposition now seem not to favour—although I might be wrong on that point—annual debt interest spending would have risen in only five years to almost £70 billion. Let me put that in context: that would have meant spending more on interest than we spent on policing, defence and transport combined. So, there is an urgent requirement to make these changes and reforms.

[Official Report, 11 November 2010, Vol. 518, c. 1-2MC.]We are at a critical point, with 5 million people on out-of-work benefits, 2 million working-age people claiming incapacity benefit, of whom 900,000—just under 1 million —have been claiming for an entire decade, and a system that has left Britain with the highest rate of jobless households in Europe. Those statistics reveal the human cost of leaving our welfare system unreformed, and with that comes an ever-increasing financial cost. The working age welfare budget rose by 40% in real terms from £63 billion in 1996-97 to £87 billion in 2009-10. A staggering £133 billion was spent on incapacity benefits in the past 10 years, and benefit spending is forecast to be more than £152 billion in 2010-11, which is about 10% of gross domestic product.

Today we spend £1 in every £3 on welfare in this country, yet youth unemployment is higher and inequality greater, and there are 800,000 more working age adults in poverty than there were in 1998-99. In that context, we also announced the reform of child benefit last week. I personally do not think that it is right, if we have to make changes and reductions, to tax the poorest to fund the receipt of child benefits by those with the highest levels of income. If we do this correctly, we can save about £1 billion, protect some 85% of families and secure fairness as we support people. I know that that is tough—we are in tough times—but I believe that it is fair, and that is the key. The important thing as we come through these spending reviews is that we should have a progressive change, not a regressive change.

At the same time, we announced procedures to set a cap on benefits for workless households to average earnings, which are about £26,000. However, we ought to set that in context. The cap will be net of income tax and national insurance, so if someone was working to receive that amount of money it would equate to gross earnings of some £35,000 a year—not a very narrow cap. Equally, we will exempt the disabled and those on working tax credit so that we encourage work incentives and do not penalise those who find it difficult to be in work. That is fair, and we will announce more details in the spending review, which means that I shall do my level best to answer some of the questions that I expect Members want to ask.

In the last week we have also announced a new enterprise allowance, which is there to help unemployed people who would like to try to set up their own business. We will be able to give them up to £2,000 in various forms, as well as the advice and mentoring of those who have started their own businesses. Today, the most important step is that we are launching two trials for those on the old-style incapacity benefit under the work capability assessment. The Minister of State, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), is travelling to Aberdeen and Burnley today to see both those trials get under way. They are about giving many thousands of people the opportunity to move from the margins of society into mainstream employment. I remind the House that we inherited the programme, and that I supported it while we were in opposition. We have had to make a few changes, and we will make more as necessary.

Under the new system we will assess people on the basis of what they can do, not what they cannot, and thereby support people to meet their aspirations for work. We are determined to get it right, which is why we will learn from the trials and why we have set up an independent experts group to scrutinise the assessment. That group includes, for example, the chief executive of Mind, so as the programme is trialled we will listen to and deal with concerns about those who are mentally ill, such as those expressed on the radio today. Through those measures and through the Work programme, we are committed to supporting everyone who goes through the assessment.

We will ensure that those deemed unable to work continue to receive the support that they need, and that those deemed able to work are fully supported to do so. People who are found fit for work will move directly on to our new Work programme rather than have their jobseeker’s allowance stopped in the normal way. They will receive an integrated package of support, and in due course so will those who have been out of work for a longer period. It will provide personalised help based on individual needs, not on the benefit that somebody receives. Using the best of the private and voluntary sectors, that will help get people into work as quickly as possible.

The systems that I have described are what we call black-box systems, and I shall explain what that really means. Put simply, we will not lay down prescriptive criteria about how they should be run. We want those running them to do whatever is necessary to help people into work—that is the key. They will be operated on a payment-by-results system that ensures that providers do not simply go through the motions. They will receive their real money only for getting someone into work and ultimately keeping them there, and they will find rewards further up the chain as they do so. We have received more than 790 expressions of interest in joining the programme from providers, and in December we will invite bids for contracts, ready for national roll-out next year.

Finally, the work capability assessment and the Work programme are of course critical to getting more of the 5 million or 5.5 million people who are currently on benefits back into work, but they will not be enough. Underpinning that support must be a benefits system that incentivises work, and we have to ensure that work always pays. That is why the coalition Government aim to bring forward a White Paper soon and a welfare reform Bill in the new year.

The introduction of what I call the universal credit will restore fairness and simplicity to an overly complex, outdated and now wildly expensive benefits system that simply prevents people from getting back to work. As we get the benefits system working, we can get Britain working. The best way to get the deficit down, drive the recovery and get the economy moving is to ensure that more and more of the British people who can work do so. Welfare reform is critical, and I give a guarantee that people moving on to the universal credit will not be any worse off at any stage. In fact, they will be better off as they find work.

Everyone in the House should unite around, and try to achieve, the cause of moving people into work and creating a pathway out of poverty for the 5 million people on out-of-work benefits. I understand that the new leader of the Labour party has said that he will not be in opposition for opposition’s sake, so I hope that he and his shadow Cabinet colleagues will do the right thing and support us in delivering a welfare system that is fit for the 21st century. I commend these reforms to the House.

[Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)]

I thank the Secretary of State for his statement and for advance sight of it. I thank him also for his gracious welcome to myself and my team. Members of all parties will acknowledge and recognise the work that he has done both inside and outside Parliament over recent years on the crucial issues for which he now bears a heavy responsibility.

As befits a responsible Opposition, my team and I will work constructively with the Government when there is common ground between us, on issues such as increasing opportunities and support for people to get into work. However, I must also be clear that when the Government propose measures that we judge arbitrary and unfair, we will oppose them robustly.

The Secretary of State began his statement with a rehearsal of the case for reform. While, of course, I disagree with the rather partial and partisan account of the economic situation that he inherited, let me be clear about the fact that I recognise the need to continue the reform of the welfare system. I believe in a welfare state that ensures that there are more people in work and fewer in poverty. That empowers people and contributes to a fairer and more equal society.

Let me also acknowledge, on this first outing at the Dispatch Box, that conditionality does have a role to play, as we recognised in government, first, because we know that it works in helping people to turn around their lives and, secondly, because it is the foundation for ensuring the public support on which the welfare state is based. Accordingly, I will carefully scrutinise each of the Government’s specific proposals on the welfare system.

The Secretary of State spoke about his plan to remove child benefit from higher rate taxpayers and, from the Dispatch Box, described that change as “fair”. How does that change meet the fairness test when it will result in one family, with a collective household income of £80,000, getting child benefit and the family next door, with an income of £44,000, getting none? There have been a variety of claims as to what the threshold in fact is. Can he confirm at this time that the change will affect only parents earning more than £44,000?

Since the shambles of the announcement last week, the Prime Minister and others have suggested that marriage tax breaks might be introduced in the near future to compensate for the removal of child benefit. Does the Secretary of State accept that there is no coalition agreement to implement the Conservatives’ marriage tax allowance proposals, that to date such proposals have applied only to basic rate taxpayers, and that even if his coalition partners were to accept those proposals, they would cost more than the savings made from the child benefit reform he proposes?

On incapacity benefit reassessment, which the Secretary of State touched on, despite its omission from the briefing in this morning’s newspapers, I welcome his acknowledgement that he is continuing the previous Government’s proposals on the trialling and roll-out of the work capability assessment. I note that those proposals this morning appeared to be attached to a specific target of removing 500,000 people from benefits. If a system of assessment is to be truly fair and objective, will he clarify whether that figure is a hard target, merely an assumption or a headline-grabbing claim?

I was also concerned to see reports in The Times today that those judged too sick or disabled to work could nevertheless have their benefits time limited to six months or a year. Will the Secretary of State confirm whether that is the case? If it is not, will he clarify what actual plans he has for reassessing those who are initially found to be unable to work?

The Secretary of State has also told us today that people found fit for work will move directly to the Work programme. His colleague the Employment Minister—the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling)—has previously told the House that the new single Work programme will not be introduced until the first half of 2011. How can that timetable be reconciled with the trials now under way, which were announced in Burnley and Aberdeen?

I welcome the comments made on the radio this morning by the Employment Minister, who said that he would be prepared to modify the test if it were not working properly. Indeed, I welcome the gracious acknowledgement of the Secretary of State’s confirmation of that point today. However, he concluded his statement by describing welfare reform as an historic opportunity. It is, none the less, an historic error to fail to realise that effective welfare reform requires economic recovery. He seems to be in denial of the fact that getting people back to work requires there to be jobs for them to take up.

That insight explains why the previous Government took measures to ensure that unemployment was kept at about half the level of that in previous recessions, that the unemployed were supported and that, at the same time, those who could move from benefits into work were doing so. In contrast, the Government’s own Office for Budget Responsibility revised forecast predictions that public sector jobs would be cut by 750,000 and that unemployment would increase to nearly 3 million people. Over the next few years, the Treasury’s own papers indicate half a million more jobs lost in the public sector, half a million jobs lost in the private sector and half a million fewer jobs and opportunities for the unemployed.

Labour Members will continue to make the case for backing our economy, fighting for jobs and standing up for fairness while reforming our welfare system.

[Mr Duncan Smith]

I thank the shadow Secretary of State. May I answer a few of his particular questions? First, I thank him for his general support for the aims of what we are trying to do. I am sure that we will work together to achieve those. I think that is the best thing to do. I recognise fully that, of course, there are things that he will not agree with. That is reasonable, and it is exactly what I would say were I sitting in his place. In fact, I did exactly that some 10 years ago. How time goes on.

I also welcome the shadow Secretary of State’s acceptance of the need for conditionality in the system; we will need to discuss that with him further. There is absolutely a need for conditionality, which can properly be introduced only once we have created what I call the contract—that is, when we can genuinely say that we have improved the programmes to get people back to work, and have made the benefit system simpler, having made sure that there are no blocks to people going back to work. If we fulfil that bit of the contract, those out of work and looking for work need to fulfil their bit of the contract—they need to take the work when it is available. That is the key to conditionality.

The shadow Secretary of State asked about the level at which child benefit will be removed. It is simple—it will be removed at the higher-rate threshold. At the moment it is £43,875, but of course I cannot predict what it will be. It is a matter for the Chancellor; no one should read anything into what I said. It is not my job to set the rate, but the benefit will be removed at the higher-rate threshold.

The shadow Secretary of State went on to say that the change is not fair. He describes the tax system when he says it is not fair, although I am not sure what he is trying to describe. The reality is we think, fairly, that it is wrong for someone on lower income to have to pay tax so that someone on higher income can receive an element of benefit to look after their children. If he thinks that it is unfair to make the changes through the tax system, I would like to know what he did in the past 10 years to reform the tax system that he now thinks is unfair. The very same tax system actually penalises those who have one single high earner in the family as against a household with two lower earners who together could be earning £80,000, so he is condemning the tax system that he has given to us. We can only use the system that we have, but he may now think that that is unfair.

The measures will help enormously to meet what I call a progressive form of reduction in costs. I think that the process will be ultimately welcomed—it has been welcomed by the general public.

The shadow Secretary of State made the point that he did not think there were enough jobs. Of course, we could do with many more jobs. We have inherited an economy that has been stuttering. In the past month or so there have been just under 500,000 jobs in the jobcentres. Those are not static jobs. Those are jobs that are available—they rotate; some are taken and new ones come on. We know that in the informal economy there are many more jobs being taken. That is evidenced by the fact that some 280,000 people went into work in the past quarter, which is the highest number of people back to work since modern records began in ’89. The reality is that there are some jobs.

The shadow Secretary of State talked about growth. As he knows, over the period of the spending review, the independent Office for Budget Responsibility, the IFS—sorry, the IMF—and others have made forecasts; the IFS may yet make the same forecast as them. The IMF has forecast that growth levels will be between 2% and, in the medium term, 2.5% and that there will be a net increase in employment over that period. We can jostle over the figures, but I do not agree that there are no jobs available. As the economy begins to grow we will see even more jobs, but if we do not get people ready for those jobs, we will be in the same situation as he found himself in with 5.5 million people on out-of-work benefits doing nothing and languishing in households that had no work at all.

The shadow Secretary of State talked about the work capability assessment and he said that there were concerns. He is right. The figures that we were talking about were estimates of where we believe we could and should be. They are not hard targets. We cannot and will not set hard targets for a simple reason. As I explained earlier, this is a process. As we look at what happens in Aberdeen and Burnley, I hope—I am prepared to share this with him—that we will figure out whether there are things that we are doing right or wrong, so I am not saying that there are targets. It would be wrong to set targets.

As for the idea of reviewing the measures, the shadow Secretary of State said that he welcomed the Employment Minister’s views. We will modify all the measures as necessary. The key thing is that nearly 1 million people have sat on incapacity benefit without anyone seeing them over the past 10 years. We have to change that. The Labour Government started that programme; we must finish it. I hope that we will receive his support. The right hon. Gentleman commented on the way that we do these things. We will consult where necessary and make sure that the Opposition get the evidence that they require to decide whether to oppose our measures.

I conclude by saying to the right hon. Gentleman and all Opposition Members that we inherited a major deficit from him and his team. That deficit is the largest in the G20. If we do not get that down, the interest payments on the loans alone will dwarf everything we do. What we are doing in the spending review is looking for ways to do that. At the same time, it is important to make sure that when we act to reduce the deficit, we share the burden across the income scale and we do not achieve savings on the backs of the poorest in society. I am here to make sure that that does not happen. I hope I will have the right hon. Gentleman’s support in that when he sees how progressive the review turns out to be.

[Several hon. Members]

rose—

[Mr Speaker]

Order. A great many right hon. and hon. Members are seeking to catch my eye, and there is a well subscribed debate on the Second Reading of the Finance Bill to follow, as a consequence of which brevity in both questions and answers is of the essence.

[Harriett Baldwin (West Worcestershire) (Con)]

As a Back-Bench MP, I receive child benefit. Prior to entering the House, I was even better paid and received child benefit. Was the Secretary of State as surprised as I was to learn that the new Leader of the Opposition would like to restore child benefit to people like me?

[Mr Duncan Smith]

He may be after my hon. Friend’s vote, in which case we will have to do some quiet talking. It is a ludicrous position to take. We now have a Labour party in opposition which prefers to defend the very wealthiest, and a coalition that wants to defend the worst off.

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

Universal child benefit is the most effective benefit for reaching the poorest children, more effective than means-tested benefits which are designed for them. Can the Secretary of State enlarge on the implications of his comments last week that child benefit will, in due course, be subsumed into his new universal credit? Should I therefore assume that there is no prospect, regrettably, of a universal payment being reinstated when the economy recovers?

[Mr Duncan Smith]

The hon. Lady is right that child benefit has been and will continue to be a very effective mechanism to get money to the poorest families. We are not eradicating the universal benefit in the case of child benefit. We are capping it off at the higher rate. The rest—[Interruption.] Well, 85% of the public will get their child benefit. The hon. Lady asked specifically about the universal credit. I did not say that it would subsume child benefit. I said that as we reform the benefit system, and as the PAYE system is reformed, we should be able to look at these things long after the spending review and look for ways of getting rid of anomalies. Right now, in the spending review, there are no plans to make any such changes. We will do exactly as I said. Child benefit will be removed from families where there is at least one earner above the threshold.

[Mr Edward Leigh (Gainsborough) (Con)]

For years my right hon. Friend and I argued in opposition that marriage should not be discriminated against in the tax and benefits system, and in particular that mothers who chose to look after their children at home should not be discriminated against. Can my right hon. Friend assure me that he has not changed his view, and that through mechanisms such as transferable allowances he will ensure that women are entitled to make their own choices and are not influenced by the tax and benefits system?

[Mr Duncan Smith]

I agree with my hon. Friend. I make a point of agreeing with him on many things. The changes to child benefit are exactly what they are—to help us to reduce the terrible deficit that we have and to save the poorest families in the land from suffering a terrible burden that they would have to bear in due course. As my right hon. Friend the Prime Minister made clear last week—these are not matters directly for me, but he and the Chancellor will bring forward measures in due course—the very best way to ensure that couples do not face that penalty is to ensure that they are not unfairly taxed from the outset. This is about child benefit, and we will support families who make the choices that they make.

[Malcolm Wicks (Croydon North) (Lab)]

When, in the mid-1970s, the decision was taken to merge the child tax allowance, which broadly benefited the wallet, with the family allowance, which broadly benefited the purse, the then Labour Government, after a bit of a kerfuffle, decided that it should become a child benefit for the mothers, for reasons which, I think, both sides of the House recognise. Does the Secretary of State realise the dismay of many people in all parts of the House and the public that he is now running a coach and horses through the principle that it is very often the mother who has to juggle the family budgets, that certainly in the south of England, salaries at the level at which he is withdrawing benefit are not extravagant, and that that is a blow to the concept that mothers are at the heart of our families in Britain?

[Mr Duncan Smith]

I respect the right hon. Gentleman enormously, and he knows that, but I am afraid that he is living in a time warp. The reality is that we have walked into government to find facing us the single biggest deficit on record. This country is close to being broke, thanks to his Government and how they ran the economy. So, yes, in a perfect world we might have wanted to continue with everything as it was, but in reality we cannot afford to. We make such changes on the basis of ensuring that we do not make them on the backs of the poorest people. Had we done it any other way, he would have complained quite rightly, and I must say to him that, if he does not like the proposal, and it sounds like he does not, perhaps he or his Front-Bench colleagues will tell us where they think they are going to get the money from as an alternative.

[Stephen Lloyd (Eastbourne) (LD)]

I appreciate the Secretary of State’s commitment, through the work capability assessment, to include the chief executive of Mind on the independent panel, because it is recognised that some disabilities go into remission. Can he give any further reassurance that other disabilities, such as ME or MS, in which there are quite profound ups and downs and cycles, will be recognised in the new assessment?

[Mr Duncan Smith]

I can give the undertaking to my hon. Friend that all those issues will be reviewed with that team. If there is an issue about that, and if it affects anybody, we will want to try to bind that into the whole assessment. The assessment’s objective is not to penalise people. The truth is that when we undertook the flow—putting people through a process that the Opposition undertook when in government—we learned a lot. We found that a large number of people who went through it have come out the better for going into work. No one ever saw them, cared about them or discussed anything with them, so we are trying to ensure that we give them help and support, not to penalise them.

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Is it fair and reasonable to impose a fixed arbitrary limit on the total level of benefits that a family can receive, irrespective of the level of rents in inner-city areas, when that rent could well constitute 70% of the £500 per week ceiling? A family cannot possibly live on the remaining 30% alone.

[Mr Duncan Smith]

The right hon. Gentleman refers to the benefit cap, as announced last week. I think that it is fair. It is fair for us to offer an explanation to the public, most of whom work for low incomes and pay their taxes. They do not want to see somebody on benefits disincentivised from work because of the very level of money that they receive. I repeat what I said in the statement: to net-out £26,000, somebody in employment would have to earn about £35,000. So, I do not think that the measure is effective, in the sense that we are bearing down too hard. It is fair.

On housing, over the next few years we will manage the process with the changes to housing benefit. After all, over the last five years of the right hon. Gentleman’s Government, housing benefit costs ballooned by £5 billion a year, and they were set to balloon to £20 billion a year. I have one last point for him: his Government had the lowest number of houses built at any time since the 1920s. I wonder whom he blames for local authorities having had to place people in those expensive houses.

[Mr Oliver Heald (North East Hertfordshire) (Con)]

For a generation, disability campaigners have pressed for more jobs for people with disabilities, yet the employment rate of those people has remained pitifully low. Does my right hon. Friend agree that what his pilots aim to achieve, taken with the universal credit, is a situation in which people with disabilities get a fair break and a chance of a job, and that if they have a fluctuating condition there is a benefit system that supports them?

[Mr Duncan Smith]

Yes, I agree. That is exactly the point of all the changes that we are making, and the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller) is bound with that to review all that we do for disabled people in order to ensure that we do not write them off at any stage but give them an opportunity to go to work, if they can. We will absolutely support those who are not able to go to work. It is their right, and we will ensure that that is the case.

[Jeremy Corbyn (Islington North) (Lab)]

I want to take the Secretary of State back to the point raised by my right hon. Friend the Member for Oldham West and Royton (Mr Meacher). The universal cap of £500 a week will have a devastating impact on people living in inner-London areas such as mine, where private sector rents—paid for by housing benefit—are exorbitant, to put it mildly. The cap will result in desperate poverty for those people who try to remain living where their children go to school and near their families and community. The effect will be one of social cleansing over a vast area of inner-city Britain. Is that what the Secretary of State really wants to achieve?

[Mr Duncan Smith]

I do not agree with the hon. Gentleman’s reading of this.

[Jeremy Corbyn]

Look at the figures.

[Mr Duncan Smith]

I have been doing the figures, actually. The hon. Gentleman should remember that the measure is not being brought in until towards the end of the Parliament in 2013. In the meantime, we have already instigated some changes to how housing benefit is paid. The hon. Gentleman knows as well as I do that in some parts of London there has been complicity among private landlords to push the rents up much higher than they should have done. That was because the Labour Government never sorted out housing benefit.

The reality is that we will manage the process. The numbers will be far smaller than the hon. Gentleman talks about. We will make sure that what we do as we go forward is give the taxpayer and those in receipt of benefit a fair deal. I do not think that a person needs £35,000 a year gross to live a reasonable life.

[Mr Peter Bone (Wellingborough) (Con)]

I thank the Secretary of State for his statement today. I do not think that anyone in the House is more able to deal with the welfare problem than him.

With hindsight, does my right hon. Friend think that it was a mistake to announce the change in child benefit policy in a television studio last week rather than waiting to announce it in the House today? Was a written statement given to the other place, which was sitting last week?

[Mr Duncan Smith]

The Chancellor made a statement in a television studio, but he made a statement to the country and my hon. Friend at the same time. All I can say is that the policy has been discussed by me, the Prime Minister and the Chancellor. As far as I am concerned, come the spending review my hon. Friend will see even more details about other changes. There will be full statements on those as well.

[Mark Durkan (Foyle) (SDLP)]

Does the Secretary of State recognise that many of us represent places where the problem is a lack of work rather than a lack of work ethic? Is he hearing any concerns from the relevant Northern Ireland Ministers about some of the proposals on which he is still working? On the Work programme, the right hon. Gentleman has referred to the black box discretion that will be given to operators there. How will he ensure that there will be no black arts, in manipulating the statistics purely to gain payment by results and the other incentives that he says will be available further up the chain?

[Mr Duncan Smith]

As the hon. Gentleman may know, I have already visited Northern Ireland to discuss these matters with his colleagues. There may be some differences of opinion about where we are going, but most of that is because they have not quite arrived at the detail of it. I think that by and large these proposals, particularly the universal credit, will in general benefit Northern Ireland dramatically. The numbers of unemployed there are very high and we need to get those numbers down and get Northern Ireland working again. That is important. We have had the discussions.

[Margot James (Stourbridge) (Con)]

My question pertains to the upper limit of £26,000 on welfare payments. My right hon. Friend stated that that equated to a gross income of £36,000. Many in my constituency work long hours, sometimes putting in overtime, but bring in considerably less than that. I remind Labour Members that those people have housing costs to pay as well. Can we make sure that people understand that the £26,000 is very much an upper limit, and that we should not ever see the welfare equivalent of £36,000 gross income as the norm?

[Mr Duncan Smith]

I made the point that we also have to balance taxpayers’ requirements alongside those of people on benefit. By the way, when seen in the context of the total number of people on benefits at the moment, the numbers that we are dealing with are much smaller than people make out.

Most of all, I should say that we will not be doing this for people on disability living allowance. Those in receipt of working tax credit, for example—those in work—will also not be caught. We are simply looking to those families who have become static and immobile. There is a disincentive against their going to work; the amount of money that they receive is such that they could never get it if they went to work. Therefore their incentive to work is non-existent. That is the benefits system that we inherited; that is the benefits system that we will change.

[Tony Lloyd (Manchester Central) (Lab)]

If the Secretary of State recognises that this period of uncertainty is very stressful for people on incapacity benefit, does he also recognise that drip-feeding information through the media is not the right way of giving people any confidence that the system is fair? In particular, I understand that 40% of people who were originally refused incapacity benefit had that overturned on appeal. What does he intend to do about that, because it is frankly unacceptable?

[Mr Duncan Smith]

If the hon. Gentleman is worried about the drip, drip, drip on the 20th of this month, I should tell him that there will not be a drip at all; we will get it out all in one go, so he should steady himself for that. None the less, the issue generally will be resolved, and I promise him that if there are any direct questions, I will answer them. He should remember that the figure that he refers to is 40% of all those who appealed. In total, 5% of those who have migrated have had their appeals upheld.

[John Hemming (Birmingham, Yardley) (LD)]

I congratulate the Secretary of State on the proposals for the universal credit, which will make it worth being in work. As well as trying to fit people to jobs, will he consider trying to fit jobs to people by using the Government’s contracting power to require that there be some jobs for the long-term unemployed and some jobs for people with disabilities?

[Mr Duncan Smith]

We will certainly ensure that we look at that suggestion.

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

There has been a huge increase in the number of people coming to my surgeries and saying that, having been on incapacity benefit, they have been reassessed as capable of working but on appeal that decision has been overturned. That applies to the vast majority of people, certainly in Derbyshire. Does the Secretary of State have figures available for the whole country? I hope so, because if he is planning on rolling this out nationwide, we need to ensure not only that people who are wrongly assessed as capable of working are not left destitute but that the tribunal system is prepared for the huge number of appeals coming its way.

[Mr Duncan Smith]

Let me repeat the figures that I gave. Of all those who have been migrated through the system, about 5% have been successful in the sense that they have had their appeals upheld. There may be a slight change to that figure, because there is a backlog at the moment; we could probably make it up to 7% or 8%, but I do not think that it will get any higher than that. We should remember that all the people the hon. Lady is talking about represent the flow—that is, people who have not been in receipt of incapacity benefit until now but have been applying to come on to incapacity benefit and are being migrated through the process on to employment and support allowance or jobseeker’s allowance. The figure for those appeals is 5%, and that was part of the process that was started by the previous Government.

[Richard Fuller (Bedford) (Con)]

Many of us welcome the Secretary of State’s efforts to tackle the scourge of worklessness and to end the era in this country of indiscriminate and too often counter-productive welfare. On work capability assessment, he will know that these macro benefits are built on a series of individual assessments by a particular doctor on a particular day of a particular condition. May I press my right hon. Friend to take a personal interest to ensure that assessments of neurological disorders and mental health issues in particular are done fairly?

[Mr Duncan Smith]

My hon. Friend raises a very important point. I can guarantee to him that we have already been doing that, but we will continue to do so. That is why the independent panel, which includes somebody from Mind, will review it. Mr Farmer has been tasked with reviewing that generally, as well. We will constantly keep this under review and ensure that that is the case. We do not want to use this to punish people; it is about helping people, not punishing them.

[Sheila Gilmore (Edinburgh East) (Lab)]

Given the large number of my constituents and many others who had problems with the work capability test under the previous system, can the Secretary of State assure us that he has already reviewed the test prior to rolling out the new pilots, rather than leaving it as it is and piloting yet again? What full report is there on the outcomes of the system thus far? In Scotland, the Scottish Association of Citizens Advice Bureaux published a report that was highly critical of the system that was in place. Although a lot of us agree with it in principle, we know that when it comes to individual people the situation is very different.

[Mr Duncan Smith]

I guarantee that we have already reviewed the matter. Indeed, we inherited a review process, which the previous Government initiated. We will bind in the results of that—we are doing that at the moment. Having said that, we have subsequently set up the panel and asked somebody to investigate to ensure that we are covering all the necessary matters. The two pilots will help us understand better the way that the system works. I am not sure what else we can do at this stage. As I said to the right hon. Member for Paisley and Renfrewshire South (Mr Alexander), we intend to use what we are discussing as a process—it is not an end point, but a process that allows us to get the best out of how we deal with those who have been on incapacity benefit and need our support and help to get back to work. I give that guarantee.

[Jake Berry (Rossendale and Darwen) (Con)]

Is my right hon. Friend aware that many responsible employers, including those in my constituency, ask their staff to attend annual health assessments? Does he agree that it is fair and reasonable for those deemed not fit to work to attend similar assessments rather than wait 10 years on incapacity benefit without seeing a doctor?

[Mr Duncan Smith]

My hon. Friend makes exactly the right point: for too long, Governments of both colours were content to see people parked on incapacity benefit. The subject should unite the House; the previous Government started the process and we want to complete it. It is no longer feasible for people to languish on incapacity benefit. My hon. Friend is right; in some cases, people have not been seen for six or seven years and in others, people self-referred and have never been seen by anybody to find out what is going on. It is high time we resolved that.

[Pete Wishart (Perth and North Perthshire) (SNP)]

Will the Secretary of State please explain why a large swathe of Scotland is being used for the Con-Dem social experiment, especially when it involves some claimants travelling for up to 90 minutes to be interviewed? He will remember that the last time the Conservatives used Scotland as a testing ground was when they introduced the hated poll tax a year early. What safeguards and guarantees have the people of Scotland this time round?

[Mr Duncan Smith]

I am not sure what the hon. Gentleman is moaning about. Two cities are in the pilot, one in England and one in Scotland—he forgot that. The cities are different in character—they have quite different populations in terms of income. The hon. Gentleman made the point that some people travel long distances, and it is important for us to understand the exact effect of that. Sometimes I wish that he was not quite so parochial.

[Sajid Javid (Bromsgrove) (Con)]

I paid a visit to my local jobcentre in Bromsgrove earlier this month, and I learned from the advisers that, in many cases, it takes them more than an hour to determine whether a jobseeker would be better or worse off by taking just six hours of employment in a week. Does my right hon. Friend agree that the introduction of the universal credit and the taper relief system will make a dramatic difference to job incentives for jobseekers, and also increase their life chances?

[Mr Duncan Smith]

I am glad that my hon. Friend sees it like that, because that is exactly how I see it. Of course, the devil will be in the detail, but we want a process that is easy to understand for those who are trying to get back to work, so that they do not need a maths degree to figure out exactly how much money they will retain if they do seven, eight, nine, 15 or 20 hours’ work a week. We want it to be easy for them to understand that there is an incentive for every hour that they work, and for those in jobcentres to figure it out, so that they can give proper advice. We want incentives, not disincentives, to go back to work.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

Will the Secretary of State give us some assurance about the future of the independent living fund? The Government trickled out the information that it was one of the quangos to be abolished. That report has caused my constituent, Mrs Seckerson, and her husband and carer, Barry Seckerson, real concern because if they lose that fund, her chance of living a meaningful life will be severely inhibited. Rather than leaving them fearful of the future, can the Secretary of State give them some sense of security today?

[Mr Duncan Smith]

The ILF, which we inherited, had been underfunded and was consequently overspent—literally on the day we walked through the door of government. The hon. Gentleman might therefore want to take up the reasons for such bad mismanagement with his Front-Bench colleagues. However, we want to ensure that we deal with people in those circumstances fairly and reasonably. We are reviewing the whole process now and, as and when we complete the review, I shall ensure that the hon. Gentleman hears the details of it.

[Richard Harrington (Watford) (Con)]

I and most of my unemployed constituents to whom I have spoken favour what my right hon. Friend has said. I am sure that many of them are pleased to have the chance to go back to work if they can find a job and, of course, benefit from the extra income. However, after speaking to many people, I am convinced that several people simply expect a whole lot of new schemes, about which they will find out in order to find ways of avoiding them and of continuing what they quite enjoy: a life on benefits, albeit on a low income. I would be interested to know my right hon. Friend’s views on that.

[Mr Duncan Smith]

The vast majority of people who are on benefits are not seeking to stay on benefits for the rest of their lives. Most of them are seeking help to get off benefits and we want to provide that help. Most of all, I want to simplify the number of benefits so that people understand what they will receive and how, but to link that to a process of getting back to work. I repeat that those who genuinely cannot work, because they have disabilities that make it impossible, must receive the best support possible. That is the sign of a civilised society.

[John Mann (Bassetlaw) (Lab)]

The Office for Budget Responsibility has projected a net increase of 700,000 EU migrant workers during this Parliament, and that point was confirmed by Treasury officials to the Treasury Committee. Does the Secretary of State agree—and as the previous Government found to their cost—that an employer is more likely to prefer a new, young EU migrant worker to someone who has been on benefits for 10 years?

[Mr Duncan Smith]

The hon. Gentleman makes an interesting point. The only answer I can give is that during the past 10 years we have had between 4 million and 5 million people permanently parked on some form of out-of-work benefit. The reality is that it became easier and cheaper for most employers to employ people who were not on benefits than to go to the pool of people who were on benefits. I hope that our reforms will make work pay for those who are on benefits and thus release that pool of talent, so that demand can be met from here in the UK, and that only those who are really skilled and necessary will have to come from overseas.

[Mr Philip Hollobone (Kettering) (Con)]

My constituents will be horrified to hear from the Secretary of State that Britain has the highest rate of jobless households in Europe. Which country in Europe has the lowest rate, and what is it doing that we are not?

[Mr Duncan Smith]

Perhaps I should not say this, but I think that it is Holland—I read that in a note. Some 20% of all households in this country have nobody in work, which is a staggeringly high number. We also have the highest number of children born to workless households. By and large, every other country is Europe is doing it better than we do—and that is the shame of the previous Government.

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

Has the Secretary of State considered the impact of the benefits cap on homelessness provision, including women’s refuges? What plans does he have for housing benefit for supported accommodation, where rents are understandably higher than in the private rented sector?

[Mr Duncan Smith]

We are looking at all that. I have made available some £60 million for transitional funding for local authorities and others, and we will keep that under review. We do not want to penalise households, because it may not be their fault that they are living in homes that they simply would not be able to afford. We need to ensure that the changes are made, and I hope that we will also be able to drive down some of the rents. A lot of change is coming in the next two years, and I hope that much of it will be very progressive.

Points of Order

Monday 11th October 2010 Commons Chamber

16:53

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

On a point of order, Mr Speaker. Future students and their parents will be alarmed that Members from the governing Lib Dem party are preparing to break their election promises and vote for huge increases in university fees. Given the need for a system of funding that is sustainable, fair, progressive and related to earnings—and which means that able students do not have to shop around for the cheapest option—is it in order for Government policy on this issue to be announced by the Secretary of State not in a statement to the House but in an e-mail to Liberal Democrat and Conservative MPs?

[Mr Speaker]

I thank the right hon. Gentleman for raising what is undoubtedly an important point. Certainly these matters have been widely reported in the media and the House knows of my wish, oft-stated, that statements of Government policy should be made first to the House. At this stage, I do not know whether the briefing that has taken place falls into the category of briefing to the media in advance. However, I confidently expect—and I emphasise that point—that these matters will be before the House in the very near future, and I also underline that last point. That will both inform me and give the right hon. Gentleman and others the opportunity to explore these issues in greater detail. I hope that that is helpful to the right hon. Gentleman and to the House.

[Paul Flynn (Newport West) (Lab)]

On a point of order, Mr Speaker. There is a proposal to close the passport office in my constituency, with the possible loss of 300 jobs, which would leave Wales as the only country in the United Kingdom without its own regional passport office. I wrote to the Minister responsible about the matter in September. No word has come from any Minister—neither the Home Secretary nor the responsible Minister—yet a civil servant has presented the case and argued it to the press; indeed, they were actually present in my constituency this morning trying to justify it. As the convention in this House is that we do not attack civil servants, how can we go about ensuring that those Ministers responsible for this irrational and damaging suggestion come before the House to justify themselves?

[Mr Speaker]

I am grateful to the hon. Gentleman for giving me notice of this matter, and I am struck by it. I am not clear in my mind that it is a point of order, but it is certainly an important matter. He will know that the House has invited the Procedure Committee to consider how Government statements are made to the House. He could draw that example—and I suspect that he will—to the Committee’s attention. In addition, the Table Office will advise him on other opportunities to raise this important matter.

Finance (No. 2) Bill

Monday 11th October 2010 Commons Chamber

Second Reading

16:56

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

I beg to move, That the Bill be now read a Second time.

As observant Members will note, this is the second Finance Bill of this Parliament and the third one this year. The date of the general election earlier this year reduced the time available for scrutiny of technical measures in advance of that election, and the short timetable available between our emergency Budget and the summer recess has made it necessary to have a third Finance Bill to address various technical measures.

Given the content of this Bill, I suspect that there will be a fair amount of cross-party consensus on the matters in it but, in any event, I would like to congratulate the newly appointed shadow Treasury team. In particular, I congratulate the hon. Member for Wallasey (Ms Eagle), the shadow Chief Secretary to the Treasury, both on her election success as a member of the shadow Cabinet and on her appointment to her current position. She will bring considerable experience of Finance Bills to the shadow Treasury team, both as a former Minister and from the Finance Bill earlier this year.

Although he is not present, I should like also to congratulate the newly appointed shadow Chancellor, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson). He stated over the weekend that his first task was to read an economics primer, but he also expressed the need to hit the ground running, because of the Finance Bill today. Whatever his education programme, I suggest that he should not necessarily begin with the scrip dividend treatment of real estate investment trusts or the taxation of long cigarettes. However, we wish him well in that process.

At the emergency Budget in June, my right hon. Friend the Chancellor set out this Government’s fiscal mandate, acting swiftly to tackle the deficit and restore credibility to the public finances. In the short, summer Finance Bill, we quickly put the core elements of the Budget on to the statute book, reassuring the British people and the financial markets that we would not allow Labour’s debt to spiral out of control.

[Kelvin Hopkins (Luton North) (Lab)]

The Minister mentioned cigarettes. Are the Government going to do anything to tackle the £4 billion that is lost through cigarette smuggling? That is four times the amount of money that they are apparently hoping to save by cutting benefits to the better off.

[Mr Gauke]

The hon. Gentleman makes the fair point that there is too much cigarette smuggling, and this is a matter that we are keen to address. My right hon. Friend the Chief Secretary to the Treasury has already announced proposals to provide additional funding to Her Majesty’s Revenue and Customs to tackle cigarette smuggling, among other things. I very much welcome the hon. Gentleman’s intervention but, let us be honest, it would be unrealistic to say that we could prevent all cigarette smuggling. We can, however, take steps to reduce it. That would be to the benefit of the Exchequer, and I am pleased that the Government are moving ahead and doing that.

It is our determined actions that have restored confidence in the economy, stabilised the nation’s credit rating and halved interest rates on Government short-term borrowing. We are saving money today so that we can invest in tomorrow. Ours is the right approach for the country, and that has been widely recognised. Only a fortnight ago, the International Monetary Fund said that our deficit plan was essential to restoring confidence in the UK’s public finances and “supports a balanced recovery”. That is the approach that we will take forward, including in the spending review.

[Ms Angela Eagle (Wallasey) (Lab)]

I should like to take this opportunity to thank the Minister for his kind remarks about me and the new shadow team. If he is so convinced that the actions that the Government took in June have stabilised the economy, can he explain why a survey reveals today that confidence among Britain’s financial chiefs has slumped to a fresh low, with 34% of finance directors polled by Deloitte believing that the economy will go back into reverse? Those findings demonstrate that optimism has dropped to its lowest level for 18 months.

[Mr Gauke]

The fact is that the measures that the Government have taken have had the support of the IMF, the OECD, the World Bank and the Governor of the Bank of England. We are getting widespread support for taking these tough measures. We also have the support of the director general of the CBI. There is an increasingly large consensus—it even includes Tony Blair—that if we simply deny the existence of the deficit and avoid taking these tough decisions, we shall face a worse problem later on. It is absolutely right that we should take these measures.

[John Mann (Bassetlaw) (Lab)]

On the Deloitte survey, does the Minister agree that business people make investment decisions based on how they see the future? What will happen if those business people see a murky future? Will they not invest less? Would not that result in the Government’s optimistic predictions of private sector growth, on which they are relying, not coming to fruition?

[Mr Gauke]

I shall tell the hon. Gentleman what would drive down investment: the fear that the Government were not prepared to take the tough decisions. Taking decisions for the long term to tackle the deficit will encourage private sector growth, and this Government are confident that we are taking steps in the right direction. We are also confident that a policy of reducing public expenditure rather than increasing taxation—which is the forecast of our plans to reduce the deficit—is the right way forward. Spending that is funded by borrowing is just a recipe for higher taxation and bigger cuts in the future, burdening future generations with the problems created by this one. That approach would drive down investment. Simply ignoring the matter would not help investment; it would not be fair and it would not be progressive.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Does my hon. Friend agree that the protests that we are hearing from those on the Opposition Benches are in stark contrast to the fact that the measures taken by this Government have secured our triple A rating?

[Mr Gauke]

My hon. Friend is absolutely right. The fact is that the Moody’s triple A credit rating was deemed to be at risk, and has now been stabilised. Our market interest rates have fallen, and we are restoring confidence in the long-term capability of this country. If we refused to take these measures, we would be taking the most enormous risk.

It may be helpful if I give some of the background. As I said earlier, there remain some technical changes that we could not include before the summer, and the Bill provides for those changes to be made.

I think it safe to say that Members on both sides of the House will agree on the contents of the Bill. I should be disappointed if they did not, given that within the last year all but one of the measures that we are debating were proposed by the last Government I am glad that we have reached a consensus on that, if not on other matters. None the less, we wanted to ensure that the public and interested parties had an opportunity to provide input.

In the Budget we set out our approach to tax policy making, with consultation at the heart of the strategy. In the spirit of that new process, we published the Bill in draft over the summer. That has not only allowed key interest groups to comment, but reassured those affected by the Bill. More than 60 responses were received, and nine clauses have been modified as a result. Furthermore, many groups have voiced their approval of the provision of a draft Bill to allow for additional scrutiny, which has made the Bill better, clearer and easier to apply.

We also increased opportunities for consultation by creating the Office of Tax Simplification over the summer. We need to increase transparency for businesses and the tax profession: that is a message that we hear frequently. We also hear about the importance of greater predictability, stability and simplicity in the tax system. The Office of Tax Simplification will identify areas in which complexity in the system can be reduced, and we will publish its findings for the Chancellor to consider before he presents his Budget. Simplifying the tax system is not just a means in itself, but a vital sign that Britain is once again open for business.

The Bill is not just a good example of engagement with the public; it also supports our aims of helping businesses and promoting fairness. Clause 10 provides support for real estate investment trusts by relaxing their distribution requirements. Clause 13 removes intellectual property conditions linked to research and development tax credits, enabling more small companies to claim. Clause 11 fixes issues in the worldwide debt cap regime to allow it to operate properly. The changes affect businesses large and small. Clause 9 removes an unintended tax charge from company distributions, and clause 7 makes changes to the venture capital schemes to guarantee state aid approval.

The coalition Government are committed to ensuring that the decisions that we make are fair, and that we protect the most vulnerable in our society. The choices that we have made to date, and the actions that we will take as part of the spending review, will help to make Britain fairer. Clauses 1 and 2 play their part by easing the tax rules for carers and extending the scope of the current tax relief. Clause 31 provides tax relief for trusts that compensate sufferers from asbestos exposure. I am sure that many Members will particularly welcome that clause. Clause 16 guarantees that those providing support under an adult care placement do not suffer capital gains tax as a result of sharing their home. Those too are small measures, but they provide significant and welcome support for those affected.

One clause has not been included in the Bill, although it was intended to feature. The aggregates levy credit scheme in Northern Ireland was introduced in recognition of the impact of the levy on legitimate businesses as a result of tax evasion on imports from Ireland and illegal quarrying. Over the summer, we consulted on legislation to be included in the Bill to extend the scheme beyond April 2011 to March 2021. Since then, the European General Court has annulled the Commission's state aid approval for the scheme, for the period covering April 2004 to March 2011. In those circumstances, it would not be appropriate to extend the scheme and we therefore decided to remove the clause from the published Bill. However, the Government strongly support the scheme and, if the Commission were to come to a fresh decision that the aid was approvable, legislation to extend it can be introduced in the Finance Bill in 2011.We will continue to work closely with the Commission, the authorities in Northern Ireland and representatives of the quarrying industry to find a solution that provides a level playing field for legitimate quarry operators in Northern Ireland, while maintaining environmental standards.

The other clauses help to align HM Revenue and Customs’ interest and penalty regimes; enable the National Employment Savings Trust to operate as a registered pension scheme; assist with the correct allocation of overpayments of tax to settlers of trusts; and tackle evasion of excise duties. Although those clauses could not make it into the previous Government's final Finance Bill—although 71 clauses did make it into their four-hour Bill—we are ensuring that these necessary but less glamorous changes are made.

This is a simple, straightforward Bill that eases burdens on individuals, businesses and HM Revenue and Customs. It is one that the previous Government all but enacted themselves. In brief, it is an important but, I hope, uncontroversial Bill, and I commend it to the House.

17:11

[Ms Angela Eagle (Wallasey) (Lab)]

As the Exchequer Secretary has said, the Bill before us is the third Finance Bill that we have had this calendar year. We normally expect two if a general election intervenes, when the usual Finance Bill timetables are inevitably interrupted. However, this year we have had three. That is because of the decision of the Chancellor of the Exchequer to stage a piece of political theatre—I might even call it crass melodrama—when he presented his self-styled emergency Budget to the House in June. Rather than one that included all the necessary legislative provisions that had to be enacted this financial year, we got a tiny Bill. Its purpose was to tie the Liberal Democrats into the huge cuts to come and to the VAT bombshell before any summer revolts could gather pace and menace the Government’s stitched-together majority.

[Sajid Javid (Bromsgrove) (Con)]

I congratulate the hon. Lady on her new position. The emergency Budget to which she referred was absolutely necessary considering the train wreck of an economy that we inherited. The country’s debts were spiralling out of control. That Budget calmed the debt markets and allowed the country to look at its finances and to bring economic competence back into the Treasury.

[Ms Eagle]

The hon. Gentleman is even more melodramatic in his rewriting of history—his historical revisionism of what was going on in the UK economy—than the Chancellor. I had thought, having watched that performance, that that was impossible, but perhaps the hon. Gentleman should try out pantomime this year as Christmas approaches.

I was about to say before I was so rudely interrupted that, rather than encumber himself with the tedious technical detail in this Budget, the Chancellor decided to start behaving like the Liberal Democrat student activists we all come across at university and to take it in parts. This is part two. As a result, we have in today’s Bill what can best be described as the technical innards of a Budget; I think that the Exchequer Secretary used other words. In fact, most of the clauses, as he pointed out, are the technical innards of the last Labour Budget, which was presented in March 2010. However, it is the duty of the Opposition to scrutinise the detail of all Budgets, and we certainly intend to fulfil that obligation tonight.

Measures included in the Bill are important to the workings of the taxation system—the Minister did the House a service by going through them in great detail—but they have failed to inspire much interest or controversy in the outside world, perhaps because they have been signalled for a long time. The measures were subject to consultation under the previous Government as well as the current one when they were in development. Some might even say that they were prototype proposals, because that is the way that things tend to be done in the Treasury. That is attested to by the lack of much comment on or reaction to the proposals even among the taxation professionals who usually pore over the technical details of Finance Bills with fine-toothed combs. In respect of this Finance Bill, those professionals have been strangely unmoved—I might even say indifferent.

[Kelvin Hopkins]

I, too, congratulate my hon. Friend on her appointment to the Front-Bench team and I am pleased to see her there. Is not the fact that this is a mouse of a Bill, given that we face a £120 billion tax gap that the Government are doing nothing to reduce, and that 1% of that sum would save more money than their cut in benefits?

[Ms Eagle]

My hon. Friend is right to point out that there are two sides to the deficit reduction equation. Clearly, one side of that is collecting the taxes that are due in an appropriate fashion, and I shall say more about that later in my speech. He is right that we need constantly to keep that side of things in mind.

I was about to pay tribute to the Institute of Chartered Accountants, which was one of the few organisations to submit comments on the Bill when many had fallen by the wayside. Perhaps it is up to the Opposition to be vigilant when others have taken their eyes off the ball.

As my hon. Friend said, it is odd that we are debating a seemingly uncontroversial and overwhelmingly technical Finance Bill in the midst of one of the most difficult and dangerous periods for the UK and world economies in many generations. We have lived through the largest banking and financial crisis in the global economy since the Wall street crash of 1929. It has caused a deep and painful global recession, and we are struggling with the aftermath of the rescue of the world financial system from the colossal market failure that was dramatised by the collapse of Lehman Brothers in 2008. That inevitably caused budget deficits to soar everywhere, but especially in the more advanced western economies.

The UK was particularly affected, in part because of the size of our banking and financial services sector. The concerted action co-ordinated at the London G20 conference averted a catastrophe, and we are now witnessing a tentative economic recovery. However, that recovery remains distinctly fragile.

[Lorely Burt (Solihull) (LD)]

We have the biggest budget deficit in the G20. What does the hon. Lady believe contributed to that? Could the previous Labour Government, of whom she was a member, have done a bit more to try to avoid that?

[Ms Eagle]

The hon. Lady must recognise that the budget deficits being suffered in all the more advanced economies result directly from the need to rescue the world financial system by underpinning it, the effect of automatic stabilisers and the loss of revenue caused by the recession that followed the credit crunch. I thank her for giving me the chance once more to put that on the record.

[Claire Perry (Devizes) (Con)]

Will the hon. Lady give way?

[Ms Eagle]

I will be happy to give way when I have finished dealing with the point made by the hon. Member for Solihull (Lorely Burt). I am pleased that she gave me the chance to put on the record again the plain fact that Budget deficits throughout the developed world were caused by the costs of the recession and the need to underpin our banking systems, rather than by profligacy in public spending. The problem was caused by a gigantic global market failure, not by the activities of Governments.

[Claire Perry]

It is a pleasure to welcome the hon. Lady to her new role, as she is one of the more economically literate and articulate of the shadow Front-Bench team. I am therefore surprised that she continues to bring out the hoary chestnut that somehow this deficit was entirely a result of the collapse in the banking system and was nothing to do with the previous Government’s spending more than they raised in taxes since 2001.

[Ms Eagle]

The hon. Lady has also to recall and acknowledge that a lot of the investment spending since 2001 went on infrastructure, which will stand our country in good stead as we look to how we can rebuild our prosperity and continue to earn our way in what will be an increasingly competitive world.

[Charlie Elphicke (Dover) (Con)]

I would point out to the hon. Lady that the Office for Budget Responsibility says that there is a structural deficit of £109 billion—I believe that is the figure—which has nothing to do with the banking crisis or the recession and will not be eliminated by growth. Does she not accept that the previous Government have some or full responsibility for that structural deficit?

[Ms Eagle]

I think we need to have a much more grown-up discussion about how we ended up facing these economic challenges. One of the more underhand approaches that the Government have taken to this narrative has been to say that the economic challenges facing us, which are formidable, are somehow all about the previous Labour Government wasting public money and spending profligately. The hon. Gentleman knows that that is simply is not true—

[Several hon. Members]

rose—

[Ms Eagle]

I will give way in a moment. If we reach the stage where we have an appropriate analysis of how our economy got to be in this situation, we will stand a far better chance of having a reasonable discourse about how we can best move forward, rather than having this gross caricature being made by those on the Government Benches.

[Mark Tami (Alyn and Deeside) (Lab)]

The Government seem to forget that when they were in opposition they promised to match our spending. The Liberal Democrats have great cheek to say now that they did not support the increased level of borrowing—I recall that they certainly did.

[Ms Eagle]

That is true. Clearly, the Chancellor and Prime Minister are on record, up to and including in 2008, as doing precisely what my hon. Friend says and supporting our spending commitments as they were at the time.

Although the recovery remains distinctly fragile, the June Budget took a huge and risky gamble with it. Since then, confidence in the UK’s economic prospects has fallen off a cliff and business surveys, such as that by Deloitte which I asked the Exchequer Secretary about, demonstrate that economic sentiment is darkening. There are increasing signs that the tentative recovery is stalling and that the economic storm clouds are gathering once more.

[Kelvin Hopkins]

I agree entirely with what my hon. Friend is saying. Is it not true that those who invest and those who are lacking confidence now are simply aware that cutting spending, cutting jobs and cutting benefits will drive the economy into recession, and that nobody will invest when we are diving into a recession? Does she agree that in the early part of this decade Britain had a relatively low level of public spending as a proportion of gross domestic product compared with, for example, Scandinavia?

[Ms Eagle]

My hon. Friend is right on both points, but he also raises an important issue about what Keynes called “animal spirits”. It is fair to say that all the signals are that the animal spirits are somewhat more depressed now than they were a few months ago and that the things that have depressed them are the decisions that were announced in the June Budget.

Ominous noises are coming out of the recent International Monetary Fund meeting about currency wars and competitive devaluations, and they offer worrying echoes of conditions that led to the great depression in the 1930s. Dominique Strauss-Kahn was not joking or exaggerating when he warned the IMF meeting about the dangers that the huge increases in unemployment will pose for our democratic institutions. Yet none of this is referenced in the measures before us today.

[Sajid Javid]

rose—

[Ms Eagle]

I have given way to the hon. Gentleman before and I want to get on, because I know that other people wish to speak.

In many ways, we find ourselves in a kind of pre-spending review phoney war. We know that something truly awful is coming but it has not arrived yet, so we are whistling to keep up our spirits as the winter approaches and the long nights draw in. The Prime Minister himself has taken to using wartime phraseology. For some strange reason, in his conference speech he was moved to invoke the spirit of Lord Kitchener and his famous “Your country needs you” first world war Army recruitment slogan, not once but twice. Quite why he did that is beyond me, since Lord Kitchener was the general who created the world’s first concentration camps in the aftermath of the Boer war. They inflicted appalling suffering on innocent women and children in order to quell any Boer resistance. As Secretary of State for War, he supported the disastrous Dardanelles operation and was widely blamed for the shortage of shells in 1915, which, incidentally, precipitated the formation of a Tory-Liberal Government.

Of course, Kitchener has become best known for the famous Army recruitment campaign and its memorable slogan, which our Prime Minister saw fit to borrow the other day. In 1914, that plea resulted in the creation of what became known as “Kitchener’s Army”, and I suppose we should refer to the attempts to create a “big society army” to fill in the gaps that the cuts will create. Unfortunately, however, that Army was destined to go into action in the Somme, where 60,000 of them were slaughtered on the first day of the offensive. By its end, 600,000 had been lost to gain just 6 miles of territory, and overall casualties in the offensive as a whole reached an almost unbelievable 1.2 million men—

[Several hon. Members]

rose—

[Ms Eagle]

I shall give way in due course, when I have finished.

[Mr Brian Binley (Northampton South) (Con)]

Be kind to me.

[Ms Eagle]

I shall give way in due course, but not at the moment.

I was just saying that the Somme offensive cost—

[Mrs Anne Main (St Albans) (Con)]

On a point of order, Mr Deputy Speaker. Is this rather long revisiting of first world war history directly related to the Finance Bill’s Second Reading?

[Mr Deputy Speaker (Mr Nigel Evans)]

Had I noticed anything out of order, I would have been sure to have pointed that out. As it is, I believe that the shadow Minister is now moving on.

[Ms Eagle]

I was just about to do so, Mr Deputy Speaker, but suffice it to say that Kitchener’s Army became a tragic symbol of a lost generation, pointlessly sacrificed because of the idiocy of those in charge. Perhaps, whether he realises it or not, the Prime Minister was on to something with his choice of exhortation.

[Jacob Rees-Mogg (North East Somerset) (Con)]

I thank the hon. Lady for giving way and add my congratulations on her elevation. It will be a great privilege to listen to more of her speeches, I hope often on Kitchener. I fear that she has maligned the late noble Lord Kitchener of Khartoum, the rescuer of what remained of Gordon’s body from Khartoum. Perhaps most relevantly, the death rates in the camps established in South Africa were exactly the same as—

[Mr Deputy Speaker]

Order. This would be a fascinating debate at another time and, perhaps, in another place.

[Ms Eagle]

Thank you, Mr Deputy Speaker. I know whose side I would rather be on in any attempt to rehabilitate Lord Kitchener.

As the spending review approaches, we are beginning to see increasing signs of nervousness about the likely effects of the cuts, and that is just among Ministers. We already know that the Government have taken a decision in principle that a huge increase in unemployment is a price worth paying to get the deficit down. In an admission that the spending review will depress economic activity, the Chancellor recently made it clear that he will sanction the resumption of quantitative easing, or increasing the money supply, should the cuts in demand tip the country back towards recession. However, the extent to which monetary policy can be effective when interest rates are so low and demand is depressed is the subject of well-placed scepticism in very respectable economic circles.

[Albert Owen (Ynys Môn) (Lab)]

I welcome my hon. Friend to her new position. Does she agree that there are lessons to be learned from the Republic of Ireland, where a centre-right coalition has made savage cuts quickly? That has not only affected its triple A rating—it has been downgraded—but created mass unemployment.

[Ms Eagle]

Yes, I do think we have to keep a careful eye on what is going on elsewhere in the world. It is clear that the mantra that there is no alternative is simply not true.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

I add my support for my hon. Friend after her elevation to her new position. She mentioned quantitative easing, and she will no doubt have seen the widespread reports in the newspapers over the weekend that the Chancellor has given it a green light. Is that not his plan B, and his way of avoiding the so-called “difficult decisions” and passing them on to the Bank of England?

[Ms Eagle]

It certainly indicates that there is some nervousness and worry about the downturn in what the economic indicators say about the effect of measures that were announced with great fanfare in June.

[Andrew Bridgen (North West Leicestershire) (Con)]

Does the hon. Lady agree that the main thing that we can learn from the economy of the Republic of Ireland is that we were right not to join the euro and should never do so?

[Ms Eagle]

I look forward to the debate that will take place within the Government on that, as I can see that Liberal Democrat Members are not exactly enamoured with the hon. Gentleman’s point.

At the weekend, the Cabinet seemed to send incoherent messages about the £83 billion cuts agenda that lies ahead. The Energy Secretary told The Daily Telegraph that spending cuts were not

“lashed to the mast with a particular set of numbers”

and could be scaled back if economic conditions deteriorated, but the Transport Secretary insisted that the Government would not deviate despite fears that the drastic cuts would damage the economy. The latter clearly regards himself as the real Chief Secretary—or perhaps it would be more accurate to say the Tory Chief Secretary—but which of the two is presenting the Cabinet’s real view? They both serve in it, so which of them is right? Perhaps when the Economic Secretary responds tonight, she would like to enlighten us about which of their positions is the real Government policy, at least for today.

Some things that I would have thought would be in the Bill, given the formidable economic challenge that now faces us, are conspicuously absent. Where is the plan for growth? We all know that growth is one of the most effective ways of dealing with a deficit. Thus, plans to get the deficit down need to be growth-friendly, but precious little in the Bill is intended to address that urgent requirement.

Since May there have been plenty of cuts that may well have a bad impact on our growth prospects, such as the abolition of regional development agencies and the savage cuts in the funding available to assist regional growth strategies. The decision to scrap the loan to Sheffield Forgemasters is another example. That company could have played a leading role in the developing global nuclear industry, but its chances of doing so have been set back significantly by that decision. The increase in VAT, which estimates suggest will cost each household in the country more than £500, will hardly boost demand, so where is the plan for growth? The Prime Minister claimed that his first Budget would be

“a Budget that goes for growth”,

but after the Chancellor’s theatrical efforts in June, the Government’s own forecaster, the Office for Budget Responsibility, downgraded its growth forecast for this year from 1.3% to 1.2%, and for next year from 2.6% to 2.3%. The CBI also decided to lower its growth forecast for next year from 2.5% to 2% to take account of the June Budget.

[Alec Shelbrooke]

I welcome the hon. Lady to her Front-Bench position. If the 2.5% rise in VAT is so wrong, why was it right for the previous Government to return it from 15% to 17.5%? Although there had been a reduction, that was still a 2.5% rise.

[Ms Eagle]

The hon. Gentleman was not in the House at the time, but the reduction in VAT was part of the fiscal stimulus that kept the economy afloat during the most dangerous parts of the credit crunch. The growth figures for the early part of this year show that that fiscal stimulus package was working.

[Stewart Hosie (Dundee East) (SNP)]

The hon. Lady talks about the fiscal stimulus package working. It did work, of course, and I backed fiscal stimulus. Does she not now regret that the previous Government was one of only two in the G20 fully to withdraw the fiscal stimulus package in 2010?

[Ms Eagle]

The hon. Gentleman is arguing that we should do the opposite of what the Government decided to do in June. I hope that, in due course, we will see him in the Lobby with us.

[Alison McGovern (Wirral South) (Lab)]

I thank my hon. Friend for giving way and welcome her to her new role. I am pleased to see one of my Wirral constituency neighbours at the Dispatch Box. I was not a Member of the House at the time, but I recall the temporary VAT reduction to 15% as being just that—a temporary improvement for consumers to build confidence. Will she assist me? Was that the case and how does that measure compare to the VAT proposals made by the Chancellor in his Budget?

[Ms Eagle]

Clearly, that measure was temporary and well signalled in advance—a cut to boost the economy in the short term in the most effective way. The interesting thing about what has been announced since June is that the VAT increase appears to be permanent. We are also seeing a range of other announcements, such as the shift from the retail prices index for benefit increases to the consumer prices index—not temporary to deal with a situation in front of us, but seemingly permanent.

[John Mann]

Will my hon. Friend give way?

[Ms Eagle]

I am happy to.

[John Mann]

My hon. Friend may not be too happy to give way, but first I congratulate her on her appointment. She is an appropriate and excellent appointment to the Opposition Treasury team. However, she is making an argument about increasing taxation leading to a reduction in growth. Is that not a rather dangerous argument for a Labour Opposition to make when the choices between spending and taxation are precisely those that any Government would have to make? Is it not time that the Labour Opposition re-examined their opposition to the VAT increase? Should we not reverse that opposition and support the increase as an appropriate way to increase taxation at a time when we need to offset any cuts that would lead to job losses in the public sector?

[Ms Eagle]

My hon. Friend should take account of the regressive nature of VAT and the fact that the Government have trumpeted from the beginning that their measures will be fair. They even used the word “progressive” during the June Budget discussions when the analysis by the Institute for Fiscal Studies and recent work by Age UK demonstrates that the effect of the Budget measures of which the Bill is a small part will be the exact opposite of progressive. It will be regressive; it will hit the poorest hardest, and VAT has a part to play in that.

[John Mann]

rose—

[Mr Gauke]

rose—

[Ms Eagle]

I am anxious to get on. I have given way a lot and many other Members wish to speak.

The Irish example demonstrates the risks of focusing on getting the deficit down—too high a cost to the growth potential of the economy. The Irish have had deep and fast cuts as well as tax rises, but growth has been hit, which is making getting the deficit down harder rather than easier.

[Mr Gauke]

I am grateful to the hon. Lady for giving way and I am listening carefully to her somewhat gloom-laden speech. I can see why her military role model is not so much General Kitchener as Private Frazer. May I press her on one particular point? The position of her party at the general election was in favour of spending cuts of 20% over the Parliament and halving the structural deficit over four years. Does she still support that position?

[Ms Eagle]

That is our starting point as we move forward to judge what the Government will announce in a few days’ time. The issue here is the scale and speed of the deficit reduction, and how that impacts on our approach to being able to see some kind of economic recovery sustained, given what is happening in the rest of the world. The worry that we have always had about the Budget judgment implicit in the June announcements and soon to be reinforced in the forthcoming spending review is that the medicine being fed to the patient runs a higher risk of killing it off. We do not want the deficit reductions to be too soon and too deep to sustain a recovery. The Irish example demonstrates the risks of focusing on getting the deficit down at too high a cost to the growth potential of the economy. The Government have a particular view on those judgments, but we disagree with them on the necessity for speed and the ferociousness of the deficit reductions. We are not saying that deficit reductions will not be necessary. The Chancellor used to mention the Irish example all the time as the Irish Government made their extremely deep and fast cuts, but lately he appears to have stopped referring to it at all. I wonder why.

The Government are gambling on their outdated and dogmatic view that if only the state would get out of the way, the private sector would spontaneously move to fill the gap and quickly create the 2.5 million extra jobs that the Office for Budget Responsibility has calculated would have to be created to get the deficit down as forecast. Thus our economy is meant to perform better in job creation terms than it has ever done before, even in much more benign economic circumstances than those we face.

We have just lived through the most dramatic example of the limits of that market fundamentalism that any of us are likely to see in our lifetime. It was not the private sector that rescued the world financial system from meltdown in the credit crunch; it was the co-ordinated action of Governments. Governments have a crucial role to play in fostering economic growth and helping to encourage the emergence of a better, more balanced economy, yet the Bill does nothing to restore the support for industry that the Government have already cut. It does nothing to reverse the £3.6 billion tax hike that will hit our manufacturers in order to pay for the corporation tax cuts announced in the June Budget, £1 billion of which will go straight back to the banks.

Abolishing allowances and reliefs effectively hits businesses with a tax hike when they invest. It benefits investment-light industries such as financial services over investment-heavy industries or new sectors looking to grow. That change penalises companies that need to make sustained investment to establish themselves and grow. It is a strange way for the Government to signal that they wish to see a rebalanced economy and the creation of new industry. Little wonder, then, that the plans have been described as “a disaster” by the senior economist at the Engineering Employers Federation and that the Institute for Fiscal Studies has said:

“Cutting investment allowances to fund a cut in the mainstream corporation tax rate would help companies which make large profits with little investment, at the expense of businesses that are investing heavily in the UK but making only marginal returns.”

There is no sign of a serious growth strategy.

[Stewart Hosie]

Will the hon. Lady give way?

[Ms Eagle]

I have given way to the hon. Gentleman before, but I shall do so once more.

[Stewart Hosie]

I agree with much of what the hon. Lady has said. Would it not carry more weight, however, if her Labour Government had not abolished, for example, industrial buildings allowance and agricultural buildings allowance—the very sort of allowances that she described that would help investment now. Would not her argument carry more strength if her Government had not butchered those important allowances only a few years ago?

[Ms Eagle]

I remember the detailed discussions that we had on that issue in previous Finance Bill debates. The hon. Gentleman has probably been in more of them than I have. The issue is not the abolition of allowances that are 40-odd years old and increasingly do not recognise the changed shape of UK industry. It is about abolishing allowances completely to fund a cut in mainstream corporation tax, with the result that the incentives for investment are taken away at the point of investment.

One of the measures that the Bill ought to have contained but does not is the creation of a tax relief for the video games industry. We all know in the House that in the UK we have a particular expertise in creating video games, which was beginning to create high-value jobs in the UK in what has become a multi-billion-pound industry. We also know that our brightest software engineers are being tempted abroad by generous and possibly illegal tax breaks, and that we risk the decimation of our UK base if we do not respond. That is why, while we were in government, we developed the video games tax credit, which was to operate along the same lines as the film tax relief. In opposition, just before the election, the Conservative party supported that. On 13 April 2010 the hon. Member for Wantage (Mr Vaizey), now the Under-Secretary of State for Culture, Olympics, Media and Sport, said:

“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”

Like so many other things said during the general election campaign, that pledge was abandoned immediately after it. We will want to explore the issue further in Committee.

Before the Minister uses the standard Treasury line about how the video industry can always make use of the research and development tax credits that are available more generally, he might care to put all our minds at rest and deal with the nasty rumours swirling around that the entire R and D tax credit may be at risk in the cuts to come. Perhaps the Economic Secretary will reassure us on that point.

Another notable omission from today’s Bill is any reference to increasing the resources which will allow HMRC to build on its already excellent work to tackle the tax gap. Obviously, as was said earlier, the more that tax due is collected, the more effectively the deficit can be tackled and the less pain our society will be forced to endure during the adjustment ahead. During the conference season the Deputy Prime Minister made much of the need to close the gap between the taxes that are due and those that are actually collected. He made grand and welcome pronouncements that it is “ethically wrong” to avoid paying our taxes. He was followed by the present Chief Secretary to the Treasury who announced, interestingly, that he regarded both tax avoidance and tax evasion as “morally indefensible” in times like these.

[Kelvin Hopkins]

I agree entirely with what my hon. Friend is saying. PCS, Richard Murphy and others have made the simple point that appointing more tax officers would solve the problem. They collect many times their own salary, and it would be highly beneficial to the Exchequer if that were done.

[Ms Eagle]

My hon. Friend is well known for his views on the subject.

Neither of the Ministers whom I just quoted revealed just how successful HMRC has been in pursuing this work in the past three years. HMRC increased the yield from compliance interventions by 60% in the three years to 2008-09. However, we all know there is more to be done and we would all support sensible measures to make such work even more effective.

Following all the fuss about that and the headlines generated, I would have expected to see some extra action in the Bill. However, despite the dramatic headline- grabbing moral assertions, nothing has been added to the Bill to signal the Government’s determination to launch a further crackdown. The worry is that the 25% to 40% cuts in departmental staffing due to be announced in the forthcoming spending review will seriously damage HMRC’s ability to maintain its work on improving tax collection, let alone to launch a further successful crackdown on the tax cheats. Again, this is a topic to which we will return in Committee, but I would be grateful for any reassurances the Minister may be able to offer us tonight that the operational capacity of the HMRC in this crucial area will be enhanced rather than decimated in the cuts to come.

Perhaps the hon. Lady can also explain to the House precisely what signal on tax collection the Government intend to send by appointing Sir Philip Green to advise the Prime Minister on Government efficiency. His own tax arrangements include paying a £1.2 billion dividend to his wife, who just happens to be domiciled in Monaco for tax purposes. Although this is not illegal, the Business Secretary has gone on record as saying that he is unhappy about it, and the Energy Secretary has said that it sends the wrong message. Can the Minister explain how this example squares with the Chief Secretary’s grand pronouncement that both tax evasion and tax avoidance are immoral in times like these? Once more, we must look at this Government’s actions rather than their words. Their decisions will be far more eloquent than thousands of well-crafted press releases or any synthetic outrage.

As we await the spending review, it is abundantly clear that the centre of economic and political attention lies not with the Bill but elsewhere. We would have wanted this legislation to contain at least the beginnings of a plan for growth, but it does not. It should have contained some extra and concrete plans to back up with credible action the Deputy Prime Minister’s fine words on the immorality of avoiding taxes, but it does not. In choosing to cut the deficit further and faster than we proposed, the Government have taken a huge gamble with our economic prosperity. A synchronised deficit reduction throughout the developed economies risks plunging the world back into either recession or a Japanese-style jobless recovery. The Irish example should be a salutary lesson to the Government of the risks that they run with their economic approach.

In the meantime, we will look closely at the Bill and take a keen interest in it as it goes through Committee. We will see whether some of the issues that I have raised can appear as amendments during its passage through the House.

17:51

[Mark Simmonds (Boston and Skegness) (Con)]

I draw the House’s attention to the Register of Members’ Financial Interests.

I am aware, as the Government and Opposition Front Benchers have said, that this is primarily a dry and technical Bill, and I shall address one particular area later in my remarks. However, it is important to set out the macro-economic climate and conditions if we are to provide a context for the Bill and for next Wednesday’s statement.

The contribution from the hon. Member for Wallasey (Ms Eagle), the shadow Minister, was perplexing. While wanting to congratulate her on her promotion, and on the fact that she clearly has a grasp of economic issues, I note the sense of complete denial about the serious situation in which we as a country find ourselves. It is quite clear that the coalition Government’s very difficult inheritance—with the previous Government having doubled the national debt so that we have the biggest deficit in the G20 and with more being paid in interest than the police, defence and transport budgets combined—emphasises the critical need to address the problem of the fiscal and structural deficit.

Treasury Front Benchers, the Chancellor and his colleagues, are absolutely right to dismiss the Opposition’s complaints. Why would anyone listen to a strategy from the very people who created the problem in the first place? I shall pick out one aspect of what the hon. Lady said, because it is something that the country needs to understand. The structural deficit, and the amount of money that the previous Government borrowed and this coalition Government have inherited, are not down to the banking crisis. The economic indicators update, which the Library provides, states very clearly:

“The Government borrowed £155.6 billion in 2009/10 (11.1% of GDP)”—

staggering numbers. Secondly, it states:

“The OBR’s Budget forecast for borrowing in 2010/11 is £149 billion. The OBR forecast that government debt will be £932 billion in 2010/11.”

And, it makes the third point:

“These figures exclude the effect of government intervention in the banking industry.”

That completely destroys the hon. Lady’s main focus and the point that she tried to make.

However, the issue is not just about the irresponsible and unsustainable Government expenditure that took place prior to the general election. I do not want to describe myself as a particularly visionary or prescient individual, but I point out to the House a question at Prime Minister’s Question Time that I asked the then Prime Minister, Tony Blair, on 25 May 2005. I shall not read it out, because it would be tedious for the House to hear it again, but I asked him what he would do to rein in the dramatically deteriorating fiscal deficit. Inevitably, as ever with Tony Blair, one did not receive a particularly comprehensive or detailed reply, but Treasury Benchers are absolutely right to focus on reining in the growing fiscal deficit.

It is quite clear, from the previous statement by the Secretary of State for Work and Pensions, my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), that the welfare budget was completely out of control, and from the initial findings of Sir Philip Green’s review of Government expenditure, that many procurement procedures are completely out of control. There was sloppy governance, and that needs to be addressed.

People may ask, “Why is it important if the Government don’t get a grip on spending.” If there is no such grip, there will be no or slower growth; if there is no growth, there will be no sustained recovery; and if there is no sustained recovery, there will be no wealth or job creation. It is no coincidence that since June’s emergency Budget, the credit rating of the UK’s risk has dissipated and yields on Government gilts and bonds have fallen significantly. It means that some confidence is returning to the markets—specifically because of the Government’s and Chancellor’s announcements back in June. They announced, first, some fiscal consolidation and, then, a promise of some control over public expenditure.

The dangers of not doing anything are considerable: sovereign debt credit downgrades; interests rate rises; additional debt interest that should be spent on investment in reformed public services; and the potential explosion of Government bond yields, as we have seen elsewhere in Europe. We need to challenge the myth, which we heard from the Opposition Front Benchers today, that fiscal consolidation and public expenditure contraction automatically lead to economic slowdown; they do not necessarily.

I hope and think that we will have, in the technical jargon, an expansionary fiscal consolidation. There are two facets to that. First, if we control public expenditure, we get greater consumer confidence as people revise down future tax burdens, something that the coalition in time need to deliver. That will encourage further consumer expenditure, and I very much hope that such control will be permanent, not temporary.

[Alison McGovern]

How will that increased confidence play out in different regions where—for the right reasons, because work is cheaper in such areas—public sector jobs are now focused? How does public confidence work in an area where a high number of public sector workers face redundancy?

[Mark Simmonds]

The hon. Lady makes a fair point, and I should say two or three things. First, the national insurance changes that the coalition Government have made will make it better and easier for employers to take on new employees in the private sector. Secondly, the Treasury is working on the regional fund to address the difficulties that are faced in some regions, which, I would argue, are over-dependent on public sector jobs, so that people can move into the private sector quicker than would otherwise be the case.

The second element of the expansionary fiscal contraction is to encourage business to invest, and I do not agree with the fundamental argument of the shadow Treasury spokesperson. There is a direct inverse correlation between Government borrowing and business investment, which means that when Government borrowing declines business investment goes up, and vice versa. That would be especially true if it were supported by expansionary monetary policy, which it is and, I hope, will be for the foreseeable future.

Opposition Members may say, “That all sounds very well theoretically, but has it ever happened in practice?” The simple answer is, yes. It has happened twice in recent times—not only in the early 1980s, when the then Chancellor of the Exchequer, Geoffrey Howe, reduced public expenditure and interest rates and, therefore, stimulated economic growth, but—

[Kelvin Hopkins]

Will the hon. Gentleman give way?

[Mark Simmonds]

In a minute, because the hon. Gentleman might be keen to comment on this point. The correlation also occurred under the previous Labour Government, between 1997 and 1999, when they stuck to the preceding Conservative Government’s expenditure plans. That is when GDP growth under the previous Administration was at its highest, averaging roughly 3.5% per year—significantly higher than during the rest of their tenure. So, the correlation has occurred before, and I see no reason why it should not occur again.

[Kelvin Hopkins]

I hesitate to say this, but I was around in 1979, and I remember it very well. The Government at that time massively increased VAT and increased interest rates. The pound rose, and neo-classical economists, like the hon. Gentleman no doubt, said that unemployment would fall to below 1 million. It actually rose to more than 3 million, and one fifth of manufacturing disappeared. It was only when the Government later reversed those policies that the economy started to expand, but sterling depreciated by 30%, during Nigel Lawson’s tenure, when the economy started to grow again.

[Mark Simmonds]

I am grateful for that intervention. The hon. Gentleman will not be surprised to hear that I do not share his analysis. In fact, the parallels are interesting. I would argue that in the early 1980s Geoffrey Howe and Margaret Thatcher were clearing up the mess that they inherited from the previous Labour Administration, just as the Chancellor of the Exchequer and Liberal Democrat colleagues in the coalition are tidying up the mess that we inherited from the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) and Tony Blair, his predecessor.

[Stewart Hosie]

The hon. Gentleman is giving an interesting analysis, which I do not share at all. He spoke about monetary loosening and monetary expansion. We have had a zero bound in interest rates and 99% of the £200 billion of quantitative easing has gone to buy Government debt—it has gone right through the tube, without hitting the sides of the real economy. Where does he think the monetary easing and expansion will come from to give the cash needed by businesses that want to invest? It is not coming from QE.

[Mark Simmonds]

The hon. Gentleman is right, in a way. I hope that interest rates will remain low for a considerable time to give businesses confidence to borrow money, when they need to, to invest; we could be having a whole argument about the banking sector and structure as well. When interest rates start to tick up again, I hope that the quantitative easing position will start to unwind and the Bank of England will start to sell some of the QE back into the market, which will then create confidence. Personally, I am very nervous about future quantitative easing; we have probably done just about enough. If interest rates stay low as a loose monetary policy, I am reasonably confident that we will have steady growth, for reasons that I have just explained.

From where will the potential dangers come? I do not think that we are assured a return to good times expeditiously. There are risks and problems, particularly in the global economic context—especially given the need to balance the UK economy away from consumer expenditure and the financial sector. I am afraid that recent news from around the world has not necessarily been encouraging. US economic growth is slowing, Chinese manufacturing is cooling and problems in Japan may spread to other Asian economies. Furthermore, there is the dangerous US-China currency stand-off, which could lead to protectionist policies. I very much hope that those will not be put in place.

If we are to have a strong export-led-growth UK model, we will require a strong eurozone. Although the eurozone grew strongly in the second quarter of this year, it remains highly dependent on German growth. We will have to monitor extremely carefully the impact that fiscal tightening has in the eurozone and its particular relevance to UK exports, although I very much hope that that will be assisted by a weakening and a sterling depreciation. Given what they inherited, the Government’s macro-economic policy is absolutely right.

I want to focus on a particular aspect of the Finance Bill. It relates to the aside, made by the Exchequer Secretary in his opening remarks, about real estate investment trusts, which are covered by clause 10 and schedule 4 of the Bill. I support the changes that are set out, but I have a couple of specific questions, which the Minister could answer in her winding-up speech or about which she could write to me, with a copy of the letter being put into the House of Commons Library.

At the moment, dividends through real estate investment trusts, which are tax-friendly vehicles for the ownership of property, particularly commercial property, have to be paid in cash. The Bill will allow them to be paid in stock as well. What will the tax status of those dividends paid in stock be? Will income tax or capital gains tax apply? Clearly, capital gains is paid only when a gain is realised or made. What would happen if the stock deteriorated rather than increased in value? In the Bill there seems to be some provision for a market value. I am not sure how that will work in practice and over what time scale that market value will be assessed.

Real estate investment trusts, which the previous Government brought in, are an excellent vehicle for the ownership of commercial real estate in particular. The HMRC REIT unit has a very good reputation and is extremely helpful to those involved in the industry. However, there are issues that should be in the Bill but are not. The Treasury needs to consider them to improve real estate investment trusts.

The trusts should be the worldwide answer to property investment, in which all our pension funds invest. They are very significant to the future well-being of most of the UK’s population. We need to make the reforms to strengthen further the position of the UK as a place for these important capital markets. The current tax structure of REITs should have put an end to the offshore floating of companies and funds, but that has not happened. It is very complex to bring back onshore a fund that is already listed elsewhere. The Treasury needs to consider ways of simplifying the procedure, therefore reducing the costs and making such a move more efficient and effective.

The Treasury also needs to look at the transition period, which is currently 12 months. It needs to be three years. Some 75% of the money raised inside a real estate investment trust has to be spent within 12 months, and that needs to be looked at and extended. At the moment, to avoid losing their status, investment trusts are having to invest in incorrect assets that are not necessarily going to produce the returns that the people involved believe they should be getting for themselves or their shareholders, whether individuals or pension funds. That issue needs to be looked at carefully.

I am also extremely nervous about the income cover rule. I will not bother boring the House with that at the moment, although officials will know what I am talking about. Currently, it is 10%, but I would argue that it needs to be the same as the takeover percentage, which is about 29.9%.

I want to make one final point about real estate investment trusts. Currently, they can be listed only on recognised exchanges. That does not include the alternative investment market, or the AIM. Many smaller REITs want to float on the AIM so that they can generate income and funds and grow their business. At the moment, they have to be listed both on the AIM and an exchange offshore. That adds costs and bureaucracy and it is utterly unnecessary. I should like the Treasury to make dual listing a thing of the past and make it much easier for entrepreneurial REITs and new REITs.

[Paul Uppal (Wolverhampton South West) (Con)]

I share my hon. Friend’s interest in real estate investment trusts. Commercial property is a success story. UK commercial property is one of the most coveted assets globally and brings in a great deal of revenue to the Exchequer. I echo my hon. Friend’s eloquently put sentiments. If we look at the restrictions on the creation of real estate investment trusts, there could be a win-win situation for the UK. We should particularly look at a policy of incorporating that for private property companies as well.

[Mark Simmonds]

I am grateful for the intervention of my hon. Friend, who is absolutely right. If he has an interest in these matters, he will also be aware that one of the outstanding main problems of UK commercial and investment banks is their level of debt against commercial property, which has fallen in value since the heights of the market back in 2006-07. The banks are finding it difficult to unravel some of those positions. The real estate investment trust structure may enable them to find a way through some of those problems.

[Stewart Hosie]

I very much welcome what the hon. Gentleman is saying about REITs. Some of his Front-Bench colleagues will remember that the same pleas were made to the then Labour Government when REITs were first introduced. All power to the hon. Gentleman’s elbow in persuading his Front Benchers to do what he suggests. Would there not be an advantage in getting small private companies, or even groups of housing associations, to benefit from REITs in respect of social for-profit housing as well?

[Mark Simmonds]

I agree with the hon. Gentleman. That is not a new idea. Many years ago I was chairman of the housing committee on Wandsworth borough council. He may be surprised to hear that at that time—back in 1993-94—I proposed to the then Treasury Minister exactly what he has just suggested about housing associations. It was about creating the ability for them to raise capital, reinvest in the stock and so on. He is absolutely on the right lines. I hope that one day he and I can work together on trying to develop our thoughts on this matter.

The Government’s macro-economic policy is absolutely right. We must control public expenditure, and that control must be permanent, not temporary in order just to get us through this crisis. Then we must ensure that UK taxpayers’ money is being spent to the maximum benefit of those who are using public services. I support the Bill.

18:10

[John Mann (Bassetlaw) (Lab)]

I know that the Leader of the Opposition is otherwise detained with an important speech at the moment, but I am sure that the newly appointed shadow Minister, my hon. Friend the Member for Nottingham East (Chris Leslie)—I congratulate him on his appointment—will want to convey the sentiment and details of the advice that I will outline in the next few minutes, not only to the rest of the shadow Treasury team but to the new leader.

I want to start by congratulating the hon. Member for Boston and Skegness (Mark Simmonds). It must be irritating—it seems so even from the Opposition Benches—for him to be sitting on the Back Benches with a Liberal having nicked his job, but such are the dilemmas of coalition. He is a great expert on real estate. I congratulate him on his speech, although it showed that he was not too well schooled in economics even though he went to school in my constituency. I may need to have a word with his former head teacher about the economics curriculum at that school, because the hon. Gentleman’s analysis of borrowing, like the document that he has read, shows a fatal flaw in economic logic and understanding.

The primary reason for the deficit—and more so in the current year than our competitors—is our over-reliance on the economic activity of, and consequently our tax take from, the financial institutions of the City of London. Over-reliance on the City, leading to the drying up of that tax take as its economic activity dived, was the classic error made by the previous Government and the two Governments before them—by Prime Ministers ever since the big bang. All failed to see that an economy that is unduly weighted towards its financial institutions and the City will succumb at any time in a financial downturn. That is precisely what has happened in the United Kingdom. However, underlying that, our actual debt, built recurrently, is not only no worse but better than that of most of our competitors, not least because of the former Chancellor’s pay-back and buy-back of debt between 1998 and 2000.

Of course, a Government must get on top of the current year’s situation, because if that features a recurrent build-up of debt, the situation over a period of years will deteriorate. In the league table of debt, we do not sit at the top, as the Chancellor and others on the Government Front Bench try to suggest. We sit in the middle—below France, alongside Germany and below Italy, and well below Japan and the United States of America. That is critically important, because they are servicing those debts recurrently as well as having a build-up.

The question that those on both Front Benches shy away from is what I call the China syndrome. That is the big issue of the imbalances in the world economy that no one is daring to address, and it has been accentuated by the financial crisis. It is rather ironic that capitalist economies are managing to ignore a state-controlled, Communist party run, non-democratic, non-central bank democratic, non-financial institution democratic state that owns more of the world’s dollar debt than anybody else, on the basis of which we are all buying huge amounts of goods with an artificially rigged currency against the rest of the world. That is at the heart of the ongoing problems and the potential for double-dip recession, which, if Government policy in this country is poor, will affect us more adversely than our competitors, but will happen on a worldwide basis. The China syndrome lies behind that; when the Nobel peace prize, or another Nobel prize, is awarded to a Chinese dissident, the Government do not even have the courage to stand alongside others such as President Obama in congratulating those dissidents. How the world of politics has gone in a circle when the Tory party is kowtowing to the Chinese Communist party, hoping that that will somehow assist our economic growth.

Protectionism has been mentioned. Anyone who analyses the economics of the 1930s will understand one particular factor that makes the current situation different: all the growth in the ’30s was protectionist growth. The United States has understood that in the longer term. Its growth was built on military expansion, rearmament and road building and, as much as possible, on the non-importation of labour and materials. It therefore allowed regeneration and created jobs.

[Mr John Redwood (Wokingham) (Con)]

Could the hon. Gentleman explain how the British Government could make the Chinese revalue their currency?

[John Mann]

Of course the British Government, cowardly as they are in their relations with China, cannot do so alone—it has to be done on an international level among all the capitalist economies of the world.

If that issue is not dealt with, the danger of a second recession will loom—for whoever is in power in whatever country, to be fair. We are shying away from that. It is not tenable to develop economies where everyone proceeds on the basis that we will continue to export to China as many aggregates and other raw materials as we can, to import the cheapest possible—virtually slave-labour—products, and hope that we will regenerate our economy based on the sale of those products. My own local economy benefits more than most from that in distribution networks, but I can see that it is not a sustainable model in the longer term. The China syndrome has to be dealt with in the near future, because if China fails to rebalance its currency there will be a second, much greater world recession.

Instead of that, we have this piffling little Bill with virtually nothing in it, not even the break-up of the big banks promised by the Liberals—the only Liberal economic policy that seemed to get adopted by the Conservatives, and an absurd irrelevance in the context of where we are. How the banks are run and regulated is absolutely vital to all of us, but who cares how they are structured? At the start of the crisis, Lehman Brothers, an investment bank, and Northern Rock, a building society, both collapsed. Such infantile politics is not surprising coming from the Liberal former so-called shadow shadow Chancellor, from Twickenham in south London, who is now in an important position in government, but it is quite extraordinary coming from the Conservative party. It is an incoherent economic policy based purely on political expediency. I note that it is not in the Bill, and it will never be put forward. It is just pure politicking to try to hide away from the fact that this is a Government whose economic policy is based on hope.

I want to make a few points about what the Opposition’s policy should be on the Bill and the economy. It is not consistent to argue that there should be no tax increases or spending cuts. That is economic illiteracy, which needs to be broken. In the current economic crisis, I have no problem with taxation going up as part of rebalancing the public finances. Therefore, if the Government propose increasing the higher rate of taxation, I am relaxed about that being necessary. Similarly, I am relaxed about VAT going up. The alternative would be to raise income tax. If the Opposition support that, they should state that view. I would disagree with it; for all its flaws and regressive nature, it is more sensible to increase VAT. I believe that £8 billion is the agreed figure that derives from the VAT increase. I will not argue against such an increase, which would thereby suggest a further £8 billion-worth of public sector cuts and job losses in my constituency, leading to a further recession based on the multiplier effect of those job losses. That would be a wishy-washy cop-out.

The Opposition need to strengthen their economic policies. They need more courage in working through what is happening—it is lazy to do otherwise. It is nonsense to suggest that there are other ways of increasing the tax take, based on projected economic growth—the current position—instead of the VAT increase. Again, that is economic illiteracy. Of course we want economic growth—so do the Government and so does every party in the House—but that is not an economic policy; it is a hope. Labour Members know that the incoherent coalition has a weak policy—the Bill lacks proper ideas and procedures for dealing with what the private sector needs. We will not, therefore, experience such growth and we, as an Opposition, cannot predicate economic policy on growth that the Government will not achieve. That is nonsense. Some serious thought and discussion should take place about the taxes that should increase and the cuts that should be made.

I ran a private sector business—that makes me rather unusual in Parliament. I set one up from my garage, so I know about the decisions that people who have no inherited wealth or banks lending to them make about how to invest. I had a capital-intensive business with my family. I know how interest rates work, and what that means for making decisions. I know about capital investment policies and how to squeeze a bit of extra capital out of them, and about decisions on the best timing. We were successful, and, like hundreds of thousands of other small businesses across the country, we made a profit—there is nothing wrong with that. We contributed an appropriate bit of tax—every business thinks that it is too much—to the Exchequer. However, we were not operating in a vacuum. Who will buy the products and services if people have been thrown out of work? Again, that underlines the coalition Government’s economic illiteracy. They have a vain hope that the private sector will turn up, but it will not, based on rational decision making. That is why the Deloitte survey, which was published today, should be so concerning to the Government and to us all.

We all like to criticise the Government—I love to criticise a Tory Government—but I do not want my constituents to suffer from recession and job losses because you lot have got it wrong. My people will be hurt first and my economy will be hit hardest. That has happened before and it will happen this time, so I want to help the Government by making some suggestions. I hope that they are making notes. The private sector cannot fill the void because of the pace of the cuts. That is the big error that needs to be put right. The speed at which the cuts are made and how they are made are crucial matters.

There is another fundamental error, on which I want to elaborate because it is a critical point. I know, Mr Deputy Speaker, that it is important to the people of Chorley. The Government’s cuts will have a disproportionate impact on the traditional English towns. The Government have the same civil servants, with the same civil service mentality, who failed to crack the problem previously. They are therefore making the cuts in the same way as other Governments made them. The civil servants think, “Ah—centralise.” The Secretary of State for Justice decides to cut magistrates courts. Which ones does he cut? He cuts those in the small English towns more than anywhere else. In Worksop, that means 16 jobs, and a couple more than that in Retford. Those are small numbers, but the jobs are relatively well paid. Those people buy sandwiches, go to jewellers and other small traders in the town centres.

I am newly elected to represent the town of Retford, due to boundary changes. It was previously Tory for a few years, but it is Labour now. The magistrates court in Retford is going. The police face a 13% cut. Which police stations might go? One of the early candidates for closure is Retford. The fire service in Nottinghamshire faces a 30% cut. Which fire stations will go? Retford is rather old and needs capital investment. Merging it with somewhere else is already being considered. What about social services? Nottinghamshire county council—one of the worst run local authorities in the country—is shifting social services, and Bassetlaw district council is also shifting its workers. Her Majesty’s Revenue and Customs is cutting the tax office. All those cuts could be rationalised individually, but add them all up. Who else works in town centres? The butcher, the baker—the candlestick maker has gone—the sandwich maker and the small pub are there, and the public sector workers provide the key income in the small towns.

[Mrs Main]

I am really enjoying the hon. Gentleman’s speech as he canters through all the things that he does not like. He promised that he would give us some encouragement about what should happen. When will he do that instead of listing all the things he thinks are dreadful and should not happen?

[John Mann]

It is very simple. You do not make the cuts so fast. You do not decimate small English towns such as Retford and Chorley—I am sure that the hon. Lady represents a small English town as well.

[Mrs Main]

It is a city.

[John Mann]

Well, the majority of the Tory heartlands—they may be former Tory heartlands in future—will get the cuts. It is fundamentally wrong that small English towns should bear the brunt of the cuts. If 50 jobs are lost in a big city, it is bad for those people, but it does not affect all the businesses. If 50 jobs in Retford, Skegness or Boston, or 100 jobs in Worksop are lost, there is a major crisis in those town centres. What do you think the very people whom you are rightly trying to get off incapacity benefit, perhaps to start small businesses in Worksop or Retford, will start doing—major, advanced science and technology? No, they will think, “I could run a sandwich shop.” Good luck to them—it is entrepreneurship, and it would be brilliant, but not if there is no one to buy the sandwiches. Who owns the small businesses and the market stalls? Those people will lose their jobs because they are on the cusp and the banks are not lending them money; they are lending even less than they were previously. Those people and the taxi drivers and the small builders come to my surgery—they suffer the knock-on effects. That is why you have got it wrong and why you should think again and slow down the cuts—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am not responsible for Bassetlaw. Every time the hon. Gentleman says “you”, he means me. He should know better—he has been a Member of Parliament for a long time.

[John Mann]

I am very grateful that you are not responsible for Bassetlaw, Mr Deputy Speaker. The truth is that this evil Government will have an impact on the constituency of Chorley in the same way as they will on Bassetlaw.

My final point is that the successes of the previous Government have led to new jobs in Worksop. Laing O’Rourke provided 350 jobs earlier this year, and I opened a new site for MBA Polymers last week, which will provide 120 jobs. Both companies came to my area because of the regional development agency grant. In the case of MBA, the grant was the reason to come to this country, never mind to my area. The considerable RDA grant was critical to their decisions. In the case of Laing O’Rourke, the land reclamation works were also important, and other sites are going to market. That is the role of the state, and the weakness of this Government’s economic policy is that the new systems replacing the RDAs—I understand the logic behind that and I agree that the bureaucracy could have been cut back—will not replace that role. Therefore, we will not see the competitive advantage that areas such as mine have had from coherent incentives to private business and bigger employers. We need small employers, yes, but we need large ones too. That is where this Government have got things fundamentally wrong.

My plea to my colleagues on the Front Bench is to tighten up on our economic policy. Let us make the real choices, because we are too woolly at the moment. I hope that the Government are listening to me and taking notes, because small-town England will not forgive a Government who decimate it. Just this week, the council in Nottinghamshire has announced that the lights will be turned out overnight, and that will be the legacy of this Government. It is not too late to change, and as a start I suggest that they withdraw this piffling little Bill and put a proper one in its place.

18:32

[Stephen Williams (Bristol West) (LD)]

That was a fascinating exposition of small town, small business socialism, a political philosophy that I have never come across before. I am not sure how much of it will have been welcome to Labour Front Benchers.

I intend to follow the example of the Exchequer Secretary who opened the debate—rather than that of the shadow Chief Secretary—and speak briefly on this brief technical Bill. It is much briefer than many of the other Finance Bills I have seen in my five years as an MP. When I was new to this place, the Liberal Democrat Whips Office inflicted cruel and unusual punishment on me by putting me on the Finance Bill Standing Committee as training in how to operate as an MP. It seems that it is my luck to serve in that way again five years later. To new MPs who may be similarly blessed by the Government Whips Office this time, I can say that it is exceptionally good training. If they can survive the Finance Bill, they will be well prepared for any other legislation in Committee.

This is a small and technical Bill, much of which is familiar ground to me from my professional career before I became an MP. I dealt with capital allowances, venture capital trusts, enterprise management incentive schemes and group relief. I am not so familiar with the taxation of the earnings of seafarers or the workings of petroleum revenue tax, and perhaps the Economic Secretary will give us all a tutorial on those in the exciting Committee stage of the Bill to which some of us may look forward.

As the chairman of the all-party parliamentary group on smoking and public health, I welcome clause 23, which refers to long cigarettes. The hon. Member for Luton North (Kelvin Hopkins), who is no longer in his place, mentioned that it would be wise for the Government to invest in more measures to combat the smuggling of cigarettes and the avoidance of duty by some by cutting long cigarettes into two.

The Bill has to be seen against the background of the deepest deficits among developed countries. Contrary to what the hon. Member for Bassetlaw (John Mann) said—I tried to intervene on him at the time—it is a fact that the deficit that this coalition Government have to tackle is the largest among the larger economies in the world. It is larger than that of the US and Japan, as well as those of the so-called PIGS countries, including Spain and Greece—[Interruption.] Yes, it is larger as a proportion of our economy. Our budget deficit is more than 10% of our GDP and is higher than those of all the countries that I have cited. That is the serious issue with which the coalition Government have to get to grips. We have made some tough choices on taxation, which were the subject of detailed debates after the Budget, and we have some tough decisions to make on expenditure next week. The Government are making those tough decisions, and we are not avoiding the adverse consequences and political hostility that may come our way. We are being responsible, and not avoiding the issue as Labour Front Benchers are doing. They are denying their responsibility for the mess we are in and even scrabbling about to bring in what must have seemed very clever quotes from Wikipedia on the Boer war and Lord Kitchener earlier this afternoon. We are taking the deficit seriously and we are putting in place the measures that are needed to tackle it.

[Bill Esterson (Sefton Central) (Lab)]

Is it responsible to follow the policies adopted in the Republic of Ireland, which have seen the deficit grow, not fall? Those policies are similar to those advocated by this Government.

[Stephen Williams]

All countries, whether in the EU or elsewhere, are having to put forward measures that are appropriate to their domestic circumstances. The circumstances of a small country of about 3 million people such as Ireland are completely different, and we will have to evolve our own response. My point is that we are in a desperate situation, as bequeathed to us by the previous Labour Government. We are taking that challenge seriously and not shirking the difficult decisions that will have to be made to put our economy and public finances back on track so that we can make the sensible investments in public services that we all wish to achieve.

18:38

[Nic Dakin (Scunthorpe) (Lab)]

This is primarily a technical Bill and I support much of the detail in it. For example, the measures to close tax loopholes are welcome. I am sure that we are all united on the need to close such loopholes and recognise that successive Governments will need to be ever vigilant in that respect. But as the spending review approaches we need to be very careful to ensure that Revenue and Customs has the appropriate capacity and resources to tackle tax evasion and avoidance effectively. Assurances from the Economic Secretary on that point would be very welcome, as my hon. Friend the Member for Wallasey (Ms Eagle) said earlier.

There is much in the Bill to applaud. Unfortunately, there is also much to regret. It represents a missed opportunity to put in place a plan for growth. This is not surprising, as the Government see deficit reduction as the beginning, middle and end of their economic strategy—a symphony of despair, orchestrated by a coalition agreement and targeted at the lowest common denominator.

It is worth reminding ourselves of what the great British public voted for in May. They had two alternative economic strategies presented to them during the election. That promulgated by the Conservatives said that there was a need to cut hard and cut fast. The alternative argument was put forward by Labour and the Liberal Democrats—that the deficit reduction should be more carefully managed, as my hon. Friend the Member for Bassetlaw (John Mann) has suggested. A more gradual reduction would allow growth and tax increases to play their part. In that strategy, the reduction in spending would be managed in a way that allowed growth to pick up the economic slack. Doing so would avoid the spectre of a double-dip recession, with all the personal distress and misery that it would bring to people up and down the land. The British people delivered an inconclusive result at the last election, but one thing was clear: they did not support the Tory argument for fast and furious cuts. They backed Labour and the Lib Dems’ more considered approach.

[Alec Shelbrooke]

I am listening carefully to the hon. Gentleman, but I find it hard to understand how he can say that the Conservative party’s policies were rejected at the general election, when the party had its biggest result since 1931.

[Nic Dakin]

I think that there was a large feeling at the Conservative party conference last week that the Conservatives should have done better in the general election, given that they faced a Labour Government who were clearly struggling in the face of many challenges. I am interested in the hon. Gentleman’s spin on the outcome of the last election, but the reality is that nobody won it. What has happened since is that the Government parties have shown skill in developing a narrative that runs along the lines of what the hon. Member for Boston and Skegness (Mark Simmonds) outlined—it was also added to by the hon. Member for Bristol West (Stephen Williams)—which is essentially that everything comes down to Labour spending profligately and a massive deficit that needs to be tackled fast and furiously. That is the narrative, but it is not the truth. The truth is far closer to what we heard from my hon. Friend the Member for Bassetlaw, who demonstrated that what has really happened is that our deficit lies alongside that of Germany. The problem is serious, but it does not require us to go as far as is being suggested.

[Alison McGovern]

Does my hon. Friend agree that it is not merely we on the Labour Benches who disagree with the fake narrative that the Conservatives and Liberal Democrats are putting forward, but the recent report by the International Monetary Fund and the International Labour Organisation? Those bodies have tried to persuade countries such as ours not to disinvest from the economy, because they are worried about jobs and employment.

[Nic Dakin]

I thank my hon. Friend for that intervention. She is completely right to suggest that world public opinion is moving in the direction of expressing concern about global cuts in spending and their impact on the world economy. She is completely right to draw attention to that.

[Alec Shelbrooke]

rose—

[Nic Dakin]

I have already given way.

In the summer, the Chancellor was keen to hold up Ireland as an example of a country with an approach to the economic challenges that we face that should be applauded. There is less talk of Ireland now, as that economy spins into double-dip recession and loses its triple A rating, as we heard earlier. The Irish Government’s debt has increased rather than decreased, as a result of over-aggressive cuts in public expenditure, and the economy is now in serious peril. The last time we had a peacetime coalition, the then Governor of the Bank of England’s advice—to take an aggressive approach to reducing spending—was followed, precipitating the great depression of the 1930s. I am afraid that Governors of the Bank of England, like politicians, are only mortal and do not always get it right.

There is something very pessimistic about the Government’s approach. Where once they were optimistic, now they see only negatives, hence the biggest rise in VAT—the most unfair and regressive of all taxes—in a generation, despite cast-iron promises from the leaders of both parties in the coalition during the election that this would not happen. Representing Scunthorpe, I know a bit about cast iron: it should last a bit longer than a few months. There has been further pessimism, with the attacks on universal benefits signalled by last week’s breaking of another promise—the promise not to cut child benefit.

[Stephen Williams]

If the hon. Gentleman is seriously suggesting that taking away child benefit from families in the higher-rate income tax bracket is a cut that should not be proceeded with, will he say what cuts he thinks should be proceeded with?

[Nic Dakin]

The ending of universal child benefit is a cut against children and families, and I do not think it is the right thing to do. It would seem that children and families are to pay the price of the global economic crisis caused by the failure of financial businesses and markets around the world. That hardly seems fair to me. To answer the hon. Gentleman’s question, I would rather leave child benefit in place and not give £6.4 billion back to businesses, through changes in their taxes, much of which will go back to the banks that got us into this mess in the first place.

This Bill represents a real opportunity to put in place the infrastructure spending that is a crucial prerequisite for economic growth. Sadly, it appears to be a missed opportunity. We have seen excellent planned investment, such as Building Schools for the Future, the playbuilder programme and so on, scrapped. Ministers then appear surprised when construction companies have to lay people off.

[Stewart Hosie]

I am listening intently to the hon. Gentleman’s speech, but just in case my memory is skewed, can he confirm that Labour’s plans were to halve capital expenditure as well, and that many of the cuts in capital investment that he is bemoaning are precisely the same as those that would have happened under his Government?

[Nic Dakin]

My hon. Friend the Member for Nottingham East (Chris Leslie) will no doubt pick up that point later from the Front Bench, as he is more knowledgeable about the overall position than I am.

There is a relationship between the private sector and the public sector. Properly managed, they support each other. As my hon. Friend the Member for Bassetlaw pointed out so skilfully, if we take all the spending out of the economy, there will be nothing to buy, and therefore the businesses that sell things will go into a spiral of decline. That is the difficulty that we are on the cusp of at the moment.

[Neil Carmichael (Stroud) (Con)]

rose—

[Nic Dakin]

I have given away enough.

If the Attlee Government had taken the view that the only solution for dealing with the debt was to cut public spending further, there would have been no NHS, no major house building and no platform for a modern Britain. That Government faced far greater debt problems than we do, and they did the right thing: they built an optimistic future. It is our responsibility now, faced with the challenges before us, not to make things worse, but to make things better. That is why I oppose the measures to cut investment allowances and cancel support for the industries of the future, such as advanced manufacturing, including wind turbine manufacturing, why I oppose the reneging on the loan to Sheffield Forgemasters—a loan that would help to position the UK to play a key role in the civil nuclear energy of the future—and why I oppose the planned increase in VAT, which will serve to dampen demand when the private sector needs a demand stimulus.

18:48

[Mr Brian Binley (Northampton South) (Con)]

I cannot let this opportunity pass without saying how good it is to follow the hon. Member for Bassetlaw (John Mann). He always speaks honestly, from his own, rather unique perspective, and he enlivened the first match of the season—to my mind anyway. However, he is the only man I know who can play for both sides in the same match, and I enjoyed his contribution.

The Minister talked about the need to support businesses large and small. You will know that I share that view, Mr Deputy Speaker, because therein lies the nub of whether the Budget strategy will succeed or fail. A flourishing business sector is vital to a sustained economic recovery, and small and medium-sized enterprises are a major element in the growth agenda. They are responsible for slightly more than 50% of the private sector work force, and they are the sector that will provide the jobs and wealth to make the Budget strategy work, given the opportunity. Sadly, however, the economic downturn hit the sector especially hard. SMEs were in the process of growing 2 million jobs over a 10-year period, when at the same time UK plc was shedding 1.5 million. If ever there was a trend to prove that SMEs are capable of creating growth, those figures ought to bring us comfort. The downturn exposed their vulnerability, however.

Everyone knows that we need to mend the roof while the sun is shining, and to stock up the larder during the good times—everyone, that is, except the members of the previous Labour Government. They told the regulators to apply a soft touch, and they failed to keep an eye on the big picture. As a result, banks were over-leveraged, bad debts mounted, asset lending ratios got out of kilter and banking institutions became unstable, resulting in a global recession. Many small business men saw it coming, and many of them took action. My company was one of those that acted at the appropriate time. Sadly, however, our recently deposed Prime Minister failed to do so. How could he, when he so arrogantly believed that he had done away with bust? No statement made in recent years will come back to haunt a man as much as that one will continue to do.

Sadly, the regulators are now overcompensating for their negligence by making heavy demands, especially on the very sector in which growth is most likely to occur—the SME sector—and things will get worse unless we do something about it. The Basel Committee on Banking Supervision has recommended that banks increase their capital reserves even further. Banks are being asked to increase their common equity as a percentage of core capital. However, just as the pendulum swung too far in the good times, so it is swinging too far in the opposite direction now, and that is having an adverse effect on lending to small businesses. Banks have already taken major steps to increase capital reserves, and there is every chance that the Basel proposals will be approved in December. That would take more money out of the economy and lock it up in bank vaults just at the time when business needs more working capital to finance growth.

[Alison McGovern]

What would the hon. Gentleman say to the representatives of small businesses in Wirral, to whom I speak regularly, who are concerned that they will no longer be able to benefit from investment allowances or benefit to the same extent as big businesses from the Government’s recent cuts in corporation tax?

[Mr Binley]

As the founder of two small businesses, I can tell the hon. Lady that investment benefits are not the major concern. The major concern is the ability to get money from the banks to act as working capital. I can see that the incentives those benefits provide are helpful, but they are not the core problem that small businesses are facing at the moment. The truth is that the Government will have to review a number of areas of policy in order to deal with the core problem.

I was saying that the banks were building up their capital assets to a dangerous degree. J. P. Morgan has recently announced new rules that will increase its risk-weighted asset base by 25%. Research also suggests that Barclays will achieve an even greater increase, of some 44%. Of course banks must be soundly based and properly regulated, but we have to get the balance right. All the evidence suggests that the capital reserve build-up has a sizeable detrimental effect on the ability of SMEs to capitalise on growth opportunities. As I said earlier, that will threaten the Budget strategy, unless the Government deal with the problem, and I hope that the Economic Secretary will come back to me on this matter.

Research by the Federation of Small Businesses suggests that 24% of SMEs are already having difficulty coming to terms with current increases in the cost of money, and the new capital requirements will compound that situation. This could not come at a worse time. More businesses are in danger of going to the wall through overtrading during the upturn than folded during the downturn.

[Bill Esterson]

I welcome the hon. Gentleman’s comments about the difficulty that small businesses are having in getting access to money from the banks. Does he agree that there will be a danger to small businesses if too many people in the public sector lose their jobs, because they are important customers of those businesses? The effect of that could represent just as great a danger as the problem he has outlined.

[Mr Binley]

I do not agree with the hon. Gentleman. The truth is that the previous Government were so profligate as to create problems for our children and grandchildren, and I find that immoral. I do not want that to happen to my children and grandchildren, and the only way to deal with financial difficulties in a business, a family or any other organisation is to cut spending and earn more money. There is no other answer, and the sooner the Opposition recognise that, the sooner the people of this country will listen to them a little more.

[John Hemming (Birmingham, Yardley) (LD)]

The Opposition wonder why this Government are in hock to the markets. Does my hon. Friend agree that it is because we have borrowed too much, as Tony Blair admits in his memoirs?

[Mr Binley]

I am grateful for that intervention. The truth of the matter is that we have a budget deficit of £70 million, but there is more lying behind it that we are not dealing with until we get the deficit down. There is the £1,450 billion of national debt, and if we add to that the money owed on private finance initiative schemes, the money owed to public sector pensions and the money that we have used to underwrite the banks, we get a figure of £3,000 billion. I asked the Treasury what a billion looked like, and I was told what a billion seconds was. This story has been heard in the House before, but I was shocked to learn that 1 billion seconds equates to just over 32 years. That puts into perspective the size of the problem that this nation faces. Again I plead with Opposition Members to come to terms with the problem, because I genuinely do not believe that we can solve it unless they recognise where it started.

[John Mann]

I cannot resist asking the hon. Gentleman whether he is aware of any country in the world, other than Uzbekistan, that has no national debt.

[Mr Binley]

This is not about whether or not we have a national debt; it is about the size of the national debt and its relation to our credit rating—

[John Mann]

rose—

[Mr Binley]

If the hon. Gentleman will allow me to finish, I will allow him to intervene again. Steady down.

This is about the size of the national debt and the deficit and their relationship to our triple A rating. If we had not taken the action that we did, it is likely that we would have lost that rating, which would have made all our interest costs considerably higher and the deficit massively bigger, causing the country even greater problems.

[John Mann]

Can the hon. Gentleman tell us where Britain stands on the league table of national debt, compared with other countries? Is it not true that we are towards the lower middle of the league table?

[Mr Binley]

I do not accept that point of view. This is not just about the size of the national debt; we need to consider its size in relation to the economy. Therein lies one of our problems. The fact is that ours is one of the worst situations in the G20. I should like to advise the hon. Gentleman that, as long as he and his party remain in denial, they will be unable to move forward, and that, for the good of politics, they need to move forward just a little.

[Alec Shelbrooke]

I should like to expand on my hon. Friend’s point about the national debt. Is it not true that the size of personal debt in this country, which was encouraged with a quiet wink by the previous Government, has also held back our ability to recover from the recession?

[Mr Binley]

My hon. Friend’s intervention takes us back to a Chancellor of the Exchequer—later Prime Minister—who suggested to the Financial Services Authority that it should apply a light touch. A light touch meant 125% mortgages, self-assessment of mortgage requests, and people with five, six and seven credit cards with their credit up to the hilt. My hon. Friend is absolutely right.

Let me return to the subject of the banks. I made the point that banks had to be soundly based, but that it was a question of the balance. As I said, research by the Federation of Small Businesses suggests that 24% of small and medium-sized enterprises are already experiencing difficulties in coming to terms with current increases in the cost of money, and the new capital requirements will compound the problem.

This could not have come at a worse time. More businesses are in danger of going to the wall through overtrading. I want to explain that a little more, because it is not readily understood in the House. Business growth costs businesses money: it is as simple as that. The more orders a business gets, the more employees it needs and the more raw materials it requires. Those are all up-front costs that simply cannot be recovered in the short term. Cash flow drag must be financed if growth is to be sustained, and growth will not be sustained if working capital is not forthcoming. That may be a simplistic view, but it is a very honest view of the reasons for which people are more likely to go to the wall during an upturn than during a downturn. They overtrade, and find that they do not have the capital to sustain that overtrading.

Owners of SMEs have spoken in their thousands of the collapse of their relationships with the banks. The number of complaints to the banking ombudsman about draconian demands placed on loans and overdrafts has increased by 119% in this year alone. So what should the Government do? First, they should recognise that the new capital requirements called for by global regulators should be balanced, and that their implementation should be sensibly programmed to ensure that real money is freed to support real growth in the SME sector. If that means getting tough with the banks and the regulators, so be it. Governments still have to get tough on occasions, and this is the area in which they need to start.

However, the Government need to go further. They need to provide greater choice and competition in the high street, particularly in the banking sector. They might even consider the creation of post banks, as suggested by the Federation of Small Businesses. That is not a quick answer, but it will help to sustain growth through the third, fourth and fifth years if the Government get down to it now. Both moves should increase available credit, and reverse the decline in local lending resources.

The Government could also encourage the mutual sector to play a greater role. I find it regrettable that Nationwide, the country’s largest building society, has chosen to restrict its banking services to just 30,000 small businesses, a minute fraction of the total. It has also decided to close its business investor account to new customers and to limit the number of account transactions to just two a month, levying 30 days’ notice of account closure for any customer who breaks that limit. Members may agree that that is a particularly unfortunate trend at a time when greater competition, wider options and a more flexible approach are needed. I hope that the Chancellor will talk to the mutuals collectively, because they have a role to play and can be more effective than they are being at present.

Recent reports suggest that Barclays, HSBC, Lloyds, HBOS and NatWest collectively handle 85% of the SME banking market. The Bank of England financial stability report suggests that banks are capable of consolidating their capital while at the same time improving their lending to the real economy, which suggests that there is an attitude among banks that needs to change. We have said that in the House week in week out, month in month out: when are the banks going to listen?

I appeal to the Chancellor to talk straight, talk tough and talk honest to the banks, many of which we now own. They have a responsibility, not only because we helped to bail them out, but because they were a major factor in getting us into trouble. The message should be sent loud and clear from the Chamber that they should face up to their responsibilities, and recognise that it really is time that they came to the aid of their nation.

[Dr William McCrea (South Antrim) (DUP)]

Many present and past Ministers acknowledged that there was a great need for banks to listen to the small and medium-sized businesses in our country, many of which are struggling. Previous Ministers said that they would be strong with the banks, and would make them listen. How will the Government make banks really pay attention to what is happening in industry today?

[Mr Binley]

How I wish I knew the answer—but I am sure that one of the answers is to get the banks’ heads together, and perhaps do a light amount of knocking.

I recognise that the banks run businesses, but let me draw attention to what the FSB has said, which I think is very relevant. It estimated that if banks limited bonuses and dividends to pre-crisis levels, they could produce approximately £10 billion of additional capital, which would finance £50 billion of new loans. Is that not a lesson for the banks? We are not saying, “Do not pay your people”, but we are saying, “In a time of difficulty, use restraint. Transfer that money to your lending coffers, and get it out to small businesses.”

Perhaps the Economic Secretary will be kind enough to pursue that challenge, remembering also that capital reserves in banks, if lent to Government, continue to be classified as such. I think that that is a pretty important point. If lent to Government, those reserves are not considered to be risk capital, and are consequently considered to be part of their capital assets.

I shall try to wind up my speech quickly, because I always try to do what the Whips tell me. However, I want to make a few more important points. I welcome the Government’s efforts to increase the availability of the guaranteed loan scheme, but I ask the Economic Secretary to consider ways of unlocking capital reserves to increase the flow of capital available for distribution in that way.

The situation for many small and medium-sized businesses is dire. The Government know that, because we are told about it every day. Figures produced by the Bank of England give the impression that bank lending rose by 0.9% in August, but if we dig a little deeper, we find that a large proportion of those loans were issued in foreign currency, and that actual lending in pounds sterling decreased by £400 million. The truth of the matter is that bank lending this August was less than it was 12 months ago.

I wanted to talk about a couple of clauses in the Bill, but because my Whip has kindly asked me to curtail my remarks, I will do as he asks. I am an ambitious chap, and I hope that he will consider that I am being kind to him.

I welcome Clause 13, which removes the requirement for SMEs to own intellectual property in order to qualify for research and development grants. Sadly, too few small businesses are made aware of how research and development relief can benefit them—I think that the hon. Member for Wirral South (Alison McGovern) made that point earlier—and I urge the Minister to make more effort to increase awareness in the sector. I also welcome the announcement by a consortium of city financiers of their plan to create a British enterprise bank, which I understand will lend exclusively to the SME sector. That is one example of bankers facing up to their responsibilities, and we should congratulate them.

[David Simpson (Upper Bann) (DUP)]

As the hon. Gentleman said, we understand that banks are running a business, but small businesses today are finding it very difficult to provide the security that banks currently seek. The hon. Gentleman used the word “draconian”. Surely something must be done in that regard.

[Mr Binley]

Of course it must. Clauses and conditions for small businesses are now one of the major off-putting factors. Such businesses must be allowed to borrow to create the growth that we need. There is massive pressure to change overdraft to loan. Most small businesses do not want a loan. That is too much of a burden around their necks. They want an overdraft facility, but the trouble is that banks are pricing overdraft facilities out of their reach and that should be taken up, too.

May I conclude therefore—although my Whip has left? Good things are happening, but much more needs to be done if the level of growth required to assure the success of the Budget strategy is to be achieved. We are debating a Bill that facilitates that strategy, but does not do much to ensure that SMEs get the working capital that they need to provide the growth on which the strategy depends. Action is urgently needed and the House will expect to hear from the Economic Secretary what the good lady and the Chancellor will do to ensure that small and medium-sized businesses are properly resourced to play their part in restoring the country's wealth and in growing the jobs to reduce the budget deficit. Once we have balanced the budget, we can get on to dealing with the national debt, bequeathed by a Labour party that seems to think that it is morally acceptable to expect our children and grandchildren to pay for its profligacy. I find that reprehensible. I therefore look forward to being reassured in that respect, and so, I suspect, does the nation.

19:11

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to follow the hon. Member for Northampton South (Mr Binley), and particularly to comment on his pleas on behalf of small business. In Scotland, we have 302,000 businesses, and 285,000 employ fewer than 50 people. They do not issue commercial paper or corporate bonds. They do not do rights issues. They are not listed on markets or exchanges in the main. Ninety-nine per cent. of them are owned in Scotland. They are almost exclusively solely dependent on the retail high street banks for their credit lines and working capital, so the more the Minister and her team can do to ensure that affordable lending goes up, and that we do not get the conversion of mortgages to loans, which puts the houses of small business directors on the line should a business fold, the better. Those businesses are hurting. Given that they provide the vast majority of employment in Scotland, we need to ensure that that powerhouse, the SME sector, drives forward with all the capital that it needs. However, that is not what I wanted to speak about today. It was, however, a fantastic opportunity to get it in again.

It would be normal on Second Reading of a Finance Bill to refer to the Budget which it follows, although this is the second Finance Bill following the emergency Budget debate on 22 June. It was the debate that followed that and the debate on the Finance Bill on 6 July that gave us the opportunity properly to debate the Government's whole approach to dealing with the economy, although listening to many of the earlier speeches, I am not sure whether I have gone back three months and we are having the first Second Reading debate. Those were the opportunities, along with the debate on VAT on 13 July, to point out that this Government plan an additional £40 billion of fiscal tightening—over and above the £57 billion of cuts and tax rises planned by Labour—to remind the House that the ratio of cuts to tax increases has gone from 2:1 to 4:1 and to remind it also of the damage that would cause. The debate on the VAT rise, which, as Shelter explained to us helpfully in advance, will lead to the poorest families in the country paying £31 every week in VAT, was the opportunity to make the case against that rise.

This Finance (No. 2) Bill—the third in the calendar year—is different. It contains what the Minister described on 15 September as minor and technical measures, but that does not mean that we should not give it our full consideration, in particular those clauses and schedules which tax practitioners have raised real concerns about. I am grateful, as was the shadow Chief Secretary, to the Institute of Chartered Accountants for its response to the Government consultation. I will draw on that heavily and do something quite unusual in a Second Reading debate: refer in detail to clauses in the Bill. I hope we will get some technical answers when the Minister sums up.

The Institute of Chartered Accountants asks, in respect of part 3, clause 25 and schedule 9, paragraph 7, which inserts new paragraphs 2A and 2B into schedule 53 of the Finance Act 2009, whether, where a company has a profit in an earlier period and a loss or non-trading deficit on loan relationships in a later period that is carried back, interest on the earlier period profits will continue to accrue if in the absence of a claim late paid corporation tax would have been due, up to nine months after the end of the later period. I would welcome formal confirmation that that mirrors the existing rules. The institute adds that those rules perpetuate the existing differences between the interest rules where losses are carried back and offset against profits of an earlier period. Under existing rules, where losses are carried back against profits and where additional corporation tax would be due, interest will run from nine months after the end of the first accounting period. However, in cases where losses are carried back resulting in a repayment of corporation tax, repayment interest will only run from nine months after the end of the later period. I would have expected that, in a genuinely harmonised regime, late paid interest and interest on overpaid tax would ideally run from the same date. Therefore, will the Minister explain the Government's thinking on those proposals?

The institute also believes that paragraph 10, inserting new part Al into schedule 54 of the Finance Act 2009 on repayment interest, would deliver the opposite provisions to what is proposed in new paragraphs 2A and 2B in schedule 9. Again, please confirm that the new rules mirror the existing rules. The same question applies to franked investments in paragraph 11 of schedule 9. Do the new rules mirror the existing provisions?

Paragraph 12 inserts new schedule 54A into the 2009 Act and makes two further changes to the general rules that were introduced in 2009. This relates to new paragraphs 1 and 2. As I understand this, subject to certain conditions, HMRC can recover as late payment interest amounts of repayment interest that have been paid, but which ought not to have been paid. However, this provision does not apply in cases where the whole or part was a result of HMRC error. Therefore, can the Minister please confirm that it is intended that these new paragraphs will have the same effect as those currently set out in section 826(8A) to (8C) of the Income and Corporation Taxes Act 1988? I know that these are technical questions but they are important. If we get this wrong, there will be all sorts of chaos within business. Some of the other clauses that I will come to pose even more dangers. Can the Minister also confirm that the latter provisions will be repealed when these new rules come into force?

New paragraphs 3 and 4 of new schedule 54A suggest that where there is an underpayment of corporation tax for one accounting period and an overpayment of corporation tax for another accounting period, neither late payment interest nor repayment interest will arise during a common period. The Institute of Chartered Accountants understands that this provision is intended to give statutory effect to HMRC's existing practice, but I would welcome confirmation of that.

A number of other questions are raised about particular provisions in those schedules and I would welcome the Minister’s assurance that, if there have been errors in drafting, oversight or inconsistencies as a result of what is in this Bill, the Government will table the appropriate amendments in Committee.

I turn now to clause 7, entitled “Settlor to return excess repayment to trustees etc”. Is there not a problem with that because of the change to make trusts pay income tax at 50%? Should the aim of the tax regime for trusts not be to maintain equality between income and gains of trusts and non-trusts? Does not taxing trusts at a 50% rate when the majority of settlors pay tax at other rates cut across that objective?

I understand that the scope of the clause is limited to repayments in respect of trust income deemed to be that of the settlor rather than reductions in the settlor's liability. Therefore, for the avoidance of doubt, can the Minister confirm that the settlor need not repay anything to the trustees where the settlor has miscellaneous income losses of his own brought forward which he has to use against the trust income?

There is also a general concern about the costs and administration burden on trustees, settlors and the Revenue in relation to implementing some of the measures in the Bill owing to the large number of tax repayments that now have to be made for small, or indeed very small, amounts, and the need for all settlors to be added into self-assessment. I would welcome the Minister’s comments on that. People with no or modest savings or dividend income are in the self-assessment regime, which is complicated and worrying for some people. Even for modest savers, the regime can cost £100 or so for an accountant to prepare a tax return.

Clause 5, “Venture capital schemes”, and paragraphs 1(4) and 2(8) of schedule 2, introduce a “financial health requirement” that prevents tax relief for investment in a firm that is “in difficulty”. The explanatory notes make it clear that the issuing company is in difficulty if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community guidelines on state aid for rescuing and restructuring firms in difficulty. However, the guidelines would appear no longer to have any effect. Paragraph 109 of directive 2004/C244/02 states:

“The Commission will apply these Guidelines with effect from 10 October 2004 until 9 October 2009.”

That implies that the guidelines have now lapsed. Will the Minister clarify whether the guidelines are still effective? Even assuming that they are, it is unclear how they will affect companies raising money under enterprise investment scheme or venture capital trust legislation, because paragraph 9 of the directive guidelines states that

“for the purposes of these Guidelines, the Commission regards a firm as being in difficulty where it is unable, whether through its own resources or with the funds it is able to obtain from its owner/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to going out of business”.

The implication is that for as long as the company can raise funds from its existing shareholders or creditors, but presumably not from new, external investors—that is not explicit—it does not fall within the definition of a firm “in difficulty”. I would be grateful if the Minister could confirm whether that interpretation is correct.

Paragraphs 10 and 11 of the directive guidelines clarify particular circumstances in which a firm would be regarded as being in financial difficulty, but they appear to be subsidiary to the primary condition—if a company can raise funding from existing shareholders, those paragraphs simply do not come into play. I would like the Minister to confirm whether that interpretation is correct.

The matter gets more complicated, because paragraph 12 of the guidelines states:

“For the purposes of these Guidelines, a newly created firm is not eligible for rescue or restructuring aid even if its initial financial position is insecure. This is the case, for instance, where a new firm emerges from the liquidation of a previous firm or merely takes over such firm’s assets. A firm will in principle be considered as newly created for the first three years following the start of operations in the relevant field of activity. Only after that period will it become eligible for rescue or restructuring aid”.

I understand that in effect, a newly created company would not be regarded as a firm falling foul of the firm-in-difficulty provisions for three years after the commencement of operations. Even if it were, I would welcome clarity on how the measure would apply in a group context. Does the three-year rule apply to a new holding company, operating subsidiary or indeed to the entire group?

On the point in time when the financial health requirement is viewed, proposed new section 108B(1) to the Income Tax Act 2007 states:

“The issuing company must meet the financial health requirement at the beginning of period B”,

which means the period beginning with the date of the issue of the shares. However, it is unclear how the Revenue will approach that in practice. The logical interpretation is that the issue should be considered only when the application for formal EIS approval is made using form EIS 1. It would create considerable difficulties for companies and their advisers if the Revenue could use the benefit of hindsight and withdraw EIS relief retrospectively, after a formal approval is given and certificates issued. It would also ultimately undermine the company’s ability to attract that EIS investment, as there is likely to be considerable uncertainty on whether that relief would be available at all.

There is also a question over the meaning of “permanent establishment” in paragraphs 1(5) and 2(12) of schedule 2. Proposed new section 191A(7) to the 2007 Act states:

“A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or general commission agent) acting in the ordinary course of the agent’s business.”

The implication is that if a company employee makes sales in the UK on behalf of the company, the company would have a permanent establishment in the UK. However, there appears to be no requirement for that employee to be resident in the UK, and that a visitor carrying on business on behalf of the company would qualify. Will the Minister confirm whether that interpretation is correct?

There are other issues in relation to that proposal. Proposed new section 191A(2)(b) to the 2007 Act states that

“an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company.”

It has been suggested that for clarity, the definition should follow that already established in the Finance Act 2003, which is that

“an agent acting on behalf of the company has and habitually exercises there authority to do business on behalf of the company.”

I realise that there could be difficulties in respect of groups with a holding company, because the Bill requires the issuing company—the holding company—rather than the subsidiary company that has the trading operation to which VCT or EIS funds will be supplied, to have a “permanent establishment”.

[Charlie Elphicke]

My understanding is that that provision is fairly well understood: “to do business” is a wider phrase than “to enter into contracts”. The “contracts” provision follows the OECD model of tax conventions on “permanent establishment” in a given jurisdiction, and it therefore tracks better the language of international tax law.

[Stewart Hosie]

I understand perfectly well that “to do business” is a better phrase than “to enter into contracts”, but I want the Minister to confirm the nature of the commissioned agent or an employee of the business. They might be based overseas while carrying out business here, and I should like absolute clarity and certainty on that rather than on the wider point on the difference between the phrases “to do business” and “to enter into contracts”. I am with the hon. Gentleman on that.

I am asking that question because as the Minister knows, in many groups, the holding company is a pure holding company, and undertakes no activity other than holding shares in its subsidiaries. My point is that such a company is unlikely to constitute a business as defined in the Bill. Consequently, to require a company to have a “permanent establishment” through which business is carried on or, if the proposed definition is maintained, a

“permanent establishment…to enter into contracts”,

could be seen as running counter to commercial reality. I would welcome further clarification on how such arrangements would be treated for those purposes.

I am dreadfully sorry, Mr Deputy Speaker, that I did not engage in a classic Second Reading debate or address more widely issues that are not in the Bill, but I thought it important for someone actually to ask some specific technical questions to probe the Government on it, rather than indulging in the kind of debate that I am sure we will have on clause stand part later in the Bill’s progress.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Before I call the next speaker, who will be Julian Smith, I remind hon. Members that his is a maiden speech, and there should be no interventions.

19:28

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

Thank you for giving me the opportunity to make my maiden speech, Mr Deputy Speaker. I think I am the penultimate Tory to do so.

David Curry was my immediate predecessor as MP for Skipton and Ripon. David gave more than 33 years of public service to this country—10 years as an MEP and 23 years as an MP. As I drove with farmers through the Yorkshire dales last month, I heard yet again the huge gratitude for how hard he worked during the dark days of foot and mouth as he acted as a conduit between the Ministry of Agriculture, Fisheries and Food and the grisly front line.

Were he still a Member of the House, David would be a big supporter of the coalition. He passionately believed in the European project and was one of only three Conservatives to vote in favour of the Lisbon treaty. David had a distinguished ministerial career as Minister with responsibility for housing, where he introduced assured shorthold tenancy agreements, and as Minister of State at MAFF, although his policy to control fish stocks by limiting the number of days that fishermen could spend at sea was not popular—his effigy was hung from fishing vessels demonstrating offshore during one Tory party conference on the south-east coast. David has not only been a highly supportive former Member, but has become a good friend, and I wish him a long and happy retirement with Anne, his seven grandchildren, his dogs and his wonderful garden.

Skipton and Ripon is one of the largest constituencies in England, spanning 900 square miles and containing some of the most stunning scenery in our country, and it takes more than two and a half hours to drive from one end to the other—think James Herriot and one will picture the scene. People travelling on the Settle to Carlisle railway or driving through the Yorkshire Dales national park will see that this is one of the best examples of England’s green and pleasant land. On the constituency’s east side is Pateley Bridge, a mecca for walkers, but one can then visit the city of Ripon, with its 1,400-year-old cathedral, and the vibrant market town of Masham. We should probably pause in Masham as it is home to the Black Sheep and Theakston breweries—I know you enjoy a pint, Mr Deputy Speaker, but not as much as one of the other Deputy Speakers.

My constituency is also remarkable for the character of those who live in it. They are independent, driven, hard-working and proud of their Yorkshire roots. The big society has been operating here for years. Doctor’s surgeries, councils and charities are all working extra hard to deal with the challenges of operating in the most rural county in England. Apart from the Skipton building society and Wolseley, agriculture and small businesses provide the vast majority of employment, and it is on behalf of those small businesses that I wish to speak briefly today. Skipton and Ripon is not like the south-east, Leeds or Manchester—many people have no choice but to make it on their own. Under the previous Government, the small business owner—the individual—as I was when, aged 27, I set up a business from the front room of my flat, has been given much more than his core business to worry about.

Let us hear from two budding, if older, entrepreneurs, who are into property—let us call them Basil and Sybil, as they want to set up a new hotel in the heart of the dales. They reach Companies House in London, where it is recommended that they set up the company online. They go online, but the forms cannot be downloaded as only dial-up speeds are available in Littondale. They want a waiter, a new Manuel, so they start some interviews, but because of the new equalities legislation they worry about asking candidates how they would cope with the very steep and rickety steps around the property. They read a business book to get up to speed on the new rules, but Basil’s eyes glaze over as he learns how to calculate employers’ national insurance, employees’ NI, pay-as-you-earn, student loan repayments, and maternity and pension payments. And when they need an injection of cash they call the bank, but are told that despite their excellent business plan, the bank is not lending to the hotel sector

We have to do better. We are desperate for private sector jobs. Contrary to what the shadow Minister said, the coalition has made a great start on addressing this issue by lowering corporation tax, scrapping the jobs tax and waiving national insurance for new small businesses setting up in Yorkshire. Initiatives such as the venture capital provisions in this Bill are also important steps, but there is more to do to create better conditions for small business—there is more to do beyond finance and, in particular, in the area of employment law.

There has been an explosion of employment law in the past 10 years, from the previous Government and from Brussels. As a small business owner trying to do the right thing, employment law took hundreds of hours of my time. People should try disciplining an employee with the three-step written process when they share the same tiny room with them—it feels ridiculous. Imagine, having started your business, you hire a graduate and four days in she asks for the free eye tests that she understands are her legal right because she uses a computer. Outrageous EU discrimination laws with limitless liability mean that even the most innocent mistake can leave a business owner broke. Additional paternity leave plans by Labour will be introduced next year and the coalition has plans for further reform, so business will get organised for one change and then have to change again in the near future. In addition, has anyone really worked out the impact on very small businesses of both men and women now being able to take up to six months off after having a baby?

Other legislation coming down the track in the next year includes the agency workers directive, the pregnancy workers directive, the removal of the default retirement age and a new right to request flexible working and training. Who is representing the challenges faced by the hard-pressed owner-manager as this legislation is developed? For BP or HSBC all this kind of legislation is manageable, because they can pay for human resources professionals and they can afford their lawyers. People who run small businesses, such as those in Skipton and Ripon or the one that I ran, are their own HR department and they have to manage these things themselves.

We have to do something now to stop new employment legislation for the next two years—these are two years when we need small businesses to feel as free as possible to take on staff. In the longer term, we need to consider more exemptions for small business, acknowledging that it cannot cope with the same burdens as bigger firms. I wanted to represent the challenges faced by small business owners in my maiden speech. Thank you for allowing me to do so, Mr Deputy Speaker, and may I finish by encouraging anyone beyond this House who has even the smallest desire to set up a business to go for it? It is a fantastic experience and, as this Bill shows, the Government, I and many of my colleagues on the Back Benches will do our very best to support these people and give them a strong voice.

19:36

[Alison McGovern (Wirral South) (Lab)]

First, may I congratulate the hon. Member for Skipton and Ripon (Julian Smith) on his fine maiden speech? As a railwayman’s daughter, my recollections of being forced as a small child to suffer the Settle to Carlisle railway as a holiday are still with me. His is an extremely beautiful part of the country and he made an excellent maiden speech.

I welcome many of the measures in this Bill. As has been said, many of them will receive cross-party support and were due from the previous Government’s Budget in March. A good, effective tax system, well resourced, is the mark of an excellent democracy, so it is important that Members of Parliament take care to ensure that our tax system functions well. I therefore want to say something about tax and its collection, and to highlight two vital points where this Government have missed an opportunity to implement change that could benefit our economy at this very difficult time.

Hon. Members may not be aware that many employees of Her Majesty’s Revenue and Customs work in Liverpool, the Wirral, Merseyside and the Liverpool travel-to-work area. Many such staff now work in my area as a result of the shifting of Government work to areas where wages are lower and it is more effective to locate staff. Their work is largely not commented on, especially in this place, even if it is good, high-quality work. We often talk about public servants, but few of us ever think to congratulate those working to ensure that our tax system functions well—that is part of what I want to do today.

I hope that the House will permit me to share the fact that one of my first experiences as a newly elected Member of Parliament was of some HMRC staff coming to see me at my newly opened constituency office. They were very fearful of changes that the new Government looked as though they might implement and they wanted to raise some of their concerns with me, particularly those relating to the resources that might be available in the future. As has been mentioned, over the past three years they have increased the yield from interventions by 60%. That is a good record and all of us want to see that continue. We legislate in this place—we debate and we pass Bills that become law—but that is all just words; we are dependent on the good work of HMRC to make real our choices and decisions. So we should not treat those staff with scant regard and we should take seriously the problems that they might have. In fact, my experience of meeting and speaking to HMRC staff has revealed that, like many in the public sector at this time, they are operating under a cloud of uncertainty.

I appeal to Ministers to act with transparency as much as they can, to keep in consultation with staff at all times and, in particular, to pay attention to whether HMRC has sufficient resources to act out the consequences of the choices that they make. The child benefit changes might place further work burdens on HMRC staff and we politicians owe it to those staff to ensure that they have enough resources to act on the consequences of our decisions.

I wanted to discuss a couple of opportunities that the Government have allowed to pass them by. One main feature of the Budget that concerned me greatly was the VAT rise to 20%, and I believe that Grant Thornton has estimated that that increase will cost individual households about £500 a year. There is sincere concern among many people about the harm that that could do to our economy. In my area, the recovery is fragile. I am very grateful for the intervention of Deloitte, which has put on record where business and consumer concerns lie. However, I know from speaking to people in my constituency that business confidence is still fragile and I worry what the increase in January will do. I worry what the increase in the cost of the contents of their shopping baskets in January will do to families, and I worry that because of the VAT rise many small businesses in my constituency will face a tougher time after Christmas than they have in the past 12 months.

Let us be clear that we have every indication that that measure is a permanent rise—it is a permanent shift in who pays what tax. We debated earlier the contrast with Labour’s temporary VAT reduction. I remember very well the restaurants in my area putting out temporary notices amending their menus—it was very clear to everybody that it was part of the stimulus and part of the Government’s work to get us through that time. That is not the case with the current VAT rise, which is a totally different thing. It is a regressive increase in tax.

I absolutely believe that, over time, we must seek to reduce the deficit, but I do not feel that raising VAT is the way to do it. One thing that has not been mentioned so far is the impact of a lower tax take on the deficit. We need to recognise that part of that lower tax take has come from unemployment caused by the global downturn. We need to make strategic investment in this country in the things in which we have a competitive advantage—in high-tech areas—so that we can increase employment and bring the budget back towards balance. That is the way to do it, rather than introducing a permanent shift in who pays tax in this country. It will hit families in my area harder than many; in fact, it will hit families harder in Wirral than it will hit those who live down the road in Cheshire, in the Chancellor’s constituency.

My second point builds on some of the debate that we have had this evening about businesses of all sizes. I am thinking specifically of small to medium-sized businesses in my constituency, representatives of which I have met recently. In fact, since I was elected in May I have been speaking with businesses in my area, which—hon. Members might not know this—are science-led. We have an excellent part of the knowledge economy in my constituency as well as many high-tech businesses that supply the electronics industry in Korea and other places. We have Unilever, which carries out high-end research; staff at Unilever’s research and development lab in my constituency have more than 200 PhDs among them. There are also many feeder businesses to those science and high-tech industries. Investment allowances are no small fry to us.

In two cases recently, I have been called in to meet a business that is about to move jobs out of my constituency. In both cases, after having analysed the situation, it has seemed that capital investment in new technology could have stopped that. The motivating factor for the removal of those jobs is the lack of capital investment and I want the Government to pay great attention to what more they can do to incentivise business to make capital investment in our country, because that will make our economy sustainable in the long run.

Let me contrast that with corporation tax, which helps big businesses that are already in profit to keep their profits. A corporation tax cut across the board does nothing to incentivise business to make capital investment. Only this morning I was speaking to people at a business in my constituency. I asked what one thing I could tell the Government to do that would help their business to invest for the long term, and they said, “Help us make those investments: introduce more allowances that enable the investment that will help to protect our employment for the long term.”

[Alec Shelbrooke]

Does the hon. Lady not agree that competitive corporation tax would attract international investment into this country and develop jobs for our economy? We must play on the global stage, not just in Britain.

[Alison McGovern]

We have competitive corporation tax. The hon. Gentleman is right that we must play on the global stage. Many of the companies in my constituency that I am talking about play on the global stage. I have seen the difference that other countries have made in working with business to ensure that they invest in their technology, which keeps them here for the long term. Let us consider, for example, the historical difference in the German automotive industry, where the Government did just that. We came very late as a country to that approach—to that industrial activism and to that investment in high-tech industry to secure employment for the long term.

I ask Ministers to consider their role. When we are dealing with global companies, the Government must always discuss with them the changes in their industry and what the next move needs to be in investment. I do not feel that an across-the-board corporation tax that hands profits back without any discussion about what is done with them is the way forward.

[Charlie Elphicke]

Does the hon. Lady not note with concern that the UK’s high rate of corporation tax, relatively speaking, has caused a whole load of British companies to leave the UK, thus destroying jobs and money?

[Alison McGovern]

I merely disagree on the facts. I disagree that we have had an overly high level of corporation tax and that we have not had inward investment. I would invite the hon. Gentleman to come with me to Vauxhall Motors or Unilever in my constituency, where they have just invested millions of pounds in high-tech kit that means that that research will go on in this country in the long term. I disagree with the hon. Gentleman on the facts, I do not think that what he says is the case, and I do not think that that is what is happening. There is a risk that it might happen in the future, unless the Government show an active approach to working with businesses to ensure that they have the right incentives to stay and invest in Britain.

In conclusion, I have three points that I ask the Government to take into account. I ask them to consider, on an ongoing basis, the effectiveness of HMRC and whether the resources allocated are enough to bring in the necessary taxes to bring the budget further towards balance. I question what more they can do to promote real growth and the rebalancing of our economy. I worry about the effect of the VAT rise on those people who are least able to cope with it and that that will yet again distort the economy in Britain. Our economy actually operates very differently in different geographical areas. I do not mean to point out a north-south divide, because parts of the south-west are likely to suffer in similar ways to my area. We need to be careful at this important time. Much can be done to work with businesses and assist them in making investments, and I hope that the Government will consider that as the Bill goes forward.

19:50

[Richard Harrington (Watford) (Con)]

I start by congratulating my hon. Friend the Member for Skipton and Ripon (Julian Smith) on making such an excellent maiden speech. He was erudite, and he was absolutely correct in what he said about David Curry, a man I know. My hon. Friend described his experience from his constituency and as a small business man, and I have had exactly the same experiences myself. I could not disagree with a word he said, and he said it very well indeed.

I have listened to a number of speeches today—in fact, I think I was five years younger when I got here, although it was only a few hours ago. I did not want us to repeat the debate that we had on the Budget before the recess, because this debate is to discuss what the hon. Member for Wallasey (Ms Eagle) described as technical innards. However, we have heard about a lot more than technical innards, and much has been said about the economy in general.

I must say that I cannot believe the advancing amnesia among the Opposition. They seem to be in denial about what happened. The right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Chancellor of the Exchequer, decided that he wanted dramatically to expand the economy by borrowing a huge amount of money and spending it on almost anything that there was to spend money on, but it did not work. As soon as the Opposition’s denial ends and they say, “Okay, we tried it, but as it turns out it was irresponsible and did not work”, we can have serious budget debates. Instead, we have heard arguments such as those from the hon. Member for Wirral South (Alison McGovern) about people putting signs up in restaurants about a small reduction in VAT, which was apparently the great fiscal stimulus. I would love her to find one person in her constituency or in the whole country who said, “Oh, VAT is about 2% less, we’ll go and eat tonight.” Such things just did not happen.

[Alison McGovern]

I feel moved to defend myself. The point is that a VAT reduction would give the economy an immediate boost and signal temporary Government action to get us through. I believe that the hon. Gentleman is wrong about the impact of VAT cuts, but if he knows of some statistics or evidence I would be very happy to hear it.

[Richard Harrington]

Well, the cut cost in excess of £300 million, and it is common sense that people do not change spending decisions based on a 2% difference.

I shall move on, because time is running short and I wish to talk about two parts of the Bill. The first relates to the British film industry. The Bill contains a technical adjustment to film funding to allow more leeway in calculating the amount that is surrenderable for tax credit. That sounds complicated, but it is sensible. The real issue is the need for appreciation by this House of the film industry’s economic contribution.

I must confess to having a constituency involvement, in that Leavesden film studios, where much of “Harry Potter” was filmed, are in my constituency. The American company Warner Bros has announced that it is acquiring the site, and that there will be a big increase in employment. Hopefully those studios, as well as Pinewood, Elstree and many others, will continue their prosperity.

[Mr James Clappison (Hertsmere) (Con)]

My hon. Friend’s mention of film studios tempts me to intervene. As he knows, Elstree studios are in my constituency in Hertfordshire, and Hertfordshire as a whole has a world-class tradition of film making. “Star Wars” was made partly in my constituency, as were many other famous films—he mentioned “Harry Potter”. Does he agree that through financial incentives it is possible to build on that tradition and create considerable employment opportunities for many young people in a growing industry?

[Richard Harrington]

I thank my hon. Friend, and of course I agree with him. Our part of Hertfordshire is rapidly becoming the Hollywood of southern England—or its Beverly Hills, in the case of his bit.

There is no doubt that taxation of the film industry is important. According to a recent Oxford Economics study, the industry employs 35,000 people and makes a direct contribution of £1.6 billion to the UK economy. It pays about £445 million in tax, even without any multiplier effect being applied. The £110 million in tax allowances for it in the Bill and in previous Acts of Parliament represent very good value for this country.

Why am I speaking about the film industry, given that as far as I am aware the main political parties agree about the need to provide that assistance? It is because the industry provides an example of not only some of the best uses of Government credits, but some of the worst. Following an earlier Act of Parliament, the accountancy tax avoidance industry used perfectly acceptable vehicles for investing in the film industry as tax avoidance methods. Film and television producers have told me that their films or programmes, which were effectively pre-sold so that there was no financial risk whatever, were used to provide large tax benefits through comparatively risk-free investments. That opportunity was correctly removed about two years ago, but that does not mean that the Government should ignore the perfectly reasonable demand for very high-risk investors to have a tax-efficient vehicle to invest in the film industry. That is good for this country and leads to vast amounts of money and a lot of high-quality employment being brought in. I accept that the Government have much greater priorities at the moment, but I ask them to consider introducing a proper, tax-efficient vehicle for venture capital investment in the film industry, in a way that does not allow it to be used as a method for tax avoidance, which is quite unacceptable.

Secondly, I feel that because of my experience in business and the continual discussion in the press and the House about whether the banks lend enough money to businesses, I should tell the House of my experiences in Watford. I have spoken to most of the major banks there and to nearly 100 small businesses to find out the exact position. Members will know that a Bank of England document shows that the monthly average of new loans has gone down from a peak of £991 million in 2008 to £564 million in 2010, which is a significant reduction.

However, the real question is not the volume of loans being granted but the percentage of loan applications that are rejected. That figure is never seen. The banks’ criteria for lending used to be entirely based on property. Many business loans were really property loans in disguise, because they involved guarantees based on the personal houses of people who were borrowing money. Now the banks do not like lending money on property, so for the first time they are looking at small businesses’ balance sheets, cash flow and business plans. They are treating them as stand-alone instruments.

I observed the figures in Barclays bank’s main business lending office only two weeks ago. I saw people borrowing money and businesses having money advanced, but the reality is that the property-based loans, for the moment, have gone. That is one reason—not a macro-economic reason, but a practical reason—why lending is low. There is money available for small businesses. I agree that management fees are high. That is because banks have to spend a lot of time on a £50,000 loan, instead of just saying, “He’s got a house worth half a million, so we are not worried about anything else.” As we know, the spreads are high because banks can lend money to Governments for 2% over the base rate, so to lend to a small business banks have to consider a spread greater than that. There is more to bank lending than meets the eye, and we should consider the number of applications compared to the number of rejections.

I see that it is 8 o’clock. I know that other Members want to speak, so I shall leave it at those two comments.

20:01

[Bill Esterson (Sefton Central) (Lab)]

I want to start by discussing some of the comments made by the hon. Member for Watford (Richard Harrington). He talked of total denial among Labour Members about what has happened, but probably demonstrates the same himself on behalf of the Members around him. The figures on unemployment, repossessions and business failures in my constituency this year and over the past two years during the recession are roughly half those on unemployment, repossessions and business failures during the Tory recession of the 1990s. Many Members on both sides of the House will have found that to be the case. The reason for that is the support given to families and businesses during the most severe recession since the 1930s and a decision to look after the human side at a time of greatest peril. I am afraid that that factor is in danger of being missed by this Government.

The decisions taken in this place, which my hon. Friend the Member for Wirral South (Alison McGovern) commented on, affect people’s lives as they go about their everyday business. We need to consider that; this is not just a series of numbers. Some Members on the other side of the House operate as if the cuts in spending and child benefit and the rise in VAT are just numbers, but the effect is very real for millions of people out there, and it is that effect that really counts.

The hon. Member for Watford also mentioned the multiplier effect. I see he is no longer in the Chamber— [Interruption.] He has moved seats; I apologise. The point about the multiplier effect is that it is key to providing the stimulus that will allow the economy to grow and the deficit to be cut. Only by growing the economy can we possibly have any hope of cutting the deficit.

It is the role of Government in a recession to step in and support the economy until the private sector is strong enough to take over. The reality is that, at this stage, the private sector in much of this country is not strong enough to take over, step in and replace the Government in growing the economy. That is why the issue is one of timing: how soon we make cuts and how quickly we can pay off the deficit. That is an important point, alongside the impact on people’s lives.

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

Does the hon. Gentleman not recognise that the Government can grow the economy only with money already paid to them in tax? We therefore desperately need the private sector to be kicking off, and the Government cannot replace the private sector.

[Bill Esterson]

The hon. Gentleman makes an important point that is often made by Conservative Members, but if the private sector is not strong enough to step in and support the economy, that approach does not work. Only when the private sector is strong enough can it step in and behave in the way that he describes. At this stage, the recovery is so fragile that my concern is that we will follow what has happened in Ireland and slip back into recession unless we get this absolutely right.

It is crucial that the timing is right, which is why the Chancellor is now considering a return to quantitative easing as advocated by the Governor of the Bank of England. It is interesting that the Chancellor is looking at increasing the amount of money in the economy, which is done by borrowing—the other way of doing this. Even the Chancellor recognises that we have to get this decision right at this stage of the economic cycle.

History teaches us many lessons. In the ’30s, and to some extent in the ’80s and ’90s, the then Governments decided to cut hard and fast. What happened was what we have seen in Ireland over the past three years: the economy grew smaller, and it grew harder to pay off the deficit, not easier. The lessons are there for us if we wish to learn from them. I hope that the Government will learn. As I have said, there are signs that the Chancellor is learning some of those lessons.

I also want to talk about the value of investment in capital projects. Tonight, some Members have talked about the way that many projects were implemented over the past few years. As I have shown by referring to low unemployment and low rates of business failure and home repossession, those investments in capital projects—not least the Building Schools for the Future programme—benefited local economies very much by providing work and business for many small and medium-sized enterprises. It is important that we keep that kind of capital spending going, which is why it was so wrong that the Government cut Building Schools for the Future and many other capital programmes when they came to office.

The primary capital programme is another such example, and I raised the playbuilder programme in Education questions earlier today. There are also schemes such as the Thornton relief road in my constituency. Road projects are a great example of how a stimulus can be very effective in a short time, through the multiplier effect, which was mentioned by the hon. Member for Watford, who has now left the Chamber. The way to pay off the deficit is by getting that stimulus in place now until the private sector is strong enough, and not to go back into recession, where the deficit will only grow.

A number of Members have mentioned the role of the banks and how they are operating at present. I have seen that myself as a number of constituents have described the circumstances that they face. Banks have been calling in loans and overdrafts at a moment’s notice, using the small print, which they always reassured business owners they would never do. In some banks, the debt collection department often steps in and threatens business owners with either having to repay at a moment’s notice or pay punitive interest rates. All that goes on without the relationship side of the bank knowing that it is being done. I have already had a number of examples of that in my constituency.

The behaviour of the banks also needs to be tackled, and I am pleased to hear that Members on both sides of the House, having experienced this through their constituents, are determined to take action. However, there is also the issue of the responsibility of the banks for creating the global financial crisis in the first place. We need to tackle that and ensure that it never happens again. We also need to ensure that those responsible for the scale of the crisis through irresponsible lending to people who could not possibly repay their loans and disguising that by using complex financial instruments are made responsible. We must come up with an effective way to deal with that in the long term.

I know that there has been discussion in Government circles of the international banking levy, and I would be interested to hear what Ministers have to say on that issue. My understanding is that they do not propose to go anything like as far as President Obama, but the opportunity should not be missed, because if we can get decent international co-operation on the level of levy that should be brought in, we have a chance of putting the international financial system in a far stronger position for the future, of finding a way to invest back in the global economy, and of ensuring a robust and lasting recovery.

A levy on banking transactions is a far fairer way of tackling the deficit than the kind of cuts being proposed. People to whom I speak in my constituency do not see how cutting child benefit or tax credits, or putting up VAT, will help to cut the deficit; they see it as taking money out of the economy and feel that they are not being supported. That makes them less likely to spend the money that will, ultimately, help businesses to get back on their feet. They do not see why people on middle and low incomes should shoulder the burden of sorting out the financial problems caused by the major financial institutions, and that is why we need to work closely with partners at an international level to sort things out.

I want to talk about why I think that some of the moves made by the Government will make it harder for us to cut the deficit and will, in fact, have the opposite effect to the one that the Government claim for them. As we have heard Members say, scrapping regional development agencies has a clear implication. By going from eight organisations to 58, it seems to me—this is also being said by business leaders, certainly in the north-west—that all we will do is cause duplication, with costs being repeated 58 times instead of eight times. The changes will make economic co-ordination more, not less, difficult. Also, many of the RDAs have a very good track record of generating inward investment. The move will cost more money and be less effective. We see the same kind of mistake being made in the health service with the scrapping of primary care trusts: that will result in the creation of more organisations that do exactly the same job, with a repeat of the costs.

I mentioned the proposals on VAT, which will take money out of the economy at a time when the recovery is still fragile. The VAT cut had the opposite effect, and I do not accept the arguments of Government Members who say that it did not. The VAT cut resulted in an immediate benefit to the economy, because the money saved was generally spent straight away: people had spare change, and they used it. That had an effect at a very local level, in the shops. Of course, VAT increases hit the poorest hardest, and the Prime Minister himself called VAT a very regressive tax when he spoke at Cameron Direct in May 2009. For once, he really did agree with Nick; Nick told the “Today” programme the same thing on 7 April this year.

In my constituency, 40% of jobs are in the public sector. What happens when those jobs are cut? When police officers, teachers or health workers lose their jobs, they stop spending money with those same small businesses that we need to thrive. They stop spending their money not only in the shops, but on builders, plumbers and other tradespeople. That puts pressure on people who are self-employed and who run small businesses, and not just on public sector workers. There will be an effect not just on the public sector but in the private sector, unless we get the approach right at this stage in the cycle.

In conclusion, we need to look to the banks in solving this problem. We need the banks to lend to small businesses, as Members have said, and we need to look to the banks to take responsibility through a global financial levy. The Government need to reconsider many of the approaches that they are taking, because they are going to make things worse; they are going to increase the deficit and make it harder to grow the economy, and their measures will not work in the way that they hope.

20:14

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I start by welcoming the hon. Member for Nottingham East (Chris Leslie) to his party’s Front Bench. He has been in the Chamber for most Finance Bill debates, and we have sparred a little bit along the way. I am glad to see him taking part from the Front Bench, but what a baptism of fire this is for him. You were not here earlier, Madam Deputy Speaker—one of your colleagues was in the Chair—but the hon. Gentleman heard an unfortunate tirade from his hon. Friend the Member for Bassetlaw (John Mann), who gave one of the most entertaining speeches that I have heard in this Chamber.

The hon. Member for Bassetlaw had us all going. At one point, we wanted to cheer, but almost immediately afterwards we wanted to boo—and that goes for Members on both sides of the Chamber. His argument developed in quite an incredible way. As my hon. Friend the Member for Northampton South (Mr Binley) said, the hon. Member for Bassetlaw is the only Member who could play for both teams during a football match. It was quite an incredible speech. However, he did talk about deficit deniers, a term illustrated quite well by the hon. Member for Scunthorpe (Nic Dakin) and even better by the hon. Member for Sefton Central (Bill Esterson), who has just spoken.

The hon. Member for Sefton Central spoke about capital spend and investment, but surely he recognises that the previous Chancellor of the Exchequer also wanted to cut capital spend. We understand that the new shadow Chancellor and the shadow Cabinet are following the former Chancellor’s plans for deficit reduction, which involved a reduction in capital spend. It would be fascinating to know whether the hon. Gentleman totally disagrees with his Front-Bench colleagues and thinks that they are completely wrong, or whether his argument was just confused. I really do not know where his argument was going.

[Bill Esterson]

Will the hon. Gentleman give way?

[Alec Shelbrooke]

In one moment; I just wanted to draw on your comment about the US economy. You said that it was a model to follow. There has been an $800 billion investment—or stimulus, if you will—put into the US economy, yet unemployment rates there have grown quite significantly. That is why President Obama’s popularity ratings have fallen.

[Bill Esterson]

I am sure that I did not mention the US economy, but we can check that in Hansard later. I want to pick up the point about capital investment. We need to be clear about the differences between the two sides on that issue. We Labour Members were clear that we would keep Building Schools for the Future and a number of other major projects going. We were looking at a long-term process for reducing the deficit. Those on the Government Benches proposed cutting all capital spending more or less straight away.

[Alec Shelbrooke]

I am glad that I gave way to the hon. Gentleman, because he makes my point. You say that you want to keep the investment going on these capital projects, but you also say that you will reduce the capital budget. How? That does not add up. You simply cannot go on saying that you will spend money here and there, not raise taxes, and carry on borrowing. The argument simply does not add up. I became confused halfway through the speech made by the hon. Member for Bassetlaw—

[George Freeman (Mid Norfolk) (Con)]

So did he.

[Alec Shelbrooke]

Yes, so did he. He seemed to be saying that unless the Government employ everybody in the country, no money will ever be spent. He said, “You can’t reduce the number of people in the public sector, because they’re the people who have to go to the sandwich shop.” Of course, people in the private sector do not eat or buy anything; they have a robotic existence. I wonder what happened before there was such a large public sector. The hon. Member for Sefton went on to give examples of private industry in his constituency that have benefited from loans from the regional development agencies. That is where I think the confusion lay. He was talking about Government investment, not Government spending on public sector jobs and so on.

The hon. Gentleman talked about the regional development agencies, but there was provision for a regional growth fund in the Budget. The Government have also put measures in place in the Budget to reduce national insurance contributions for those setting up companies outside the south-east, and have reduced capital gains tax. As I pointed out in my intervention on the hon. Member for Wirral South (Alison McGovern), that helps investment from international business to come in.

Yorkshire Forward, a regional development agency, says at the bottom of its e-mails, “We have created more than 52,000 jobs.” No, it has not. Private business creates the job. If Government money is used, the job is not “created”; there was a subsidy that eventually has to be paid back.

Government money is just private money that the Government have nicked and are trying to put back. It is not our money. We do not earn it. We take it from the wealth creators. If we are not creating that wealth in the first place, how can we go on and spend it? The deficit deniers do not understand or do not accept that every one of us would like to stand here and say, “Do you know what? I’m going to replace every school in my constituency, and I want a first-class service.” Every one of us wants a first-class service—that is why we went into politics—but we must be realistic. We must be pragmatic. We must understand that we cannot go on spending money as we have been doing.

I take issue with the suggestion that the move to a 20% rate of VAT is permanent and that we have no intention of lowering it because ideologically we want to tax more. Ideologically we want to tax more? I have never heard such nonsense. We are the party of low taxation. We made it clear in every speech that at each Budget we would review and lower taxation if we could. It has never been said that VAT would remain at 20%. One would hope that we may be able to move to a lower taxation rate.

In the short time that I have left, I shall move on to a specific topic. The Bill refers to closing tax loopholes. Everybody in the Chamber wants to achieve that because there is a great deal of revenue out there that the Government are not getting. Let us look at the way money circulates in the economy. Representations have been made to me that red diesel be used in emergency service vehicles. We can see the sense in that. Emergency vehicles are paid for through Government money, VAT is paid, and money is being circulated and coming back. That is a sensible argument and would impose no cost on the Exchequer.

I make a plea to the Minister to consider something else. I am proud that we have an excellent Yorkshire air ambulance—indeed, we have two. They are on BBC 1 every day at 9.15 am, relating their exploits in rescuing people who have got into difficulties in areas such as the Yorkshire dales. That leads me to say what an excellent maiden speech my hon. Friend the Member for Skipton and Ripon (Julian Smith) made, describing that countryside, where people like to go hiking. We know that accidents can happen, so we have the air ambulance.

Yorkshire air ambulance costs £2.628 million a year to run and not one penny comes from Government. It is all raised through charitable giving. I therefore urge the Minister to consider, when the time is right, exempting from fuel duty Yorkshire air ambulance, the other air ambulances and the people who contribute to the emergency services? They would still raise their money through charitable giving, but that exemption on the 162,632 litres of fuel that the Yorkshire air ambulance used last year would help greatly to reduce overall costs.

I close with a further plea. We have had several Finance Bill debates and all we hear, all the time, is cherry-picking: “We don’t want to do this bit. We don’t want to do that bit. The Government are hitting the poorest here. They are not doing enough for the rich there.” Can we please start to look at the Finance Bill holistically? We have raised tax thresholds. We are reducing national insurance. We have raised capital gains tax. We are reducing corporation tax to bring in more businesses and create more jobs. We are putting in place regional growth funds. Can we please stop the cherry-picking, have a sensible debate and look at the arguments sensibly, holistically and in a grown-up way, and can we please stop denying that the deficit exists?

20:23

[Sheila Gilmore (Edinburgh East) (Lab)]

In the course of the debate, yet again, we have heard an awful lot of myths and legends. One of the biggest of those is the notion that because the Opposition have a different view of the economy, we are deficit deniers. You do not have to be denying a deficit to hold a different view of how it arose and the background circumstances, and a different view of how we get out of the situation that we are in. That is quite reasonable.

It is healthy that we have politics within which there are different viewpoints. The proof of the pudding will be apparent in a few years. If you are right, I will have to eat my words. I do not believe that those on the Government Benches are right, but we cannot tell just by throwing words at each other. It is not correct to say that somehow the Opposition hold the view that there is no deficit. That would be plain nonsense.

There are other myths and legends that we have heard today. One, which we heard from the hon. Member for Northampton South (Mr Binley), is that the previous Government were guilty of not mending the roof when the sun shone. We hear that repeatedly. If building schools, hospitals and roads was not mending the roof, I do not know what it was. If by that Conservative Members mean that we should have saved the money and put it in a reserve somewhere, that may be a legitimate criticism, but to suggest that we were not investing in the country’s infrastructure is plain wrong.

The hon. Member for Northampton South also suggested that the economic crisis was entirely our fault because of light-touch regulation. I may have been asleep through the years of the Labour Government, but I always thought I heard Conservatives saying that there was too much regulation, that we were the party of red tape and regulation, and that we over-regulated not just financial services, but everything. We heard an excellent maiden speech from the hon. Member for Skipton and Ripon (Julian Smith). Although I disagreed with the entire political content, it was a good speech. The hon. Gentleman said that in his view there was too much regulation.

It is easy to say with hindsight that there should have been more regulation of the financial services industry, for example. I believe that there should have been, but when people say that we were over-regulating the economy, that is one of the myths and legends.

We are told that we do not want to leave our children and grandchildren in a big financial mess by not paying off debt, but equally, and perhaps more importantly, do we want to leave our children and grandchildren in the position that generations have been placed in by previous economic failures, by destroying jobs and creating long-term unemployment in various parts of the country? I do not want to leave that to my children and grandchildren.

We are allowed to differ and to hold different points of view and different economic theories. The difference is not about whether there is a deficit, but about how we got into the present situation and how we get out of it.

The previous Government managed to stop the rise in unemployment reaching the levels that had been predicted. That was the cause of economic stimulus. Far from the deficit spiralling, as we heard earlier from the hon. Member for Stratford-on-Avon (Nadhim Zahawi), the deficit did not rise as much as had been expected. Therefore, we were not in some sort of new crisis—that is what has been suggested—which justified an emergency Budget which had very little in it. The Finance (No.2) Act 2010 that we passed in a great hurry before the summer also had very little in it, and we lost an opportunity to make some important changes.

The public and private sectors are inextricably linked, and slashing jobs in the public sector will further reduce the tax-take, increase the demand on benefits and, in itself, increase, not decrease, public borrowing and the deficit. Equally, reducing our investment in infrastructure—not stopping it entirely, but reducing it more than we need to do—will ultimately put us in a more difficult position.

Just last week I visited two constituent households at their request. The problems that they asked to see me about had nothing to do with jobs; nevertheless, by no coincidence in both households there was a working-age construction worker who was desperate to work but could not find any in my city. One said that the last job on which he had worked was now a complete university building in the city, but we will not see much more of that kind of building by our educational institutions. He is very keen to work, but the jobs are simply not there.

[Alec Shelbrooke]

Everybody would like to see that investment, but, and this is the point that I tried to make in my speech, the previous Chancellor would also have cut the capital budget. I talk about deficit deniers because I do not understand how you can ask for capital investment to carry on when your shadow Front Benchers would, as I understand it, follow that plan to reduce the capital budget.

[Sheila Gilmore]

I thought I had covered that issue. We are not saying that there is no deficit or that there will be no reductions; we are saying that if you cut too far and too fast, you will worsen the current position.

[Gordon Birtwistle (Burnley) (LD)]

I am extremely interested in the fact that you admit that you would have cut the deficit, and I am extremely interested to know how you would do so.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Tempted as I am to answer the questions that are being posed about the deficit, I remind the House that the hon. Gentleman is not the only one in this debate currently blaming the Chair for everything, so I would be grateful if we could return to the convention, ensure that our language is correct and, if possible, keep me out of this argument—for now, anyway.

[Sheila Gilmore]

The whole matter is very much one of degree, not either/or. However, one other interesting difference between the Government and Opposition Front Benchers is that the Government frequently argue that high public spending and a big public sector act as a drain on, and kill off, the private sector. In the city of Edinburgh between 1997 and 2007, however, development and building—not just public sector building, but private sector building—flourished. In fact, the Royal Bank of Scotland built a huge corporate headquarters just outside the city during that period. The argument is that if we have a huge public sector, the private sector will shrink and disappear, and that, therefore, if we do the opposite, the private sector will suddenly rise up. I do not yet see, and doubt whether we will see, any great rise in the private sector. Where are the private residential houses and offices being built by the construction industry in my city? They simply are not there. They were at a time when, according to all the arguments that Government Members have put forward, they should not have been. If the public sector is so bad for the private sector, we should have had huge problems.

At this stage in the passage of a Finance Bill there are opportunities to do several things. We heard an interesting exposition of the importance to the film industry of tax reliefs and credits, so why did the Government decide not to go ahead with an equivalent tax credit for the video games industry? The city of Dundee, which is not far from where I live, suffered for many years after what happened to the old industries. It was a city of jam, jute and journalism, and it struggled for a long time, but the relatively recent expansion of the further and higher education sector in the city and the spin-offs in terms of the research and development have been very impressive. They have brought people back to a city that was losing its population, and they have encouraged young people who were educated there to stay there. Industries such as the video games industry, for which Dundee has become justly famous, have done that, yet for no good reason the coalition Government have stopped something that might have allowed the industry to develop and flourish. The opportunity exists in this legislation for the Government to reintroduce that opportunity, and I hope that they will do so.

I was at a briefing earlier today on the Robin Hood tax, a financial transaction tax that many organisations in this country advocate not only because they feel it right that the banks, which did so much to cause the financial crisis, should contribute, but because it is a way of raising funds to deal with poverty and deprivation here and elsewhere. That proposal could be included in the Bill. It is well worked out, and I hope that, even at this stage, the Government will be prepared to consider amending the legislation in order to include such matters.

20:35

[George Freeman (Mid Norfolk) (Con)]

I start by congratulating my hon. Friend the Member for Skipton and Ripon (Julian Smith) on the magnificent maiden speech that he made earlier. If he is indeed the penultimate Conservative of the new intake to speak, it was certainly worth the wait. I am sure that the people of Skipton and Ripon can see that they have made an excellent choice. I also take a moment to congratulate the hon. Member for Nottingham East (Chris Leslie) on his elevation to the Labour Front Bench; like the Geoffrey Boycott of the debate, he has stood at the crease manfully as his colleagues behind have been skittled out.

In supporting this key plank of the coalition Government’s programme to tackle the deficit, I wanted to stress three key points in the time available. There is the seriousness of the crisis in our public finances that we inherited from the Opposition; I have to say that it is disappointing not to see more of the people responsible for the crisis here this evening. Secondly, there is the key role of the private sector in generating the growth that we now need to pay for the public services that we all cherish. Thirdly, there is the specific importance of the measures in clauses 10 and 12 to promote venture capital trusts and research and development relief for high-growth SMEs, which are especially important to the recovery for reasons that I will touch on in a moment. I emphasise the importance of high-growth companies as one who has come to the House after a 15-year career of supporting technology companies in the life sciences sector. I declare an interest in a number of small companies set out in the register.

In discussing the measures in the Bill, we need to remind ourselves of some hard facts. The deficit currently stands at £155 billion. It is the largest in our peacetime history. We have the largest deficit in the G20. This year alone, debt interest is set at £43 billion, and without the measures set out by the coalition Government and my right hon. Friend the Chancellor to tackle the deficit, interest payments alone would have risen to £70 billion a year.

To prevent interest rates from spiking—the true risk of that inheritance—the Government are right to commit to reducing public spending and increasing private sector growth. Labour Members talk of growth, but seem to forget that it is the private sector that is the source of all growth and that pays for any growth in the public sector that we or they may promise. It is private-sector business people up and down the country who pay for our promises, and they now need our support.

We need to think about where the growth will come from, and I should like to suggest two key sources. First, the millions of SMEs up and down the country, frankly, want us to do something simple—get off their backs, stop taxing and regulating them and allow them to grow and flourish as they will. I also want to turn to a second source of growth, which is the three key specialist sectors of which I have some experience. They are biomedicine, food science and environmental science, in which the country punches well above its weight; in many areas of those sectors it leads the world. As the world’s population rises inexorably, they will become enormous sectors of growth across the world.

High-growth companies in those sectors have the potential to lead our recovery and lead this country back into positions of world leadership, provided that we support them properly. High-growth SMEs in the sectors have very special financing needs. Unlike smaller, high-street SMEs, which are struggling so hard, they are not, typically, dependent on the banks. They tend to be dependent on entrepreneurs, on founders—often scientists or people around universities or research institutes, who are then backed up by angel investors who put their expertise and hard-earned money to good use, by venture capital trusts and by corporate venture investors. We need to recognise the importance of that very specific financing food chain and encourage it. I therefore warmly welcome the measures in clauses 10 and 12 on tax relief for research funding and SMEs and for encouraging venture capital trusts. More widely, I welcome the coalition Government’s measures to reduce corporation tax and to relieve entrepreneurs on capital gains tax.

Those are vital measures in a serious Government programme to tackle the deficit. It would be nice to hear from Labour Members what they would do to tackle the deficit were they to be in power.

20:40

[Chris Evans (Islwyn) (Lab/Co-op)]

As this is the third Finance Bill that we have debated in the House this year, one could say that Finance Bills are a bit like buses: you wait for one to come along and three arrive at once. Even though this is a dry and technical Bill, it does have some merits. My primary concern is the failure to put in place a plan for growth.

Throughout this debate, we must remember that economists cannot predict the future. History is littered with economic theories that have failed, and I am sure that everyone in this House would agree that only time will tell how the economy will pan out. However, we can deal only in facts. There is no doubt that the economy is at a very dangerous crossroads. In the past, economic recovery following a large-scale financial crisis has inevitably been slow. It is vitally important that we make the correct decisions now on growth, jobs, the deficit and public spending. Yes, dealing with the deficit is absolutely key to future economic policy, and there is no doubt that we must cut waste where it is found. That is not deficit denial; it is the truth.

I am deeply concerned about statements made by the Prime Minister and the Chancellor of the Exchequer that seem to imply that deficit reduction is the beginning and the end of economic recovery. To me, it is vitally important that we have a credible and medium-term plan to reduce the deficit based on a careful balance between employment, spending and taxation—but only once growth is fully secured and over a longer period than the Government are currently planning. Simply put, hitting growth will make it more difficult to pay down the deficit because it means less revenue for the Exchequer. That is not deficit denial; it is just plain common sense.

We face fundamental questions. Is it right to be cutting millions of pounds from public services and taking millions of pounds out of family budgets this financial year and the next? What will that do to jobs and growth? Ultimately, what will it mean for the deficit? There seems to be a growing consensus in the House today that says that the deficit is the only issue that matters in economic policy, that the measures to reduce it are unavoidable, and that there is no alternative. Adopting the consensus view may be the easy and safe thing to do, but it does not make one right or credible. We did that in the ’30s and were faced with the great depression. The leader of my party, Ramsay McDonald, fell out with his parliamentary party over cuts, and we saw what happened then.

Of course, the impact of immediate cuts to public spending on jobs and the recession has not yet fed through. Even though polls tell us that the public support deficit reduction when they are told that it will come from cutting waste in public spending, I wonder how they will view it when a local hospital is not built or a school is in desperate need of repair and there is no money to pay for it.

To attempt to repair the damage of such an event and return the national debt to its previous levels in just a few years is not only incredibly dangerously in the eyes of financial markets but places an intolerable burden on current users of public services. Even halving the deficit, as Labour Members propose, would represent comfortably the biggest and fastest cut in the deficit since the period after the second world war, but without the peace dividend to fund it.

By far the biggest influence on deficit reduction and the balance between taxation and spending is economic growth and the number of taxpayers in jobs paying their fair share. That is why the priority must be growth and jobs. It disappoints me that the Government have seen fit to cancel support for industries of the future such as the games industry. The Labour Government set out plans to support the industry in March, the new Government axed them in June, and the result was job losses in Scotland in August. That is what happens when a Government cut at any cost. The industry sustains thousands of highly skilled jobs that we simply cannot risk losing if we are to secure economic recovery and protect jobs. The industry, which contributed £1 billion to the UK economy last year, is competing with significant incentives from countries such as Canada, which are trying to entice companies to relocate their jobs. To me, cutting support for industry and highly skilled jobs is wrong at this time. I believe that the Government should urgently rethink that decision.

The UK’s creative industries will be essential to rebalancing our economy away from dependence on financial services. The Government’s decisions do not seem well thought out, and the video games industry has issued warnings about the long-term implications. The Association for Interactive Entertainment has already said that, with the absence of tax breaks, it is essential that the Government work with the industry to address the skills gap and better access to research and development initiatives. It is therefore of the utmost importance that an assessment of the impact on the creative industries is made. Perhaps most worrying, the scrapping of tax relief, which puts the future of the computer games industry at risk, took place without industry consultation or discussion.

Many hon. Members have mentioned regional development agencies and their benefit to the economy. They, too, were scrapped without consulting business. That sets a dangerous precedent, and I urge the Government to think carefully about formulating policy in that way in future.

I have tried to keep my comments brief because other people want to speak, but now is the time for a careful and considered discussion of reforming tax and benefits in this country. I hope that we can do that through the Bill. Although I am happy about elements of it, I trust that the Government and the Opposition will now engage in that discussion.

20:46

[Penny Mordaunt (Portsmouth North) (Con)]

Historically, it has been argued that the secrecy surrounding Budget measures has hindered proper scrutiny, especially as Parliament has but little time to consider their broader implications. Those implications have not always been positive for the Government of the day. Indeed, had a previous Chancellor not guarded his Budget measures so jealously, his blushes might have been spared over the abolition of the 10p tax rate. I remember that time well—in Portsmouth, the average wage was £18,500, and anyone earning below that and above £5,000 was absolutely clobbered. That is why I will never take lessons in fairness from those who now find themselves on the Opposition Benches.

The Government’s publication of the measures in the Bill on 12 July is therefore a welcome departure from the norm, opening a consultation and inviting comment. That is an innovation in the interests of good and transparent government, and I hope that, in future consultations, a broad audience beyond the usual tax practitioners will let its views be known to Her Majesty’s Treasury.

The many people in Portsmouth North who suffer from asbestos-related illnesses are part of that broader audience. The proposals in clause 31 to facilitate compensation payments to those people are a proper response to the tax liability to which many well-intentioned trusts have found themselves exposed.

Asbestos-related industrial diseases are sadly a common occurrence in all our constituencies. The long period from exposure to presentation of symptoms, as well as lack of awareness, means that we will see new cases for decades to come. Indeed, in the next 10 years, the number of cases emerging each year will peak at about 2,500. As a dockyard city, Portsmouth can expect to contribute disproportionately to that number.

Currently, the trusts established to pay compensation to asbestos illness sufferers can be liable for inheritance tax, capital gains tax and income tax on their assets. Clause 31 will introduce a retrospective exemption for trusts established between 6 April 2006 and 23 March this year. That will mean more money going to victims, and will be very welcome in Portsmouth. It will be a relief to sufferers from asbestosis, cancer and even relatively benign conditions such as pleural plaques, which can nevertheless be a precursor of more serious complaints. The extra resource is much needed, as it will also help meet the cost of care. Often, only 35% of the cost of that care—particularly hospice care—is met by the NHS. The provision happily complements the High Court ruling in August this year, which asserted that insurers’ compensation should be used for the care that victims have needed. I am encouraged that the unwitting exposure to tax liability of an essentially charitable endeavour is to be put right, and that the problem can be avoided in the future if new trusts consult fully the Charity Commission and HMRC.

It is a happy coincidence that the launch of the consultation period on Finance Bills comes with a Bill that offers so many positive measures. In addition to clause 31, I welcome the amendment to collection procedures for income tax for individuals and the harmonisation of administration regimes for different taxes—a further advance towards simplification and transparency. We must all recognise the exasperation that many individuals and businesses in our constituencies have felt in their dealings with HMRC, and measures to ensure that taxation is fair, straightforward and transparent are always to be applauded. However, I hope that the Economic Secretary will dwell on clauses 26 and 27 about the failure to make returns and late payments. Given HMRC’s track record, I seek assurance that those measures will not over-burden taxpayers or impose disproportionate penalties. I am especially anxious that the size of fixed penalties for small businesses be given careful consideration.

I also applaud first-year allowances for zero-emission goods vehicles, a genuine incentive for logistic firms to pursue a green agenda and a sign of the Government’s determination to reward green behaviour.

It is also worth noting what the Bill omits. The long period of consultation has afforded us adequate time to enjoy the absence of some measures favoured by the last Government. Happily, we can pass this Bill without unfairly impinging on the landline user or the cider drinker.

20:51

[Jacob Rees-Mogg (North East Somerset) (Con)]

I congratulate my hon. Friend the Member for Skipton and Ripon (Julian Smith) on a speech that was excellently delivered and every word of which I agreed with. It was a fine maiden speech and a pleasure to listen to.

I also welcome the hon. Member for Nottingham East (Chris Leslie) to his new position. His speeches are in a somewhat different category, in that I always enjoy them but never agree with them. It is nevertheless a pleasure to see him in his place as his contributions in earlier debates were all listened to with bated breath, not least as we waited to intervene on some telling point.

This is a good and worthy Bill that is, perhaps, typical of the workmanlike approach that the coalition Government are taking to the difficult matters at hand to ensure that government is done fairly, justly and properly. In that context, it is interesting to look at the issue that was raised by the shadow Chief Secretary about the morality of taxation and whether it is moral, in one sense or another, to avoid taxation. We should be careful about eliding “avoid” and “evade”. The two are clearly different things, and this Bill exemplifies why that is so.

The Bill will relieve the taxpayer of burdens that Parliament probably never intended to place on them. For example, did we really want to have a special taxation for merchant seamen who are within the European economic area, as against those who are British subjects? Or was it an accidental result of historical legislation that meant that EEA citizens were caught in a way that the British subjects were not? As it happens, it is right and proper that Parliament should legislate to take people out of a tax that is misplaced, and it is equally right and proper that Parliament should legislate when it wants to bring people into a tax that it has not legislated for in the past.

The famous exponent of this was, of course, Lord Tomlin. In 1936, in a case brought by the Inland Revenue commissioners against the Duke of Westminster, Lord Tomlin said:

“Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure that result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax”.

That is why it is so important that we have these detailed pieces of legislation coming through, because when we look at the length of a cigarette, which is dealt with in clause 23, and whether it should be 3 inches or 4 inches—the measurements are all in centimetres, but being British, I shall stick to inches—and therefore be taxed differently, is that an issue of great, high morals, that should be referred to the College of Cardinals for debate, to decide which is one and which is the other? Or is it, in fact, a detailed point of law that is quite rightly passed by this House, so that taxpayers will know exactly where they stand? If we take an aircraft that weighs more than 8 tonnes—I shall not convert that into hundredweight, but I am sure that some will want to—should it be specially subject to value added tax, or should it not? Again, it seems quite clear to me that that is an appropriate matter for detailed legislation. The taxpayer who follows the letter of the law is never doing anything either wrong or immoral, and people who seek to try to confuse the two at seaside party conference are making a great error and doing a great unfairness to the British subject who is doing his best in an immensely complex area.

There is one other thing from this Bill that I would like to note, which is that clauses 5, 6, 14, 18, 19, 20, 21, 22 and 23 are, in whole or in part, requirements of the European Union. I mention that so that this House notes that we are perhaps not quite as free as we think we are to set our own tax rates, and that there is creeping Europeanisation. I see my hon. Friend the Member for Dover (Charlie Elphicke) is in his place. He is, in his port, at the forefront of our protection from creeping Europeanisation coming across our shores—this creeping Europeanisation that makes up almost a third of the Bill.

[Charlie Elphicke]

I thank my hon. Friend for his generous comments about our desire to buy our port. As far as Europe is concerned, does he not agree that it would be better if we were more masters and captains in the ships of our national destiny?

[Jacob Rees-Mogg]

That is put in an appropriately Nelsonian way. Of course we should sail the ship of state independently. It is important that so much of our domestic law is, in fact, coming from Europe, including our tax law, because that is the one thing that many people thought was broadly exempt from the interference of—

[Ms Louise Bagshawe (Corby) (Con)]

rose—

[Jacob Rees-Mogg]

It would be a great privilege to give way to my hon. Friend.

[Ms Bagshawe]

My hon. Friend is making a typically eloquent and masterful speech. Does he agree that he has done the House a great service in listing those clauses of the Bill that are subject to European regulation? Surely at the very least we owe our electorates such transparency on the issue, so that they should be informed as to which decisions are those of our Government and which are being handed down from Brussels.

[Jacob Rees-Mogg]

My hon. Friend has put it absolutely correctly and wisely: people need to know what is going on. “Truth is great and it will prevail” is, I believe, a motto of some.

Let me draw my remarks to a conclusion. I praise the Government. I think that they are right. They are putting forward serious-minded, proper legislation—detailed, pernickety, perhaps even dull—but it is rightly the duty of this Parliament to pass such laws, albeit with the caveat that we want our laws to be our laws, and not an adjunct to the European Union.

20:59

[David Rutley (Macclesfield) (Con)]

I think the phrase is, “Follow that.” What an amazing tour de force. I congratulate my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) on his great remarks. I should like also to congratulate the hon. Member for Nottingham East (Chris Leslie) on his elevation and my hon. Friend the Member for Skipton and Ripon (Julian Smith) on a wonderful maiden speech. He represents a great part of the world, and I am sure that the people there will be well satisfied that he represents them well.

As has been discussed, the main purpose of the Bill is to enact a series of technical tax measures inherited from the previous Government. It is a wide-ranging Bill, and it is part of a package of measures that this Government are having to take to tackle the economic crisis. The first Finance Bill, this Bill and the comprehensive spending review will each assist us to address the economic challenges facing our country.

I shall begin by focusing on the clauses relating to Her Majesty’s Revenue and Customs. It is important that the necessary improvements be made to help income tax to be more effectively deducted at source, as set out in clause 8. We need to support HMRC in doing a better job of collecting the taxes that are owed. That is a critically important job, given the state of our public finances. That said, however, it is not just the legislation that needs to be updated. It is clear that HMRC’s senior management team has more work to do, given the recent huge problems with PAYE.

The Treasury Committee held a meeting in September to review HMRC’s operation of the PAYE system. Like other members of the Committee, I had the chance to probe the issues surrounding the new computer system, and the announcement that 1.4 million taxpayers would be receiving letters informing them that they had underpaid their taxes. The hearing also highlighted the much broader issue of HMRC’s mind-boggling backlog of 18 million open cases of overpayment and underpayment in previous years. Dealing with that must be a major priority. The senior management team will simply have to improve its communication skills, enhance the so-called customer journey—which for too many has felt like a short trip down a dead end—and prove its new system’s capability as it moves to full roll-out. Based on my postbag, and on conversations that I have had with HMRC staff in Macclesfield, I believe that much more work is required to improve taxpayer confidence in the organisation and to raise employee morale across its operations. I welcome the clauses in the Bill that will help HMRC to do its job, but these other challenges must be addressed to enable the Government to achieve the objectives that they have set out in their tax measures.

The challenges facing HMRC would not be so huge or so critical if the public finances were not in such a mess, however. That is why it is important to examine the context in which the Bill is before the House. This country’s record deficit has repeatedly been highlighted in the debate. It is not the product of a mythical global economic crisis. Even before the credit crunch, there was clear evidence that spending and the burden of tax were too high. The truth is that the previous Government were caught completely flat-footed as they faced the economic crisis. The scale of the challenge has now been starkly set out, and it is time for the coalition Government to pay back Labour’s debts.

It is against that backdrop that the Chancellor announced his emergency Budget, which included a clear fiscal consolidation plan that placed a priority on lowering spending, combined with tax measures to reduce the deficit and to reform the tax system. Clearly, this Bill has a role to play in that regard. Strong medicine is needed, and it must be taken in the months and years ahead. That is what the British public expect; they recognise that it must happen. The detail will be spelled out in the comprehensive spending review in a few days’ time. Radical welfare reform must be an essential part of the plans, and tough decisions on tax have also been made, with VAT having to be increased to 20% in January.

All that is necessary to get the public finances back under control and to get through the economic crisis, but we need to go further and create the conditions for sustainable economic growth that must be based on an expanding private sector. Colleagues have mentioned that in their speeches today. Growth comes from the private sector, not the public sector, and restoring national competitiveness must be a priority. It will be critical to give greater confidence to small and medium-sized enterprises, which form the backbone of our economy and are the engine of job creation. That is why I am pleased to support the Bill, as clause 13 sets out help for SMEs with tax relief for research and development.

It is good that the Chancellor is also taking forward other critical measures, including scrapping Labour’s tax on jobs, and reducing corporation tax year on year for four years, down to just 24% in 2014. It is good to see that Britain is definitely open for business once again, as it should be. All that must be underpinned by a change in direction in economic policy making. This is about asking the right questions, and about taking a new approach to getting the best possible answers.

Over the past 13 years, the previous Government and many in the media were simply asking the wrong questions. They wanted to know, “How much can we spend on this, and what steps are you taking to protect spending on that?” No one asked whether we could afford a particular policy, or how much it would increase the burden on taxation. Coming from the world of business, I find it obvious that a different question must be asked by most companies in competitive marketplaces day in, day out. The way in which it is asked may vary from business to business, but the substance of the question remains the same: “How can we give our customers more for less?”

That is not a question that businesses are ashamed to ask. It lies at the heart of how they compete and how they provide worthwhile work for their colleagues: it is ingrained in their culture. However, although some in the public sector have sought to take the question seriously, it has not been heard above the demands to spend, spend, spend that have come from Opposition Members. It is a tragedy that it has taken an economic crisis of this scale to enable it to be heard.

I am pleased that the right questions are being asked now, and that legislation such as this will help to address the challenges that we face. Behind the questions, however, there must be a new approach if we are to obtain the answers. Faced with big challenges following the general election, the Conservatives and the Liberal Democrats made a bold decision to work in coalition. That is not something for which I hoped at the time of the election, but it means that there must be give as well as take. It means that both parties must get around the table, and the evidence so far suggests that it has led to radical and bold solutions as both parties seek to work in the national interest.

I believe that, given the tough challenges that lie ahead, that approach will have wider applications. I believe that it will define new, creative ways of working between Government Departments, between businesses and Government, and between local councils and community groups. It is about people working together in new ways in the interests of their country and, indeed, their communities in this most difficult of times. We see it working in Macclesfield as residents, community groups, local businesses and Cheshire East council work together, strengthen the local economy and revitalise the town centre. Our new treacle market is a tremendous success, and I recommend it to the House. It is held on the last Sunday of every month, and I suggest that anyone interested come along.

At least the Bill sets out business initiated by the previous Government that needed to be progressed, but it is sad to note that not much more was worth progressing, and that so much was left undone. A complete mess was left for the present Government to clear up, and today’s evidence suggests that the Labour party, not notable for the huge number of its Members present, has nothing much to add to the debate. Faced with such challenges, unlike the coalition Government, they have chosen denial—or, as today’s attendance suggests, avoidance—rather than a constructive dialogue.

I am no psychoanalyst, but I understand—and I am sure that Members will be interested to hear this—that denial is a defence mechanism used by a person who is faced with a fact that is too uncomfortable to accept. Such a person will insist that something is not true despite overwhelming evidence to the contrary, and will often behave in ways that others see as quite bizarre. We see such behaviour on a regular basis on the Opposition Benches. To make matters worse, the Opposition are in double denial. They cannot see the scale of the crisis, and they are not willing to accept that they are responsible for it.

We might have hoped that things would improve with the birth of new-generation Labour—although that too is not obvious from today’s debate—but we have heard nothing to support that hope today. For once I agree with Alastair Campbell, who said over the weekend that what Labour needed was a proper economic narrative. We on the Government side of the House have been saying that for a long time, and I am pleased that the hon. Member for Bassetlaw (John Mann) joined us this afternoon.

I support the Bill, and support the work that the Government are doing in tackling the deficit. Difficult challenges and uncomfortable decisions lie ahead, but the right questions are finally being asked, and the Government are making important progress in the most difficult of circumstances.

21:09

[Claire Perry (Devizes) (Con)]

I join in the congratulations to my hon. Friend the Member for Skipton and Ripon (Julian Smith) on his excellent maiden speech. I also congratulate the hon. Member for Nottingham East (Chris Leslie) on his elevation. He is a triumph of quality over quantity tonight. It is either that or he needs to change his Lynx body spray.

I am pleased to speak in support of the Bill, an agglomeration of 31 yawn-inducing technical tax measures to some, but to me another item crossed off the most important “to do list” of this Parliament, tackling the crippling millstone of public debt inherited from the last Labour Government. I would like to do three things: to address some specific clauses; to review the need for presenting the Bill in this slightly unusual form; and to provide some context for the measure.

There are 33 clauses to be put on the statute book. In—I think—all cases, those measures were inherited from the previous Labour Government; there are almost no changes from our side of the House. All are worthy of review, but three are particularly relevant. The first is on the level of support provided to carers. Almost every week in surgeries around my constituency I hear about carers and the particular burdens put on adult carers. We heard just this morning that 25% of women in their 50s—not so far off for some of us Members—will be carers while also facing the challenges of continuing to be supportive parents for their teenage children. It is imperative that the measures that we put in place to relieve carers of unnecessary tax are carried through handsomely.

I echo the comments made by my hon. Friend the Member for Portsmouth North (Penny Mordaunt) about the importance of the first-year allowances for zero-emission goods vehicles—100% of first-year allowances will be deductible from April, continuing until April 2015. That demonstrates our Government’s commitment to supporting incredibly valuable legislation that helps us in the overall attempt to “green up” the British economy.

The Bill’s measures, alluded to by my hon. Friend the Member for Mid Norfolk (George Freeman), on supporting enterprise and venture capital investment are critical to our plans to open Britain for business, although as part of that process we must continue to ensure that the banks actually lend. That matter is not for debate tonight, but we must return to it again and again as we proceed through the Parliament.

I turn to the odd split of Finance Bills, for which the Government have come under mild criticism. We had Finance Bill No. 1, which enacted a series of emergency Budget measures and now we have No. 2, which has been described as the mopping up of technical tax measures. May I review what was happening at the time of the election, and the need for emergency Budget measures? Our triple A credit rating was under threat, 10-year interest rates were spiking up at over 4% and starting to approach the interest rates of Italy, which has, I believe, had 62 Governments since the second world war. The credit default swap rating—I know that this all sounds like bankers’ speak but it materially impacts on the level at which we can borrow—which is the measure of potential British default on our debts, was getting up to 90 basis points, up there with Portugal and Spain, which could not even dream of a triple A credit rating. A fire was burning in the heart of the British economy and the Labour Government had no plans to put it out. We did. The emergency Budget on 22 June, introduced within the 50-day limit that we set ourselves, restored confidence both internationally and domestically in the British economy.

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

Does my hon. Friend agree that, because of that emergency Budget, we are still able, although we are dealing with a massive deficit and borrowing £500 million a day, to borrow at half the rate of Ireland?

[Claire Perry]

As always, my hon. Friend makes an excellent point based on his substantial experience in the business world. During that process, we showed a clear commitment to doing the right thing for the British economy. We did not do things to maximise political headlines, of which the previous Government were guilty on an almost weekly basis.

What is the result of taking those bold actions? Let us talk numbers. The risk premium on the British economy has dropped by 30% since the election. Long-term interest rates—the 10-year interest rates—have dropped by more than 1%, meaning a 25% reduction in the cost of borrowing. These are not arcane measures thought up by a load of greedy bankers; they materially flow through to the borrowing costs of our constituents, both for mortgage and small business borrowers. The measures mean real growth for the British economy.

Why did we not consider tax measures in the first Finance Bill of this Parliament? The point made earlier on transparency and consultation is a valuable one. We said that we will be a Government who are far more transparent and that we will allow time for consultation.

[Kelvin Hopkins]

I am listening with interest to the hon. Lady. She said that the Government did not introduce tax measures, but what about the rise in VAT, which is a regressive tax? The introduction of a more progressive tax—for example, a tax on the rich or on big business—might have been more acceptable, but a regressive tax will deflate the economy by taking money out of the pockets of ordinary people, who spend most.

[Claire Perry]

I would debate regressive and progressive taxation and the question of income or expenditure with the hon. Gentleman, but I would like to make a little progress, if he will allow me, and focus specifically on the technical measures in the Bill.

The measures were published on 12 July, and I believe that we have had a number of responses to them, and we now feel that we have had adequate consultation to proceed. The House feels that we can cope with the split between two Finance Bills, but I would like Ministers to reassure us that we will revert to one Finance Bill as soon as possible, as the situation normalises. In that way, the whole finance package can be given proper scrutiny, and we will not have the kind of piecemeal debate that we are having today.

Finally, let me give some context to the measures. We have heard this before, but I make no apologies for saying it again: we have a record deficit. That is not the result of a financial shock that emerged like the creature from the swamp from America in 2007, but the result of a Government who spent more than they earned in taxes every year from 2002. I have listened with great interest to the representations made by Labour Members. They say, “We were investing. We weren’t ‘spending’; we were building schools and hospitals.” They were building schools and hospitals, but they were borrowing money to do so. In the process, they put the bill on future generations of taxpayers. They talk about being progressive, but that is not a progressive thing to do with the British economy.

The previous Government bequeathed us interest costs of £120 million a day. That is paid largely to foreign Governments, so that they can build their schools and hospitals off the tax pounds that we collect from our taxpayers. There is nothing progressive about that.

What do we get when we discuss the measures? Do we get the intelligent, grown-up debate that the hon. Member for Wallasey (Ms Eagle), the shadow Chief Secretary, asked for? We certainly do not get intelligent, grown-up debate on how to cut the deficit from the few Labour Members in the Chamber. With a very few honourable exceptions, we get opposition to everything. That was amply demonstrated during today’s statement by the Secretary of State for Work and Pensions. We now have the extraordinary situation of Labour Members, in opposing everything, wanting to tax the poorest families in this country to pay £1 billion in child credit to the richest 15% of families. I suggest that, by opposing everything, Labour Member get themselves into some extraordinary technical tangles.

Conservatives want to talk about deficit reduction, but Labour Members put up the ideological barricades, saying, “You’re bad Tory cutters. You’re bad Lib Dem ideologues.” Behind the sound and fury, one question remains unanswered: what would Labour Members cut? Where would their £44 billion-worth of spending cuts fall? If they oppose everything in our deficit-reduction plans—the plans are supported by the International Monetary Fund, the OECD, the CBI, the Bank of England, Tony Blair, Peter Mandelson and everyone but Labour’s Front-Bench team—they weaken their status as a viable Opposition.

I shall finish if I may by quoting Labour’s new shadow Chancellor, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson). No, this is not about his need for an economics primer; it relates to what he has said about the British people. He said:

“I think the reason why they took to the coalition is they thought, well, here’s someone rolling their sleeves up and getting down to the job.”

We are getting on with the job. The measures in this Bill are part of that, and I urge every hon. Member here tonight to vote for the Bill, as I shall be in the not-too- distant future.

21:20

[Charlie Elphicke (Dover) (Con)]

I wish to add my congratulations to my hon. Friend the Member for Skipton and Ripon (Julian Smith), who spoke in the most heartfelt way about his heartbreakingly lovely and beautiful constituency and in the most thoughtful and considered way about the impact of regulation on smaller businesses. I also wish to congratulate the shadow Chief Secretary to the Treasury on her elevation and the hon. Member for Nottingham East (Chris Leslie) on returning to the Front Bench, even if it is not the Front Bench that he would have preferred to be on—no doubt he is a patient man who will wait to have another go in due course.

This Budget, with this Finance Bill, is an essential piece of legislation. We have a country that is all but bust; its budget deficit is more than £150 billion and we face a structural deficit of £109 billion, according to the Office for Budget Responsibility. What does that tell us? It tells us that two thirds of the current extra borrowing each year has nothing to do with the recession and the global financial crisis, and has everything to do with the economic incompetence of the previous Government. The Leader of the Opposition urges that instead of adopting a fiscal position of raising taxes by one third and cutting spending by two thirds, we should make it 50:50. My hon. Friend the Member for West Suffolk (Matthew Hancock) has calculated that that would raise people’s taxes by another £1,300. Such a massive bombshell would not be constructive in this difficult fiscal environment. The Government have taken difficult decisions on taxes, but the further tax rises that the Opposition urge on us are not at all responsible or helpful.

It is therefore right that the coalition is taking the economically responsible and sensible position to step right and stabilise our country and its finances, but we need to have growth and a growth agenda. It is helpful that corporation tax is being reduced to 24% over the next few years, and I hope that in time the Government will be able to go further and bring it down to about 19%. I hope that they will give serious and substantial consideration to a holding company regime such as exists in places such as the Netherlands and Luxembourg, so that the UK becomes a holding company international headquarters of the European time zone. The UK and London, rather than the continent itself, would thus become the jumping off point for Americans investing in Europe, which would provide a massive fiscal stimulus to the UK economy and would make it the financial headquarters centre and the international business centre of the European time zone. We should be very alive to the competitive fight that we have with our European friends, and seek to maximise our position and that of London as the international financial and business centre of this time zone.

We may get a fiscal bounce out of encouraging large businesses to move to this country, set up here and stay here—I note that WPP and Hiscox have left and moved overseas, as have others—but if we want long-term sustainable development and growth, and more jobs and money over the longer term, we need to consider smaller business, because it has a stronger sense of growth over the long term and it supplies the entrepreneurial flair that creates more jobs and money.

[Kelvin Hopkins]

I entirely accept the need to sustain small businesses, but small businesses live off two things: first, big businesses, which make orders for them; and, secondly, demand in the economy, as we go for meals out, get building alterations done to our homes and so on. If people are not spending because they are frightened of losing their jobs and having their pensions and benefits cut, that damages small businesses at least as much as it does big businesses.

[Charlie Elphicke]

I would agree with the hon. Gentleman that confidence plays a massive role in our economy—and nowhere more so than with our smaller businesses. The confidence that we have seen since the election seems to be feeding through to the growth figures, which seem to suggest that we are coming out of the recession faster than anyone thought we would. Personally, I think we should be more positive about the prospects for the economy and the prospects for faster growth over the medium term, given the nature of the stabilisation and the confidence that the coalition Government have provided to the country. However, that does not mean that there is not more we can do for small businesses. We can and must, as my hon. Friend the Member for Devizes (Claire Perry) and others have said, have more liquidity for the small business sector. It has been too locked up in banks preparing their balance sheets—we need more lending.

[Mary Macleod (Brentford and Isleworth) (Con)]

Does my hon. Friend agree that a reduction in corporation tax is a way to encourage more small businesses and to keep big business in the United Kingdom, and that it will help the overall long-term growth of our economy?

[Charlie Elphicke]

Absolutely, yes. The previous Government were planning to increase corporation tax on smaller businesses and to do nothing for larger businesses. The reduction in corporation tax that we are seeing across the board is an incredibly positive move by the coalition Government that will help to create more jobs and money and help to encourage businesses—international businesses in particular—to set up in the UK.

We need more liquidity for smaller businesses, but we also need tax reform for smaller businesses. Earlier today, I met the Quoted Companies Alliance, which represents smaller quoted companies. It put to me the suggestion that we should perhaps think harder about the enterprise investment scheme and venture capital trust regimes. They are limited at about 50 employees, but EU state aid approval would be allowable for fewer than 250 employees under the EU SME definition. I hope that Ministers will consider that in due course and in further Finance Bills. There is a negative effect on businesses because they dare not grow over 50 employees. That is quite important.

The QCA says that the connected company or connected person regime should be considered, because business angels could be effective and useful directors and advisers to those businesses. The alliance also says that it would be better to have lighter-touch regulation. It would concede the income tax relief if it would help to keep the capital gains tax relief and increase the limits and thresholds available in the EIS and VCT regimes. I hope that Ministers will consider that and will consider the technical detail that will help to improve things for the smaller business sector.

On CGT, the alliance welcomes the entrepreneurs’ relief—it says that that is great—but asks why it lasts for only 12 months. Does that not encourage speculators? Should it not be for three or four years, to encourage long-term investment? Should it be restricted just to those who have 5% and are employees or should it perhaps involve those who have 5% or who are employees, to widen the investment base for smaller businesses that benefit from entrepreneurs’ relief? I hope that Ministers will also consider reinvestment relief when entrepreneurs come up with wonderful ideas, sell their businesses and reinvest. Perhaps they should be encouraged to do so with a wider base of reinvestment relief, to lock in more capital and investment, which will create more jobs and money over the longer term. I recognise that these are ideas to be developed in further Finance Bills, but I hope that Ministers and the Government will give them due consideration as time passes.

The other question the alliance raises is why we do not allow AIM shares to be put into individual savings accounts. That seems to make little sense. The AIM market has changed massively since the late ’90s and it would perhaps be constructive to allow AIM company shares to be in ISAs so as to widen the investment pool and widen the availability of capital to businesses that are typically smaller in nature and faster growing.

Finally, although the London stock exchange has said for a long time that we should have got rid of the stamp duty reserve tax, which is difficult to afford in the current circumstances, the QCA asks the interesting question: what would happen if we allowed getting rid of SDRT outside the FTSE 350 for smaller companies, to help to make their shares more liquid? Trading volumes would be lower and it might be more affordable. I hope that that is something to which Ministers will give due consideration and thought in future Finance Bills.

The most important thing for our country and our countrymen is to have more jobs and more money. I hope that over time we will develop a further growth agenda and deepen the one that we have already put forward, so that we can have faster structural trend growth and the UK can become the envy of not just our friends in the European Union but the world as a whole.

21:30

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

As the astute observer may have noticed by now, the Bill is a largely inherited set of technical measures, with the general election having interrupted the conventional timetable and truncated the previous Administration’s Bill, which would have introduced many of the same provisions. No matter; we have had a successful and thorough debate. The hon. Member for Bristol West (Stephen Williams) noted, I think sarcastically, that he was looking forward to the fun and delights of Committee, but we have covered the Bill’s territory well.

I pay tribute to the hon. Member for Skipton and Ripon (Julian Smith) for his very good-quality maiden speech. He made the case for the small business community in his constituency strongly and passionately. It is a fine and beautiful constituency, and I was born near or within it at Airedale hospital, so it has a special place in my heart for that reason if for no other.

The hon. Member for North East Somerset (Jacob Rees-Mogg), who is no longer in his place, made a series of interesting observations about long cigarettes, the weight of aircraft and the creeping Europeanisation of the world in general, and I look forward to his pearls of wisdom in Committee. The hon. Member for Watford (Richard Harrington) rightly noted the measures in clause 14 on film tax credit arrangements, and the hon. Member for Portsmouth North (Penny Mordaunt) talked eloquently about the important changes in clause 31 affecting asbestos compensation settlements.

I agreed very much with the hon. Member for Devizes (Claire Perry)—that may come as a shock to her—about the provisions for shared lives carers. Being a carer is a big commitment and requires a lot of patience, understanding and hard work, but it offers adults who need support owing to their health or disability a valuable opportunity to live with people who can give them the help that they need, share their hobbies and interests and so on. We, too, therefore welcome the simplification of the tax treatment of foster carers and shared lives carers so that their costs and expenses are recognised more fairly in the tax system.

The hon. Member for Portsmouth North mentioned the clauses on penalties for failures to make tax returns and pay taxes. We clearly need a regime that is tough on evasion and that incentivises prompt payment, but we also need to ensure fairness in the system so that entirely innocent people and companies are not caught in an unfair penalty cycle. As the Institute of Chartered Accountants has noted, we need to ensure that we monitor that regime carefully, especially for very small businesses that do not necessarily have in-house accountants or bookkeepers.

A number of other measures were mentioned in the debate. The hon. Member for Dundee East (Stewart Hosie) talked about the safeguards for investors in venture capital schemes and the insertion in the rules of a financial health requirement, to prevent tax reliefs from falling into “firms in difficulty”. That raises a number of questions that we will want to explore further in Committee.

The hon. Member for Macclesfield (David Rutley) rightly highlighted the clause about the deduction of income tax at source. It is a positive thing that there will be a new online mechanism for customers to lodge the fact that they are returning their income tax deductions, but that prompts the question of how HMRC enables access for customers through downloadable information and whether customers can identify their tax office correctly. Again, we will want to pursue those points in Committee.

Very few Members noted the Bill’s provisions on the automatic enrolment of employees in pension schemes from 2012, which are technical measures to facilitate the new pension scheme arrangements. That national employment savings trust is incredibly important—something that the previous Government rightly put in place for all workers between the age of 22 and retirement age earning more than £5,000 a year, unless they were already in a pension scheme. I particularly want to press the Minister on that matter, because I understand that the consultation process said that by 30 September we would know the Government’s views on that automatic enrolment arrangement. We have passed that point, and I do not think that we have had any information on the issue.

It is a curious and fragmented process that we have entered into with this chopping and changing between Finance Bills. The cynic in me detects the possibility of some highly tactical games being played by Treasury Ministers. Perhaps I am wrong, but their approach to finance legislation, as my hon. Friend the Member for Wallasey (Ms Eagle) suggested earlier, seemed to create a toxic, bad Bill—perhaps the one that was pushed through before the summer recess, possibly without the Liberal Democrats quite noticing how bad it was. Other toxic, bad Bills are to come in due course, such as those on scrapping the health in pregnancy grant, the savings gateway and the child trust fund arrangements. It is interesting to see how Ministers are packaging up these measures. Machiavelli may have some observations on that particular tactical game.

As my hon. Friend also mentioned in her opening speech, a number of measures are conspicuous by their absence from the Bill. My hon. Friends the Members for Edinburgh East (Sheila Gilmore) and for Islwyn (Chris Evans) mentioned the video games tax relief arrangements for that particular industry, which many firms in my Nottingham constituency have also been urging and expecting. They were disappointed when the Government withdrew them. My hon. Friend the Member for Bassetlaw (John Mann) referred to the investment allowances to help businesses to grow and ensure that they invest in plant, infrastructure and capacity to enable them to prosper. I might have disagreed with him slightly in his comments on VAT, but he made a number of points that are worth deeper thought and observation.

The context of the Bill says everything. Although the measure is wide ranging, it is absolutely a missed opportunity—perhaps the calm before the storm of the spending review. We know that many failings arise from the legislation, basically because of those aspects that are not in it. Insufficient steps are being taken to clamp down on tax evasion, and serious doubts are now growing, as my hon. Friend the Member for Wirral South (Alison McGovern) mentioned, about the capabilities of a depleted HMRC, should its budget be unfairly constrained.

The Bill is particularly a missed opportunity for legislation to promote growth and generate revenues, and that is what it will be remembered for. We should look at the growth deniers on the other side of the House. My hon. Friends the Members for Scunthorpe (Nic Dakin), for Sefton Central (Bill Esterson) and for Islwyn all mentioned TINA—there is no alternative, as the former Prime Minister, Lady Thatcher, described it—and that notion has infected those on the Government Benches. They are doing a good job in sticking to their message and trying to ram their points home, but it is becoming a little obvious that the script is getting somewhat old.

I was impressed in particular by the comments of the hon. Member for Boston and Skegness (Mark Simmonds)—the ideology that he has formulated of the expansionary fiscal consolidation strategy and the theory that he has announced that cuts can stimulate economic activity. His comments were mirrored to a certain extent by those of the hon. Member for Mid Norfolk (George Freeman). We need to hear much more from the hon. Member for Boston and Skegness on that strategy. It is clear to me that the Conservative party is focusing its energies exclusively on this ideological crusade in cutting investment, rather than looking equally at the other side of the balance sheet—rebuilding revenues—which surely must be attended to.

Everybody knows that the deficit position was largely caused by reduced revenues following the credit crunch and the banking crisis, and growth is the best antidote to that. It is quite clear also that the Government see public services and economic regeneration as somehow negative aspects—a glass half empty—whereas Labour Members see growth, public services and investment in infrastructure as a glass half full and an opportunity to expand. Through that virtuous cycle, we will repair the public sector balance sheet.

My hon. Friend the Member for Edinburgh East asked whether we wanted to burden future generations with a legacy of high unemployment and low growth, and that is absolutely the right question to pose to Government Members.

It is important to look at the wider context in which the Bill was presented, but we can already see, as the news develops, that growth is fragile and that confidence is wobbling. I think that my hon. Friend the Member for Wallasey mentioned a report in The Times that showed that finance directors’ confidence is at its lowest level in 18 months, and 34% of those surveyed in a Deloitte poll said that they expected the economy to go into reverse. We sincerely hope that that does not happen. The hon. Member for Dover (Charlie Elphicke) said that confidence is a critical ingredient that plays a massive role in the economy, and it is a great shame that we can already see the steps taken by the Government eroding some of that confidence. That has its roots in the decisions made in the Budget before the recess.

The downgrading by the Office for Budget Responsibility of the forecast for 2011 from 2.6% to 2.3% suggests a £5 billion loss in receipts because of the smothering of economic activity. That is compounded by the many anti-growth policies pursued, and messages given, by the Government parties. Tonight, hon. Members have talked about regional development agencies being scrapped and the Sheffield Forgemasters loan not being granted.

There are a number of ways in which the economy is at risk. It is important that, throughout the passage of the Bill, we explore the Government’s strategy and what more can be done to ensure that we pursue a pro-growth strategy. We might not divide the House tonight, but we put the Government on notice that we expect and need stronger pro-growth measures and legislation in future. We will scrutinise the detail of the Bill closely in Committee. I look forward to hearing what the Minister has to say.

21:41

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

I welcome the new shadow Treasury team to their roles. Obviously, I have had experience of debating with the hon. Member for Wallasey (Ms Eagle), the new shadow Chief Secretary to the Treasury. I look forward to continuing those debates, and to debating with the new members of the team.

We have had an interesting and wide-ranging debate. I pay tribute to the maiden speech by my hon. Friend the Member for Skipton and Ripon (Julian Smith), who follows in the footsteps of a fantastic predecessor. He described a constituency that I know, and he is right to say that it is absolutely beautiful. He is very lucky to represent it, and I am sure that he will do a great job in his new role.

Let me turn to the Finance (No. 2) Bill. Obviously, its clauses have a lower profile than many of the measures announced in the emergency Budget, but they are nevertheless important for the smooth running of the tax system. That is why the previous Government were also keen to see many of the measures put on to the statute book.

Let us be clear about why we are debating the Bill in the autumn, and not earlier in the year. As we have heard from my hon. Friends the Members for Mid Norfolk (George Freeman) and for Dover (Charlie Elphicke), and from many others, when the coalition Government came to power, we faced an economic challenge of an unprecedented scale. In fact, urgent action was needed, and we responded with the emergency Budget. The shadow Chief Secretary to the Treasury and the hon. Member for Nottingham East (Chris Leslie), who responded to the debate, seem to have developed some form of amnesia when it comes to the content of the emergency Budget and why it was required. It is impossible to exaggerate the seriousness of the situation that we inherited, or the risks to Britain if we had continued on the course that they proposed. There were almost 2.5 million people unemployed; yet again, a Labour Government left office with unemployment higher than when they came in. We inherited the largest budget deficit in the G20, and a fiscal legacy that had us spending £4 for every £3 that we raised in taxation.

We had to take action to restore the credibility of the UK economy, to allow the recovery to take hold, and to ensure that future growth was sustainable and not driven by an ever-growing burden of debt. That is why we introduced a short Finance Bill in the summer—to maintain economic stability, calm market fears and put in place a credible plan to deal with the record deficit. That plan is supported by the International Monetary Fund, the OECD, the CBI, the Bank of England and countless other organisations that clearly have a greater grasp of the deep dangers that face our economy than the Labour party does.

There was an opportunity today for the Opposition to start participating in the debate on the most important challenge facing our country—how to get our economy back on track. I was interested to hear whether they have a plan, now that they have a new leader. The answer is that they do not. The debate touched briefly on the subject of tax avoidance, but the Opposition have developed a brand new form of tax avoidance. They try to avoid talking about tax and spend altogether or having any plan to deal with it.

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

In my constituency over the past 13 years 17 new high schools and more than 50 new primary schools have been built. Does the hon. Lady condemn that investment?

[Justine Greening]

The hon. Gentleman should direct his question at his colleagues, who had planned the capital cuts that he no doubt hates so much. If he comes and looks at other schools, he will see that his Government left schools such as my own Elliott school in Putney in an appalling state. I do not think he has an answer to that.

We heard a number of contributions from Opposition Members. The hon. Member for Wallasey offered no alternative to the plan set out by the Government. The hon. Member for Scunthorpe (Nic Dakin) spoke about scrapping the package that we presented in the emergency Budget to support business. We heard from the hon. Member for Wirral South (Alison McGovern), who apparently welcomed the Bill and wanted investment, but was against the cuts in corporation tax that we introduced. We heard from the hon. Members for Islwyn (Chris Evans), for Sefton Central (Bill Esterson), for Edinburgh East (Sheila Gilmore), and for Bassetlaw (John Mann) who were all against taking action to sort out the economy. At least the hon. Member for Bassetlaw acknowledged that his party has a gaping chasm in its economic policy. Until the Opposition fill that, they will have no credibility.

[John Mann]

I hope the hon. Lady did not miss the other part of my contribution, which was intended to expose the gaping chasm in the logic and the economics of the Treasury proposals.

[Justine Greening]

I decided to pick out the piece in which the hon. Gentleman talked about his party, which he obviously supports. Our plans are all about tackling the deficit. Funding that debt will cost our economy £43 billion this year. That means that every taxpayer in Britain will pay almost £1,400 of income tax to service that debt interest. The hon. Gentleman might consider that a good use of taxpayers’ money rather than spending it on front-line services. I do not. Unless we take the difficult but fair decisions that we are taking now to sort out the deficit, we will not be in a position to undertake sustainable funding of our public services again. That is why the measures that we are taking are so important.

Many of the clauses in the Bill were brought forward by the previous Government. We consulted stakeholders over the summer because we were keen to make sure that we have a more open and considered approach for our tax legislation than we have had in the past. Many respondents have been clear about how welcome that approach is. It has made the Bill more transparent, more robust and better focused. It was a pleasure to hear from the hon. Member for Bristol West (Stephen Williams) who, I believe, is a fellow chartered accountant and could therefore appreciate the care that has been taken with the Bill.

Let me pick up on some of the technical questions raised by my hon. Friend the Member for Boston and Skegness (Mark Simmonds) and the hon. Member for Dundee East (Stewart Hosie). I am pleased that my hon. Friend welcomes the measure on REITs in the Bill. I will write to him on some of the more specific issues that he raised. He should recognise that the measure in the Bill is symptomatic of the fact that we see REITs as a positive vehicle, and we will see what we can do to support them further.

The hon. Member for Dundee East raised so many issues so quickly that I barely had time to scribble them all down. I hope we will return to many of them in Committee.

The other thing that foxed me was that the hon. Gentleman went in reverse order, starting at clause 25 and moving on to clauses 7 and 5. But, he asked some broad questions, and on the corporation tax and petroleum revenue tax changes he was right to say that the measures are about creating a more harmonised system. He raised many specific issues, and we can go into more detail about them, including clause 7, in Committee. On clause 5, he raised a number of good questions about guidance, and we are looking to revise that. We are talking to stakeholders and hearing about the issues that they want clarified; indeed, he mentioned some of them in his speech. His points were well made, and I look forward to continuing the debate in Committee.

There are further measures in the Bill to support the private sector and contribute to more balanced growth in the UK. We heard from my hon. Friends the Members for Northampton South (Mr Binley), for Dover, for Watford (Richard Harrington), for Elmet and Rothwell (Alec Shelbrooke) and for Macclesfield (David Rutley) about how important it is that our Government take steps to support business so that business in turn can create jobs. We must not forget that without the steps that we took in our emergency Budget, small companies would face a small companies corporation tax rise, not one that is going to fall, and a national insurance rise—the jobs tax. Instead, they can look forward to enjoying a reduction in national insurance liability, so we are taking the steps that we need to take.

[Mr Binley]

What will my hon. Friend do, therefore, to ensure that banks provide the money to generate the growth that small businesses will need to create if the Budget strategy is going to work?

[Justine Greening]

My hon. Friend makes a very good point, and I am sure that he is aware of how clause 5 ensures that state aid clearance of the enterprise investment scheme and venture capital trusts takes place. In 2007-08, the enterprise investment scheme supported investment of £7 billion in more than 15,000 companies, and we want to see that enhanced. We are cutting the small profits rate of corporation tax, and to follow up my hon. Friend’s question, I note that the Government plan to create a growth capital fund, which we think will provide a further £237 million of enterprise capital funds, so we are very conscious of the issues that he raises. We are in continuing discussions with the banking industry to ensure that credit flows to the companies that so badly need it—for the very reasons that he so eloquently set out in his contribution to the debate.

The Bill is not just about supporting business, although that is a key part of it. As my hon. Friends the Members for Portsmouth North (Penny Mordaunt) and for Devizes (Claire Perry) pointed out, it includes measures that will support some of the most vulnerable people in our society. I pay tribute to my hon. Friend the Member for Portsmouth North, who made an excellent contribution on the measure—I think it is clause 31—to help trusts that have been set up to compensate asbestos victims. There are further measures in the Bill not only to support people who are shared lives carers and, indeed, carers more generally, but to support through the tax system those people who act as guardians or look after children under a residence order. My hon. Friend the Member for Devizes, who gave a fantastic speech, too, talked about those measures for carers. They are badly needed and will, I hope, have a good impact.

To wrap up, the Bill contains many necessary measures that will ease the burdens on business and help the most vulnerable in our society. Owing to the need for urgent action before the summer, there was simply no time to consider them when the Finance (No.2) Act 2010 went through the House. However, I know that many Members from all parts of the House will want to join me in Committee for more detailed scrutiny of the Bill’s clauses.

This Bill, while unglamorous in comparison with its predecessors, is important. It represents clear progress, it is considered in its approach, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63.)

Finance (No.2) Bill

Monday 11th October 2010 Commons Chamber

Ordered,

That the Finance (No.2) Bill Committee shall have leave to sit twice on the first day on which it meets.—(Bill Wiggin.)

Business without Debate

Monday 11th October 2010 Commons Chamber

Delegated Legislation

Monday 11th October 2010 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 118(6)),

constitutional law

That the draft Scottish Parliament (Constituencies and Regions) Order 2010, which was laid before this House on 1 July, be approved.—(Bill Wiggin.)

Question agreed to.

Postal Services (Scotland)

Monday 11th October 2010 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Bill Wiggin.)

21:55

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Royal Mail—[Interruption.]

[Mr Speaker]

I am grateful to the hon. Gentleman for his forbearance. If Members leaving the Chamber can please do so quickly and quietly, we can proceed to an orderly Adjournment debate. I, for one, certainly wish to hear Mr Gregg McClymont.

[Gregg McClymont]

Thank you, Mr Speaker.

Royal Mail is a vital public service in Scotland. With 1,400 branches, the Post Office is Scotland’s largest retail chain. According to Consumer Focus Scotland, its services are used by 95% of the population. Scottish business, too, depends on the service. The Federation of Small Businesses estimates that one in six small to medium-sized enterprises relies exclusively on Royal Mail.

The Minister will be aware of the serious risks involved in privatising a Government-owned industry that provides a popular public service. Get it wrong and the Government of the day preside over a carve-up: executive pay hikes, job losses and the curtailment of services to the detriment of consumers. That is why I am seeking clarification of the Government’s plans tonight. I am keen to hear about how the Minister intends to protect the existing level of service provided by Royal Mail and the Post Office in Scotland.

The Government propose to split postal delivery and the management of the post offices—Royal Mail doing the former, and Post Office Ltd the latter. Both functions currently reside in Royal Mail Group, which has an obligation to provide a certain level of service to the public. That is the universal service obligation. These obligations are contained in the licence granted to Royal Mail Group. The licence requires that Royal Mail provide a certain number of deliveries at a certain time to homes and businesses and that Post Office Ltd retains post offices in all Scottish communities.

Royal Mail is also currently obliged to take the provision of all post office services from Post Office Ltd. That is called the inter-business agreement. That agreement, alongside a taxpayer subsidy of approximately £150 million per year, enables Post Office Ltd to fund its entire network of 1,400 post offices in Scotland. If neither of those conditions existed—the inter-business agreement or the public subsidy—the number of post offices would fall sharply, especially in rural parts of Scotland. The danger is real, for the Business Secretary has said that the Government do not wish to retain a stake in Royal Mail. That means full privatisation, with Royal Mail managers incentivised to seek maximum profitability. In these circumstances, the importance of postal services as a public service to the nation cannot be their priority. I say to the Minister that there is a strong memory throughout this country of former public service managers making unmerited fortunes at the expense of the public following previous privatisations in energy and in rail. Indeed, this tension between managerial freedom and the preservation of public services always emerges when utilities are privatised.

22:00

Motion lapsed (Standing Order No. 9(3)).

Motion made, and Question proposed, That this House do now adjourn.—(Stephen Crabb.)

[Gregg McClymont]

The response of policymakers is the universal service obligation, which specifies the services that the privatised entity is legally obliged to provide.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

I congratulate my hon. Friend on securing this debate. As he may know, last month reports surfaced of a leaked letter from the Business Secretary to the Chancellor hinting that flexibility may be built into the Royal Mail Bill to scale back the universal service obligation from six days a week to a five-days-a-week service. Such a move would set a very dangerous and worrying precedent. Will my hon. Friend join me in calling on the Minister to give a categorical assurance that under no circumstance will the Government allow delivery services to be scaled back in West Dunbartonshire and, indeed, across Scotland?

[Gregg McClymont]

My hon. Friend raises a very good point, and I am sure that the Minister will wish to address it.

An under-specified universal service obligation and an inadequate subsidy, where that is necessary, mean that there will not be a good postal service. That is currently the situation in telecoms in respect of the provision of fibre-optic broadband to rural areas. A universal service obligation is contained in the Royal Mail Group licence. The number of letter and parcel deliveries is laid down in statute and in the Royal Mail Group licence. However—this is crucial—the rules regarding the number of post offices are much less tightly drawn. There is very little in statute and a limited number of criteria in the licence that Royal Mail is obliged to fulfil.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Does my hon. Friend agree that far from considering cutting the number of post offices, we should be looking to ensure that every community has access to the post office service? Can he, or the Minister, say what plans there are to ensure that every community has that access, particularly communities where new housing developments and so on are being generated?

[Gregg McClymont]

My hon. Friend raises a very good point.

There is very little in statute and a limited number of criteria in the licence that Royal Mail is obliged to fulfil in terms of post office outlet numbers. That did not matter in the past because outside the formal rules the Government, as owner, could and did order Post Office Ltd to maintain the current number of post offices. However, it will matter in future. The statutory or licence conditions, if any, imposed on Royal Mail will determine the future of up to 4,000 of the existing 11,500 post offices.

[Margaret Curran (Glasgow East) (Lab)]

I, too, congratulate my hon. Friend on securing this debate. As has been evident so far, post offices are highly valued by the British public. Does he agree that instead of post offices facing a cuts strategy it would be much better if they were facing a growth strategy? Surely as part of that, the Government could, for example, insist that Royal Bank of Scotland, a state-owned bank, signed up to the post office universal banking counter service. In fact, in these days, we do have opportunities to grow post offices. What is his view on that?

[Gregg McClymont]

My hon. Friend makes a good point. I am sure that the Under-Secretary will want to address a future strategy for growing the Post Office, and not letting it fall into decline.

I said that 4,000 post offices in the UK are at risk. Individuals with industry experience suggest that between 2,500 and 4,000 post offices would be at risk if the existing licence criteria remain unchanged. Scotland is likely to be at greater risk given its disproportionately large number of rural post offices. That is why I say that maintaining the current level of public service means not only retaining existing conditions for Royal Mail’s licence, but adding new criteria. I would be grateful if the Under-Secretary clarified which obligations will be maintained, and to which body they will apply, if Royal Mail is to be privatised.

I also hope that the Under-Secretary will agree that the scope of the universal service obligation must be a decision for Parliament, and not delegated to the regulator or to an individual Minister, even one as capable as the Under-Secretary. I say that as a matter of both pragmatism and principle: pragmatism because a Minister or the regulator would be subject to enormous pressure from the privatised entity to reduce the required service; principle because, if there is a will to amend the universal service obligation, it must be done transparently and publicly by Parliament. My constituents and those of my hon. Friends care deeply about the service that Royal Mail and the Post Office provide. They demand no less.

Moving from the universal service obligation to the future of the inter-business agreement, what happens if the current exclusive agreement between Royal Mail and Post Office Ltd is ended? There is a danger that the Post Office will be undercut unfairly by competitors. For example, a supermarket chain could say to Royal Mail, “We can provide post offices more cheaply than Post Office Ltd. We will include no loss-making outlets.” To avoid such an outcome, there needs to be a level playing field. Fair competition would depend on a strictly written set of licence criteria. Any business that wished to compete for supplying post offices to Royal Mail must fulfil exactly the same objective licence criteria on a national basis as Post Office Ltd currently does. The contract for providing post offices must be set on just such an aggregated basis, otherwise bidders will cherry-pick the profitable post office locations.

The Government have given a welcome guarantee that Post Office Ltd will remain in public ownership when Royal Mail Group is broken up, but, without a guaranteed revenue stream from Royal Mail, many branches will be at risk from public spending cuts. I fear that some of the Under-Secretary’s colleagues perceive privatisation simply as a way to generate a commercial incentive for reducing the demand for post offices, to which the Government will then acquiesce. Can the Under-Secretary confirm whether the public subsidy to Post Office Ltd will be maintained? I am sure that we would all like an answer to that question.

I urge the Under-Secretary to adopt measures that protect current postal services to the public. For deliveries, that means maintaining the current number. For post offices, the Government have two choices. They could adopt an exclusive supply arrangement between a privatised Royal Mail and a publicly owned Post Office, or they could set the universal service obligation criteria at a level that provides for maintaining the current number of post offices. Long-term protection of Scotland’s postal services means giving Parliament the power to agree the level of service and any subsequent changes to it.

22:09

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

I thank the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) for giving me this opportunity to begin a debate that we will have over the next few weeks and months about Royal Mail and the Post Office. If I am not able to answer all his questions tonight, he will understand why, and I am sure that he knows that all his questions will be answered over the weeks and months to come. I hope that he will like many of the answers that he hears.

Let me start by saying that I am absolutely committed to the universal postal service. As Minister for both postal services and consumer affairs, nobody is more keenly aware than I am of the critical importance of postal services to our communities, small businesses and the country at large. That is why I will introduce a postal services Bill in this Session to ensure that the universal postal service remains one that we can rely on for the future and that will safeguard those two separate but highly valued businesses, Royal Mail and the Post Office.

The hon. Gentleman raised concerns about the post office network in Scotland. The Government fully recognise the important social and economic role played by post offices in communities throughout the UK and particularly in rural and deprived urban areas, whether in Scotland or elsewhere. More than 99% of the population live within 3 miles of a post office and 93% within 1 mile, and it serves 20 million customers per week. It is a fantastic network.

We remain wholly committed to maintaining this nationwide network of post offices. Let me be clear about what that means: we will not repeat the mass closure programmes of the previous Government, which saw around 5,000 post offices close across the UK, including 600 in Scotland and six in the hon. Gentleman’s constituency. Labour’s closure programmes tore the heart out of rural communities up and down the UK: I opposed them in opposition and I have no intention of repeating them in government. Instead, we have protected £180 million of Government funding for the Post Office in 2011-12—before the spending review has been announced—to maintain the network at around its current size, with further funding for future years to be finalised within the spending review and announced shortly.

The hon. Gentleman raised a point about the future relationship between Royal Mail and the Post Office. Our starting point must be to recognise that the Post Office and Royal Mail are different businesses facing different challenges. This Government are committed to safeguarding both, but our approach must reflect those differences. It is a commercial reality. I have already made it clear that the Post Office will not be for sale—as the hon. Gentleman recognised—so the two businesses will need to have a different relationship in the future. This should be seen as a real opportunity for the Post Office: separation will give its management greater freedom to focus on growing its revenue and getting the most out of its branch network.

There should be no doubt that Post Office Ltd and Royal Mail will continue to work closely together in the future. Post offices carried out more than 3 billion mail transactions for Royal Mail last year, and the two are closely entwined in the public mind. These companies need each other, and that will continue to be the case after separation.

Our reforms will not end there. We want to see a sustainable network offering a wider range of financial and Government services to boost revenues for local sub-postmasters and the network. We are working intensively across government to examine the scope for the Post Office to act as a “front office” for the Government, where local post offices are the natural place for citizens to access face-to-face Government services, and where the Post Office has an important role in supporting e-government, for example helping people to access online Government services through their local branches.

We are also considering the case for a Post Office bank. We must remember that the Post Office already offers a wide range of financial services and is increasingly taking on many features of a bank, but I want to go further and to see a situation in which 100% of current accounts are accessible at post offices and 100% of people know about that. Of course, those are ultimately commercial decisions for the banks involved. However, as a Government, we have a role to play in encouraging that process and explaining to the banks how important we think it is. Hon. Members can rest assured that we are doing that.

There are interesting opportunities, too, in the growing trend of community groups, charities and local people getting involved in the running of their local post offices. That is what the big society is all about: Government getting out of the way and letting the people who know best have a real say in running their services. We are fully behind this trend and are open to all ideas that can contribute to a vibrant and sustainable post office network on which communities can rely.

The hon. Gentleman also raised concerns about how the universal postal service must not be downgraded as a result of any Government action. Let me start by explaining why the Government are taking action. In 2008, the hon. Gentleman’s own party commissioned Richard Hooper to lead an independent review of the postal services sector, seeking recommendations to sustain the universal postal service, so that many of our small businesses and communities could continue to rely on them. However, those recommendations were never implemented, for reasons that I will not go into because I wish to spare the hon. Gentleman the embarrassment. However, for the past two years Royal Mail has continued to suffer under the perfect storm of a declining market in letters, a volatile and crippling pension deficit, and frankly outdated working practices, which continue to cause problems despite the welcome modernisation agreement.

In June this year, my right hon. Friend the Business Secretary asked Richard Hooper to update his report. His latest diagnosis, published in September, is stark, and I recommend that hon. and right hon. Members read the report. Royal Mail’s financial position is worse now than it was in 2008. The decline in the letters market has been faster and deeper than predicted. In the UK, we now send 13 million fewer items a day than we did just five years ago. The trend is set to continue, with worldwide volumes predicted to fall by 25% to 40% over the next five years alone. They dropped by 7% in the UK last year, and by over 12% in the United States. This is a serious issue that we have to tackle.

Fortunately, it is not all bad news. The online revolution has opened up a series of opportunities—we all know about parcels and packets—but as Richard Hooper has made clear, they do not offset the decline. If we are to seize those opportunities and make the best of them, Royal Mail urgently needs more modernisation and investment, yet modernisation takes capital and commercial disciplines that I am afraid Royal Mail simply does not have at the moment. Let us remember that the taxpayer has made £1.2 billion available to Royal Mail since 2007 to support the current modernisation programme.

Frankly, if we are serious about dealing with the problems, we will have to modernise and invest much more. So where will the money come from? I am afraid that economic times have changed. There is enormous pressure, as every Member must realise, on the public purse. We simply cannot expect taxpayers to continue to provide the ongoing investment that Royal Mail needs when it could be supplied by the private sector, as has been shown with Deutsche Post in Germany, which has seen massive investment since it was first floated in 2001. This is not just a question of cash: Royal Mail needs private sector disciplines and the freedom from Government intervention to innovate and take the right commercial decisions to secure its future.

I say to the hon. Gentleman that we have a choice: to do nothing and allow Royal Mail to slip into a slow decline, requiring ever-increasing handouts from the taxpayer; or to take action, which I will come to.

[Margaret Curran]

The Minister referred to working practices that he believes are causing difficulties. Will he outline what those practices are, and say how the Government intend to change them?

[Mr Davey]

I refer the hon. Lady to the agreement reached by the Communication Workers Union and Royal Mail recently, which looks at significant reforms to working practices. For example, I strongly support the fact that the CWU has agreed to a reduction in the number of sorting offices in order to reduce costs. That kind of change is very welcome.

[Gregg McClymont]

I have been listening intently to what the Minister has said and, as far as I can tell, he is replying to a speech that I did not make. I am asking whether the licence criteria, as currently constituted, protect the 11,500 post offices in the UK and the 1,400 post offices in Scotland. Unless I am mistaken, he has not addressed that point yet, and I hope that he will be able to do so.

[Mr Davey]

I thought that I had made it clear that, under this Government we will see no major programme of closures as we did under the previous Government. The hon. Gentleman will know the number of post offices that closed in his constituency. There were six, and I can list them. Greenfaulds, Queenzieburn, Banton, Rosebank, Waterside and Kildrum all closed in his constituency under the previous Government, and we will not see such a closure programme again.

[Gregg McClymont]

rose—

[Mr Davey]

Does the hon. Gentleman wish to intervene? I hope that he is going to apologise for those closures.

[Gregg McClymont]

I understand the determination in a political culture to ask people to apologise for things in which they played no role. I do not intend to go down that route. The Minister has given an undertaking to protect the level of Post Office services, but he has not explained how he intends to do it, beyond making some rather vague allusions to the path that the Post Office might go down in the future. I say again that, in my estimation, the licence criteria as currently written can be met only by 7,500 post offices, and I am waiting with great interest to hear something specific about how the 4,000 post offices are to be maintained.

[Mr Davey]

Over the next few weeks and months the hon. Gentleman will hear a huge amount about our proposals to ensure that we can make good on our pledge not to repeat Labour’s mass closure programme. I have already mentioned the extra revenues—whether from Government services or financial services—that will form a critical part of delivering on that. Frankly, it is not through regulation that we will save the post office network; it is by getting business through the network so that sub-postmasters can have a decent income and post offices can be financially viable. That is the way to do it.

[Cathy Jamieson]

Given that the Minister believes that a number of the previous post office closures were wrong, what provision will he make for the communities that wish their post offices to be reopened?

[Mr Davey]

As the hon. Lady will see in the weeks ahead, we want to empower communities and to ensure that the post office network is financially viable for the long term. She will have to wait until she hears this Government’s full policy statement, but I hope that she will support it. We saw 5,000 post offices close across the UK under the previous Government, and we will not see a repeat of that. Those closures left my constituents—and, no doubt, those of the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East—far worse off than they were before.

I should like to continue, as I want to deal with an issue that the hon. Gentleman spent some time on. This Government have made a clear choice. We will take action to safeguard Royal Mail and its universal service—the six-day, one-price-goes-anywhere service that is so essential to consumers, small businesses and rural communities. I recognise the hon. Gentleman’s particular interest in this matter, as that service is highly valued in Scotland, as it is in other extensive rural and remote areas of the UK. He was right to make that point.

Protecting the universal service is our primary objective. That means giving Royal Mail the access to the private sector capital and disciplines that it needs to modernise, innovate and thrive in the modern communications market; it means putting in place a regulatory regime that recognises that post is now competing in a wider communications market; it means giving the regulator an increased focus on safeguarding the universal service, regardless of who owns Royal Mail; and it means making sure that postmen and women have a real stake in the future success of the company. That is why we will be introducing the largest employee share scheme in a privatisation for 25 years—bigger than that of British Gas, BT or British Airways. Indeed, as a percentage of the shares, it will be the largest employee share scheme of any major privatisation. I firmly believe that our proposals for an employee share scheme will help to increase engagement and productivity, and will align the long-term interests of the company with those of its employees.

Let me return to the hon. Gentleman’s specific concern. Some have said that privatisation will lead to a degraded service, but they are wrong. The forthcoming postal services Bill will be all about protecting the universal postal service by establishing new, stronger safeguards and a firmer focus on its continued provision.

I do not know whether the hon. Gentleman is aware that our obligation under EU law is to a lesser service than the one that we currently enjoy in the UK. When it comes to the universal postal service and the minimum service that member states are required to provide, the European postal directive specifies only five days per week, with no obligation to keep the service uniform throughout the UK. I am sure that, as one who comes from Scotland, the hon. Gentleman agrees that a non-uniform service would be unacceptable here in the UK. However, the power to downgrade our service to that level already exists, and could be used by a future Government without a parliamentary vote or any need for consultation. That is completely unacceptable to me.

As I said earlier, I intend to establish new, stronger safeguards for the universal service. The Government have no intention of downgrading the service, and will never allow a situation in which the service required in one area of the country is not the same as that required in another. I hope that the hon. Gentleman will support the safeguards in the Bill when they are debated in the House, because they relate to the very points that he has made so eloquently tonight.

The measures that I have described will ensure that our communities continue to benefit from a vibrant post office network and a reliable universal postal service. Safeguarding the Post Office and the universal postal service is at the very heart of the Government’s policy, and I hope that I have been able to reassure the hon. Gentleman on that point.

Question put and agreed to.

22:27

House adjourned.

AWE: Manpower

Monday 11th October 2010 Ministerial Corrections

[John Woodcock]

To ask the Secretary of State for Defence how many staff are employed at the Atomic Weapons Establishment sites in (a) Aldermaston and (b) Burghfield.

[Official Report, 9 September 2010, Vol. 515, c. 621W.]

Letter of correction from Peter Luff:

An error has been identified in the written answer given to the hon. Member for Barrow and Furness (John Woodcock) on 9 September 2010.

The full answer given was as follows:

[Peter Luff]

Atomic Weapons Establishment plc employs 4,230 staff at the Aldermaston site and 340 staff at the Burghfield site. These numbers are full-time equivalent staff employed on 27 August 2010 and are rounded to the nearest 10.

In addition some 2,000 staff are employed by contractors at these sites.

The correct answer should have been:

[Peter Luff]

AWE plc employs 4,230 staff at the Aldermaston site and 340 staff at the Burghfield site. These numbers are full-time equivalent staff employed on 27 August 2010 and are rounded to the nearest 10.

In addition some 2,000 staff are employed by contractors at these sites.

AWE Aldermaston: Fires

Monday 11th October 2010 Ministerial Corrections

[Caroline Lucas]

To ask the Secretary of State for Defence how many incidents at the Atomic Weapons Establishment Aldermaston have resulted in attendance of the Royal Berkshire Fire and Rescue Service in each year from 2006 to 2010; and on what dates each such incident occurred.

[Official Report, 9 September 2010, Vol. 515, c. 624W.]

Letter of correction from Peter Luff:

An error has been identified in the written answer given to the hon. Member for Brighton, Pavilion (Caroline Lucas) on 9 September 2010. The date for the false alarm event in March 2006 should have been the 12th, not the 19th.

The full answer given was as follows:

[Peter Luff]

Since 2006, there have been four events at the Atomic Weapons Establishment (AWE) Aldermaston site where the Royal Berkshire Fire and Rescue Service (RBFRS) has been requested to attend. In addition, there have been three events where RBFRS acted as a stand-by resource while the AWE Fire and Rescue Service attended the event. These are summarised in the following table:

[Peter Luff]

Since 2006, there have been four events at the Atomic Weapons Establishment (AWE) Aldermaston site where the Royal Berkshire Fire and Rescue Service (RBFRS) has been requested to attend. In addition, there have been three events where RBFRS acted as a stand-by resource while the AWE Fire and Rescue Service attended the event. These are summarised in the following table:

Human Trafficking

Monday 11th October 2010 Petitions

The Petition of the constituents of Manchester Withington and others,

Declares that the petitioners believe that the continuing and increasing incidence of human trafficking into the UK and across the world is a disturbing situation that brings misery to many adults and children across the globe; notes that the petitioners believe human trafficking is a stain on the moral values of the UK; and notes that the petitioners support the “STOP THE TRAFFIK” campaign.

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to put an end to human trafficking.

And the Petitioners remain, etc.—[Presented by Mr John Leech, Official Report, 27 July 2010; Vol. 514, c. 973.]

[P000855]

Observations from the Secretary of State for the Home Department:

Human trafficking is a brutal form of organised crime where people are treated as commodities and exploited for criminal gain. Home Office research suggests that in 2009 there were up to 2,600 victims of trafficking for sexual exploitation in England and Wales.

The UK takes a comprehensive approach to combating trafficking, combining a robust approach to enforcement and prosecutions with arrangements to identify and support victims of trafficking. This is in line with the UK’s international commitments, chiefly under the UN Convention Against Transnational Organised Crime (and in particular the Palermo Protocol) and the Council of Europe Convention on Trafficking Against Human Beings.

The UK works to prevent trafficking in many ways. We work to understand the nature and scale of the problem through estimates of trafficking for sexual exploitation and a scoping study on labour trafficking; by reducing demand at home, by raising awareness and reducing demand upstream through international development programmes.

A range of UK enforcement agencies help to combat trafficking. The Serious Organised Crime Agency gathers intelligence and deploys specialist resources, co-ordinates programmes and activities across UK law enforcement agencies, and leads on upstream enforcement activities in key source and transit countries, in conjunction with overseas law enforcement agencies. The UK Border Agency also plays a crucial role in tackling trafficking through gathering intelligence, border protection (at home and overseas) and taking enforcement action against employers who may be using trafficked labour. The UK Human Trafficking Centre (now part of SOCA but retaining its own role and identity) is a central point of co-ordination for intelligence, analysis and operational activities around human trafficking. All 55 Police Forces have a Senior Investigator trained in human trafficking, and all new police officers get training on human trafficking.

Victim care is central to the UK’s approach to combating trafficking. The aim is to ensure that all victims receive the right support and protection. We have established a National Referral Mechanism to improve identification and protection of trafficking victims, which we are currently reviewing to ensure its effectiveness. Identified victims of trafficking are provided with specialist support and accommodation to enable them to recover from their ordeal, including accommodation, advocacy, counselling, legal advice, interpretative services and reintegration assistance if they return home.

We view the trafficking of children as a very serious offence and acknowledge that where children are found to be trafficked, their safety and welfare needs are urgently addressed. All trafficked children are entitled to the same protection as UK nationals and the primary responsibility for safeguarding children falls to local authorities.

The Government are committed to creating a National Crime Agency, which will help combat organised crime, including trafficking, more effectively.

Bromsgrove Railway Station

Monday 11th October 2010 Petitions

The Petition of the people of Bromsgrove

Declares that the petitioners, whilst recognising the current pressure on public finances, believe that the cost to the public purse of a new railway station in Bromsgrove would be more than offset by the resulting economic and environmental benefits for both Bromsgrove and the wider region; and notes that there is uncertainty about the availability of Government funding for this project.

The Petitioners therefore request that the House of Commons urges the Secretary of State for Transport to confirm that Government funding for this vital infrastructural upgrade will go ahead.

And the Petitioners remain, etc.—[Presented by Sajid Javid, Official Report, 13 September 2010; Vol. 515, c. 710.]

[P000858]

Observations from the Secretary of State for Transport, received 28 September 2010:

I am aware that the growth in demand for rail travel from Bromsgrove means that the existing station does not have platforms long enough to accommodate the longer trains expected to be needed to cope with the number of people expected to use the services which call there.

The preferred option to address this issue proposed by Worcestershire County Council is to build a new station to the south of the existing station. This would increase the amount of car parking available to rail users and provide better interchange with other forms of transport than would be possible at the existing site.

This solution is supported by other rail industry partners and it would complement the proposal to electrify the railway line from Barnt Green to Longbridge and extend “cross city” services to and from Birmingham and beyond, to terminate at Bromsgrove rather than Longbridge.

The West Midlands Region had proposed to contribute £5 million from its Regional Funding Allocation from Government towards this project. In common with other schemes to be funded through this mechanism, consideration of this scheme has been suspended pending the outcome of the Comprehensive Spending Review. This has been necessary given the Government’s priority of tackling the budget deficit.

After the Spending Review and the consequent allocation of funds to local authorities and other bodies by the Government, Worcestershire County Council and other potential funding partners will need to consider whether this project remains a priority for funding from capital budgets.

In reaching a decision, funders will wish to take account of the economic and environmental benefits a new station would bring to the area.

Government Efficiency Review

Monday 11th October 2010 Written Statements

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

On 13 August, Sir Philip Green was commissioned by the Prime Minister to conduct an external review of Government efficiency. Sir Philip submitted his findings and recommendations to the Chief Secretary of the Treasury and me on 7 October. We are grateful to Sir Philip and his team from Arcadia for the time and effort they have taken to produce their recommendations. Their findings clearly demonstrate the scale of inefficiency and waste present in the system today. It is clear that there is a huge opportunity and a real willingness on behalf of civil servants to take on the important task of delivering efficiency. We welcome the sense of urgency that Sir Philip has brought to this work and are looking at how we can best take forward key recommendations. The review will be placed on the Cabinet Office website.

Conference Adjournment 2010

Monday 11th October 2010 Written Statements

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

I would like to update hon. Members on the main items of business undertaken by my Department during the Conference Adjournment 2010.

Transparency

The Department is continuing its commitment to deliver transparent and open government. Ahead of the requirement in November for all central Government Departments to publish monthly details of spend over £25,000, my Department has published the details of its spend over £500 for the first quarter of 2010-11 and for 2008-09. This follows the publication, in August, of 2009-10 spending details.

We have been working with the Local Government Association on measures to increase transparency in councils including new guidance from the LGA detailing best practice for putting council spending and senior salary information online. Over 60 councils have already published the details of their spend over £500 ahead of their January deadline.

On 29 September my Department published for consultation a proposed new statutory code of recommended practice on local authority publicity. The proposals are intended to stop taxpayers’ money being squandered on town hall newspapers or hired lobbyists. An independent local press is an essential part of our open democracy helping local people scrutinise and hold elected councillors to account. The proposed new rules around council publicity will restrict council newspapers to four times a year. The proposed code will also guard against councils using public funds to hire lobbyists to campaign. A copy of the proposed code has been placed in the House of Commons Library. Subject to the consultation, I intend before the end of the year to seek parliamentary approval to the proposed code, after which it will come into force.

Supporting local people

When times are tough Government have a duty to treat the public fairly. The Exchequer Secretary and I confirmed on 23 September that the Government would not carry out a council tax revaluation in England during the lifetime of this Parliament. An unnecessary and expensive revaluation could lead to increased council tax bills. Taxpayers now know there will be no unexpected council tax revaluation hikes in the next five years.

A local authority breakdown of the property attribute information collected on people’s homes, including number of bedrooms, patios, value significant gardens and scenic views, has also been published in the interests of transparency to make the public aware of the datasets that have been gathered under the last Government.

In addition, an independent data protection audit of the Valuation Office Agency’s (VOA) council tax database is to be carried out to make sure people’s privacy is protected when the agency assesses properties and stores data. This is in keeping with the coalition’s desire to defend civil liberties, and to restore the rights of individuals.

On 1 October small business rate relief doubled for over half a million small businesses for one year as part of the Government’s emergency budget commitments to help invest in growth. This means 345,000 businesses will pay no rates at all. We have also announced a package of practical advice and training for traditional market traders, to support existing markets and help potential enterprising traders get started.

Changes to rules contained in the Mortgage Repossessions (Protection of Tenants etc) Act 2010 have increased protections for tenants who face having their home repossessed through no fault of their own. For the first time tenants will be able to attend the repossession court hearing and judges will be able to take their situation into account and delay repossessions proceedings by up to two months.

We are changing the way in which parish councils can make payments. Currently parish councils make payments through cheques that must be counter-signed by two members of the council, changes will mean that they will be able to use modern banking methods such as electronic banking. This will save time and benefit many small private companies who will get paid faster.

Decentralisation

The Department is continuing to push power and control down away from the centre.

The announcement of plans to introduce legislation to scrap the housing revenue account and replace it with a system allowing councils to keep the rents and receipts from right to buy sales that they collect was made on 5 October. This will give councils greater financial freedom to meet the housing needs of their local communities.

The Government are committed to freeing up councils and cutting red tape. We have launched a consultation setting out our plans to streamline the current three sets of regulations and orders covering tree preservation orders in England into one document. The change has the potential to save local councils more than £500,000 in administration costs each year. The new regulations will reduce paperwork, simplify the process of protecting trees and provide a fairer, more straightforward and effective system for tree preservation.

Decentralisation and pooling budgets

We have already set out plans to decentralise power to individuals, neighbourhoods, front-line professionals and local institutions.

Individuals are being put in charge of their lives through personal budgets, for example on adult social care and childcare, or choice, such as which hospital to use or over who runs the police.

Community groups and neighbourhoods will be in charge of planning and responsible for delivering more and more public services. Public sector professionals will be using their judgment over how best to run services, for example with GPs in control of commissioning and heads running schools.

Local government will have a general power of competence and increased freedom to run services free from central diktat, with hundreds of targets already abolished and over £1 billion of ring-fenced funding already removed in 2010-11—with much more to be removed through the spending review.

Moving forward, our goal is to see the public sector operate in a much more unified way to maximise the resource available to us to tackle social problems. That means getting different organisations and agencies to work together in a way that simply has not happened in the past.

We are putting in place national welfare to work and offender rehabilitation schemes, operating on a payment by results basis. But we do not just want that important support to be done by central Government—local government should be involved too, putting its own funding and expertise into developing enhanced programmes to work alongside the core work that we are doing nationwide.

We will put local councils in the driving seat to join up public services, pooling resources across the public sector to tackle social problems. We want elected mayors to trail-blaze such initiatives, not least since elected mayors in our cities will be embraced by the public if they have real power. So we will create the opportunity for mayors to bring together different devolved budgets and pool them with our national payment-by-results systems. Together, mayors will be able to help design services specifically targeted at the hardest-to-help families. They will be able to add their own budgets—social services, care, housing, health improvement—to the national programmes. This will give local communities the power to change lives, and help save money at the same time. I would expect to make a further announcement to the House in due course.

European Union Bill (Sovereignty)

Monday 11th October 2010 Written Statements

[The Minister for Europe (Mr David Lidington)]

The coalition programme for Government said that the Government would examine the case for a United Kingdom Sovereignty Bill affirming that ultimate authority remains with Parliament.

The common law is already clear on this. Parliament is sovereign. EU law has effect in the UK because—and solely because—Parliament wills that it should. Parliament chose to pass the European Communities Act 1972. That was the act of a sovereign Parliament.

The Government have explored how to ensure that this fundamental principle of parliamentary sovereignty is upheld in relation to EU law. We have assessed whether the common law provides sufficient ongoing and unassailable protection for that principle. Our assessment is that to date, case law has upheld that principle. But we have decided to put the matter beyond speculation by placing this principle on a statutory footing.

In the autumn, the Government will legislate to underline that what a sovereign Parliament can do, a sovereign Parliament can always undo. A clause to this effect will be included in the European Union Bill.

This clause will not alter the existing UK legal order on a day to day basis in relation to EU law. And it will be in line with the practice of other member states, like Germany. Although they have a different constitutional framework, they have given effect to EU law through a sovereign Act.

Global Abolition of the Death Penalty

Monday 11th October 2010 Written Statements

[The Minister of State, Foreign and Commonwealth Office (Mr Jeremy Browne)]

I wish to make the House aware that I will publicly launch HMG’s strategy on global abolition of the death penalty at an event in the FCO today to mark the world day and European day against the death penalty.

This strategy sets out the UK’s policy on the death penalty, and identifies three goals to support our overarching objective of global abolition. First we will aim to further increase the number of abolitionist countries, or countries with a moratorium on the use of the death penalty. Secondly we want to secure further restrictions on the use of the death penalty in retentionist countries and reductions in the numbers of executions, and thirdly we will aim to ensure that EU minimum standards on the death penalty, such as fair trial rights and non-execution of juveniles, are met in countries which retain the death penalty.

Promoting human rights and democracy is a priority for the UK. We oppose the death penalty in all circumstances as a matter of principle because we believe it undermines human dignity; there is no conclusive evidence of its deterrent value; and any miscarriage of justice leading to its imposition is irreversible and irreparable.

A copy of the strategy will be placed in the Library of the House and published on the FCO website (www.fco.gov.uk) by 12 October.

National Dementia Strategy

Monday 11th October 2010 Written Statements

[The Minister of State, Department of Health (Paul Burstow)]

The Government published a new outcomes focused implementation plan for the National Dementia Strategy on 28 September 2010. “Quality outcomes for people with dementia: building on the work of the National Dementia Strategy” has been placed in the Library and copies are available to hon. Members in the Vote Office. The document is also available electronically at: www.dh.gov.uk/en/Aboutus/Features/DH_119830.

Raising the quality of care for people with dementia and their carers is a major priority under this Government. The key purpose of “Quality outcomes for people with dementia: building on the work of the National Dementia Strategy” is to set out for health and social care localities and their delivery partners:

the Department of Health’s role and its priorities during 2010-11 for supporting local delivery of and local accountability for the implementation of “Living Well with Dementia—A National Dementia Strategy”;

the strategy’s fit with the new vision for the future of health and social care as set out in the White Paper “Equity and Excellence: Liberating the NHS”; and

the fit with the consultation document “Liberating the NHS: Transparency in outcomes—a framework for the NHS”.

“Living well with Dementia—A National Dementia Strategy”¹ was launched in February 2009 following an extensive consultation process, with the aim of improving the quality of care for people with dementia and their carers. It is a five-year strategy containing 17 objectives to transform dementia services. Some £150 million has been made available to primary care trusts in the first two years—£60 million in 2009-10 and £90 million in 2010-11—to implement the strategy, but without a ring-fence on the funding or targets. Alongside delivery of the strategy, work is under way to implement the recommendations of Professor Sube Banerjee’s report into the over-prescribing of anti-psychotic drugs for people with dementia². Professor Banerjee’s report has been placed in the Library and is available at:

www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_108303.

“Quality outcomes for people with dementia: building on the work of the National Dementia Strategy” provides an implementation plan that reflects the principles of the White Paper “Equity and Excellence: Liberating the NHS”³, the consultation document “Liberating the NHS: Transparency in outcomes – a framework for the NHS”⁴ and the current economic and political landscape, where the Department’s role is more enabling and less directive.

The new implementation plan identifies four priority objectives for the Department’s work during 2010-11 to support local delivery of the strategy. These areas provide a real focus on activities that are likely to have the greatest impact on improving quality outcomes for people with dementia and their carers. The four priority objectives are:

good-quality early diagnosis and intervention for all;

improved quality of care in general hospitals;

living well with dementia in care homes; and

reduced use of anti-psychotic medication.

The Government have commissioned a national audit of dementia services, which is establishing the provision of dementia services across the country. The audit will provide local NHS and social care organisations with a measure of their progress in key areas including the use of senior clinical leads for dementia in hospitals, establishment of memory services, reducing the use of anti-psychotic medication and expenditure on dementia services, so that they can drive forward action to accelerate improvements in dementia care. The initial results are expected by the end of the year.

The revised NHS operating framework for 2010-11 highlights that the NHS and its partners must give a greater priority to dementia. Local organisations will be expected to publish how they are delivering on quality outcomes so that they can be held to account by local people. This expectation along with the data generated by the national audit will create much greater transparency.

The Government are working with the Alzheimer’s Society to develop a National Dementia Declaration, which is due to be launched in autumn 2010. This is a sector-wide initiative, led by the Alzheimer’s Society, which involves a wide range of national organisations. It will be a call to action to improve the quality of life outcomes for people with dementia and their carers.

The Government support the implementation of the “End of Life Care Strategy”, published in 2008, which aims to improve end of life care for all adults, including those with dementia. The Government have also confirmed its commitment to improving quality and choice in palliative and end of life care in “Equity and excellence: Liberating the NHS”, which includes the commitment to move towards a national choice offer to support people’s preferences about how to have a good death.

“Quality outcomes for people with dementia: building on the work of the National Dementia Strategy” reflects the Government’s commitment to ensure a greater focus on accelerating the pace of improvement through local delivery of and local accountability for achieving quality outcomes in dementia care.

At the heart of this vision is the Government’s commitment to putting patients and the public first; improving health and social care outcomes; ensuring autonomy, accountability, democratic legitimacy and improving efficiency.

As highlighted in the National Dementia Strategy, the pace of implementation will vary depending on local circumstances and the level and development of services within each NHS and local government area. It describes what the Department of Health considers as its priorities for policy development in its role of enabler for continued progress in improving outcomes for people with dementia and their carers.

A key element of this new outcomes focused approach is ensuring greater transparency and provision of information to individuals so that they have a good understanding of their local services, how these compare to other services, and the level of quality that they can expect. Local organisations will be expected to publish how they are delivering on quality outcomes so that they can be held to account by local people.

Notes

¹“Living well with dementia: A National Dementia Strategy”, Department of Health, 3 February 2009.

²The use of antipsychotic medication for people with dementia: Time for action—A report for the Minister of State for Care Services by Professor Sube Banerjee,12 November 2009.

³The NHS White Paper: “Equity and Excellence: Liberating the NHS”, Department of Health, 12 July2010.

⁴“Liberating the NHS: Transparency in outcomes—a framework for the NHS”.

Equality and Human Rights Commission (Triennial Review)

Monday 11th October 2010 Written Statements

[The Parliamentary Under-Secretary of State for the Home Department (Lynne Featherstone)]

The first triennial review of the Equality and Human Rights Commission (EHRC), “How Fair is Britain?”, has been laid before the House. Copies will be made available in the Vote Office.

Family Courts: Part 2 of the Children, Schools and Families Act 2010

Monday 11th October 2010 Written Statements

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

The Under-Secretary of State for Education, the Minister with responsibility for children and families, my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) and I wish to make the following statement to the House about part 2 of the Children, Schools and Families Act 2010.

The Act received Royal Assent in April, but the provisions in part 2, which relate to the reporting of family court proceedings by the media, have not yet been commenced. This is a sensitive issue, on which a broad range of views have been strongly expressed. It is important that the family justice system is properly understood and commands public confidence. At the same time, there is a clear need to protect the privacy of vulnerable children and adults involved in cases in the family courts. My hon. Friend and I have decided to wait until the family justice review has published its final report before determining whether to commence these provisions, which will allow us to consider the changes part 2 of the Act would introduce in light of the review’s recommendations for reform of the family justice system.

European Council (16 September 2010)

Monday 11th October 2010 Written Statements

[The Prime Minister (Mr David Cameron)]

I attended the European Council meeting on 16 September, with the Foreign Secretary.

The focus of the Council discussion was how to strengthen the EU’s relationships with emerging powers, notably in advance of the EU-China and EU-India summits on 6 October and 10 December respectively.

The Foreign Secretary and I had three clear objectives for the Council.

The first objective was that the Council recognise that trade should be at the heart of the European Union’s engagement with strategic partners. The Council conclusions contain strong language on this.

The second objective was to secure the EU-Korea free trade agreement. This was signed at the EU-South Korea summit on 6 October and will now be put to the European Parliament. It will enter into force on 1 July 2011.

The third objective was to ensure that the European Council conclusions made a clear statement of European support for Pakistan in response to the devastating floods that the country has suffered.

Leaders agreed a declaration on Pakistan which commits the EU to providing humanitarian aid, development assistance and new trade concessions to Pakistan. On trade, the declaration confirms that the EU will grant exclusively to Pakistan the immediate reduction of duties on key imports to the EU. Furthermore, the declaration confirms the EU’s commitment to Pakistan’s eligibility for a package of trade concessions that the Commission estimates to be worth over €1 billion annually known as GSP+.

On 7 October the Commission adopted a significant package of trade measures for Pakistan which suspends tariffs on a further 27% of Pakistani imports into the EU. It is estimated to be worth each year around €100 million in additional trade and €80 million in tariff savings. This will be put to the Council later this month.

The Council also approved a declaration on the middle east peace process. This strongly welcomes the launch of direct negotiations, calls for an extension of the settlements moratorium and offers support for the US-led efforts.

President Van Rompuy gave a progress report on the work of his taskforce on economic governance ahead of wider discussion at the European Council on 28 and 29 October.

Copies of the Council conclusions have been placed in the Libraries of both Houses.

House of Lords

Monday 11th October 2010 Lords Chamber

Monday, 11 October 2010.

14:30

Prayers—read by the Lord Bishop of Chester.

Introduction: Lord Monks

Monday 11th October 2010 Lords Chamber

14:38

John Stephen Monks, Esquire, having been created Baron Monks, of Blackley in the County of Greater Manchester, was introduced and took the oath, supported by Baroness Dean of Thornton-le-Fylde and Lord Lea of Crondall, and signed an undertaking to abide by the Code of Conduct.

Death of a Member: Lord Acton

Monday 11th October 2010 Lords Chamber

Announcement

14:43

[The Lord Speaker (Baroness Hayman)]

My Lords, it is with very deep regret that I have to inform the House of the death yesterday of the noble Lord, Lord Acton. On behalf of the whole House, I extend our condolences to the noble Lord’s family and friends.

Immigration: Detention of Children

Monday 11th October 2010 Lords Chamber

Question

14:44

Asked By

[Lord Roberts of Llandudno]

To ask Her Majesty’s Government when they will end child detention in immigration cases.

[The Minister of State, Home Office (Baroness Neville-Jones)]

My Lords, I am unable to provide a date for the ending of detention of children for immigration purposes but we remain determined to end this practice as soon as possible. Working with NGOs, we are designing and testing alternative arrangements to protect children’s welfare while ensuring the return of families who have no right to be here. We are making significant progress.

[Lord Roberts of Llandudno]

I am grateful to the Minister for that Answer. Will she make available in the Library every week a list of the numbers of detained children, where they are detained and their ages, so that we can end this practice and monitor it if a list is available for us to refer to? Will she accompany three or four of us to Yarl’s Wood so that we can see the situation there for ourselves?

[Baroness Neville-Jones]

My Lords, it is perfectly reasonable to make these arrangements. We will certainly be glad to arrange a visit to Yarl’s Wood. The number of children in detention is either zero or two. I cannot give an exact figure as it depends on whether the two children in a family who knowingly entered the country illegally yesterday are still in detention; they may have been briefly. However, the numbers are very low.

[Lord Soley]

Is it not time for both parties in the Government to admit that they made promises to the electorate on this emotive issue which they cannot keep because, if they do, they will end up taking children into care or forcefully separating them from their parents? That admission from the Government is long overdue. We all want to minimise this practice to the absolute smallest limit, but let us be realistic and not make promises which we cannot keep, as the Government have done too often on matters such as this.

[Baroness Neville-Jones]

My Lords, I do not accept that. We are going to keep this promise. We are trying to go upstream of the previous procedures for requiring families to leave by encouraging voluntary return. We are engaged in that pilot with the help of NGOs. We will, and must, honour an undertaking that we have given.

[Lord Avebury]

My Lords, bearing in mind that the Royal College of Paediatrics and others have said that significant harm is caused to children detained for immigration control purposes, why has this process not been brought to an end? Will the noble Baroness give a date when the facilities at Yarl’s Wood and other places of detention are to be dismantled so that such detentions cannot happen again?

[Baroness Neville-Jones]

My Lords, I wish I could give a date. We cannot do that because, as things stand, we are taking seriously the whole business of how we bring about a situation whereby it is no longer necessary to detain children. It requires time to get the right procedures in place and, if I may put it this way, it is an earnest of our seriousness that we are going into considerable detail to get the right procedures.

[The Earl of Listowel]

Will the Minister consider extending from two weeks to three months the window for families to consider voluntary returns? Is she aware that in Sweden in 2008, 82 per cent of families chose to take the voluntary return route?

[Baroness Neville-Jones]

My Lords, I am aware that this figure of a fortnight has got around to being perceived as some sort of deadline, whereas a fortnight is the absolute minimum period that the families are given to consider voluntary return. I do not want to set a timetable for the other end. We would obviously like to achieve a high rate of voluntary return which would take place as soon as was possible and at the least cost to the taxpayer.

[Lord Hunt of Kings Heath]

But, my Lords, the noble Baroness has not answered my noble friend. The coalition agreement states that the Government will end the detention of children for immigration purposes. Her honourable friend Damian Green said on 6 September in the other place that the policy was to minimise the detention of children. Why the change in policy?

[Baroness Neville-Jones]

My Lords, we intend to end the detention of children for immigration purposes.

[Baroness Howe of Idlicote]

My Lords, if, in fact, children of school age and their families are still being detained together, will the Minister assure the House that education in outside schooling will be provided?

[Baroness Neville-Jones]

The emphasis of our policy is obviously on keeping families together. I trust that we will not be in a situation in which children are detained for any length of period at all; but certainly if they were, education would be a very important factor.

[Lord Dholakia]

My Lords, has the Minister taken a view on whether families should be deported to countries such as Somalia, Afghanistan, Sudan and Zimbabwe, and particularly on the impact, which could be considerable on those being deported, of sending families with children back to those countries?

[Baroness Neville-Jones]

My Lords, if there are security factors in place, those of course introduce elements which are not necessarily present in all other cases.

[Lord Rooker]

Can the Minister confirm that Yarl’s Wood, which was opened on my watch as a Home Office Minister, remains a removal centre and not a detention centre? As she will find out, if people are reluctant to go and they have children, it is not possible to organise removals economically and humanely by knocking on their doors; nor, if one wants to keep the family together, is it possible to do so other than by the family spending a minimum short period in a removal centre. That is not detention in the normal use of the word.

[Baroness Neville-Jones]

The noble Lord points to some of the difficulties that arise. In our view, it is certainly not humane to knock on people’s doors and require them to go absolutely immediately to a train or plane. Indeed, removal to a centre such as Yarl’s Wood, which has facilities, is sometimes the right procedure. The situation varies from case to case but we entirely accept that the procedure to be followed should be humane and in the interests of the family, and the children in particular.

[Baroness Williams of Crosby]

My Lords, is it possible to persuade the border agency not immediately to deport children, often by breaking into their homes in the early hours of the morning, but perhaps, as was suggested just now, to give the family a little more time to consider its position and return to the country from which it comes so that the children can be brought round to understanding what is going on? There is a great deal of evidence from the Royal College of Psychiatrists and others to show the huge effect on young children of suddenly being forced out of their homes in the middle of the night and compelled to go to a totally strange environment.

[Baroness Neville-Jones]

My Lords, I entirely take that point. The Government are trying to learn these lessons, and we are piloting this scheme precisely by going down the road of giving families more time and more options, particularly for voluntary departure. The scheme is absolutely in the spirit of the point mentioned by the noble Baroness.

Disabled People: Dementia

Monday 11th October 2010 Lords Chamber

Question

14:51

Asked By

[Lord Ashley of Stoke]

To ask Her Majesty’s Government what steps they are taking to help people with impaired faculties, such as hearing or vision, and concurrent dementia.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, tackling dementia is an urgent priority and the Government are committed to the delivery of better-quality care for all those with dementia. Ensuring that people with impaired faculties or disabilities receive the best type of care that they require is one of the reasons we are accelerating the pace of improvement through a focus on local delivery and accountability.

[Lord Ashley of Stoke]

I thank the noble Earl for that response. Is he aware that people with dementia who are also blind and deaf have a really difficult life? They are trapped in a kind of living hell and require urgent attention. The Minister said that the Government are accelerating the process. To what extent is that happening, and can he guarantee that the Government will support a campaign to provide all the facilities necessary for people of this kind?

[Earl Howe]

The noble Lord, Lord Ashley, as so often, is absolutely right. Those who have dementia and also suffer from sensory impairment have a particularly difficult time. That is why we have signalled, in the recently revised operating framework for the NHS, that improving dementia care will be a priority. However, the noble Lord may also like to know that we have today published a Written Ministerial Statement, which he can read in Hansard, showing that we aim to accelerate the pace of improvement in four ways in particular: by improving early diagnosis and intervention; by improving care in hospitals; by improving the care of dementia patients in care homes; and by reducing the use of anti-psychotic medications. Those are the four priorities that we think will make the most difference.

[Lord Laming]

My Lords, can the Minister inform the House what steps the Government are taking to ensure an adequate supply of community-based nurses who have been specially trained in dementia care, not least to support carers?

[Earl Howe]

My Lords, an informed and effective workforce is clearly central to the delivery of the dementia strategy. The Department of Health has recently published reports which map the current level of training, and these have been widely disseminated to key bodies involved in providing education and training. Professor Alistair Burns, who is the National Clinical Director for Dementia, is chairing an advisory group that will aim to ensure the development of proper education and training for all staff involved, and he will be engaging with all the key organisations in doing so.

[Baroness Pitkeathley]

My Lords, the Minister will be aware that family carers have two main concerns about dementia services. The first is that they are patchy and are not uniform across the country and the second is that they are not co-ordinated across acute voluntary, independent and family care. How will the Minister ensure that those two issues are better addressed under the proposals in the White Paper?

[Earl Howe]

My Lords, there are several prongs to the strategy which will be needed to meet the concern of the noble Baroness. One is to drive up quality standards through a proper tariff for these services and another is better regulation of providers. As the House will know, the NICE quality standard was published in the summer, which will improve commissioning to deliver greater efficiencies, not simply in a financial sense but also to deliver a better pathway of care for patients, with a focus on outcomes.

[Baroness Hussein-Ece]

My Lords, can my noble friend tell us whether those with special educational needs have a higher preponderance of dementia? What is being done to address those needs and to drive up standards of care, given that the All-Party Parliamentary Group on Dementia concluded that some care being given to dementia suffers is dehumanising? Can my noble friend please outline what is being done for those people with special needs who are diagnosed?

[Earl Howe]

My Lords, my noble friend has hit on an extremely sensitive and important area. My answer to her is similar to the one I gave on a previous question: we must focus on outcomes. That is the main theme of the recently published implementation paper. This morning, I was speaking to a representative of the King’s Fund, which has done tremendous work in this area. This is one aspect of its work, of which I am sure we shall be hearing more.

[The Lord Bishop of Chester]

My Lords, what policy do the Government have for supporting the learning of British sign language?

[Earl Howe]

My Lords, the right reverend Prelate rightly calls attention to the needs of those with aural disability. The Government’s plans for audiology are in gestation at the moment. Unfortunately, it is too early for me to tell him, but I shall aim to write him a letter at the earliest opportunity.

[Baroness Greengross]

My Lords, in declaring an interest as chair of the All-Party Parliamentary Group on Dementia, I ask the Minister what plans the Government have to reduce the inappropriate length of stay in hospital of many patients with dementia and other impairments. As that would result in quite a lot of savings, I ask the Government to reinvest those savings in community services.

[Earl Howe]

My Lords, the noble Baroness is right. The national dementia strategy quite rightly recognises the need to improve the quality of care for people with dementia in hospital and that is identified in the new implementation plan as one of the key priorities for action. Of course, the main priority has to be to avoid admitting dementia patients to hospital in the first place, if possible. We should admit them only when it is strictly necessary and we should discharge them at the earliest opportunity. We have set priority areas for all hospitals to take urgent action, including appointing a senior member of staff to improve the quality of care for people with dementia and to look after the training of staff in hospitals.

[Lord Touhig]

My Lords, between a half and two-thirds of people with dementia never receive a formal diagnosis. That could be improved if GP practices, the mental health services and the royal colleges were to develop dementia care pathways. That was a recommendation by the Public Accounts Committee in the other place in 2008. What progress has been made in developing those pathways?

[Earl Howe]

My Lords, progress is being made thanks to the quality standard published by NICE in the summer on dementia care. That will underpin the outcomes framework that we shall look for in the care of dementia patients. He is absolutely right in what he says: two-thirds of people with dementia never receive a diagnosis in the first place; the UK is in the bottom third of countries in Europe for diagnosis and treatment of dementia patients; and GPs do not feel adequately trained in this area. So there is a lot of work to do.

Taxation: Income Tax

Monday 11th October 2010 Lords Chamber

Question

14:59

Asked by

[Lord Higgins]

To ask Her Majesty’s Government what rate of interest they propose to pay to people who have paid too much income tax because of mistakes by HM Revenue and Customs; and what rate of interest they propose to charge people who have paid too little income tax for the same reason.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, HMRC interest rates are linked to the Bank of England base rate and are currently 3 per cent on late payments and 0.5 per cent on repayments. The interest position in instances of error or delay by HMRC is considered on a case-by-case basis.

Underpayments arising from the current end-of-year PAYE reconciliation exercise will not attract an interest charge, provided that people who have been notified of an underpayment contact HMRC and agree a payment arrangement.

[Lord Higgins]

My Lords, I am grateful to my noble friend for that helpful reply. The situation in Her Majesty's Revenue and Customs is another example of the problems which have been left by the previous Government. My noble friend will be aware of the disturbing and complacent evidence which was given to the Treasury Select Committee in another place on 15 September. Apart from the uncertainty and distress which has been caused to something like 6 million taxpayers and the minimal rate of interest which is being paid to those to whom Revenue and Customs now propose to refund something, a large amount of money has been written off. What is the overall cost of what has happened in the department, against a background of trying to cut public expenditure?

[Lord Sassoon]

My Lords, as my noble friend points out, this is another part of the inheritance which we are getting on with having to tidy up. On his specific questions, I can only apologise to the taxpayers who are caught up in this reconciliation exercise. We are trying to make the process as painless as possible. The bills for those owing less than £300 are being written off. That will entail a cost of some £600 million. The cost of the overall exercise, in which 90,000 letters a day are going out between now and Christmas to clear it up, will be up to £10 million.

[Lord Newby]

My Lords, in the light of the very low rates of interest involved in this procedure, does the Minister accept that for most taxpayers, what matters most is not the rate of interest but the speed with which repayments are made? Can he give the House an assurance that HMRC is taking every possible step to make repayments as quickly as possible?

[Lord Sassoon]

My Lords, it is worth reminding ourselves that the great majority of PAYE self-assessments are done online—by 75 per cent of people who are self-assessed. For that largest group of taxpayers, repayments are in the ordinary course made as soon as two to three working days from filing, although there may be a slight delay in the peak in the year around 31 January. For the sort of exercise we are talking about, repayments are normally made within seven working days. That is indeed the thing to focus on rather more than the precise rate of interest.

[Lord Forsyth of Drumlean]

My Lords, what is the total amount which is owed to the Inland Revenue in unpaid tax which is now due?

[Lord Sassoon]

The amount of tax which is now due under this reconciliation exercise is some £2 billion from 1.4 million taxpayers, although, as I said, all amounts under £300 individually, which is for about 900,000 taxpayers, will be written off.

[Lord Eatwell]

My Lords, the House will agree that underlying the interesting question from the noble Lord, Lord Higgins, is the notion that HMRC should be fair. It seems to be very unfair that the rate of interest charged on unpaid balances is six times greater than the rate of interest provided on repayments when the Revenue for some reason or other has made a mistake. Does the noble Lord believe that HMRC should be fair? Given the extensive misuse of that word on the Benches opposite, will he define for us what fairness in taxation means?

[Lord Sassoon]

My Lords, the previous Government brought in the current interest rate regime within the past year, and after extensive consultation, on the basis that late payments are calculated at 2.5 per cent over the bank rate and repayments are 1 per cent less than the bank rate, subject to a minimum of 0.5 per cent. This regime is similar to that of other countries ranging from Australia to the United States. Indeed, of the six or eight countries surveyed, Japan is the only one that does not apply differential rates to payments and repayments. So, in that sense, the system does reflect a due degree of fairness.

[Lord Myners]

My Lords, can the Minister reconcile his comments about fairness with the reported remarks in the Financial Times of 19 August from Mr David Hartnett, the Permanent Secretary in HMRC, that he proposes henceforth to take a gentler and easier line on tax avoidance?

[Lord Sassoon]

My Lords, I do not have the precise context in which Mr Hartnett made those remarks. However, in relation to the PAYE reconciliation exercise that we are talking about, the fact that interest is being waived for people who have underpaid, that balances under £300 are being written off and that those who do have to make further payments will be able to make them over a number of years, particularly where hardship is concerned, represents an appropriate response in this case.

Argentina: Falkland Islands

Monday 11th October 2010 Lords Chamber

Question

15:06

Asked By

[Viscount Montgomery of Alamein]

To ask Her Majesty’s Government what discussions they have had with the Government of Argentina about statements made in the United Nations’ Special Committee on Decolonisation.

[The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)]

My Lords, we regard Argentina as an important partner. We have a close and productive relationship on a range of bilateral and multilateral issues, but we will not discuss the sovereignty of the Falkland Islands with Argentina unless the Falkland Islanders so wish.

The UK is not a member of the UN Special Committee on Decolonisation, but we regularly make clear within the UN our support for the right to self-determination of the Falkland Islanders.

[Viscount Montgomery of Alamein]

My Lords, that is a most informative reply, but the noble Lord will be aware that some time ago Argentina withdrew unilaterally from the joint commissions on fishing and oil. In the light of the rather absurd statements recently made by the President of Argentina on the subject of oil exploration in Falklands’ waters and other matters, can the noble Lord say whether that represents sensible co-operation? It does not seem to me that it does.

[Lord Howell of Guildford]

The noble Viscount is quite right that in 1995 Argentina withdrew from the hydrocarbons co-operation declaration and subsequently withdrew from the fisheries co-operation arrangements. We can say only that it is a pity. The benefits to Argentina would be there, were it ready to co-operate, but it has shown a determination not to do so. That is Argentina’s loss.

[Lord Anderson of Swansea]

My Lords, at the time of the Falklands invasion in 1982, the then US Administration were extremely supportive to us in terms of reconnaissance and so on. However, the current US Administration have latterly made some rather unhelpful remarks in respect of the Falklands. Have we made appropriate representations?

[Lord Howell of Guildford]

I can confirm that the US position has not changed, regardless of the allusions to which the noble Lord has referred. The US recognises the UK’s administration of the Falkland Islands. We are in regular touch with the US on this issue, as on many other issues. We expect that dialogue to continue.

[Lord O'Neill of Clackmannan]

Does the Minister agree that the UN decolonisation committee is normally concerned with the liberation of subjugated peoples rather than the transfer of ownership of islands that are largely uninhabited and are liable to be uninhabitable for a long time to come? Surely the role of the British Government at this time, nearly 30 years after the cessation of hostilities, should be to try to achieve a decree of reconciliation between the megaphone diplomacy of the Kirchner Government and the obduracy of many of the islands’ elected councillors, who do not seem to realise that they live in a world in which their nearest neighbour could be a friend rather than a source of hostility?

[Lord Howell of Guildford]

Except on the question of the Falkland Islands and its right to self determination, which I am sure that the noble Lord would not be against, we wish with Argentina—an important country and a member of the G20—to establish better relationships. But it is very hard if all the time the counterpropositions and withdrawal of co-operation we have described occur. The noble Lord is touching on a relevant point as regards the decolonisation committee, which is rather outdated and full of language about colonies, British imperialism and so on. We have moved far away from that because the Falklands Islands is a self-governing overseas territory under the British Crown and that is what it remains.

[Baroness Falkner of Margravine]

My Lords, will my noble friend explain his views on why 12 Commonwealth countries supported the Argentines in the UN committee? Is that not a source of some regret to us?

[Lord Howell of Guildford]

It is always a pity when there is not full agreement, particularly among our fellow Commonwealth members with whom we operate closely on many issues. But they have their point of view, to which they are perfectly entitled. The debate goes on, but it is not a binding debate as no binding resolutions are involved. I expect that the debate will continue, particularly among not so much Commonwealth countries but other Latin American countries.

[Lord Brett]

My Lords, the Minister makes the point that Argentina is an important partner. When last did the Government seek to re-engage with Argentina, particularly on the outstanding fishery and oil issues, which clearly are of importance? When, equally, has the Foreign Office sought to ensure that our position as a country is understood throughout the rest of Latin America with our Latin American allies?

[Lord Howell of Guildford]

I mentioned the difficulty of getting co-operation, which we certainly have on offer, over the two items that the noble Lord mentions. But on other things we are engaged. We are dealing with Argentina as an important country, which, incidentally, is a very beautiful country and is, potentially, a country of great wealth and prosperity. We are dealing with it on science, mining, education and energy. This is a very positive agenda, which we welcome. But on these difficult issues involving the Falkland Islands, we have seen the non-co-operation which we deplore and we would like to see it replaced by active co-operation.

[Lord Grenfell]

My Lords, I declare an interest as someone who appeared before the decolonisation committee many times in the 1970s, defending the World Bank’s position that it could not lend money to the PLO because it was not a sovereign state. Does the Minister agree that the empty-chair policy is not very enlightened? As we have heard, many Commonwealth countries are members of that committee. Would it not be appropriate for at least the United Kingdom to be present?

[Lord Howell of Guildford]

The noble Lord obviously has considerable experience on this issue. If he is talking about the decolonisation committee, I am not sure that we are even entitled to be on it. Two members of the Falkland Islands Government have a place on that committee and have made their views clear. I am not sure that those views prevail or are the majority view, but they have made them very clear indeed; namely, that Falkland Islanders do not wish to end their present status. They wish to remain as they are. That is the right approach. If the noble Lord is talking about another committee, perhaps I should have a word with him afterwards about that.

Demonstrations in the Vicinity of Parliament (Removal of Authorisation Requirements) Bill [HL]

Monday 11th October 2010 Lords Chamber

First Reading

15:13

A Bill to make provision for repealing Sections 132 to 138 of the Serious Organised Crime and Police Act 2005 and for connected purposes.

The Bill was introduced by Lord Tyler, read a first time and ordered to be printed.

Arrangement of Business

Monday 11th October 2010 Lords Chamber

Announcement

15:14

[Baroness Anelay of St Johns]

My Lords, immediately after the debate set down in the name of my noble friend Lord Bates, my noble friend Lord Freud will repeat a Statement on welfare reform.

House of Lords: Reform

Monday 11th October 2010 Lords Chamber

Question for Short Debate

15:14

Tabled By

[Lord Hunt of Kings Heath]

To ask Her Majesty’s Government, in the context of House of Lords reform, what is their view on the purpose of the House.

[Lord Hunt of Kings Heath]

My Lords, no one would have enjoyed this debate more than my beloved friend and our good colleague Richard Acton. He loved this House and the House loved him. He made us laugh, but his contributions were always telling and to the point. He was immensely proud to have been reappointed to this House as a life Peer after his service as a hereditary Peer. I was proud to have been his friend. Our sympathies go to his wife Patricia, to his son Johnny and to his family and friends. We will miss him very much.

I am delighted that so many noble Lords have chosen to speak in this debate and that we have been promoted to a prime time spot. I want to debate the purpose of our second Chamber both now and in the context of promised reform. I have no doubt as to the vital role of the House of Lords in the revision and scrutiny of legislation. While I do not agree with much of what the noble Lord, Lord Strathclyde, said in his article in last week’s edition of The House Magazine, he was certainly right about this Chamber’s effectiveness. My experience as a Minister for 10 years, with the many defeats that I suffered, confirms that, but I have no complaints because the Lords was doing its job in holding Ministers to account and improving legislation. However, I did not follow the logic of the noble Lord, Lord Strathclyde, when he gloried in the defeats suffered by the Labour Government but warned off Labour Peers from challenging what he called the “clear mandate” of the elected House of Commons. I am not sure what mandate he had in mind: the Conservative mandate, the Liberal Democrat mandate or the coalition mandate? Which of those mandates said that child benefit would be cut and which of the many mandates will hold on tuition fees?

I remind the noble Lord, Lord Strathclyde, and noble Lords opposite that, in its excellent analysis of the conventions, the Joint Committee chaired by my noble friend Lord Cunningham, in its description of the Salisbury/Addison convention, refers to manifesto Bills—but which manifesto? We are indeed in new territory and I suspect that the noble Lord, whom we all admire, is developing a new convention, which in essence says that the coalition Government ought not to be challenged in your Lordships’ House. This House has won a deserved reputation for its ability to cause Governments to think again, but a Government will think again only if they are defeated or believe themselves to be in danger of defeat, and that means making necessary concessions.

We now have the new circumstances of the de facto majority that the coalition enjoys in your Lordships’ House. No doubt the noble Lord, Lord Taylor, when he winds up, will say, “Well, the Government have already lost some votes”. So they have, but let us see what happens when the heavy legislation reaches us. Let us see what happens when a number of substantial Bills have been through your Lordships’ House. If the coalition is determined to win every vote in this place, the work of your Lordships’ House is bound to be devalued. I say to the noble Lord, Lord Taylor, that he should not dismiss this concern out of hand. It is shared by many Members and is highly pertinent to the more substantive reform of your Lordships’ House, because it goes to the heart of what it is that we are here to do.

The Government have made clear their intent to bring forward for pre-legislative scrutiny draft legislation on Lords reform by the end of the year. This is prior to a substantive Bill being presented to the Commons by November next year. The cross-party group under the Deputy Prime Minister is working on a draft Bill, so this is an excellent time to debate the role of the House in a post-reform world.

All too often, discussions on Lords reform have been confined to membership and the form of election and have shied away from an analysis of the impact of democratic legitimacy on the work and nature of the second Chamber, but surely it is time to grasp that nettle. I have no doubt that, with an elected House, the dynamics will change; an elected House will have a major impact on the Commons and on our constitutional arrangements. Vernon Bogdanor wrote in the magazine Political Insight:

“An elected upper house … would replicate the Commons with its confrontational politics and whipped majorities. It would be more powerful than the current House of Lords, because it would conceive of itself as being more democratically legitimate. For that very reason, it would make Britain more difficult to govern”.

As a supporter of reform, I am entirely comfortable with a more assertive House, but I am puzzled as to why many of my fellow reformers are so reluctant to acknowledge it. An elected Chamber will behave differently—and so it should. Otherwise, what on earth is the point of an elected Chamber? I do not fear for the primacy of the Commons; that is reflected in the Parliament Acts, supply and confidence, all of which underpin that primacy. I know that the noble Lord, Lord McNally, has said that the Parliament Acts should continue to be the basis of the relationship but, equally, I have no doubt that an elected second Chamber will use all the powers at its disposal and I doubt that the conventions will hold very long. After all, they are merely voluntary constraints reflecting our current lack of democratic legitimacy. As Cunningham said,

“conventions … are flexible and unenforceable”.

The debate would be much more honest if the Government acknowledged this and opened up a discussion now. We need to discuss and consider whether we want an elected Chamber to be able to use all the current notional powers of the Lords or whether we need to codify or legislate to define the powers that are considered suitable for an elected, though subordinate, Chamber. I am convinced that we need to do so.

What about secondary legislation? In theory the Lords can veto all secondary legislation. Would an elected second Chamber turn that into reality? Ought it to be able to do so? Cunningham said:

“If the Lords acquired an electoral mandate, then in our view their role as the revising chamber, and their relationship with the Commons, would inevitably be called into question, codified or not”.

The noble Lord, Lord Taylor, may think that those who wish to raise these kinds of questions are opposed to reform and see this as a delaying tactic. He will know that I support reform, but, equally, I believe that unless the issue of powers is resolved now it risks unfolding when legislation reaches Parliament and this reform attempt will go the way of many previous reform attempts.

The House of Lords, of course, will debate this in detail when the reform Bill reaches us. I wish to ask the Minister about timing. In a paper slipped out by the Government just before the Recess, it is stated that the reform Bill will go to the Commons in November 2011. I assume that that would mean the Bill coming to your Lordships’ House in or around February 2012. However, the Session is due to conclude at the end of April 2012, so there will be little time to consider the Bill, particularly taking into account half term, Easter and the pressure of other legislation. Under the terms of the Parliament Acts, if a Bill has had longer than a month in the Lords and has not been agreed to, or the Lords has passed amendments that are not agreed between the two Houses, the Parliament Acts could be used to force the Bill through. I do not think that that would be acceptable.

Let us be clear: this House should scrutinise Bills in reasonable time and not procrastinate or filibuster. This Bill will be of immense importance and it is surely right that we should be given sufficient time to deal with it effectively and for amendments to be able to go back and forward between the two Houses. I hope that the noble Lord will be able to satisfy me on that point and on the Government’s willingness to lead a substantive debate on the appropriate powers for a reformed second Chamber.

15:24

[Lord Forsyth of Drumlean]

My Lords, I feel as if I have bumped into a Radio 4 programme, “Just a Minute”, where you have to speak for two minutes without hesitation or repetition on a given topic. The Question before us, on what the purpose of this House is, is the key question that we need to answer. I believe in the supremacy of the House of Commons. I believe that this House is here to reform legislation and to pass it down to the elected House, which is accountable to the voters, for its consideration. In the end, the Commons must have its way.

I enjoyed the speech of the noble Lord. He was honest enough to acknowledge that making this an elected House, or having an elected element, will change the nature of this Chamber. If we are going to have an elected House, I shall stand for election, but I am not going to knock on doors, saying, “Vote for me. I’m very good at reforming legislation but I won’t do anything to upset the House of Commons”, or, “I am going to do this for you and I’m going to challenge the House of Commons”. I certainly do not think that would be appropriate, because it would undermine the authority of the Commons, lead to conflict and, most importantly, mean that no one was here doing the very important job that this House does.

The Deputy Prime Minister is very fond of telling people that he wants to “repair our broken politics” and that we need reform. I say to those in the House of Commons that they should first put their own House in order, for that is the bit of the system that is broken, and leave this place alone. How many people in this Chamber would stand for election? I suspect very few. What sort of people would stand for election, including me? They will be the B team; they will be the people who could not get elected to the House of Commons, or felt that they were not able to. All the expertise and knowledge which come to this House, and the experience of people who have had careers and done other things—all the things that people complain about a lack of in the House of Commons—would be lost. This Chamber works. Leave it alone. It is not broken.

15:25

[Lord Adonis]

My Lords, I suggest that we do not regard Lords reform as solely about future changes to the membership of this House. We also need to address how the existing House can and should perform its functions better. A week ago, a booklet was circulated to your Lordships on the work of the House in the past year. On page 19 is set out the policy committees’ reports for the year. Vast areas of public policy are entirely absent. There is nothing on any of the public services, education, health, law and order, energy, transport, defence, immigration or on welfare, yet in all these areas Members of the House possess great expertise which is largely untapped. In my entire five years as a Minister in the education and transport departments, I was never once called upon to give evidence to a committee of the House on domestic policy. Our record as a deliberative assembly—if I may differ from the noble Lord—is not much better. In my year as Secretary of State for Transport and as a Cabinet Minister accountable to this House, there were three major government policy decisions: on the third runway at Heathrow, on high-speed rail and on the ending of motorway construction. The House did not debate any one of those three policy developments.

A century and a half ago, Walter Bagehot said that the cure for admiring the House of Lords was to come and look at it. I fear—if I could dissent from what I know is the consensus in your Lordships’ House—that this is still too often true today. Being objective about ourselves, I recognise that we are diligent and public-spirited, that now and then we strike a chord of issues of public interest and that, occasionally, we act as a constitutional backstop. However, we have failed to develop modern procedures or committees for scrutiny or deliberation, and, across large swathes of public policy, we are practically non-existent as a parliamentary assembly. We need to improve our existing House as well as debating a future one.

15:28

[Lord Tyler]

My Lords, on that theme of improving the existing way in which we operate, perhaps we could have one reform this afternoon on which we all agree: that is, that we should take charge of the time allocated for debates. It is surely ridiculous that this extremely important subject allows only two minutes for individual Members of your Lordships’ House, while the debate on the Olympic Truce permits 10 minutes.

On the timing of this debate, I am bemused by the noble Lord, Lord Hunt of Kings Heath, because he was the very distinguished co-author of the 135-page, 2008 White Paper. If he wanted to spell out exactly what the role of your Lordships’ House should be, why did he not do it in 2008 and why now?

We have had 100 years of discussion about the role of your Lordships’ House, and it is clear that some want it never to end. Some believe that a snail’s pace of reform is the appropriate approach—some very big and important snails have recently arrived from the other place who clearly take this view—regardless of the fact that they presumably stood on successive manifesto commitments for reform, in 1997, 2001 and 2005. I presume that they also took note of the overwhelming majority in the other place in favour of democratic reform. It is extraordinary that those who want to codify the role and responsibility of your Lordships’ House do not want to go the whole hog and introduce a written constitution, because that is what it is.

The noble Lord, Lord Hunt, may believe that, but I do not believe that many of his colleagues who support hastening very slowly indeed also want a written constitution. This is a ploy to paper over party divisions and delay the very proper parliamentary scrutiny of the draft Bill that is now due next year.

Those who believe in the primacy of the Commons should look carefully not only at the White Paper but at all the previous analyses of the best way to elect your Lordships’ House. I believe in evolution not revolution. Those who insist on pinning down precisely what your Lordships’ House should do post-reform are revolutionaries.

15:30

[Baroness Boothroyd]

My Lords, the coalition is already making heavy weather of its agreement to replace this House with an elected Chamber, so we must be vigilant. The frank account of the Government’s thinking by the noble Lord, Lord Strathclyde, in our debate in June gave fair warning of the dangers of forgetting principles and playing politics. He talked about the Government’s thinking and said that an elected Chamber would do what we do and have the same powers that we have. He said that its priority was,

“how people get here, rather than what they do once they get here”.—[Official Report, 29/6/10; col. 1666.]

I have heard many clarion calls for radical change in my time, but never one as feeble and unconvincing as that reply that he gave to the noble Lord, Lord Rooker. He might just as well have said, “I know this is topsy-turvy but it’s part of our deal with the Lib Dems so we are stuck with it”.

The Leader of the House was more forthright when he was in Opposition. He raised the same pertinent questions that need an answer now. Commenting on Jack Straw’s White Paper, he said:

“Lords reform is like opening the lid of Pandora’s box: who knows where debate might lead if there is no firm guiding principle behind it? So will the noble and learned Lord answer, just this once, the basic question? Exactly what problem is this package aiming to solve? Is the House too strong or too weak? Is the aim to enable us to defeat all Governments more, with “more legitimacy”, as the noble Baroness, Lady Jay of Paddington, used to say, or what?”.—[Official Report, 7/2/07; col. 714.]

Those were valid questions then and they are even more valid now, so I look forward to hearing from the Government later this afternoon what they have to say on those issues. Vague assurances on a vital issue of constitutional reform simply will not do. Until we know precisely what powers a reformed second Chamber will have, we cannot subscribe to the wanton destruction of this House in the interests of a new political class that lacks the acknowledged expertise and cherished independence of this institution.

Three years ago, the noble Lord, Lord Strathclyde, urged the Labour Government to be brave about the powers of a reformed Chamber. I quote his stirring words. He said that,

“this House has been more assertive since 1999, and government has been none the worse for it. Some of us might say it has been a lot better. If a reformed House kept and used its existing powers with even more confidence, things might get even better still”.

He continued—and I ask your Lordships to mark his words—

“as to statutorily containing your Lordships’ procedures or reducing your Lordships’ powers, I can promise the Minister nothing.—[Official Report, 19/7/07; col. 393.].

That was three years ago. We should promise nothing either. If the Government want a serious dialogue, they must pay more attention than lip service to transparency or face unremitting opposition.

15:33

[Lord Wills]

My Lords, I support my noble friend Lord Hunt’s call for codification. As noble Lords will know and as we have heard again today, the key issue that has bedevilled House of Lords reform for so long is the potential for challenges to the primacy of the House of Commons if the composition of this House is elected. I understand those concerns, which arise logically from the greater democratic legitimacy of an elected Chamber. But such concerns are not necessarily justified. They could be an outcome, but they are not inevitable.

I believe both in an elected House of Lords and in the primacy of the House of Commons, and I do not believe that they are axiomatically incompatible. The key to resolving any incompatibility must lie in the codification of the functions of this House—to put beyond doubt the respective roles of the two Chambers and their relationship. Convention and custom, upon which we can often rely successfully in our constitutional arrangements, always need to be scrutinised for their adequacy in radically new circumstances—and a wholly or partly elected House of Lords would be radically new circumstances.

I recognise the deep concerns that are felt about codifying our constitution, and to some extent I share them. But we must also recognise that our constitution has in recent years been subject to a creeping codification with no adverse consequences—quite the opposite, in my view. So I do not believe that we need fear such codification of the functions of this House. However, any constitutional codification raises complex and challenging sets of issues, and this debate has illustrated again the importance of fully exploring them so that that debate can be adequately informed.

For that reason, I conclude with a plea to the Government. The previous Government established a working group—a galaxy of wise and distinguished experts from all the main parties and from none, including distinguished Members of this House, to explore these issues without any assumptions about the outcome. The general election intervened before this group could get under way. Please would the Minister commit to getting that group under way? It makes no assumptions about the outcome or its conclusions, and I have no doubt that it will produce invaluable work that will aid policy-making on all sides of the debate. If he will not convene the group, perhaps he could tell the House why not.

15:35

[The Lord Bishop of Chichester]

My Lords, on 29 June, the noble Lord, Lord Rooker, asked:

“At what point will the House get the chance to debate what a Second Chamber is for, what it is to do and what its powers are? Surely, all we are talking about at the moment is its composition, which seems to be the wrong way round”.—[Official Report, 29/6/10; col. 1666.]

He was right—hence this afternoon’s debate. However, there are some prior questions. What is any Parliament for, whether unicameral or bicameral? What is its role in relation to government and, in a bicameral arrangement, what are the relations between the two Houses, their respective functions and the basis or bases of their legitimacy? Those questions must be addressed in any consideration of the purpose of the House of Lords. Although in life we often have to get on with practical action without answering all underlying questions, there can be times when to do so implies some definite answer to those questions while they are still being debated. I do not need to quote again what the noble Baroness, Lady Boothroyd, quoted from the rather feeble answer that the noble Lord, Lord Strathclyde, gave to the noble Lord, Lord Rooker, on that occasion, or her comments about it.

Reference is frequently made in debates on this subject to democratic legitimacy, and the assertion is made that only election as we have come to understand it can deliver that legitimacy. It is not enough to assert that principle to make it true. Democracy is used to describe many quite different political systems. In our own society, criticisms are often made of a political class that seems to have lost the confidence of the population at large. The evidence for that is the low turnout in elections, and not what is said in cheap and cost-free comments to pollsters on doorsteps. In trying to understand and respond to why the electoral legitimacy of the other place is not quite all that it is cracked up to be, we really do need to discuss long and hard what we believe society to be and how we call our rulers to account. The Prime Minister may be on to something with his talk of the big society, even though it is rather hard to understand. The current enthusiasm for fairness as a guiding principle also has much to commend it, but again raises more questions than it answers. Even my own favourite yardstick of what makes for human flourishing does not automatically translate into specific policies.

Some things are clear, however. In a complex society such as modern Britain, increasingly a community of communities, it is more important than ever that our political processes are genuinely transparent and accountable. What our representatives do is more important than how they get there. No less important is who they are and the extent to which the rich diversity of peoples in our country have people to speak for them and their multiple needs and aspirations. Unless we answer some of those prior questions about the nature of politics and the role of government and parliaments, it is very difficult to engage directly with the narrower focus of this afternoon’s debate.

15:38

[Lord Higgins]

My Lords, I think that we are all very clear what the purposes of this Chamber are: first, to act as a revising Chamber with regard to legislation, which was tremendously important in the last Parliament because the House of Commons had virtually ceased to legislate and programmed everything; and, secondly, to hold the Government to account. That was, again, demonstrated very clearly in the previous Parliament, when the Government were more preoccupied with passing Acts on terrorism and so on than with human rights, liberty and so forth. We therefore have tremendously important responsibilities.

I do not propose to repeat the very well rehearsed basic arguments about election and non-election, although I suddenly discover that we have great publicity as a result of the noble Lord, Lord Prescott, pointing out that it would undermine the sovereignty of the House of Commons. He failed to mention that it would also undermine the position of individual Members of Parliament in their constituencies. Instead, I want to draw attention to what seemed to me a considerable danger: that some developments since the election may undermine the status of this House, and consequently make it easier for people to say, “We should have an elected Chamber instead”.

I start with two-minute speeches. I do not recall any precedent for them, but I would be rather surprised if the media do not suddenly say, “Well, here they are, all making two-minute speeches at a new rate of expenses”, then work out the cost-effectiveness of those speeches. The arithmetic is not terribly difficult, but this is not a laughing matter. In that context, one should also say clearly that the bureaucracy has somehow come up with a form for claiming expenses where you have to decide each month what rate to claim, whereas we all know perfectly well that we come here sometimes for a short time and sometimes for a very late-night sitting. We ought to have the flexibility to be able to decide the appropriate level within given ranges.

The other thing that somewhat endangers us is that we are clearly in a coalition now and, as a result, it will be more difficult for the opposition forces to defeat the Government by way of persuasion, whereas in the previous Parliament we certainly had the opportunity to do that by persuading the other parts of the House to go along with us. It appears that that will no longer be the case.

Finally, on the size of the House, again there is a considerable danger that we are getting so large as to be open to ridicule. We ought to be gravely concerned about that, because all these recent developments lead to the position of the House being undermined and the call for it to be an elected Chamber.

15:42

[Lord Howarth of Newport]

My Lords, the role of the appointed House of Lords is entirely clear. It is advisory: to advise on policy, to scrutinise legislation and to offer revisions to it. This House is well fitted to performing that role, drawing as it does on the knowledge and wisdom of the two principal groups of its Members: senior and experienced politicians and very distinguished individuals from many other walks of life. This House invigilates the Government and presses and prods them and the House of Commons to think again, to think harder and to explain themselves. It is never a rival to the elected Chamber. An elected second Chamber could not perform the same role, nor would its ambitions be so modest. Its Members would believe that they had a duty to those who had elected them to use their democratic authority not just to advise and advance a point of view but to insist on what they thought was right. The gentle and persuasive critique of an appointed House would be replaced by the clash of two elected Chambers.

It may be that the Deputy Prime Minister has a cunning plan to define and constrain the role and powers of the elected second Chamber. Perhaps he intends to legislate to entrench the existing conventions, or something like them. There would be two possible consequences of that. The parties could use the list system to place pliant individuals in the second Chamber. What benefit would that be to politics and to the country? It would lose the virtues of the existing House and gain nothing worth having. If the governing party were in the majority, it would reinforce the dominance of the elective dictatorship; if the opposition parties were in the majority in the second Chamber, the second Chamber would become a second arena for the party dog-fight, and no more. Or, if people worth their salt did stand for election to the second Chamber, the lid would quickly blow off the pressure cooker. Those people would indeed insist on what they thought to be right. They would strike down legislation, particularly when they and the country thought that the Government have got it wrong. Armed with democratic authority, they would challenge the primacy of the House of Commons. We would risk legislative impasse between the two Houses.

Codification will not work. We have seen how the European Parliament, the Welsh Assembly and the Scottish Parliament have all gradually gained powers. Elected Chambers will always seek to do that. For the umpteenth time in these debates, I ask the essential question: how will the replacement of an appointed House by an elected House improve the performance of Parliament? To say that it will make the second Chamber more democratic or legitimate does not answer the question. I suspect that the Government are not interested in improving the performance of Parliament. All Governments regard Parliament as a nuisance. We must be on guard to ensure that so-called reform does not weaken Parliament, which is—or ought to be—a restraint on executive absolutism and the safeguard of our liberties.

15:44

[Lord Bilimoria]

My Lords, the House of Lords, according to our website, is,

“a forum of expertise, making laws and providing scrutiny of Government”.

As we have heard, we are a check and balance for the other place, a wise counsellor and an adviser. Where those in the other place are inexperienced, we are experienced; where they are partisan, we are objective; where—it could be argued—they are lightweight, we are definitely heavyweight. If only the public understood—and if only the other place understood—the work that we do.

When I look around the Chamber, I struggle to think of another legislature in the world with such a deep well of expertise in every field you can think of. We have healthcare professionals, lawyers, athletes, television presenters, journalists and so on. When one looks at the 100 members of the Senate, one sees that 57 list law as their occupational background, 27 list business and 16 list education—real diversity there.

The reason that 40 per cent of amendments made by this House are accepted by the House of Commons is the quality of this House's advice and the level of our expertise. This would be lost were we to be elected. We have heard that we would challenge the primacy of the House of Commons. This House is unlike any other upper Chamber in the world in the way that it is made up. We do not have to copy another nation or nations. This country has never copied; historically it has always created and originated. We have always led the way. The idea of this Chamber becoming a proportionally representative elected House stinks of the European Parliament. MEPs are unknown to their constituents and have no idea who their constituents are: it is a farce.

In building a business from scratch, I have always tried to change things and build through relentless, restless innovation; but with this House, we should heed the old saying: “If it ain't broke, don't fix it”. To change the nature of the House would be completely to devalue it. The whole purpose of this House as a check and balance would be diluted and destroyed. This cannot happen, because—ironically—it is the appointed House that is the guardian of our nation, the unelected House that is the cornerstone of our democracy.

15:46

[Lord Campbell-Savours]

I believe firmly in an elected House, a House elected indirectly on a list system geared to the result of a general election. Some who are of my view believe that the Cross-Benchers would represent those who have abstained. I believe that the problems raised by the noble Lord, Lord Forsyth, can be sorted out in a new constitutional settlement between the two Houses. My only concern is to what extent during the course of the reform debate we are taking into account the agenda that is being pursued in the House of Commons following the Wright recommendations.

The House of Commons has set up a group called Parliament First. Noble Lords should be far more engaged in the work of that group in the Commons, which is currently dealing with the powers of Select Committees, carryover, the treatment of Lords amendments, the treatment of Private Members’ Bills, pre-legislative and post-legislative scrutiny, the taking of evidence by Public Bill Committees, parliamentary commissions of inquiry, the role of the Merits Committee and a number of other issues, all of which would be affected by any change in the constitutional settlement between the two Houses.

15:48

[Lord Strabolgi]

My Lords, the late Lord Hailsham used to say that if the House of Lords were abolished, we would have an elected dictatorship. Sometimes I wonder whether this House in its present state would be strong enough to stand up to a House of Commons of the extreme left or the extreme right with a large majority. An elected senate would be a stronger House. It would also be more democratic, with its Members called senators.

We have to separate the peerage from this House. Every photograph of the House in the press shows Peers wearing robes, which cuts us off from another place and the general public. An elected Chamber is some way off, particularly one called a senate, but I think it is the way we should go.

15:49

[Baroness Noakes]

My Lords, despite the views of the noble Lord, Lord Adonis, I believe that this House works remarkably well. Last week, as has already been mentioned, my noble friend the Leader of the House had an article in the House Magazine in which he set out some of our achievements. We saw off the attempt to kill trial by jury; we cut back the scope of identity cards, which we are now—I am proud to say—going to abolish; and we protected freedom of belief and speech. It is clear that this House serves the public interest. The Question of the noble Lord, Lord Hunt, is about the purpose of the House, though he spoke about powers. My answer as to the purpose of the House is simply that it is to serve the public interest. Any reform must not undermine that.

In my brief time today I will say what any reform of this Chamber should avoid if it is to continue to serve the public interest. First, this House must not become just another place of partisan politics in a pale, or even more highly coloured, version of another place. Elections, which will be controlled by the party machinery, will take us firmly in the direction of a politicised House.

Secondly, this House must not lose the wealth of expertise and experience that an appointments system delivers. We see this in particular on the Cross Benches but all parts of the House possess an extraordinary breadth of experience and knowledge. We must not forget the particular contributions of the Bishops’ Bench. Elections simply will not deliver what our current system does deliver.

Thirdly, we must not undermine the primacy of the House of Commons. As has been said today, it is inevitable that an elected upper Chamber will robustly challenge the conventions that preserve the current balance between the two Houses. We must ask ourselves whether it is more or less likely that another House of elected politicians, jostling for position with another place and stripped of the experience and expertise that we currently have, will achieve what we have achieved in the past. Will that serve the public interest? I think the answer to that is clear.

15:52

[Lord Grenfell]

My Lords, I am thrilled to join this succession of tweeters. The abolition—that is what it would be—of the House and its replacement by an elected second Chamber would be a constitutional upheaval, the outcome of which cannot conceivably leave us with an unchanged relationship between the two Houses. The 2008 White Paper advised us that a reformed second Chamber would almost certainly be more assertive, but rather strangely went on to state:

“A second chamber that is more assertive than the current House of Lords, operating against the background of the current arrangements for its powers, would not threaten primacy”.

This position has been swallowed hook, line and sinker by the coalition Government. On what grounds do the Government make the assumption that “a more assertive House” will wish to continue to operate,

“against the background of the current arrangements for its powers”?

Those of us who claim that an elected House would demand more powers are accused of failing to explain how such powers would be granted if they were dependent on the agreement of the primary Chamber. This is the point. There is of course no guarantee that they would be granted. As the noble Lord the Leader of the House told us on 29 June:

“The view at the moment is that the House should continue to have the powers that it holds and do the work that it does”.—[Official Report, 29/6/10; col. 1666.]

What is virtually certain is that an assertive elected Chamber would none the less demand greater powers. If, as is likely, the primary Chamber refused the demand, the scene would be set for a continuing and bitter struggle between the two Houses. The Government and those on other Benches advocating an elected Chamber clearly do not wish to acknowledge that possibility. Such self-deception is worrying and dangerous.

I have not said anything that has not already been said, but the more people who say it and the more often they say it, the greater the hope that the coalition Government may see the light. I certainly hope that is the case.

15:54

[Baroness Howe of Idlicote]

My Lords, though I had spent a lot of my life on the political fringes, the range of exceptional experience, ability and independence of view that I found on my arrival to your Lordships' House came as a very welcome surprise and has convinced me that the balance and value of what history has delivered to make today’s House of Lords is more than worth fighting for. What we have is a typical British accident, but one that works supremely well.

As your Lordships will know, normally I find myself making the case for equality and non-discrimination, but on this issue I want to strike exactly the opposite note: that is, that the membership and composition of the two Houses of Parliament are, and must continue to be, absolutely different from each other, for that difference makes all that is best out of the partnership between the two Houses. The crucial difference, of course, is that one is elected and the other is not, and that the elected House is the master and has the last word while the other—misleadingly called the upper House—does not. The Members of the first House, the elected House, are recruited, rather like soldiers in a regimental system, and are bound to each other in solidarity, whereas the membership of this House is much more individualistic and independent. Most of us are selected through a very strict process.

In short, we all have independent experience and expertise that are very different from those in the other place, and we must remain so. Why, otherwise, should we need—as others have said—two different Houses? It is because the deciders—the Commons—may well be able to take a broad view but they have to take account as well of the distinct and often different judgments that emerge at this end of the Building. That very difference—the input from two directions—is the fundamental of our Parliament: in other words, vive la différence. If either of the two Houses was to lose its distinctive quality, which is what would happen if elected Members began arriving here, the mother of Parliaments would become a much less effective place and much less of a model to the world, and the British constitution would suffer a gravely damaging blow.

15:56

[Lord Gilbert]

My Lords, were we to move to a wholly elected House of Lords, in my view we would do immense damage in three directions. First, we would make the job of trying to create a Government hugely more difficult for the Prime Minister of the day. When confronted with the results of the democratic process, Prime Minister after Prime Minister shudders and sends people here to complete his Government. We all know that that is true not just of the previous election but of election after election. That is one reason why we have the marvellous noble Lord, Lord Adonis, sitting here—he could not find a position as Transport Secretary in the other House—and we are very grateful to him for that.

The creation of a wholly elected House of Lords would do immense damage to the House of Commons as Members elected to this House, by whatever method, will not replicate the size and number of constituencies of the other House. The respective elections could not be held on the same day: to do so would be utterly pointless. Elected Members of this House could say to Members of the other House, “I have a much better mandate than you, my friend. I was elected by more people and I was elected more recently, so you just listen to me”. Anybody who thinks that the balance between the two Houses will remain as it is today has another thing coming to them. You do not need to know very much about constitutional history to know that the United States Senate was first an appointed body. Then the House of Representatives was foolish enough to allow the Senate to be elected. Who is top dog now? That process did not take very long and will inevitably happen again, whatever restrictions are imposed on the relationship between the two Houses. This House will say, “I want supply—to hell with the Parliament Act—and I want more Cabinet Ministers”.

The third place where the damage would be done is quite clearly in this House. We would lose the Cross-Benchers, and that would be a terrible thing. There would be no military experience to speak of here. There is none down the other end; you can be quite sure of that. You would lose the Bench of Bishops. I think we made a great mistake in getting rid of the Law Lords. There just would not be the experience. You would have just the B team, the failures and the duds who could not even make it there and who were insufficient in number to make a Government. That is what you would get in this place, and then you would get the pernicious influence of the Whips. I have said enough.

15:59

[Lord Gordon of Strathblane]

My Lords, grateful as I am for this short debate on the important issue of the function of the House of Lords, I hope that at some point before we consider legislation we will have a proper, full-scale, two-day debate, because the most important issue is: what function do we wish the House of Lords to perform? Once we have decided on that, you tailor everything else to make us able better to fulfil that function.

I regret to say that I agree entirely with what the noble Lord, Lord Forsyth, said at the start of this debate as regards the folly of electing a House and hoping that it will stay the same as the present one. The Scottish Parliament has been in business for slightly over 10 years. It is already seeking more powers. If the noble Lord, Lord Forsyth, were to be elected—I would be one of his constituents because we live in the same part of the world—what would be his platform for election? How would I know whether he had delivered on that platform? We do not yet know, simply because the previous Government, I am afraid, used the term “election” as an emotive slogan and shied clear of trying spell out exactly what they meant. That was probably because they knew that the majority of Labour MPs were against election—as indeed were a majority of Conservative MPs. It is only the Liberal Democrats who carried the day in the House of Commons.

You have the choice of either having re-election, in which case you get accountability—undoubtedly there would be people wanting to get the power to demonstrate to their constituents that they had delivered what they had promised—or not having re-election, whereby, frankly, you have no accountability whatever; you elect me on day one and I do precisely what I want for the rest of the 15 years or so for which I may be elected.

We have at the moment a constitutional convention—the Cunningham agreement. It is vital that we decide, first, whether we wish to change that in any way. If not, we stick with what we have, because we change the Cunningham convention at our peril. We are living in very strange times in politics. Things that would have been thought impossible a year ago are now happening. Coalition government is one; changes in the Scottish Parliament are another; and the Welsh Assembly is becoming a Scottish-style Parliament. If we have an elected House, you do not know where that is going to lead.

16:02

[The Earl of Clancarty]

My Lords, I spoke in the reform debate of 1999 and now speak in a similar debate, having spent the intervening years outside this place. This distance from Parliament has confirmed for me that the purpose and reform of the Lords is too important an issue to be left as a wrangle between the two Houses, between parties, and over primacy. My concern is rather how we should further democratise Parliament as a whole. I should like to see the issue decided much more by the public; but first we need better to engage and inform them about aspects of the current system which we Members of this House know would be lost in a fully elected membership, but that the public might think are worth retaining.

For example, it would be a tragedy not to keep in some form that part, currently 25 per cent of this House, which is independent from party politics—namely the Cross-Benchers. That is attainable through a mixed membership. Independence brings many beneficial features, including the chance for Members to think, act and vote according to their consciences, and to debate freely the contentious topics untouched by the other place. Indeed, a modern reformed House of Lords should recognise that, rather than being a lesser other place, it could be celebration of public involvement in government.

Rather than narrowing down politics to tighter control by professional politicians, should we not be opening up our second House to the British people? If we retain an appointments system to introduce expertise and life experience into the Lords, should it not be decoupled from party-political involvement, perhaps by bringing ordinary citizens into government of their peers through a jury system, and asking—as indeed our Prime Minister might say—not just what Parliament can do for the people, but what the people can do for Parliament?

16:04

[Viscount Bridgeman]

My Lords, the theme running through the ongoing debate about the future of this House is the ignorance in the other place of the working and—dare I say it?—the effectiveness of this House. It applies to all parties and has certainly, so far as I can recall, ever been thus. One of the effects of this is the unawareness among many of our colleagues in the Commons of just how well they are presently served in the current legislative relationship between the two Houses. To take one example, flagship Bills have been given six times the amount of Committee time in this House compared with the other place. We pose no constitutional threat.

The pros and cons of an elected House have been rehearsed many times during this debate: the expense, and the problems of finding candidates of sufficient quality. However, transcending all that in constitutional terms are the powers that an elected House would seek—nay, demand. There is only one place that those can come from—the House of Commons, and how popular would that be down there?

Much has been made of the present lack of democratic legitimacy in your Lordships’ House. Perhaps I may respectfully suggest that that is precisely how it should be—no challenge to the supremacy of the other place. Rather, we would do well to build on the present structure of our House, which, it can be argued, is probably working more effectively than it has ever done in the whole of its history, but with one major proviso: we must have a strong statutory Appointments Commission and, indeed, one that is proofed from any gerrymandering on its composition.

Finally, there are two bedrocks which any changes in this House must enshrine, so well articulated by my noble friend Lord Forsyth. The first is the ability of this House to get the Government to think again and the second, which to some degree is a corollary of the first, is to provide that in principle the Government should in the end get their business.

16:06

[Lord Kennedy of Southwark]

My Lords, I thank my noble friend Lord Hunt of Kings Heath for putting down this Question for debate today.

As a new Member who joined your Lordships’ House in June this year, I am fully aware that this is the second Chamber in our parliamentary system. We are the revising House that sometimes asks the other place to think again. No party has a majority and the Conservative Government have to persuade the House of the merits of their case. However, at the end of the day the will of the Commons takes precedence if no agreement can be reached.

If we move to an elected second Chamber, this noble House will become democratically legitimate. No matter what is put in place to guarantee the supremacy of the Commons, the fact that Members sitting on these Benches are elected will change the whole relationship between the two Houses. That may be something that this House wants to do but, if that is where we go, we have to be prepared to face up to the consequences of that fact.

What we will not get away with is having elections at the same time as the local or European elections on some national or regional PR list system, with Members being returned and this House carrying on as before because we have the Parliament Acts and the Salisbury convention. Maybe we will need a Clegg or a Taylor convention so that we codify how the Government would deal with a newly elected House of Lords elected midway through their mandate. The candidates will have stood on their parties’ manifestos and some Members will have been returned to this House with the democratic authority to oppose specific elements of the Government’s manifesto put to the country some years before.

From my few short months in this House, I suggest that there is much here that the other place could learn from. No one likes change and that is as true of this House as it is of any other organisation or workplace. As we begin these discussions, we should do so with caution, proper debate and careful consideration of the consequences of any proposals for change.

16:08

[Lord Lipsey]

My Lords, the purpose of the House of Lords is to scrutinise legislation, especially legislation which the Commons has not had the time or the inclination to scrutinise; to hold the Executive to account from a less partisan perspective than exists in the Commons; to create and sustain a core of men and women of knowledge and experience with a duty to contribute to public debate in Parliament and outside; and to act as an ultimate backstop to prevent a temporary Commons majority riding roughshod over Britain’s constitution and its people’s liberties. A moment’s thought should convince any objective observer that these functions are best discharged by an essentially appointed rather than elected House.

16:09

[Lord Naseby]

My Lords, I had the privilege of being Chairman of Ways and Means for five years when the noble Baroness, Lady Boothroyd, was Speaker. Both she and I believe totally in the primacy of the House of Commons. Having said that, I hope that the coalition Government will fully take on board the probing questions which she asked earlier this afternoon.

I have one thing to add: the public trust the House of Lords and at the moment it is a fact of life that they do not trust the House of Commons. We have a very strange situation in that the one part which the British public trust is to be removed or dramatically changed and the other part is just to be tinkered with. As many noble Lords have said today, we are here to revise and to challenge the Government of the day and to do that you need men and women with experience of life and experience of how to legislate. In the 10-plus years in which I have been a Member of the House, that is how this House has proved its validity. However, this House has had an opportunity but still has not acted on the Bill presented by my noble friend Lord Steel. The Bill may need some additional elements added to it, but it is there and could be very usefully implemented.

16:10

[Lord Haskel]

My Lords, speaking at the end, it seems to me that this debate proves that we are a House in transition. Being a House in transition we have to tread very carefully; for instance, during this period there surely must be a balance of party groups. You cannot have an unelected House of Parliament in transition where one group of unelected party politicians has a majority. Not only is it a mockery of democracy, but it also inhibits our current work of revision. The triumphs of the House, listed in the article by the noble Lord, Lord Strathclyde, and repeated in this debate, happened because the Labour Government did not have a majority in this House. A majority in this House also allows the Government to be sloppy—perhaps the Opposition too, but that does not matter so much.

I know that the public’s attitude to the House of Lords is very mixed, but for how long will they put up with unelected Peers, in a majority, with real power over their lives? In my view, it will not be long because the public are becoming more interested and more informed about the work of this House. As Liz Hallam Smith, our Director of Information Services points out in her paper to the Information Committee, if we are to have a reform agenda, the process will be enriched if we have an informed public. The public are becoming well informed and soon they will ask what is our purpose and what are we here for. It will not just be a matter for parliamentary debate. I look forward to hearing the Minister’s response to that point.

16:12

[Lord Elton]

My Lords, I wish to speak in the gap, which is somewhat unexpected in this debate. We are debating the function and not the membership of this House, although they are closely related. The essential function of an appointed House in a democracy is to protect the electorate from any structural or systemic failure in the elected Chamber which leaves them exposed to overmighty Government or the leeching away of their freedoms. I wonder how many of the electorate know that if it had not been for this House, any one of them could, on any day, have been told, without warning, that their name was on a piece of paper signed by the Home Secretary and that they were to be put in detention for three months without appeal and without access to a court, a judge or a jury. We stopped that on the day and night of 10 to 11 March 2005. That is what the House is for and that is what it did.

The other House had lost control of the Government, although they had a huge majority, because the Government control candidature and standing again, and Members’ careers depend entirely on pleasing the party. Therefore, when Members’ salaries increase inexorably, that is a sharpened power which the Whips carry. The need to be elected, the need to be approved and the need to be re-elected are the three elements that caused that trouble and they are precisely the three elements which the current Government are now foolishly proposing to introduce in place of this independent, unelected, unpaid House.

16:15

[Lord Bach]

My Lords, my party’s manifesto on House of Lords reform stated that we will hold referenda for moving to a democratic and accountable second Chamber. However, as is rather painfully obvious, we are not in power and therefore await the new Government’s draft Bill with eager anticipation. Will it include mention of a referendum, for example? Almost as fascinating will be the reaction of Conservative Peers. As the Leader of the House has so often told us, and as appears so clear from this debate starting with the noble Lord, Lord Forsyth, they are absolutely eager for reform of this House. Indeed, the noble Lord, Lord Strathclyde, has said it so many times and with such conviction that I almost believe him.

In the limited time that I have, I want to ask the Minister two direct questions. One is about the existing House and the other is about a reformed House. First, the here and now. Commentators and experts rightly argue that since the coalition was formed, the Government have a political majority in this House and can get their way at the first time of asking. Labour never sought a political majority. This House lost its political majority with the removal of the vast majority of hereditary Peers, but it is back again. Therefore I raise this question: is the role of the Liberal Democrats in this House now the same as that of the departed hereditaries? In other words, is it to back up a Conservative Government with their votes when necessary? How can the Government justify this state of affairs? How can the House be an effective revising and scrutinising Chamber if the Government have an inbuilt political majority? This is a question not just of political importance but of constitutional importance and I believe that it deserves an answer.

As regards a reformed House, the question posed by my noble friend Lord Hunt about timing needs an answer and I hope that we will get one this afternoon. Is the Minister confident that there will be sufficient time for the Bill to complete its passage through Parliament, having been debated properly in this House in keeping with its significance as a major constitutional change?

The noble Lord has not been asked to answer many questions in this debate. I have asked two and I very much hope that he will answer them.

16:16

[Lord Taylor of Holbeach]

My Lords, I thank the noble Lord, Lord Hunt of Kings Heath, for bringing forward this short debate and I thank all noble Lords for their contributions. It has been a good debate containing a great deal of wisdom, distilled and concentrated through the pressure of time. It is perhaps a good thing that it was moved from the dinner hour business, so that therefore we have had a little longer to speak. I shall just explain to noble Lords that the time constraints are laid down in the Companion. I hope that we will have the opportunity to discuss these matters at greater length on another occasion because the content of the debate has shown how justified that would be. After all, most noble Lords have an opinion on this subject and views are held with passion and conviction. I shall do my best to do justice to the speeches and hope that I shall be forgiven if I fail to cover every contribution and point raised. However, a number of specific ones were made and I hope that I shall be able to satisfy noble Lords opposite on them.

Several Members raised issues that might be described, as my noble friend Lord Elton observed, as commenting on the nature and character of the House and the style and manner in which it fulfils its purpose. Although not strictly speaking the terms of the debate, I understand why noble Lords consider those issues important and hope to be able to refer to them if I have time. The debate is on the purpose of the House of Lords, and many Members have given examples of what they think that is. The Government believe that its purpose can be summed up as threefold: first, to scrutinise legislation; secondly, to hold the Government to account—exactly the words used by my noble friend Lord Higgins; and, thirdly, to conduct investigations. I hope that this tallies with the view of the noble Baroness, Lady Boothroyd. Indeed, I think that all noble Lords have shown agreement with those three principal purposes of the House.

I will say a little more on each of those in turn, but I will do so in a constitutional context which recognises the primacy of the elected House of Commons. That is the cornerstone of this country’s parliamentary system. The work of this House should complement that of the House of Commons. That was widely recognised by noble Lords. I agree with the noble Lord, Lord Campbell-Savours, that it is increasingly important that the two Houses work closely together, whatever the shape of this House.

Let us turn to the purposes in more detail. First, there is scrutinising of legislation. This House shares the role of law-making with the other place. However, this House, rightly, has a reputation for thorough and detailed scrutiny of legislation line by line. In the 2008-09 Session, Members spent 60 per cent of their time debating and scrutinising legislation. We made 1,824 amendments to Bills. It is a matter of pride in which all noble Lords will share that legislation leaves this Chamber much improved as a result of the thorough consideration it receives here.

I should like to tackle the canard laid by the noble Lords, Lord Hunt of Kings Heath and Lord Bach, about the arithmetic of this House. The arithmetic of this House has not been fundamentally altered by the existence of the coalition. After all, those on the Benches opposite greatly outnumber that of any other single party in this House. An argument will be won by winning the support of noble Lords across the House. It always has been so. Indeed, the Cross-Benchers are there to be influenced and their opinions supported. No Government have a majority in this House, even in coalition. It is argument that is sovereign, I like to think, in your Lordships’ House.

The second purpose is described as holding the Government to account. In their speeches, many noble Lords considered it to be key to the House to hold the Government to account. I guess that that is what is happening at the moment. In the Chamber, about 40 per cent of time is spent this way. Through Questions and debates, this House challenges the Executive and holds it to account. In the 2008-09 Session, noble Lords asked 484 Oral Questions and more than 5,500 Written Questions. Many noble Lords have stood at this Dispatch Box and can testify to the rigour with which noble Lords hold the Government to account. The partially reformed House has no doubt become more assertive, defeating the Government on average on 50 occasions per Session. Outside the Chamber, in the Grand Committee Room, a further purpose is conducting investigations. The Committees of this House are one of its great resources. Their membership draws on a wide range of experience, and their reports are influential and well respected.

While respecting tradition, the House of Lords has also been prepared to embrace change and look forward with a renewed purpose. We need procedures which will help us to continue to fulfil our purpose. Over the past 18 months, this House has made a number of changes to improve its ability to scrutinise legislation and to hold the Government to account—for example, the new approach we have adopted to scrutinise Law Commission Bills. I am sure that the Leader’s group chaired by my noble friend Lord Goodlad will look into the working practices of this House and will propose further improvements. The noble Lord, Lord Hunt of Kings Heath, considers that we should be clear about the purpose of the second Chamber before we consider further reform. I reassure him that the cross-party committee on which served my noble friends Lord Strathclyde and Lord McNally and the noble Baroness, Lady Royall, will consider this issue with their colleagues. As part of their remit, they are considering the function and powers of a reformed second Chamber. There is no reason to suppose that their recommendations will impact on the conventions of the House without them being fully considered by that cross-party committee.

The noble Lord, Lord Wills, asked about the working group to consider the constitutional implications of reform. I can confirm that it will be necessary to put the conventions on a statutory basis to reduce the powers of the second Chamber. A reformed second Chamber should have the powers that this House currently holds. The Government are not setting out to reduce the powers of this House. The cross-party group will be considering the conventions and codification as part of its deliberation. I hope that that satisfies the noble Lord, Lord Hunt of Kings Heath, and the noble Lord, Lord Bach, who also asked about that issue.

[Lord Hunt of Kings Heath]

Can the Minister confirm that on that basis the House after reform will be left with the powers as in the Parliament Acts, as opposed to the codification of the conventions?

[Lord Taylor of Holbeach]

I am not a member of the joint cross-party committee, but the advice I have is that that is the case, that the Parliament Acts will not necessarily be changed as a result of this and that the conventions under which the House currently operates will continue to be the framework in which a future House will operate. I hope that satisfies noble Lords’ curiosity on that point.

A further matter for the cross-party committee will be how to handle the potential risk to the expertise of the House in the independent Members. The committee will address outstanding issues, including the proportion of Members who should be elected. If the reformed second Chamber were mainly elected, there would still be a role for Cross-Benchers. As with the current House, Members of a reformed second Chamber could access expertise and experience in a number of ways, including via the committee system. The noble Baronesses, Lady Boothroyd and Lady Howe, and the noble Lord, Lord Gilbert, asked what role there would be. If there is a mainly elected House, there would be a role for the Cross-Benchers.

Several noble Lords suggested that only an appointed second Chamber could continue to fulfil the functions and purposes of the House as the Government have described them. The Government do not accept that. We believe that elections will not undermine the ability of the House to fulfil its functions but will enhance it. There is no doubt that this House will continue to develop its role during its transition to a wholly or mainly elected Chamber. The Government recognise the need for an orderly process of transition from the current House to a reformed second Chamber. The Government are clear that this House performs its role well and can be proud of the work that it does. We strongly believe that there is not a noble Lord, whatever his or her views, who does not want the best for this House. The Government share this view and hope to have a constructive debate when we publish a Bill in draft early next year. I can assure noble Lords that there will be no pressure to rush pre-legislative scrutiny of this draft Bill. I can almost hear my noble friend the Leader of the House saying it in those terms. Indeed, I am sure that there will be many further opportunities to debate this issue, and I look forward to them.

[Lord Hunt of Kings Heath]

My Lords, perhaps I may take the noble Lord through the timetable. Before the Summer Recess, the Government published a programme showing that they hoped that the Bill would go to the other place by November 2011. There is not much time between November 2011 and April/May 2012 for a Bill to go through both Houses. Can I assume from what he has said that the intention is that the timetable will be lengthier than that?

[Lord Taylor of Holbeach]

I can assure the noble Lord that the pre-legislative process is extremely important. We cannot get a satisfactory resolution of this issue unless all parties to the discussion feel that they have a proper opportunity for debate and for giving their input. At the moment, a relatively small group of people is setting about the task with a purpose. The all-party committee is representative of the senior figures of this House and of the House of Commons. Its draft Bill is the material with which Members of this House will be able to debate and the whole process of pre-legislative scrutiny is vital if we are to get a proper solution to something for which I think that many Lords have indicated their support—that is, the reform of the House of Lords and the bringing about of an elected Chamber.

[Lord Elton]

Can the noble Lord be a bit more specific about what form the pre-legislative scrutiny will take because most of us have no idea?

[Lord Taylor of Holbeach]

I would imagine that it will take the form of a Joint Committee of both Houses, but I am not in a position to suggest that form. The draft Bill will be debated by this House. It will be up to this House to determine that.

Olympic Games 2012: Olympic Truce

Monday 11th October 2010 Lords Chamber

Question for Short Debate

16:31

Tabled By

[Lord Bates]

To ask Her Majesty’s Government what preparations they are making for declaring the Olympic Truce accompanying the London 2012 Olympic and Paralympic Games.

[Lord Bates]

My Lords, it is my privilege to lead off in what I am reliably informed by the House of Lords Library is the first time that the Olympic truce has been debated specifically in your Lordships’ House. Perhaps I may express at the outset to the distinguished list of Members who have put their names forward to speak in this debate how grateful I am that they have rallied to the cause at such short notice. In securing this debate and in my enthusiasm to accept the time slot allotted by the business managers, I failed to recognise that many of the distinguished Members who would have wanted to take part are at the Commonwealth Games in Delhi. In particular, my noble friends Lord Coe and Lord Moynihan have asked me to place on record their sincere apologies. They very much wanted to be here to support this debate, but unfortunately they cannot be.

On 7 October, the noble Lord, Lord Moynihan, as chairman of the British Olympic Association, spoke in this House of the importance of the Olympic truce in his excellent contribution to the millennium development goals debate. Following that, he wrote to me saying that he hoped that the Government would respond positively to this debate. In that regard, our chances of securing a positive response are much improved by the fact that my noble friend Lady Rawlings is responding on behalf of the Government, given her intuitive understanding and commitment to international relations.

The Olympic truce resolution, as passed by the United Nations,

“urges Member States to take the initiative to abide by the Truce, individually and collectively, and to pursue in conformity with the purposes and principles of the Charter of the United Nations the peaceful settlement of all international conflicts”.

Despite this UN resolution being agreed to by all member states, it has hitherto been totally ignored at a government level. Today, the Olympic truce is seen purely as symbolic, accompanied by a flag outside the stadium and a peace wall inside the Olympic village, but that was not always the case.

At the outset of the ancient Olympic Games, the truce was not an optional extra; it was its very purpose—it was not symbolic, but sacred. In 776 BC the Greek king, Iphitos, frustrated at the perpetual state of war, consulted the oracle at Delphi, who proposed a sporting competition every four years that would have as its aim the bringing together of military and political leaders in one place where they could seek to resolve their differences peacefully, with athletes competing together as Olympians rather than as citizens of a city state.

The sacred truce was remarkably successful. The ancient Olympics ran for 1,168 years, until they were ended by the Romans in AD 394, and during that time violations of the truce were extremely rare. By contrast, in the 116 years of the modern Olympiad, the Games have had to be cancelled three times due to war, have experienced major boycotts on five occasions and have twice been the focal point of terrorist attacks. In ancient Greece, people stopped fighting to take part in the Games; in the modern era, we stop the Games in order to keep fighting. What is it that we have lost in 3,000 years of civilisation that makes even today the notion that combatants may exercise restraint during a period of truce such a distant dream? I suggest not that the concept of the truce has been tried and found difficult but that it has been found difficult and left untried. To coin a phrase, I believe that we can do things differently next time.

The reason for this optimism is a remarkable visionary, Jeremy Gilley, a British documentary producer who began a campaign in 1997 to get the international community, through the United Nations, to advance one day of global peace—the campaign is called Peace One Day. In 2001, that campaign was endorsed unanimously by the United Nations—like the Olympic truce—and was proposed by the British Government. In 2007, 2008 and 2009, Peace One Day brokered a one-day truce in Afghanistan between warring factions, including the Taliban. The truce allowed health workers from UNICEF, the World Health Organisation and many other agencies to move into areas hitherto unreachable due to violent conflict. As a result, over a period of three years, some 4.5 million children were immunised against polio. It is an utterly inspiring story, which shows what can be done with just one day of truce, let alone the prospect of 20 or 30 days. This reminds us that the value lies not in the truce itself but in what it allows us to do. When the guns fall silent, the voices of reason have a chance to be heard above the bomb and the bullet and, when the guns stop, the delivery of vital humanitarian aid can start.

Specifically, I urge the Government to consider what initiatives they could take to exploit the opportunities presented by the Olympic truce surrounding the London 2012 Games. Could they consider hosting a G8-style summit on the theme of truce? The aspiration would be to seek to advance the case for peace and reconciliation in the same way that the talks at Gleneagles advanced the causes of debt relief and climate change. Could consideration be given to adding a ninth millennium development goal to create a specific target of reducing the current 30 conflicts around the world by 2015? Given the linkage between conflict and poverty, it is bewildering that conflict resolution is not even mentioned among the current eight goals, 21 targets and 60 measures. Could the UK leverage its unique roles in international organisations—the Commonwealth, the UN Security Council, the European Union, the G8 and the G20—to invite some parties currently engaged in conflict to the UK during the Games to undertake proximity talks, which just might advance a peaceful solution? Finally, could the Government work with Peace One Day to extend significantly the initiatives that it has secured for using the window of the truce to deliver humanitarian aid in the form of vaccinations and immunisations in the most dangerous and unreachable parts of this world? Others in the debate will be able to speak with far more experience and authority as to what initiatives may be possible but, where there is political will, I am convinced that our skilled diplomatic corps will be able to find a political way.

On 14 June, my right honourable friend the Prime Minister, David Cameron, made a Statement on Afghanistan to the House of Commons, in which he concluded:

“Insurgencies usually end with political settlements—not military victories … we need a political process to bring the insurgency to an end”.—[Official Report, Commons, 14/6/10; col. 605.]

This reminds us of the supremacy of politics and the deficiency, in the final equation, of violence as a means of achieving the lasting resolution of disputes. I believe that the Olympic truce represents a golden opportunity to advance a fresh vision of an international society, with the alluring prospect that the legacy of London 2012 will be not just sporting venues, medals won and records broken, but lives saved and hope restored. All that is required for that to happen is that, in their ambition, belief and courage, our athletes on the track and in the field are matched by politicians and diplomats in the corridors of power.

16:40

[Lord Puttnam]

My Lords, I thank the noble Lord, Lord Bates, for raising this issue and for making the debate possible. I have little to say other than to support him entirely in his aims. I hope that the Government and others listen.

I will add just two thoughts, which I hope may be helpful. First, as the noble Lord, Lord Bates, touched on, there has been a precedent with UNICEF, whose days of tranquillity—sometimes called the corridors of peace—have been remarkably successful. There have been about a dozen of them since 1985. As the noble Lord said, most recently, in December of last year, more than 3 million children under the age of five were immunised against a particularly virulent form of polio. That was achieved with the support and co-operation of the Taliban. If you can deal with them, I suspect that you can deal with almost anyone. That is important. Certainly UNICEF would powerfully support the argument of the noble Lord, Lord Bates.

My second, possibly more significant, thought concerns the special symbolism that ties the notion of peace to the Paralympics. I know that Paralympians are not necessarily thrilled when they get separated in any way, shape or form from the Olympic Games, but to me the Paralympics are a special, symbolic issue. There is a tragic and all too obvious link between violent conflict and disability. That link is extraordinarily well symbolised by the presence of victims of conflict—most recently in Afghanistan—in the UK’s 2012 Paralympics team. I mention three. Private Derek Derenalagi, a member of the 2nd Battalion, the Mercian Regiment, was injured in Afghanistan in 2007, losing both legs. He is now a successful javelin thrower and part of Team GB. That is quite extraordinary. Lance Corporal Terry Byrne lost a leg in Helmand province and is now a developing Paralympian cyclist. Jon-Allan Butterworth, a former RAF weapons engineer, lost his left arm in 2007 and is now a part of the Great Britain cycling development squad. These are all extraordinary examples—and there will be more. I have no doubt whatever that, when we are watching on Channel 4 the Paralympics 2012, other victims of the violence in Afghanistan will be representing this country. I cannot think of anything more moving or more symbolic to support the argument that the noble Lord, Lord Bates, is making.

Over the weekend I watched a quite remarkable film—I doubt that it will be seen in many cinemas in this country—called “Lebanon”. When I was watching it, it struck me that you had to have a powerful lack of imagination to have any time whatever for the concept of war. For an hour and 40 minutes, you are inside an Israeli tank in Lebanon in 1982. Anyone who can watch that film and come away from it thinking that there is anything to be said for violent conflict has a breadth of imagination that I clearly lack.

This is about having the imagination and guts to do something that many people think is impossible. However, we know that it is not impossible—UNICEF has proved that it is not impossible—and I commend the noble Lord, Lord Bates, for raising the issue. I hope to God that people listen.

16:40

[Lord Addington]

My Lords, I thank the noble Lord, Lord Bates, for raising this subject, primarily because it takes people out of the normal boxes in which they think. A few of us will do sport, a few of us will do international development and a few of us will do other things, and we try to look at them across our little silos. I have often berated parts of government for not talking to each other—indeed I have a standard speech for doing so—but we all do it. This has brought home to me the fact that we occasionally think that sport does X, international development does Y and other things do other things. However, it also shows the power of the Olympic Games as an international celebration and how they can go on to mean something else.

The Olympics have clearly grown in most people’s eyes over the past few years. The ending of the Cold War did more for the Olympics than anything else because it is no longer a “them and us” situation and our bloc doing better than theirs. Looking through the history of the ancient Games, I found out that it was not so very different when the Athenians and Spartans competed with one another in internecine warfare. Did one prefer the totalitarian side that treated its women better or the democratic side that ignored its slaves and kept its women at home and under veils? They were appalling states of affairs and appalling peoples. Let us remember that, just because they gave us nice columns and beautiful buildings and discussed things in public, it was not the ideal society.

However, the idea that a mass celebration—it is not just a nation’s celebration, but a worldwide celebration—should aspire to do something more is a good one. We can celebrate something tangible in a sporting context. That by the time you get to the field you should be on even terms and have a chance to interact as equals is probably the greatest idea of sport. Let us assume that we all have the same budgets and preparation, although here I am possibly going back to my normal silo. If the Games can take place and people can watch, they are surely a very good vehicle for taking forward other ideas.

The London Games have set themselves a very high benchmark in being concerned with legacy. An international legacy that can be built on, or at least a model for our country that other nations can follow, is incredibly difficult to achieve. If London gets it right, it will be surpassed fairly quickly because it will have taken the first steps on a difficult road—we are almost guaranteeing that we will take the first step.

The programme for international inspiration is probably the most interesting of the many projects that are emerging at the moment. The organisers are saying, “We will take this abroad, speak to other nations and try to get young people involved in sport”. Are we going to try to develop the idea beyond our legacy and prepare it for the Olympic legacy? Do we want to leave something that will be remembered and which somebody else can pick up, take forward—it will be Brazil next time—and expand and grow? Hopefully, we may even bring it home one day. If we can do that, we will have done something very special.

When we look at the ancient Games, we always forget the other games that went on at the time and how they became a circuit building up to the Olympics as the major event. I suggest that we try to bring in competitions such as the Commonwealth Games and the various world championships and make them more a part. We were talking about silos. The organisers of the Olympics and the Commonwealth Games like to talk to themselves rather than to each other. Indeed, they have squabbled in the past about which has the greatest participation in certain sports. For instance, I heard doubt expressed for a long time about whether Scotland takes hockey seriously in the Olympics because it enjoys the Commonwealth Games more. If one can see the bigger picture, silly interactions of this type will hopefully be cut down, helping sport along the way.

The noble Lord, Lord Bates, has started a very interesting discussion. I feel that most of us are not well enough prepared to go into it at any great length, so I shall sit down in a few moments. How are the Government making sure that we as the host nation are starting something that can be carried on? How can it go beyond the Olympics and be seen as something else? The truce is a good symbolic start, but if we say that it means simply, “Please stop fighting”, it will not work. It should mean, “Please stop fighting so that we do can something and reach for something”. The truce’s original purpose was to allow people to get to and from the Games without being killed. We should remember the brutality of the state in Greece and where the idea for the truce originally came from.

Let us go further. Then, you had to be Greek, not a trouser-wearing barbarian, which I believe is the ancestry of just about everyone taking part in this debate or listening to it. We can go beyond that and reach out to see how we can touch the rest of the world. When the Minister responds, if she could give us an idea about reaching out so that something that starts with the Olympics will go on and be renewed and given greater incentives at various points, we would be doing good here. We have proved that people are interested in the Olympics. They want the Games and will take time out to watch them. Surely, asking people who are taking time out to watch the Games to take time out to stop killing each other with such vigour is not that big a shift.

16:50

[Lord Hall of Birkenhead]

My Lords, I, too, am delighted that the noble Lord, Lord Bates, has raised this important subject for debate this afternoon. I would like to speak briefly about the inspiration of the truce for young people and artists. Whereas the role of the Government is very important, the role of other organisations such as LOCOG, the Cultural Olympiad and the Olympic Festival are also important. I remind the House that I am chair of the Cultural Olympiad Board and on the board of LOCOG.

My job and that of the team preparing for Festival 2012 is to make sure that some of the best creative talent in the world and in this country can give their best in the run-up to Games time. It is interesting that as we develop the programme with some of the world's greatest artists, including many of the UK's brightest, one theme keeps returning as an inspiration for the festival’s creative commissions. For many artists, the story of the Olympic truce and the idea of what the truce can do is an inspiration.

In ancient Greece, artists were part of the Olympic celebrations, which meant that when everyone in the ancient world agreed to a truce they came to watch not only the sportsmen but the artists. That idea of intertwining sport and art is exactly what we hope we can achieve in this country in 2012. In 2012, artists will have the chance to speak to the world, and the opportunities are greater than ever before in our history if we think about the millions—or probably billions—who will join in by watching digitally.

Of course, artists will do what artists want to do and we all know that the only way to get the very best shows, concerts, performances, exhibitions and events is by giving them the ability to do exactly that. What is so interesting is that so many artists and talented creative and cultural partners are already turning to the idea of peace and truce as a theme that they want to pursue with their creative work preparing for 2012. It is what they want to say to the world. That is not new if we think back to some of the greatest work in the causes of peace such as Benjamin Britten's “War Requiem”, Picasso’s “Guernica” and the war poetry of Wilfred Owen. But what is so great is that London 2012 is giving a once-in-a-lifetime opportunity to look at that whole theme afresh.

Let me give noble Lords a couple of examples of the sort of projects that the idea of truce is inspiring. On World Peace Day this year, the Cultural Olympiad launched a creative collaboration with the charity Peace One Day, whose founder, Jeremy Gilley, has achieved so much through the power of film, as the noble Lord, Lord Bates, reminded us earlier on. The project that we are working on together will involve young people in creative workshops who will then end up making their own short films in our programme called “Film Nation: Shorts”. The best of those films will be shown in the Olympic Park in 2012 and will be showcased by Peace One Day at its World Peace Day concert at the O₂ next year. That scheme for young people is sponsored by Panasonic. I mention that only because its company motto is:

“Peace and happiness through prosperity”,

which is a testament to those important themes that we are discussing this afternoon.

Another example shows how these themes of truce and peace are something of which this country has a lot to offer the world in 2012. I am talking about the experience of people in Northern Ireland and the extraordinary and difficult route taken towards resolving that conflict. For all of us, a highlight of the Cultural Olympiad programme so far has been the Pied Piper project in Belfast, a performance bringing together primary school children and their families from across Catholic and Protestant communities, in a powerful example of the way in which music can foster friendship and reconciliation. The Cultural Olympiad and its festival will have as one of its most important partners Derry-Londonderry city of culture 2013, which like us has put the theme of peace and reconciliation at the heart of its creative programme. We share a passion to show how the arts can illuminate and support the process of peace and will be sharing creative commissions to help Derry to build up its programme in 2013, and a legacy beyond.

The inspiration of the Olympic truce is a powerful tradition of the Games and for London 2012. I am delighted that the inspiration will enrich also our education and cultural programmes. LOCOG intends that from September next year schools will be invited to learn about the principles of building bridges, community cohesion and conflict resolution in a major initiative around the idea of Olympic truce. We are working in 15,000 schools in the UK and building up to working with 12 million young people in schools in 20 countries around the world. I hope that the Government will support this wonderful work.

The UK’s creativity was one of the strengths that won us the Olympic Games, and our arts and creative industries are envied worldwide. We want our festival in 2012 to show the UK at its best and to be a springboard for economic growth and cultural tourism. As Boris Johnson’s cultural adviser memorably said:

“Culture is to London what sun is to Spain”.

Culture is what attracts vital tourist income, and London 2012 is our chance to show the world how wonderful our cultural institutions and creative artists are. I hope that the Government think very carefully about how best to ensure that, come 2012, we show off what sets this country apart: its arts, its culture and its creative industries. We also want a festival that raises the bar for artistic commissions, inspired by the themes of Olympic truce, which future Olympics could find hard to beat. We have the talent and ambition, and we hope that we have the Government’s wholehearted support.

16:55

[The Lord Bishop of London]

Like other noble Lords who have spoken, I am extremely grateful to the noble Lord, Lord Bates, both for introducing this subject and for the way in which he introduced it, as well as the very practical menu that he has drawn up for government comment. I join those who have talked about the role of sport and art in the ancient Olympic Games. Of course, those noble Lords who actually know the site of ancient Olympia will know that it was a combination of Wembley Stadium and Westminster Abbey. There was constant reference to the temple of Zeus and the sacred truce, which the noble Lord, Lord Bates, recalled, was believed to be policed by Zeus himself, protecting travellers to the sacred territory of Elis for the seven-day period before and after the Games.

There is a beautiful Greek word for the truce—ekecheiria. It meant a holding of hands. That was the vision extended to people. But, as the noble Lord, Lord Addington, remarked, we should not be bemused by, or too idealistic about, these ancient precedents. The terms were somewhat limited, as he suggested. The ancient Greeks were notably pugnacious. Aristophanes made his point about “trousered barbarians” in his play, “Lysistrata”, which describes a sex strike by the women of ancient Athens in a “make love, not war” campaign. The women say:

“In no uncertain terms I must reproach you

Both sides and rightly. Don’t you share

A common cup at common altars

For common gods like brothers

At the Olympic Games?

The world is full of foreigners you could fight

But it’s Greek men and cities you destroy”.

So there was very definitely a limitation on people’s sympathies. That in some way should be an enormous encouragement to us, because there has been an expansion of idealism in connection with the Olympic Games, and we should not cease to underline that point. In the medieval West in the 10th and 11th centuries, there was a “truce of God” movement in the area of modern Europe that includes France and Germany in an attempt to curb the endemic warfare among feudal barons. In some form or other, that truce lasted for nearly three centuries. The modern truce movement has already been described by other noble Lords and, inspired by those precedents, More Than Gold—the ecumenical body which brings together all the Christian churches concerned with making the London Olympics a success—has already pledged itself to support the initiative of a truce. Led by a member of your Lordships’ House, the noble Lord, Lord Mawhinney, it has pushed out that message to some of the bodies with which it co-operates. LOCOG, for example, has already set up an interfaith reference group and this is a major item on its agenda.

Speaking as Bishop of London, I am chairman of London Church Leaders; that group represents the 650,000 Christians who worship at least once a week in more than 4,000 churches in the Greater London area. It includes the Archbishop of Westminster and leaders of free and black-led churches. We have already discussed ways of applying the truce to London, where—I make this point particularly—with experience of street-level work and street pastors spreading in various forms throughout the capital, we see the truce as potentially very significant in assembling the enthusiasm and commitment of young people to combat gun and knife crime. We already have bodies working on that, so we have a network which could make a substantial contribution.

Noble Lords have, absolutely rightly, talked of the international dimension. We are focusing on what can be done in the environs of the Olympic stadium itself and looking for ways of co-operating with other agencies to make the truce effective. Internationally, when your Lordships look at the reach and influence of the great world religions, it will be vital to get them on board very soon. I think of the recent visit of Benedict XVI, in the margins of which was an attempt to see how we could work effectively with Vatican agencies internationally, to push some of the agendas in climate change and development which have been promoted to that important sphere of questions and policies which are beyond the partisan battles in which we all participate. It seems to me that this is another candidate for the kind of co-operation with international faith networks that the Pope was talking about.

The ancient truce was proclaimed throughout Greece by three heralds; we shall need rather more. We will need credible heralds to carry the message to every community in the street around the stadium, and will want to proclaim the Olympic Truce and make our small contribution to the general effort. At St Paul’s Cathedral, we intend to organise an event bringing together not only Christians but supporters of all the nine major, recognised religions in London to proclaim the truce. It seems that we will have to work out very carefully a process of commending this and penetrating the community at depth. We hope that the truce will be proclaimed in every one of those 4,000 churches of Greater London and, because we already have solid interfaith relations, we will be working with friends in mosques, synagogues, gurdwaras and temples to ensure that this really exemplifies one of the things which sold the Games to London—our extraordinary cultural diversity and extraordinary experience of cultural and religious harmony. In that spirit, I once again thank the noble Lord, Lord Bates, for initiating this important debate.

17:03

[Lord Hannay of Chiswick]

My Lords, the noble Lord, Lord Bates, is to be congratulated on having obtained this debate on an Olympic Truce, and to have done so in good time for thought to be given to the question well ahead of the London Olympic Games in 2012. We have heard a lot about the benefits that the Games might bring to London and to Britain; we have also heard a lot about the legacy that they might leave here after they are over; but we have heard nothing like as much about what Britain could do to bring benefits to the rest of the world when the Olympic Games take place in London. I was delighted to hear the noble Lord, Lord Addington, too, speaking along these lines. That is surely where today's debate, and the concept of an Olympic Truce, comes in, although I can see the point made by the right reverend Prelate that the project for a truce in this city is enormously worth while, too.

It is all too easy to decry the idea of an Olympic Truce, which after all was not invariably effective even among the city states of ancient Greece. It is easy to say that it is hopelessly utopian. Attempts to use the concept of an Olympic Truce in the 100 years or more since the Games were revived have tended to fall on deaf ears, alas, and to be ignored by the parties to violent disputes around the globe, but that is no reason to shrug our shoulders and walk away. Rather, it is a reason to be a bit more imaginative and practical in developing the idea in the context of the London Olympics. It is probably utopian to hope that every conflict will cease temporarily for the duration of the London Games; and it can be argued that a mere cessation of hostilities for a few weeks, followed by their resumption, would not bring a huge amount of benefit. However, the idea of an Olympic Truce is in essence a form of conflict prevention, and the scope for improving on the international community's performance in this field is considerable. Hardly one of the conflicts that have broken out since the end of the Cold War—both those between states and the even more numerous ones within states—came out of a blue sky. Most were preceded by plentiful signs that hostilities were going to break out. What was lacking was not forewarning, but any effective action taken to prevent it happening.

We all know that the cost of successful conflict prevention, in terms of resources, is a tiny fraction of that of dealing with the conflict once it has broken out, so would it not make very good sense to use the occasion of the London Olympics in 2012 to reinvigorate the international community's efforts at conflict prevention? I suggest that any such initiative would need to be focused on the United Nations. Its charter enjoins it to rid the world of the scourge of war, and its track record in conflict prevention over the years has been a good deal better than it is ever given credit for. However, it is short of resources and often short also of that indispensable commodity, political will, without which conflicts are seldom prevented.

I hope the Minister will say that the Government will give careful thought to ways in which the UN's capacity for conflict prevention could be strengthened, and to how best that could be achieved by making use of the occasion of the London Olympics and the noble and ancient concept of an Olympic Truce. After all, Britain plays an important role still at the United Nations as a permanent member of the Security Council and as a major donor to help achieve the millennium development goals that the House debated only last week. Can we not put that role to good use and thus make the London Olympics an occasion that will be remembered for more than just sporting achievements?

In conclusion, perhaps I may do something that is virtually unheard of in this House and complain about having been given too much time to speak—a problem that I notice has assailed every other speaker in the debate. Earlier this afternoon, we had a very important debate in which the speakers were limited to two minutes. Last week, we had a debate on the millennium development goals in which the speakers were limited to four minutes: that is, half a minute per millennium development goal. I am moved to suggest that this is not the way in which railroads ought to be run. I am not asking the noble Baroness to respond—I know that these matters fall to those other than her—but I hope that on the Olympian Areopagus where the usual channels have their meetings, they might think a bit about the absurdity that they create by the rigid application of these rules. Perhaps the noble Lord, Lord Goodlad, who is looking into these matters, might think about that, too.

17:10

[Baroness Grey-Thompson]

My Lords, I also thank the noble Lord, Lord Bates, for raising this debate and for kindly reminding me that I might have the opportunity to sneak in and make a few comments as time allowed. I have listened to the discussion with interest. I declare an interest as a Paralympian. The idea of an Olympic and Paralympic Truce is a wonderful ambition, but I wonder whether we might widen it to think about the power of sport to change the world.

The Games themselves are about two weeks of competition, but also so much more than that. They are about the influence we have over physical activity and how we encourage young people to think differently about themselves. Sport has such a strong power to influence society and bring about change. We need only to look at the athletes from countries that won medals at the Commonwealth Games to see not just the celebrations among the athletes but those among people at home.

What I know from sport is that young women who do two hours of physical activity a week are less likely to be teenage mothers, more likely to stay at school, more likely to have career ambitions and less likely to be in abusive relationships. This is something that we should want for all young people. Sport helps set the tone to achieve some amazing things. The truce might be a long way off but maybe we should think about baby steps along the way.

The Olympic and Paralympic Games have huge power to influence and bring about change. By hosting the Games in 2012 we have an opportunity to set a mark for the other countries that will follow us to try to reach. The noble Lord, Lord Addington, mentioned International Inspiration. I have huge pleasure in being an ambassador for that charity, which is about the legacy of the 2012 Games. I recently had the opportunity to travel to Jordan to see the influence that London is having on the rest of the world. There, young girls have the opportunity to play together and learn, which helps them to gain confidence. The Games are a once-in-a-lifetime opportunity that we have to grasp. They are the start of a process of working towards, eventually, I hope, the truce.

17:11

[Baroness Billingham]

My Lords, I add my thanks to the noble Lord, Lord Bates, for securing this debate on the Olympic Truce and congratulate all today’s speakers on their excellent contributions. It has been a glittering cast of speakers, who have lifted this debate far beyond the boundaries that I anticipated. This is something of a first for me. I have taken part in many debates. In some I have been full of confidence, knowledge and conviction. In others I have been less informed but have had enough facts at my disposal to make a half-decent presentation. However, when on Friday I was asked to wind up today’s debate for the Opposition, I was flummoxed. I had never even heard of the Olympic Truce—but not any more. Following today’s debate and the contributions from around the Chamber, and some intensive Googling and trawling through Hansard to find previous speeches over the weekend, I am now happy to pronounce myself fully truce-conversant. In fact, I will undoubtedly declare myself to be a world authority on this matter in the time-honoured way of politicians who have always, down the ages, taken such a stance.

What is the truce about? We have heard much this afternoon. We now know that in 776 BC the peace-loving King Iphitos yearned for the warring factions to cease killing each other—a noble thought. He made what can only be described as a grand gesture, using the four-yearly Games in Athens as a catalyst for change. He decreed that for three months around the Games peace would prevail. Furthermore, penalties would be imposed on any nation that broke the truce. Thus, for more than 1,000 years the truce became part of the Olympic legacy. The king was inspired to this plan of action following visits to Delphi, where he witnessed the Games and consulted the oracle.

I, too, visited Delphi some years ago. I was struck by the magical feeling of the place. It is a place of stunning beauty, high on the side of Mount Parnassus, with an area sculpted out of the mountainside. It is breathtaking. I remember sitting on the sun-warmed stone steps around the sporting arena, looking down and imagining the sporting activities there, and looking even further down beyond the arena to the Sea of Corinth sparkling beneath us. It is a great place for reflection, and a visit to the nearby cave of the oracle gives an even more mystical feel to the whole experience.

As we bring ourselves back to the Chamber today, let us evaluate the proposal of the noble Lord, Lord Bates, that the 2012 Games to be held in London should recapture some of the peace and tranquillity that a truce would bring. No doubt there are many merits. As the noble Lord, Lord Hannay, reminded us, the United Nations sets the tone for this and gives us an object lesson in how it can be dealt with. However, my practical intuition has in its mind’s eye a negative thought, for which I apologise but cannot avoid. I have a vision of a meeting between the noble Lord, Lord Bates, the Prime Minister and all the Ministers responsible for immigration, law and order—not forgetting terrorism—to discuss this very proposal. It is not necessary for me to return to Delphi to consult the oracle as to the outcome of such a meeting, nor do I need to speculate on the headlines that would follow in the Daily Mail and the Daily Express. However, those are first thoughts that we need to look beyond. We need to adopt some of the ideas that have come out of this debate as regards applying previous experience to the present day. As the right reverend Prelate the Bishop of London and other noble Lords so rightly tell us, we have a real opportunity here.

It is a pleasure for me to wind up the debate on behalf of Her Majesty’s Opposition and I do so as a keen observer of the merits of the proposal of the noble Lord, Lord Bates, but I fear that my response can only be delphic.

17:16

[Baroness Rawlings]

My Lords, I, too, thank my noble friend Lord Bates for tabling this Question on the timely, important subject of the Olympic Truce. Tributes have rightly been paid to him; he has pursued this matter for some time with much passion. I am truly grateful to all the speakers who obviously care and have made such constructive contributions. I say “timely”, not lightly, as the Government are just starting the process of preparing their resolution on the truce for the United Nations. As is often the case, your Lordships’ House is ahead of the game.

The noble Baroness, Lady Billingham, enlightened us about the Olympics, being a great sporting lady herself, as we all know. I had heard about the truce only because I had listened to my noble friend’s impassioned speech this June. I was fascinated then, and am more so now after hearing all your Lordships’ speeches.

This Government take the truce very seriously and will be taking measures to make sure that it is properly observed and promoted in relation to the 2012 London Olympic and Paralympic Games. The IOC revived this concept only in 1992, calling on the international community to observe the Olympic truce for the duration and to table a resolution in the United Nations in advance of their Games. While each resolution reflects the specific ambitions of the individual host country, they represent a consistent ideal,

“to use sport to promote peace, dialogue and reconciliation in areas of conflict”.

The Government believe—as do many of your Lordships—that the benefits of sport can have a positive influence on individuals and nations.

We have used the UK’s hosting of the Games to promote these benefits directly. The London 2012 Get Set programme explains the Olympic values in a new and engaging way. More than 14,500 schools have now signed up to the programme. The International Inspiration programme is active in 13 countries and has given more than 6 million young people increased opportunities in sport. The noble Lord, Lord Puttnam, mentioned UNICEF, which is part of this. I thank my noble friend Lord Addington, who so often enlightens us on sporting matters, for his eloquent contribution to today’s debate, for his close involvement in the establishment of International Inspiration, and for mentioning the importance of the legacy. I also pay tribute to the noble Baroness, Lady Campbell, and my noble friend Lord Moynihan, who are trustees of the International Inspiration Foundation, and to my noble friend Lord Coe for all his efforts in helping to bring the Olympic values to life.

The UK has actively supported the Olympic Truce resolutions in advance of recent Olympic Games to demonstrate our support for the ambitions of the respective host countries. In doing so we have sought also to highlight the UK’s role as host country for 2012, which we must not forget is Her Majesty’s the Queen’s Jubilee year.

As the host country for the 2010 Vancouver Winter Games, Canada sought to promote through the Olympic Truce the contribution that sport can make to peace. The UK co-sponsored United Nations General Assembly Resolution 64/4 of 19 October 2009 to support Canada’s ambition. Canada’s resolution placed greater emphasis on people with disabilities and the Paralympic Games than previous resolutions. The Paralympic Games were inspired by the Stoke Mandeville games in 1948 and the UK may look at disability as a theme for our resolution. The noble Lord, Lord Puttnam, rightly stressed this idea, and the noble Baroness, Lady Grey-Thompson, reminded us clearly of the importance of the truce in this area.

The Olympic Truce was established around 776 BC to create a period during which the athletes, pilgrims, artists and their families could travel in safety to participate in or attend the Olympic Games and return to their respective countries. The right reverend Prelate the Bishop of London, in his most eloquent and witty speech, reminded us of the sacredness of the truce and of his project involving nine religions. As my noble friend Lord Bates pointed out in his speech in your Lordships’ House on 14 June, the truce was very rarely violated during the almost 1,200-year history of the ancient Olympics. Offenders were sanctioned by suspension from the Games and tended not to reoffend.

Following my noble friend Lord Bates’s two suggestions, first that the Government might consider including in the resolution targets, such as the UN millennium development goals on conflict resolution, the Government have not decided on a theme for the resolution and would be happy to consider all suggestions—many of which we have heard today. That is why this debate is so important. Traditionally, the text of the resolution is not controversial, which enables it to attract wide support from the UN membership. Secondly, he suggested that the UK might organise an intergovernmental conference during the 2012 Olympics. All my noble friend’s ideas are very interesting and we know that many heads of state and government will be in London during the Games but it is too early to say what meetings may take place at the margins. However, the noble Lord, Lord Hannay, with his great experience of the United Nations and his many ideas, is right to say that there is a chance to benefit the rest of the world in conflict prevention and that this idea should be considered. Interestingly, though, the Olympic protocol dictates that no political conferences of intergovernmental meetings take place in the margins of the Games.

The noble Lord, Lord Hall, as chairman of the Cultural Olympiad, delivered an inspirational speech involving schools.

As the host country, the UK will be promoting a fresh resolution calling for the continued observance of the Olympic Truce for the 2012 Games, as has every nation since 1992. The UN General Assembly session will begin in late September 2011 and we expect our resolution to be adopted in October or November of that year.

Once again, I thank all noble Lords for all their suggestions in this debate. It has been perfect timing and most helpful in identifying the areas to be considered for the framing of our resolution. Perhaps I may write to noble Lords who have asked questions that fall outside the debate about the truce.

We look forward to hosting the Olympic and Paralympic Games in London in the spirit of the initiative to provide an exciting and memorable experience for the competitors and the spectators, and to foster a spirit of international harmony and co-operation.

Welfare Reform

Monday 11th October 2010 Lords Chamber

Statement

17:26

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, with the leave of the House, I shall repeat a Statement on welfare reform made earlier today in the other place by the Secretary of State, Iain Duncan Smith. The Statement is as follows:

“Today’s Statement is in three parts: first, the launch today of a new approach for those on incapacity benefit under the work capability assessment; secondly, more detail on the new work programme, which I will set out; and, thirdly, our plans for wider benefit reform as we look ahead to a White Paper and welfare reform Bill.

The economic backdrop is severe. We have the largest deficit in the G20—at £155 billion, the largest in peacetime history. With net interest of £120 million a day, that is £43 billion in 2010-11. Under the previous Government’s deficit reduction plan, which the Opposition now seem not to favour, Labour’s plans had annual debt interest spending rising in only five years to almost £70 billion.

Reform is urgent. We are at a critical point, with 5 million people on out-of-work benefits, 2 million working-age people claiming incapacity benefit, of which 900,000 have been claiming for an entire decade, and a system that has left Britain with the highest rate of jobless households in Europe. These statistics reveal the human cost of leaving our welfare system unreformed.

With this comes an ever increasing financial cost. The working-age welfare budget rose by 40 per cent in real terms from £63 billion in 1996-97 to £87 billion in 2009-10. A staggering £133 billion was spent on incapacity benefits in the past 10 years, with benefit spending forecast to be over £152 billion in 2010-11—about 10 per cent of GDP. Today, we spend £1 in three on British welfare, yet youth unemployment is higher, inequality is greater and there are actually 800,000 more working-age adults in poverty than in 1998-99.

It is in this context that we also announced reform of child benefit. I do not think that it is right to tax the poor to fund child benefits for those above the higher-rate tax threshold. We can save £1 billion, protect 85 per cent of families and secure fairness as we support people into work. This is tough, but it is fair. At the same time, we announced that we will cap benefits for workless households to average earnings, which are around £26,000. This cap will be net of income tax and national insurance, so in practice equates to gross earnings of £35,000 a year. Equally, we will exempt the disabled and those on working tax credit, so we encourage work incentives. This is fair and we will announce the detail in the spending review.

Today, we launch two trials for those on the old-style incapacity benefits under the work capability assessment. My right honourable friend the Minister of State for Employment is travelling to Aberdeen and Burnley today to see those trials get under way. This is about giving many thousands of people the opportunity to move from the margins of society into mainstream employment. This new assessment will put an end to a system that has simply abandoned people to a life of dependency and exclusion. Under this system, we will assess people on the basis of what they can do, not what they cannot do, and thereby support people to meet their aspirations for work. We are determined to get this right, which is why not only will we learn from these trials, but we have also set up an independent experts group to scrutinise the assessment.

We are committed to supporting everyone going through the assessment. For those deemed unable to work, we will ensure that they continue to receive the support that they need and, for those deemed able to work, we will ensure that they are fully supported to do so. People who are found fit for work will move directly to the work programme, an integrated package of support that will provide personalised help based on individual needs, not the benefit that they are on. Using the best of the private and voluntary sectors, this will help people to get into work as quickly as possible. It will operate a true payment-by-results system that pays providers not simply for getting someone into work but, more important, for keeping them there. We have had 790 expressions of interest from providers to join the programme and in December we will invite bids for contracts ready for national rollout next year.

The work capability assessment and the work programme are critical to helping people into work, but alone they are not sufficient. Underpinning this support must be a benefits system that incentivises work. We have to make work pay. That is why the coalition Government aim to bring forward a White Paper shortly and a welfare reform Bill in the new year.

The introduction of a universal credit will restore fairness and simplicity to a complex, outdated and wildly expensive benefits system. As we get the benefits system working, we can get Britain working—the best way to get the deficit down, drive the recovery and get the economy moving. Welfare reform is critical; it is also the right thing to do—to move people into work and create a pathway out of poverty for the 5 million people on out-of-work benefits. This is a cause that should unite this House.

The new leader of the Labour Party has said that he will not be in opposition for opposition’s sake, so let him and his shadow Cabinet colleagues do the right thing and support us in delivering a welfare system finally fit for the 21st century. I commend these welfare reforms to the House”.

That concludes the Statement.

17:35

[Lord Knight of Weymouth]

My Lords, I am grateful for this Statement—although, given that Parliament was sitting last week and given the contents of paragraph 9.1 of the Ministerial Code and paragraph 6.35 of the Companion, it would have been much better to have had the Statement last week. I disagree with the Minister’s characterisation of the macroeconomy, but we can debate that some other time. Suffice it to say, given that the UK has one of the lowest debt-to-income ratios in the G7, the pace of reform is a choice and not an inevitability.

As my right honourable friend the new shadow Secretary of State said today in the other place, we are not against reform and much of the reform is a continuation of what we did in office. But there are of course a number of questions. On the migration of incapacity benefit claimants through the work capability assessment, rolling this out nationally is, as I am sure the Minister would agree, a huge undertaking. What is he doing to increase capacity in the market for providers of those assessments? Furthermore, given the bleak projections by the Chartered Institute of Personnel and Development and others of rises in unemployment due to the speed of public spending cuts, what proportion of providers’ income will be paid by results on the basis of job outcomes? What is the Minister’s prediction of the unemployment rate when the work programme starts next summer? Given that the bidders of the programme are, with their financial backers, having to make predictions on successfully getting people back to work, I do not think that he can any longer hide behind the mantra that I used that Ministers are not in the business of making predictions.

What is being done to encourage employers to take on those who have been long-term sick when, with the claimant count now rising, they could take the recently unemployed, recent graduates or highly motivated EU migrants instead? Finally on this point, what will be done differently by providers in this programme from that done by those who deliver the old Pathways to Work programme with such mixed success, where the private sector did not outperform the public sector?

I shall move on to the proposed benefit cap of £500 per family per week. To some, that may sound reasonable, but it will cover not just the main income replacement benefits such as jobseeker’s allowance, not just child benefit and child tax credit, and other benefits such as carer’s allowance, but crucially it will also include council tax benefit and housing benefit. In many of our urban areas and in the south-east, the high cost of rented housing and council tax means that, if you lose your job and have a larger family, it will not be long before you lose your home as well, as you will not be able to afford the rent. Does the Minister think that that is fair and will really help those families back into work?

As regards child benefit, has the Minister seen the report in Thursday’s Guardian where the right honourable Secretary of State for Work and Pensions said that child benefit will be rolled into the new universal credit from 2017 and will therefore be means-tested? Can he confirm that the Chancellor’s new wheeze for clawing back child benefit from higher rate taxpayers is only temporary? What discussions took place between Ministers in the Department for Work and Pensions, especially those responsible for child poverty, and Ministers in the Treasury before the announcement was briefed last weekend? In the other place today, the Secretary of State claimed that the unfairness of the child benefit changes was due to the unfairness of the taxation system. Has the Minister seen the comments of the Institute for Fiscal Studies, which stated:

“Using the means-test in tax credits could be considered fairer to single-earner couples, and would not distort incentives so dramatically”?

Is it just not-invented-here syndrome that prevents the Government from using the tax credits system to do this?

Finally, the Chancellor repeated in the media last week that his proposed changes would affect those paying the higher rate of tax—about 1.2 million families. That was also repeated by the Secretary of State in the other place. What is the Minister’s latest estimate of the number of higher rate taxpayers who will lose out due to the child benefit changes, given the reduction in the threshold for higher rate taxpayers announced in the Budget? Surely, if the higher tax threshold is lowered as part of moving to meet the Liberal Democrat ambition of a starting tax threshold of £10,000, there will be many more than 1.2 million people affected by this measure.

The announcements of welfare reform are in large part welcome in principle, because they follow from what my party, and I, pursued in government. The announcements about child benefit last week were frankly a shambles. I hope that this Minister, whom I know to be a good and noble Minister, will clarify things for the benefit of Parliament.

17:40

[Lord Freud]

I thank the noble Lord, Lord Knight, for some general supportive words, although he also asked some specific difficult questions, which I shall endeavour to answer as they came up. He started off by saying that he welcomed the general thrust and claimed that it builds on existing processes. To be fair, we have tried very hard to build on the present system. There is an argument for being radical, but just ripping everything up and starting again can be dangerous.

Let me start with the noble Lord’s question about the work capability assessment process for people on IB. We are indeed taking steps to increase capacity with the provider, Atos. One control of the process, by which we do it over three years, is exactly to take account of the capacity available.

On the noble Lord’s point about unemployment in general, one of the most shocking stories that I read last week was not in the Guardian but in the Financial Times, which stated on the front page that the total number of jobs that had so far been lost in this recession by people living in this country was roughly 600,000. However, people from outside this country had taken 200,000 more jobs. That tells you something about how we have locked people up in inactive benefits.

The whole point of what we are trying to do with the universal credit and the work programme is to take people out of this trap—being defined as inactive and unable to seek work—certainly on a flexible basis. Once we have a universal credit in place, people will be able to take any amount of work gradually and we can have a great deal more flexibility as we steadily get rid of the 16-hour rule and the 30-hour rule. It is not just about the unemployment rate; it is very much about the nature of the employment that is available. The work programme is designed to take people and unleash their capacity by making them available for the particular jobs that are there.

The noble Lord’s next question was: what will be done differently? He pointed out that Pathways was a disappointment, as indeed it was. It was a disappointment because it was a prescriptive programme based on six work-focused interviews and was underresourced to do very much else. The point about the work programme is that it will allow providers to discover and build on the things that are working. The difference between past programmes and the work programme is that past programmes have looked on outside contractors as a price discovery mechanism, whereas this programme looks to providers to unleash their creativity and the competitive pressure to get the things that work copied and used.

The noble Lord asked whether the £500 benefit cap is fair. Many hard-working families do not achieve a rate of £35,000 gross. It puts things into context for them when people on benefits can get more than that. Therefore, our aim is to cap what people can get. This will come in towards the end of this Parliament and we have a lot of measures, including the cap on housing, to work the process through. So, yes, it is fair.

I was asked whether there is a plan to roll child benefit in with universal credit. At the moment, there is no such plan. Within this spending review, the child benefit change will be introduced in the way described using the tax system as a measure. It is clear that beyond this spending review, once universal credit is in place, there can be decisions to use that, but at the moment there is no such decision.

I was asked about the discussions on child poverty. We have done an immense amount of modelling on the impact of the universal credit. The models change on a regular basis, but the effect of the universal credit at the moment is to take some hundreds of thousands of children out of child poverty. The current model—it may not stay at this rate, so the figure is not rigid—would take 300,000 children out of child poverty and would raise others much nearer the line. It has a most powerful effect on poverty. One of the most attractive things about the universal credit is that it takes a lot of people out of poverty.

I am conscious that I need to give other people time, so I will stop and come back to some of the noble Lord’s other questions.

17:48

[Lord German]

I thank the Minister for his Statement. I am particularly interested in the work programme and the way he announced that it will bypass the jobseeker’s allowance. Can he give us an estimate of the prospects for lifting people out of poverty as a result of this new programme? Will a big attempt now be made to ensure that that happens as a fundamental principle? The Minister mentioned expressions of interest from providers. Will they include people from the third sector or people who can deal with people who are further from the job market? There is a fear that those who are closest to the job market are the easiest to deal with and will be dealt with by private contracts.

[Lord Freud]

The core difference between the work programme and past programmes is that we are determined to put price differentiation into it because otherwise, as the noble Lord pointed out, the financial incentive for providers is to concentrate on the easiest people. To neutralise that effect, we need to give providers a higher reward for helping the more difficult people. That also has the effect of encouraging the consortia which are formed to be rather rich in terms of their capability. As the noble Lord pointed out, the third sector has some of the greatest expertise in the most difficult people to help. Once you pay for that, it encourages consortia to form which include them. That price differentiation mechanism is one of the most powerful aspects of the work programme for lifting people out of poverty into jobs.

[Baroness Hollis of Heigham]

My Lords, I very much support the Government’s approach in their 21st Century Welfare paper on making work pay and on the running particularly of benefits alongside low hour working in order to reduce the risk of returning to work. That approach is absolutely right and well done on that point. However, for most people of whom I have had experience the issue is not whether work paid, because people have an irrational attachment to being in work, it is whether you can reduce the risk of returning to work. If the job folds and as a result you have to go back on benefits, which may take three to four weeks to come through, and you are only two tins of baked beans away from not being able to feed your children, you may prefer the security of a low but steady income than the risk of work. I hope that the Government’s approach on that will identify that problem, but it is to be welcomed and very much supported.

I have two key questions, to which my noble friend referred, on child benefit. Perhaps the Minister can help us. One shocking consequence of the proposals is that at the moment, if you are on child benefit, through the passporting of HPP—home protection payment—being a carer of a child until your youngest child is 12 years old gives you credits into the state pension. Women who stay at home to bring up their children—all credit to them—whose husbands earn above £44,000 will lose their child benefit. At the moment, those same mums will simultaneously lose a huge chunk, potentially, of their state pension credits. That is completely and utterly unacceptable. If that is not amended, I am sure that this House may have a view which differs from that of the Minister as at present exposed. It would be good if he could help us on this. To penalise stay-at-home mums twice over with the loss of child benefit and the loss of credits into the state pension is completely unacceptable.

Secondly, I turn to the connection between JSA and HB with the threat that HB will be cut after 12 months on JSA. This assumes that what is stopping people on JSA after 12 months going into work is their unwillingness to work and that, therefore, they need to be sanctioned by an additional sanction of 10 per cent on their HB. On this point, I should declare my interest as chair of Broadland Housing Association. I had the stats done for me by the House of Lords for July. In July in Norfolk, 15,900 people—just under 16,000 people—were on JSA. The number of job vacancies in Norfolk was 3,500. The people who get those vacancies will be those who have been most recently made unemployed because they are the most attractive to the employer. Those of us involved in social housing will have on our books young people, who are sometimes difficult to place in jobs, who will have been on JSA for far more than 12 months by virtue of the job shortages that currently exist. Yet they will face a sanction of 10 per cent on their rent.

As a chair of a housing association, I can either accept that rent arrears will mount or I can evict them. They will become homeless and then they may squat. But if I keep them and their rent arrears go up, I do not have the money to put in the solar panels et cetera to reduce the fuel poverty of elderly people. What choice would the Minister have me make? Should I evict those young people who through no fault of their own cannot get a job where there are 16,000 people unemployed and 3,500 vacancies or deprive elderly people of the opportunity to reduce their fuel poverty? No Government should force socially responsible landlords into having to choose between those two categories. I hope that the Minister today will assure us that that will not be the choice we will have to make.

[Lord Freud]

I thank the noble Baroness, Lady Hollis. Again, I take comfort from her general support for the universal credit. The point I would like to emphasise is that because we have two systems, an out-of-work benefit system and an in-work tax credit system, the risk of moving from one to the other is enormous. One has only to experience doing a job which does not work out, having to fall back into out-of-work benefits with perhaps a delay of three months as the bureaucracy is sorted out and thus not being able to afford the baked beans mentioned by the noble Baroness, to realise that that kind of risk is highly unattractive. We have created a very conservative group of people who should be prepared to take that risk, by which I mean conservative with a small “c”. On child benefit, we have not made a full announcement of what is going to be in the spending review on 20 October, at which point the detail will be revealed, so I am not in a position to answer.

On the second point made by the noble Baroness, noble Lords will be aware that what we are looking at in the numbers is flows. Any work programme tries to balance the disadvantage experienced by people who have been out of the job market for a period and what it takes to get them back into work against those who have only just lost their jobs. Effectively, that is what all programmes try to do. Clearly, we need to ramp up the speed with which we can get people back into work, and this is one measure that is designed to encourage and put pressure on them.

[Baroness Meacher]

My Lords, one of the Government’s aims is to reduce the number of employment support claimants by around half a million. I respect the Minister’s expertise in this area and, indeed, his commitment to produce a more efficient system. However, can he assure the House that he will not introduce, for example, the time-limiting of benefits to six months or a year, as has been mooted, for people with severe and enduring mental health problems and other long-term disabilities? Has he made it clear to the Chancellor of the Exchequer that the cost of long-term hospitalisation of these people if their benefits are removed will be a great deal higher than maintaining them on benefits? Finally, will he delay the introduction of the new medical tests until the evidence makes it abundantly clear that they are fit for purpose for all, including for people with fluctuating and long-term disorders, most particularly of course for those with severe and enduring mental health disorders?

[Lord Freud]

I thank the noble Baroness for those questions. We do not have a target for the transfer of IB claimants into JSA, but we estimate that 23 per cent will move straight over. However, it is an estimate and one point of the trials that have been launched today is to find out what the figure might be. The process by which we move people over from IB to ESA means that a substantial proportion will move on to unconditional support allowance so that they are fully supported. However, we would like to make sure that the work-related activity group within ESA moves through the process so that it does not become another place to park people. We are therefore looking at ways to ensure that those in the work-related activity group move through so that they go into JSA as fast as possible. The worst thing is for people to remain inactive for a week longer than necessary.

[Lord Skelmersdale]

My Lords, my noble friend will not be surprised to learn that I am broadly supportive of the plans he repeated today. However, I wish to ask a specific question about the Atos programme of work capability assessments for those on ESA—in other words, the programme to ascertain which people currently on ESA are suitable to move into work preparation and perhaps into work. My noble friend will have noticed that recently there have been big complaints in the press about the work capability assessment. There was a suggestion in at least one of the papers over the past few days that 40 per cent of people who have been assessed as capable of work or working towards work have successfully appealed. My right honourable friend the Secretary of State said in the Commons that actually around 5 per cent were successful in appeal. None the less, it seems that the assessment needs to be looked at critically. Can my noble friend give me an assurance that it will be?

[Lord Freud]

I thank my noble friend Lord Skelmersdale for his question on the work capability assessment. He will be aware that there has been an internal review of the work capability assessment and that four changes have been made to it. In practice, these changes will come into the work capability assessment next spring. On top of that, in June we employed Professor Malcolm Harrington to review how the work capability assessment worked on an annual basis. He is supported by a scrutiny group, which includes Paul Farmer, the chief executive of Mind, and three others. I mention Paul Farmer in particular because of the importance of mental health and the fluctuating conditions to do with mental health. We are determined to make sure that the work capability assessment does the job it needs to do.

[Baroness Turner of Camden]

My Lords, I welcome the Statement made by the Minister to the effect that we have to make work pay. I agree—but does that mean that the Government will be inclined to bring pressure to bear on low paying employers to ensure that they are prepared to pay a living wage? I do not see why the taxpayer should subsidise employers who are paying extremely low wages.

As to unemployment, I suggest that there may be particular difficulties in certain areas of the country where manufacturing industry used to exist and does not exist any more and there is a decline in suitable work for people. What steps can be taken in such areas to ensure that there is work available for people who can demonstrate a capacity to work but where there are no jobs available because of what has happened to local industry? Where the local industry does not provide jobs, because there are no jobs, people are simply resigned to spending the rest of their lives on benefit.

[Lord Freud]

I thank the noble Baroness for that. She makes the real point that if we do not get the universal credit right we could encourage underpaying employers. We are fully aware of that and are looking into the situation. On her other point about unemployment black spots, it is always a tragedy when an area loses its economic rationale. However, what makes the inevitable adjustment process worse—and perhaps stops it—is a benefit system which hides people away. The shocking story of Merthyr Tydfil is an example. When the steel plant there closed—I do not have the exact figures—there were approximately 4,000 people working in it; two years later there were 3,800 people on incapacity benefit. That meant that no potential entrepreneur or employer would go to that part of the world thinking there was labour there to be used because the system had locked that labour away. If we can get people back on active benefits, we will at least encourage the necessary, and sometimes painful, adjustment process to happen at the fastest speed possible.

[Lord Kirkwood of Kirkhope]

My Lords, perhaps I may return to the important question raised by the noble Lord, Lord Skelmersdale. Does the Minister accept that there is real concern about whether the work capability assessment is fit for purpose? In the pilots established in Aberdeen and Burnley, will Professor Harrington be able to look at the medical versus the biopsychosocial dimensions of the tests? Some of us believe that the tests are far too medical. My experience working with the Wise Group suggests that people have not medical problems but biopsychosocial problems, which do not admit of an easy medical solution. Will Professor Harrington be able to look at that and give advice to the Government on improving the tests?

[Lord Freud]

I thank the noble Lord, Lord Kirkwood, for concentrating on the important issue of what good health and ill health are, which is extraordinarily difficult to pin down. I am sure that he believes as I do that the well-springs of health are around basic social skills and a sense of meaning and community. When we put people on inactive benefits, we are taking away from them the well-springs of health. It is vital that we help people back into work, which is such an important contributor to their psychosocial well-being. We will watch the WCA very closely to make sure that it does its job, so that we can have the opportunity to get people back to work.

[Baroness Smith of Basildon]

My Lords, I apologise to the Minister for missing the beginning of this Statement, but I have listened with great care to what he has said in response to questions. I think that all of us in this House will share the objective of supporting back into work those who are able to work. However, all this is predicated on jobs being available. The Minister spoke about 600,000 jobs having been taken out of the economy already. The Government’s own policies, particularly public service expenditure cuts, are destined to lead at a conservative estimate to about half a million jobs being lost, with an equivalent knock-on effect in the private sector. There is some difficulty therefore in encouraging people to go back to work while the Government are taking away the very jobs that they can do. What discussions has the Minister had with ministerial colleagues? What discussions has the Secretary of State, Iain Duncan Smith, had with his ministerial and Cabinet colleagues not on job cuts, which we know have taken place, but on job creation?

[Lord Freud]

I thank the noble Baroness for that question. The state of the economy is a fluid entity in terms of where jobs are. While jobs may be lost in some areas, new ones are created elsewhere. We have already seen a good pick-up: 280,000 people went back to work in the last quarter. Independent forecasts for the next couple of years from organisations such as the IMF and OBR are for 2 to 2.5 per cent growth. That would create net new jobs. The jobs will be there, but they may be different jobs.

[Lord Beecham]

My Lords—

[Lord Taylor of Holbeach]

Order. I am afraid that the time is up and we must move to the next business.

Health: Neurological Conditions

Monday 11th October 2010 Lords Chamber

Question for Short Debate

18:09

Asked By

[Baroness Gardner of Parkes]

To ask Her Majesty’s Government what is their assessment of the role of allied health professionals in maintaining the health and social well-being of people with long-term neurological conditions.

[Baroness Gardner of Parkes]

My Lords, the notice of the opportunity for this debate was very short, but the topic is an important one and I am delighted that we are debating it this evening. I thank those who are speaking. I know that in some cases they have had to alter their arrangements to enable them to be here and that many others who also have a particular interest in or knowledge of the subject cannot be here today.

I start by giving noble Lords the Royal College of Physicians’s definition of long-term neurological conditions:

“Long-term neurological conditions (LTNCs) form a diverse set of conditions resulting from injury or disease of the nervous system that will affect an individual for the rest of their lives. They include: sudden onset conditions (eg acquired brain injury of any cause (including stroke), spinal cord injury) intermittent conditions (eg epilepsy) progressive conditions (eg multiple sclerosis (MS), motor neurone disease (MND), Parkinson’s disease (PD) and other neurodegenerative disorders) stable conditions with/without age-related degeneration (eg polio or cerebral palsy). Taken together, LTNCs are more common than most clinicians realise. Some 10 million people in the UK are living with a neurological condition which has a significant impact on their lives, and they make up 19% of hospital admissions”.

Many of us would be glad to learn the precise definition of allied health professionals. There are 15 health professions registered with the Health Professions Council, including speech and language therapists; radiographers; therapeutic radiographers; and prosthetists and orthotists, who mainly make artificial limbs—two different words but the same profession. There are also podiatrists; some still use the word “chiropodist”. A podiatrist is principally concerned with keeping patients steady and supported on their feet. The aim is to reduce falls, which are a main cause of serious injury and hospital admission for people with long-term neurological conditions. It is interesting to learn that Botox injections in the ankle and foot may help patients with cerebral palsy.

There are also physiotherapists. Some call themselves chartered physiotherapists, but they are the same profession whether they are chartered or not: it is just a distinction. There are paramedics. Television has made us all familiar with paramedics and it is interesting to see how their roles have developed and are constantly expanding as new treatments are discovered and put to use.

There are also orthoptists, who look after eye health; occupational therapists; dieticians; art, music and drama therapists; hearing-aid dispensers; practitioner psychologists; and clinical scientists. A clinical scientist oversees specialist tests for diagnosing and managing disease, advises doctors on using tests and interpreting the data, conducts research and devises new therapies.

Each of those professions plays a significant part in the care of long-term neurological conditions. Often, their work is interrelated. It is always to the benefit of the patient and makes the difference between maintaining quality of life and losing that quality. Usually, a multidisciplinary approach is needed and used.

Many Members of the House will know of my personal interest, but I will formally declare it again. My eldest daughter, Sarah, was diagnosed with multiple sclerosis at the age of 21. Now, 30 years later, she continues to make the most of life and plays a full part in the community. She is a patron of the Multiple Sclerosis Trust and only this year became a council member of the Royal Horticultural Society. She knows, as do all of us in her family, the real difference that allied health professionals have made in her life. Under the care of the National Hospital for Neurology and Neurosurgery, she has an excellent consultant neurologist, but the practical help and advice for everyday life is given by allied health professionals.

AHPs are important to people with long-term neurological conditions, as they provide a vital input throughout the whole disease process—I emphasise the whole disease process—from early intervention to prevent disability, through the management of complex symptoms, to end-of-life care. For the National Health Service, they provide effective management of admission and discharge from hospital, thereby minimising hospital admissions and reducing length of stay. Maintaining people at home, thus preventing in-patient admissions, is very cost-effective for the National Health Service; £2,000 is the minimum cost of any admission. The use of specialist expertise to manage specific symptoms including those related to cognition, fatigue, pain, spasticity, speech and swallowing improves quality of life for the person with the condition, enabling people to maintain important life roles, such as working or looking after their family, reducing the cost to UK taxpayers. Interventions also prevent additional complications through treatment.

Allied health professionals enable people to self-manage and to remain within the community, again reducing national health costs. Allied health professionals bridge the gap between health and social services, working with people in home, work and leisure environments. In the current climate of wishing to ensure that health and social services are working together, the allied health professionals are vital. They are well placed to work with the new GP consortia to engineer service redesign and provide leadership for services. Multidisciplinary teams can provide a holistic and co-ordinated approach to intervention.

Professor Alan Thompson at the National Hospital for Neurology and Neurosurgery at Queen Square stated that,

“any model of care for MS has to have both breadth and expertise to address the wide range of problems and the flexibility to cope with variability, unpredictability and changing pattern of need”.

I believe that applies to all the long-term neurological conditions set out in the definition from the Royal College of Physicians.

Physiotherapy is probably the best known of the functions carried out by the allied health professionals. Although familiar to all, it is not always appreciated that benefits are not only physical but psychological and socio-economic. I was rather shocked to learn that there is not a single specialist physiotherapist for the 4,000 multiple sclerosis cases in Northern Ireland, and I wonder why that is so. For people with motor neurone disease or multiple sclerosis, physiotherapy cannot regenerate tissue that has been destroyed, but works to maintain functional strength, endurance and independence. In Parkinson’s disease, physiotherapy helps to maintain general levels of fitness and enable patients to maintain independence for themselves. It helps to prevent or manage falls, for example, by working on specific balance training. A physio usually works with an occupational therapist to look at ways in which to free the home environment of hazards. The Parkinson’s Society refers to the vital role of allied health professionals in neurology in treating the individual patient and not just the condition; it is important that each patient receives the therapies that they need at the right time to ensure the best management of their condition. That will prevent unnecessary deterioration and reduce the burden on the health and social care system.

Radiographers are necessary in diagnosis to provide accurate imaging examinations. The importance and limitation of the short window wherein a scan can benefit a person who has suffered a stroke has often been discussed in your Lordships' House. Speech and language therapists not only help with speech—a most necessary task to restore confidence after a stroke. They can also help patients with swallowing difficulties, which can occur in various conditions due to changes in mouth secretions. Podiatrists provide essential assessment and foot care for a wide range of patients, including those with cerebral palsy and peripheral nerve damage. Those podiatrists specialising in biomechanics are particularly relevant to the elderly. Dieticians are the only qualified health professionals who assess, diagnose and treat diet and nutrition problems at an individual and wider public health level. Their input is of great value in hospitals, care homes and the wider community.

Each of the allied health professions plays a vital part in the treatment of people with long-term neurological conditions. I have spoken about some of these professions, but my speaking time is over. I pay tribute to all for the wonderful job they do and recognise that it is the working together of those professions that makes them so effective. As long as people have these neurological needs, they will continue to need and value the great work being done by the members of the allied health professions. The points I have made summarise why all long-term neurological conditions are difficult for the NHS to manage, but the allied health professions are having a real impact.

I have not spoken about dementia but I am delighted that the noble Baroness, Lady Greengross, is here and I hope that she will do so, as it is so important in our lives. I would be glad to hear the Minister confirm that he understands the importance of the role played by the allied health professionals and that their work with patients will continue.

18:20

[Lord Alderdice]

My Lords, I am grateful to my noble friend Lady Gardner of Parkes for obtaining this debate, because the conditions which we are considering are not glamorous. They are not the kinds of thing that excite public interest all the time. It is important that there are thoughtful, committed individuals like my noble friend who, from time to time, bring this back to your Lordships’ House to help us focus on this important area of medicine and health and social care.

I shall pick up from where she finished her speech: paying tribute to those allied health professions who are involved in the care of chronic neurological disorders. It is of course difficult to deal with any kind of serious illness, but particularly when you know that these conditions are chronic and are, in many cases, simply not going to go away. For those of us involved in medical care, a degree of excitement is present when you see a problem, can get involved and know what to do to bring a good outcome. You can receive great personal satisfaction from that, but there is not that excitement when the conditions are generally not of that kind. You know that a long-term, dogged commitment is necessary. I take the opportunity of paying tribute to those allied health professionals who continue on with this kind of work not just week after week, or month after month, but year after year after year. It is extremely important.

From a medical point of view, these conditions induce a certain amount of appropriate humility because the neurological conditions in general are not ones that we know very much about how to cure. We can often diagnose them, sometimes rather accurately, and do lots of tests to demonstrate all the elements of them. Yet at reversing or curing them—relieving the patient completely of the problem—we are not so good. In fact, the truth is that the amount of useful work we can do in diagnosis and treatment is much less than the value of the management that can be provided over a long term by allied health professionals.

In many ways, while is important to have some of the time and expertise of the neurologist it is often more important to have the long-term commitment of the physiotherapist, who is able to help you manage the problem—and here is one of the difficulties. While physiotherapists are vital, there is what we have come to describe as a churn or turnover of them. It is fairly inevitable to some extent, but the long-term care is difficult if you have a lot of turnover. Can my noble friend the Minister say anything about how we can encourage the long-term continuity of care in nursing—particularly community nursing care—and physiotherapy, rather than the rather fast turnover that there sometimes is?

The second thing I will say is about not just the importance of physiotherapists, but the significance of other allied healthcare professionals. It is becoming clear to us that, while it may be more scientifically and technologically interesting to do lots of complicated, high-tech, expensive scans, things like art therapy, music therapy and hydrotherapy—physiotherapy exercises in a pool—often are much more important. They make a difference to people. For example, we know from recent research that people who have had strokes and have music therapy often recover more quickly and more completely than people who do not. We do not always know why, but it seems that some of these other professions are able to help.

The Minister would be astonished if I did not raise the question of counselling and psychotherapy, and of the importance of the input of those professions to those who are suffering from chronic, long-term conditions and to their partners and families. Chronic conditions affect not just the person but everyone with whom they live, and sometimes counselling of a didactic or emotional kind is helpful and necessary to sustain the person with a chronic disorder and their family and partner or spouse.

The noble Baroness, Lady Gardner of Parkes, mentioned music therapists and other health professionals. She rightly said that a large number of them are already regulated by the Health Professions Council. As the Minister knows, that is not true of psychotherapists and counsellors. I will use this opportunity to ask him—because I never fail to use such an opportunity—how we are getting on with the question of regulation, because as we move toward more decisions being made at a local level about which services to commission, commissioners quite properly will want to see regulated professions employed. If we do not have regulation of psychotherapists and counsellors for these kinds of condition, commissioners are likely to be wary of employing them—understandably so.

The third and final area that I will touch on is what is sometimes described as multidisciplinary teamworking. It is clear that an enormous number of people are required to be involved in managing these conditions. The Motor Neurone Disease Association calculated that on average 18 healthcare professionals were involved with any patient. Some of this is terribly important and valuable. There are lots of areas of life that are adversely affected when somebody has a chronic, long-term neurological condition. However—this is a delicate matter, not particular to these disorders—we must be careful sometimes in the health service that we do not simply make yet another referral and add on yet another person who does not necessarily operate with the others as a team. When 18 people are involved, it is not a team but a lot of different professionals.

I found in my own work, until recently, that sometimes I would suggest an out-patient appointment to a patient and they would say, “I’m sorry, I’m too busy to come along that week because I have appointments every other day”. That is not terribly helpful. The Motor Neurone Disease Association rightly says that it is very important to have a key worker to whom the individual patient refers, and everything else goes through them. In medical terms, this is the general practitioner. We do not like referrals being made without the general practitioner being informed because they can act as a gatekeeper. However, it is also important for allied health professionals that one of them—preferably one who knows a good deal about the disorder concerned—acts as the key individual, and that everyone else relates to them. If not there is a temptation, when a patient comes along with a chronic condition and you desperately want to help but cannot do much, to make a referral, sometimes in the desperate hope that somebody else will be able to contribute something.

However, we must not forget that every referral is a resource taken away from another patient; so encouraging colleagues to think about whether yet another referral is necessary, or whether more collegiate teamwork is possible with those who are already being treated, is a very difficult area that I do not expect my noble friend to be able to say a great deal about. However, perhaps he will take this genuine problem back to his colleagues: the notion of multidisciplinary teamworking, which is excellent and important in all these areas, becomes a lot of different people working in a not necessarily terribly co-ordinated fashion. Maybe at a strategic level we must think about some kind of guidance as to the difference between a bunch of people on the one hand, and a multidisciplinary team on the other. Is there an optimum size for this kind of input?

I finish, as I began, with a tribute to those involved in this kind of work. It is by no means easy. It requires strength of character and a commitment to the care of people that is quite remarkable. We are profoundly fortunate in this country to have so many people who are prepared to undertake this, not for a day or a week, but over a long and committed professional career. I am honoured to pay tribute to them.

18:30

[The Countess of Mar]

My Lords, the noble Baroness, Lady Gardner of Parkes, has chosen an appropriate moment to table this Question and I am grateful to her. I declare an interest, as I have a diagnosis—finally—of organophosphate poisoning leading to autonomic dysfunction. I am a patron of several charities and groups that represent the interests of patients with myalgic encephalomyelitis, also known as ME or CFS, but which I will call by its common abbreviation, ME. I am also chairman of Forward-ME.

Arising from my own illness and the battle that I and others had to get the toxicity of the once-ubiquitous organophosphates recognised—a battle that I am sure the Minister well recalls—I became interested in other medical conditions, such as fibromyalgia and Gulf War illnesses, for which there was no diagnosis or treatment, let alone recognition. Foremost among these is ME. ME has been categorised as a neurological condition at least since 1968. It is recognised as such by the World Health Organisation and the United Kingdom Government. However, for all these years, sufferers from this awful debilitating illness have been ignored, derided and mistreated. The soubriquet “yuppie flu”, acquired in the 1970s, has stuck in the minds of the public and, unfortunately, in the minds of far too many members of the medical and allied health professions. Too often I hear statements such as: “Sometimes I felt that the therapist did not appreciate how physical and biological the symptoms are. She said she understood but then suggested that a lot could be cured just by thinking differently. I don’t think she really appreciated how severe the symptoms are, or that when I said I couldn’t do something I really meant that I couldn’t do it. She also talked a lot about needing to get fitter, which I thought completely missed the point”.

Many thousands of peer-reviewed scientific papers from researchers around the world demonstrate that ME is a physical disease which has endocrine, immune and cardiovascular effects, as well as neurological symptoms, albeit with some of the psychological aspects common to many chronic diseases. It is distinct from chronic fatigue which is a symptom of many diseases—depression or cancer, for example. Despite this, there is a school of thought, dominant through the last three decades, that this is a psychosocial behavioural problem, easily dealt with by cognitive behavioural therapy and graded exercise. On many occasions I have spoken about the failure of successive Administrations to recognise ME for what it is: a chronic illness with fluctuating symptoms of unknown or uncertain origin and of variable severity. There are theories that it has its source in a viral or bacterial infection that persists and eventually affects all the major bodily systems. Others think its source may be environmental—caused, for example, by those ubiquitous toxic chemicals such as OPs, which are, incidentally, designed to attack the nervous systems of their target species. The simple answer is that we do not know.

In the UK, funding for research into ME has concentrated on its psychological aspects. There is a school of psychiatry determined to claim the condition for its own, both in the UK and internationally. After many years of working in this sphere, I have observed the means by which any valid arguments for a biological cause are mocked and eventually overwhelmed by the noisier medical opposition. They ignore internationally recognised science on the grounds that it is not scientific. They find every reason to reject small-scale scientific research projects conducted in the UK because they are not representative. Members of their own profession who have a considerable degree of success in treating patients with ME are hounded out of business. By writing numerous papers which, of necessity because there is no one else to do it, are peer-reviewed by their colleagues, they appear to have proved that there is no need for further research and that the doctors responsible for diagnosing and treating ME do not need to conduct any more than the basic range of tests on their patients.

The previous Administration did try to help patients with ME. The Chief Medical Officer commissioned a report, published in 2002, on the subject. It recognised that ME is an illness that is as chronic and disabling as MS. It recognised the shortfall in research and in NHS provision, particularly for children. The Chief Medical Officer recommended the setting-up of specialist centres to diagnose and treat people with ME—£8.5 million was allocated for the purpose. There developed small pockets of excellence where patients were pleased with the provision. These tended to be fine for patients who were able to get to the centres, usually hospital-based, but for the 25 per cent of patients who are housebound and, worse still, bed-bound, there was little help. Some health authorities were so slow that their projects failed to get off the ground before the funding had dried up; others, based on psychiatric units, were regarded with suspicion by patients. What I am saying is that, because of the way that people have behaved over this illness, patients with ME are not getting access to ancillary helpers in the NHS.

Two later reports, the latest published earlier this year by the All-Party Parliamentary Group on ME, of which I was a member, again highlighted the lack of NHS provision for patients with ME. Both reports stressed the failure of the NHS to provide for children and the severely affected. NICE, in its CFS/ME guidelines, also recognised the variable severity of the illness and the lack of treatments available. It recommends that treatment should be tailored to the patient with the patient’s consent and that allied health professionals such as physiotherapists and psychologists must have knowledge of ME and be experienced.

Current NHS treatments depend upon a multidisciplinary approach. I know from experience that a hospital referral can be very unsatisfactory unless the consultant has an open mind and looks at more than just one “bit” of a patient. All too often when a patient fails to respond to the recommended treatment, he or she is blamed for the failure and a psychiatric referral ensues. There is no passing patients on to people who might be able to help them, such as cognitive behaviour therapists. There are an estimated 250,000 people with ME, most of whom are treated by professionals with very little, if any, understanding of their illness. Since specialist services are inadequate, many patients are left to fall upon their own resources. Some are fortunate, such as the patient who said, “By understanding how I could approach my daily activities in smaller chunks and hence planning for this, including fun activities, I ultimately became stable and could build from there”, or another who said, “One-to-one supervision from a very skilled and experienced therapist kept me on track, pulled me up when I needed it and gave me encouragement. They listened to me, believed in me, reflected my progress to me at times when I couldn't see it”.

I cannot say how important being listened to and being believed are. I am pleased to see that the coalition intends that patients should have more say in the NHS provision of services. I also see that it is to discuss professional training with the royal colleges. However, until there is a cultural change among health professionals, patients with ME will continue to find it difficult to find help within the NHS. Until the professionals take time to listen to patients and to believe them, they will never develop the skills needed to enable them to help patients along the road to recovery.

I wish I had the solution to the suffering of people with ME. It seems that, no matter how often Ministers and senior officials confirm their acceptance of the seriousness of this condition, nothing will change until the culture both within and outside the NHS changes. I believe that in this particular case the patients, some of whom have experienced illness for decades while others have made excellent recoveries, have a huge amount of knowledge to impart. The Canadian guidelines to diagnosis and treatment of ME have, for reasons that have never been explained, repeatedly been rejected by health professionals and yet they are regarded by patients as providing the best course of action.

May I ask the noble Earl whether the coalition continues to accept that myalgic encephalomyelitis is a neurological illness as categorised by ICD10 G93.3? If he does, will he say how Her Majesty's Government will ensure that there is sufficient qualified medical and allied professional expertise to treat patients with illnesses such as ME with the effectiveness and dignity they deserve?

18:39

[Baroness Finlay of Llandaff]

My Lords, I am sure that all patients with chronic neurological disease and the allied healthcare professionals who look after them would join me in thanking the noble Baroness, Lady Gardner of Parkes, and congratulating her on securing this important debate. I have to declare my interests as president of the Chartered Society of Physiotherapy, as patron of the Motor Neurone Disease Association, as patron of MS Society Cymru and as a clinician with responsibility for palliative care services in Wales, where we have recently instigated consultant and physiotherapy posts to lead on co-ordination of care for young people’s transition from paediatric to adult services.

As the Every Child Matters report, Transition—Getting it Right for Young People, points out, it is those with neuromuscular conditions who are the worst catered for. They feel as though there is an abyss when they go from children’s to adults’ services. Young adult disability teams are no more expensive than the ad hoc services that they often encounter. This debate is timely because the changes in the NHS present a real risk to the multidisciplinary specialist teams that are key to delivering high-quality care. It is cost-effective care when the teams work well, but given the new commissioning arrangements, I ask the Minister how the Government will ensure that the multidisciplinary teams have the relevant allied healthcare professionals as core members of the specialty team for these patients. These patients in any one diagnostic group with neurological conditions are not in high numbers on a GP’s list. They are not a volume problem in primary care. They have not been subject to government targets and are not at the forefront of commissioners’ minds. They are too dependent to be able to speak up for themselves, and their families are too occupied with care to have the spare time and energy to find out what they should be getting and call for it.

In the short time that I have, let me focus on a specialised area of allied healthcare professionals’ work—the management of failing respiration in patients with progressive neuromuscular disease. As respiration fails, patients do not sleep well, wake with a headache, feel muzzy, function less well and are less likely to work. That is because their lower respiratory effort during sleep means that carbon dioxide levels rise rather than being exhaled, as happens in normal deep breathing. Early non-invasive ventilation at home overnight allows the patient to have good overnight oxygenation, lowers carbon dioxide levels, and the patient wakens refreshed. This means that they can continue to function in society, and that includes working. Indeed, it is no secret that some Members of this House depend on night ventilation and contribute enormously and invaluably every day here in this Chamber.

In acute episodes of respiratory failure, the early intervention of appropriate professional help saves money and lives. Early non-invasive ventilation, or NIV, has better outcomes than intubated ventilation because it has a lower complication rate, particularly a lower infection rate. It is a technique that depends on expert physiotherapy. NIV corrects blood gases, including oxygenation, in about 70 per cent of these patients, so they do not need to go on to be intubated. Intensive care costs about £2,000 a day; 25 days in ITU costs more than the salary, including on-costs, of an allied healthcare professional for a year. It does not make sense not to have them locked in as core members of the team. It is a waste of money not to have them there.

The NICE guideline on NIV for motor neurone disease lists the core members of team as a specialist respiratory physiotherapist, a speech and language therapist and a respiratory physiologist—with others added to the team when needed. They need early contact with patients and they must be core members of the team to establish a baseline and inform patients of what lies ahead. It is often the physio who allows early recognition of symptom deterioration and the functional impacts on activities of daily living. Proactive intervention on advice on seating, limb supports and so on pays for itself over and over again. The physiotherapist can follow up on patients, provide continuity of care and free up consultant time for complex diagnoses. He or she can also allow more time at the point of interaction when people are devastated by a new diagnosis.

The churn that the noble Lord, Lord Alderdice, described occurs just as much with nurses and doctors, so competent teams are absolutely key. A proper team meets regularly, reviews patients together, teaches across the boundaries of the disciplines and develops cross-over skills. However, the psychosocial support of a proper multidisciplinary team is a major part of the specialist role. A Dutch study by van den Berg and colleagues showed that patients seen in an MDT—a multi-disciplinary team—had better aids and appliances, better swallowing support and better quality-of-life scores. The most pronounced differences between them and those with motor neurone disease seen in an ordinary neurology service were in the domains of social functioning and mental health. This was through the better implementation of supportive treatments, better nutrition and better psychosocial support. The Italians found that those seen by specialist teams had 75 per cent fewer acute hospital admissions, and, even if admitted, the length of stay was reduced by a half. The service proved cost-effective to the patients and to the community as a whole. I am quoting from a paper that they published. A Cochrane review of non-invasive ventilation in respiratory failure shows the same benefits of the multi-disciplinary team—fewer infections, better weaning off ventilation, lower mortality and shorter hospital admissions.

I am indebted to the Lane Fox unit at St Thomas’s for allowing me to access its data over the weekend, which support the cost efficacy of a highly specialised centre with a full multidisciplinary team. Such a tertiary centre can link to other units, drive up standards of care and ensure better care delivery nearer to patients’ homes. Even if highly specialised commissioning is done centrally, how will GP consortia know what to commission to ensure cost efficacy from local neurological services? It is at that level that often the really tight multidisciplinary team is not in place. The Motor Neurone Disease Association, in its “Year of Care”, provides excellent information on both the interventions and the costs, but that needs to be taken up at a local level.

Before I finish, perhaps I may turn to the more generalist services. It is the OT and the physio who will get the patient home quickly through improved functioning and appropriate support and aids to avoid pressure sores. Let us not forget that pressure sores can kill patients. It is these professionals who teach families how to support patients safely as they move. It is the physiotherapist who will spot early deterioration in neurological function. For those with stable but severe brain injury, physiotherapy and occupational therapy have led the way in helping people to get back to functioning well in spite of their disability, supported by speech and language therapists, who are in terribly short supply.

For those with a serious disease, nutrition is absolutely key to recovery. Dietetics are complex when patients need assisted feeding. No one should forget the key role of the speech and language therapist in re-establishing communication whenever speech is impaired and in ensuring effective safe swallowing, avoiding aspiration pneumonia. None of these roles can be fully undertaken by healthcare assistants or nurses. They do not have the training to give them the competencies required. However, perhaps I may give a St Bartholomew patient the last word. He wrote in a letter to his consultant at the unit:

“I really can’t overstate the benefit to me of this integrated multidisciplinary approach. It enabled me to play a major part in managing my own condition, with the minimum of time off work. It gave a richer and more thorough diagnosis than could be done by the clinicians working separately and it gave me confidence in the clinical team.

I have subsequently thought about the process from the hospital’s point of view. Some major problems were managed better than I have previously experienced, in fewer appointments and in a shorter time than using the traditional interdepartmental referral process. It has involved specialist clinicians from the outset. I could witness the energy, enthusiasm and collaboration of the clinical team. I can’t help thinking that this is much more cost-effective and economical than the old ways of doing things”.

And indeed it is.

Therefore, I urge the Government to lay out clearly the parameters of a modern service—the minimum required for a service so that the tariff is fixed appropriately. If that is not done, the allied health professionals will be the first to be skimmed off and it will be a false economy. It will rebound with complex admissions that could have been avoided, and let us not forget the cost of those admissions to the NHS.

16:14

[Baroness Greengross]

My Lords, first, I congratulate the noble Baroness, Lady Gardner. I found her initial comments, as always, very informative and very moving. I am so pleased that we are able to have this short debate.

Often allied health professionals are under-recognised but their role is absolutely key to the way in which patients, particularly those living with neurological diseases, are cared for. Many of them with progressive and incurable diseases such as motor neurone disease, multiple sclerosis, Huntingdon’s disease or Parkinson’s disease face very long-term physical and psychosocial challenges, which can last for years or decades with long periods of dependency.

The role of allied health professionals must be better recognised. They can ensure that people with a neurological condition receive adequate nutrition; that their communication skills are maintained; that cardiac and respiratory functions are maintained, as the noble Baroness, Lady Finlay, has identified; and that respiratory functioning, bowel motility and skin integrity can be dealt with. They often co-ordinate care within a multidisciplinary team, which is very important. They are also frequently the first contact practitioner who can access the range of care which a patient needs over a long period.

In community settings, hospitals, residential care or wherever, dieticians also have a key role to play. They can often prevent a problem that can cause significant complications, and can compromise quality of life and lead, as has been said, to considerable cost for the health and social care system.

I am privileged to head up a think tank, the International Longevity Centre, in the UK, which looks at the implications of demographic change and ageing on our society. The IRC has often tried to raise awareness among policy-makers and the general public to the risk of malnutrition and dehydration for many of the most vulnerable members of our society. In the next couple of months, it will publish work on the importance of speech therapists. From a summary of the literature, it is clear to me that the vast majority of policy initiatives relating to speech and language therapy focus on children and younger people, which is terribly important, but despite our growing ageing population only 20 per cent of speech therapists currently focus on older people. I hope that the Minister can look at this issue, as it demonstrates an imbalance.

The IRC will highlight the need for an increased number of speech and language therapists for older people with neurological conditions. I would also like to highlight, as has the noble Baroness, Lady Finlay, the importance of occupational therapists, who very often enable older people who have suffered a stroke or who have dementia to regain some of the skills they previously had in daily living. The importance of that cannot be overemphasised. I declare an interest as president of the College of Occupational Therapists.

Just because we cannot alter the disease progression of many neurological conditions, we must not assume that nothing more can be done. It is because of that inevitability that we must do everything possible to alleviate the symptoms and offer appropriate psychological and spiritual support to patients. Allied health professionals have a key role to play in that respect.

We also need to ensure that we adequately support this group of healthcare professionals. Some neurological diseases, particularly those that apply to older people, can evoke rather negative attitudes. That is perhaps because they are linked to our mortality—we would rather not think about them and rather that they went away. Given the growing number of people who suffer from dementia, it is important that we raise awareness of this type of condition across the sector. It is also important that those who work in the allied health professions have the basic training in dementia care, among other neurological conditions, and know how to manage these difficult diseases as they progress in the huge number of patients who suffer from them. Training in dementia care and in the management of dementia should form an integral component in all the training for allied health professionals and for their career development. We must recognise the crucial importance of their work and ensure that they can meet the difficult situations that they will face with appropriate skills, training and recognition.

18:55

[Baroness Thornton]

My Lords, I join other noble Lords in congratulating the noble Baroness, Lady Gardner of Parkes, on initiating this debate. I suspect that there would have been more takers for it had there been more notice, although it is clear that the quality of the debate has not suffered as a result. On balance, the fact that important issues are getting an airing because the Government do not seem to have got their head around scheduling legislation for the House is definitely of benefit to some of us.

I am grateful to the Motor Neurone Disease Association, Parkinson’s UK and the MS Society for their comments on this important issue. Those organisations and many others care about this issue with great passion and with great experience. It is my understanding that around 15.4 million people in the UK are living with long-term conditions and that of them 8 million have neurological conditions. I note that other speakers have given different figures, but it is a very large number and I am sure that the Minister will have the most up-to-date and accurate figures to give us.

I want to take a moment to look at the vital role that allied health professionals play in the care of those with motor neurone disease. The Motor Neurone Disease Association research carried out between 1996 and 2000 found that having a multidisciplinary motor neurone disease clinic extended survival for people with that disease by 7.5 months. We know that specialist MDT care can significantly improve the quality of life. The complexity of the symptoms presented by motor neurone disease means that a large number of health and social care professionals may be involved in the care of someone. It is common to have up to 18 professionals involved in caring for a person with motor neurone disease at any time. Therefore, examples of good practice in co-ordinating this care take a variety of different forms and different models suit different local situations. The models that work best for the people with motor neurone disease are typically those that involve a designated key worker—often themselves a clinical nurse specialist, a motor neurone disease care centre co-ordinator or other specialist clinician—co-ordinating care across different services. The key worker often achieves the best results by bringing together and co-ordinating a multidisciplinary team to care for the person with motor neurone disease.

That co-ordination of care and treatment is vital. If the treatment is poorly co-ordinated, untimely and without specialist knowledge of motor neurone disease, it can result in treatment being missed, the person’s condition becoming more acute more rapidly—in fact, the kind of issues that the noble Baroness, Lady Finlay, talked about earlier—leading to greater expense and suffering as more intensive treatment and care is then needed.

Parkinson’s UK sent me some case studies which definitely bear repeating:

“With occupational therapists, physios and speech and language therapists, it would be very beneficial to be able to access regular, routine follow-up rather than being ‘signed off’ at the end of a treatment”.

That was said by a person with Parkinson’s disease, who also went on to say,

“I have worked hard to get counselling with a qualified, experienced psychologist … my GP has been very helpful but the waiting time has been many months”.

Parkinson's UK conducted a case study into the value of physiotherapists in the system; as we have already noted, they provide a high-quality, cost-effective service, especially those who specialise in conditions such as Parkinson’s. They offer an immensely important service and patients can often see them in place of a medical consultant, which is a significant cost saving. According to one physiotherapist:

“Condition-specific exercise classes are a wonderful way of maintaining people’s fitness initially and building confidence to then carry on at a gym, or out with the family”.

There is no doubt that, as Parkinson's UK states, providing access to a range of therapies and other services is cost-effective. It helps people with Parkinson's to stay independent longer, preventing costly admissions to hospital and care homes. Existing clinical guidelines, including those from NICE and the royal colleges, of the various therapies recognise how important that is.

Allied health professionals must form part of a specialist, multidisciplinary Parkinson’s team that looks at the full range of therapies needed by someone with Parkinson's. In order to treat the individual patient, not just the condition, it is important that each patient receives the therapies they need at the right time to ensure the best management of their condition. This will prevent unnecessary deterioration and reduce the burden on the health and social care system.

The Multiple Sclerosis Society, along with many other organisations concerned with long-term neurological conditions, supported the NHS outcomes framework and believes that insufficient resources have been dedicated to the implementation of the NSF for long-term conditions, resulting in patchy neurological services across the country. The recent report, Half-way Through—Are We Half-way There?, which considers the progress of the national framework on long-term conditions, shows that there is still a great deal to do. I am anxious that the progress that has been made will be lost under the new regime proposed by the Conservative Government. The previous Government initiated the 10-year strategy and, in January this year, published what I thought was a great document about the commissioning of such services.

I have spent the past few months talking to organisations and individuals about what they think about the Government's proposals for the NHS and how those proposals might affect the issue with which they are concerned. I must say that great concern is being expressed across the piece. I went into some detail about the kind of integrated care required for those neurological conditions because it begs the question: how will it be maintained and developed under the new regime? That is at the heart of my final remarks.

I heard the Secretary of State, Andrew Lansley, on Radio 4 at the weekend saying that although people had raised justifiable questions in the consultation, he could not see that there was real opposition to the Government's proposals. He is behaving something like an ostrich, because every day there are more and more appeals to the Government to slow down. Doctors, nurses, royal colleges and many organisations concerned with things such as long-term neurological conditions are saying, “Please slow down. We are confused and anxious about what is going to happen to the issue with which we are concerned”. When the solution lies, as it does with long-term neurological conditions, in pathways dependent on teamworking across disciplines of health and social care, they are right to be concerned. It is a long process to secure the right services for people with long-term neurological conditions. How will that be maintained within the new structure? It is not clear where and how, for example, the care of people with motor neurone disease will be commissioned and how effective it will be. There are significant risks of deteriorating standards of care and spiralling costs if the wrong choices are made over the next few years.

In conclusion, it is clear that the work of allied health professions is integral to the successful care of and prospects for those with long-term neurological conditions. Organisations that work with those who have such conditions have a right to be concerned about where the funding for those conditions will sit. I note, for example, that in its submission on the White Paper one of them asked whether its condition would be commissioned at a specialist care level by the commissioning board or whether it would be done by GP commissioners, and how the integrated pathways will be assured under those circumstances. I searched the Department of Health website in vain for some enlightenment about those questions. Perhaps the Minister will be able to shed some light on them.

19:05

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

I thank my noble friend for calling this debate and for introducing it so authoritatively. As she indicated, this is a welcome opportunity to outline the valuable role that allied health professionals play in health and social care in delivering our ambition for world-class healthcare outcomes and, in particular, for people who have long-term neurological conditions.

First, let me set out some background about the allied health professions. They are a diverse group of 12 professions—in fact, three of the professions mentioned by my noble friend are, strictly speaking, not classified as allied health professions. These registered practitioners deliver high-quality care to patients across a wide range of care pathways and settings from public health through to recovery, rehabilitation, reablement and end-of-life care. Some of the most well known professionals are occupational therapists, physiotherapists, speech and language therapists and podiatrists.

Over 84,000 allied health professionals are working in the NHS in England and just under 2,000 occupational therapists are working in social services. From day one, these are skilled practitioners in their profession of choice. They assess, diagnose, treat and discharge throughout the care pathway from primary prevention through to specialist disease management and rehabilitation. They often work with the more vulnerable and marginalised in society. They treat some of the least recognised problems—for example, incontinence. I agree with my noble friend that their approach is very person-centred. Their particular skills and expertise can be the most significant factor in helping people to maintain their independence through physical and mental rehabilitation.

Long-term neurological conditions affect children, adults and older people. These conditions cover a wide range of care groups and include multiple sclerosis, motor neurone disease, Guillain-Barré syndrome, epilepsy, cerebral palsy and Parkinson’s disease. We know that an estimated 8 million people in England are living with a neurological condition. They account for approximately 20 per cent of acute hospital admissions. Neurological conditions are the third most common reason for seeing a GP. An estimated 350,000 people across the UK need help with activities of daily living because of a neurological condition and 850,000 people care for someone with a neurological condition.

Allied health professionals work with partners in social care, education and voluntary organisations to support individuals with long-term neurological conditions to manage those conditions and to support their carers to manage them. They focus on achieving clinical outcomes that are about maximising the individual’s functional abilities and participation in home, work and social life—for example, enabling a young mother with multiple sclerosis to manage the physical challenges of family life alongside the impact of the condition on mobility and other activities of daily living, or supporting a person with newly diagnosed epilepsy to return to work, often working with the employer in assessing the suitability of the work environment or facilitating a phased return to work.

People with long-term neurological conditions usually require the services of all the allied health professions at some point during the management of their condition. For example, a person with multiple sclerosis might see the physiotherapist for assessment, diagnosis and treatment of mobility problems and an occupational therapist for assessment, diagnosis and treatment of residual impairments impacting on activities of daily living and to be assessed for environmental adaptation in preparation for discharge. A speech and language therapist would assess, diagnose and treat swallowing and communication problems. The arts therapists would use psychotherapeutic interventions to gain insight into and to promote resolution of behavioural and emotional difficulties, such as depression.

When it comes to a health and social care model for long-term conditions, there are three levels. Allied health professionals work at all three levels and their impact is directed to keep patients in the lowest tier appropriate for their condition. Level 1 is self-management, with allied health professionals supporting individuals to take an active role in managing their condition. Level 2 is disease management and the focus for allied health professionals is preventing complications and promoting well-being. At level 3, an individual will have a case manager, who may be an allied health professional, to co-ordinate a multidisciplinary, multiagency care package to meet complex needs.

Perhaps rehabilitation and reablement is where the unique role of allied health professionals lies. It is important not just for people with long-term neurological conditions but for everyone with long-term conditions and, indeed, those with acute health problems to optimise health and well-being. Rehabilitation is aimed at enabling individuals with disabilities to reach and maintain their optimal physical, sensory, intellectual, psychological and social functional levels. Reablement is intensive intervention to optimise function, often focusing on independence in activities of daily living, including acute exacerbations of a long-term condition.

Allied health professionals deliver rehabilitation and reablement and they may train patients, carers, support staff and others to develop their skills in rehabilitation. Rehabilitation and reablement reduce length of stay and minimise hospital readmissions. Vocational rehabilitation supports individuals to return to work and become economically active.

On 5 October, my right honourable friend the Health Secretary announced that £70 million of extra funding will be allocated to primary care trusts to be spent this financial year across the health and social care system to enable the NHS to support people back into their homes after a spell in hospital through reablement. PCTs will work closely with trusts and local authorities in delivering this.

Allied health professionals also have a broader role in public health and health promotion. It is clear that this is important for those with long-term neurological conditions and other long-term conditions. Some allied health professionals work in public health to reduce the risk factors that may impact on health and well-being. Allied health professionals’ services are actively engaging and brokering services with the third sector. An example of this is in County Durham, where the therapy services are working with the Multiple Sclerosis Society to offer a lifestyle programme, including diet and exercise advice, to improve general health and social engagement.

I now turn to some of the questions that were posed in this debate—I suspect that there were too many for me to answer now—not least the extremely important issues raised by the noble Baroness, Lady Finlay, about multidisciplinary teams, on which a lot of work is currently going on in my department. Suffice it to say at the moment that for all the reasons given by the noble Baroness it is imperative that the future commissioning arrangements ensure wide engagement with all clinical professionals, including allied health professionals. As she said, part of this will depend on the development of tariffs for long-term conditions. We are working to improve the tariffs for community services and mental health, in particular, and I undertake to keep the noble Baroness apprised of our progress.

The noble Baroness, Lady Thornton, spoke about the context of the White Paper and questioned whether the architecture outlined in it could satisfactorily address the need to ensure multidisciplinary and integrated working. Effective GP-led commissioning will require the full range of clinical and professional input alongside that of local people. Nurses, allied health professionals and others will all have a vital role to play, with a real opportunity to develop services and improve the health outcomes of their local populations. As the Government have made clear, healthcare will be run from the bottom up, with ownership and decision-making in the hands of professionals and patients. It is only by putting patients first and entrusting professionals to design and configure services that we will drive up standards, deliver better value for money and, ultimately, create a healthier nation.

My noble friend Lord Alderdice talked about key workers and the need to avoid multiple referrals. He is absolutely right. There are many examples of allied health professionals working as key workers, particularly occupational therapists. Multiple referrals can also be avoided through the greater use of self-referral to allied health professional services. This has been available on the NHS for many years but is an option that is perhaps not as well known as it should be. He asked how we can reduce turnover in nursing and physiotherapy and thus ensure long-term continuity of care. We are concerned to ensure this. Through the new architecture of commissioning, I want to see allied health professionals and community nurses re-engaged with commissioning decisions to ensure that services really are commissioned right through the care pathway and across sectors such as health and social care. My noble friend also asked what news there is about the registration of psychotherapists and counsellors. Strictly speaking, so I am advised, they are not classified as allied health professionals. Be that as it may, the news on this has to reach my ears, so I need to write to him about it.

The noble Countess, Lady Mar, asked whether the coalition accepts that CFS/ME is a neurological condition. The Government accept that it is a neurological condition. In many cases, allied health professionals will have a role to play and it goes without saying that all of them should treat patients with respect and dignity, whatever their diagnosis.

The noble Baroness, Lady Finlay, pointed to a shortage of speech and language therapists. Admittedly the latest official figures that I have are rather historic, but I am advised that the vacancy rate as at September 2009 was 0.6 per cent, which does not sound very large to me. The noble Baroness, Lady Greengross, raised the issue of dementia training. This care is covered in the training of all the allied health professions at an appropriate level for the profession concerned.

I hope that, in the time available, I have illustrated the valuable contribution that these professionals make not only to people with long-term neurological conditions but also in meeting the health and social care needs of the wider population. I recognise that allied health professionals could and should be playing a greater role in service redesign to deliver the true outcomes that people want from healthcare, as well as improving productivity.

House adjourned at 7.17 pm.