House of Commons

Wednesday 27th October 2010 Commons Chamber

Wednesday 27 October 2010

The House met at half-past Eleven o’clock

Prayers

Wednesday 27th October 2010 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 27th October 2010 Commons Chamber

The Secretary of State was asked—

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

1. What recent discussions he has had with the Secretary of State for Business, Innovation and Skills on the future provision of services currently provided by Consumer Focus Scotland.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The Government carried out a review of the landscape of consumer protection bodies and will publish a consultation early next year with proposals to streamline and transfer the functions of Consumer Focus Scotland to Citizens Advice Scotland.

[Cathy Jamieson]

I thank the Minister for his answer. I know that he will be aware of the significant work done by Consumer Focus Scotland and indeed of the very worthy work of citizens rights bureaux in Scotland in upholding citizens’ rights. A report published today highlights one trend of serious concern: the number of people approaching citizens advice bureaux regarding employment support allowance has almost doubled in the last 12 months. In the light of the damaging cuts to the welfare budget announced last week and the significant additional pressures it will put on citizens advice bureaux, what discussions have the Minister and Secretary of State had directly with Citizens Advice Scotland regarding the transfer of these functions?

[David Mundell]

The Scotland Office has been in dialogue with Citizens Advice Scotland—and, indeed, with the Scottish Government—about the services it currently provides and those it will provide if the functions from Consumer Focus Scotland are transferred to it. The hon. Lady makes an important point about the provision of advice, not just about the benefit she mentioned, but about all benefits.

[Katy Clark (North Ayrshire and Arran) (Lab)]

2. What recent discussions he has had with ministerial colleagues on trends in levels of employment in Ayrshire; and if he will make a statement.

[The Secretary of State for Scotland (Michael Moore)]

The Government are committed to creating the right conditions in Ayrshire and elsewhere to ensure sustainable economic growth and, with it, employment opportunities.

[Katy Clark]

I thank the Secretary of State for that answer. Has he had the opportunity to look at the Experian report, which has received some coverage in the press over the last few days? It says that, owing to the high dependence on public sector jobs and the poor performance in other sectors of the economy, North Ayrshire will be the part of Scotland that finds it most difficult to recover from the recession. Will he look at that report, consider what impact the loss of public sector jobs will have in North Ayrshire and meet colleagues who represent the area to discuss what needs to be done to protect the economy?

[Michael Moore]

I have seen the report and I appreciate the challenges faced in North Ayrshire and elsewhere. Our challenge as a Government is to tackle the deficit we inherited from the previous Labour Government, under whom unemployment was rising significantly. All the measures we have announced in the Budget and the spending review are designed to tackle that, but I would be happy to meet the hon. Lady and other colleagues to discuss the situation.

[Ann McKechin (Glasgow North) (Lab)]

The Government have repeatedly stated that they always want to make work pay, but in areas such as North Ayrshire, which my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) represents, many families that desperately want to work can find only temporary or part-time jobs. The charity Gingerbread reported this week that one third of all jobcentre vacancies are for jobs offering fewer than 16 hours a week, yet the Secretary of State’s Government propose to remove working tax credits for all families working between 16 and 24 hours a week. How many hard-working families in Scotland will lose their credit because of this change? Will the right hon. Gentleman stand up and urge the Secretary of State for Work and Pensions to abandon this draconian measure?

[Michael Moore]

I welcome the hon. Lady to her post. She knows the Scotland Office well from her previous position as a Minister. I look forward to working with her on issues where we agree, although we will also have robust exchanges where there is room for disagreement. I am afraid that this issue is one such area. As I said to the hon. Member for North Ayrshire and Arran (Katy Clark) a moment ago, we inherited from the Labour Government the largest deficit in peacetime history—£155,000 million. The measures we announced in the Budget to help reduce corporation tax and the burden of national insurance and now the measures in the comprehensive spending review to invest in energy projects for the future show that we are setting out on our plan to get sustainable employment for the whole of Scotland.

[Ann McKechin]

I thank the Secretary of State for his initial remarks. I am sure there will be areas where we can work together, but on this issue his answer is certainly disappointing. Yet again his Government admit to taking twice as much from people with families as they do from our banks. His Government now propose a 10% cut in housing benefit entitlement for those on jobseeker’s allowance for more than 12 months—regardless of the fact that they have complied with all the rules and looked for work at every opportunity. Most people regard this as no better than a form of punishment. The Secretary of State missed the vote on the VAT rise; is he going to miss this vote, too, or will he now stand up for decency and fairness?

[Michael Moore]

What matters is for us to have a welfare system that supports those in need, helps them to get back into work, and, when they get back into work, makes work pay. All too rarely have the existing arrangements met those tests. We are determined to support those in need on an ongoing basis, and to ensure that the system is fair to those who need it and fair to those who pay for it.

[David Cairns (Inverclyde) (Lab)]

3. What recent discussions he has had with representatives of the broadcasting industry in Scotland on the Government’s plans for local television networks.

[Greg Hands (Chelsea and Fulham) (Con)]

4. What discussions he has had with the Secretary of State for Culture, Media and Sport on the likely effects in Scotland of the implementation of the Government’s proposals for local television networks.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

Both my right hon. Friend the Secretary of State and I have met broadcasters to discuss a range of issues. We also have regular exchanges on broadcasting with ministerial colleagues.

[David Cairns]

Given the inevitable adverse implications for the BBC’s programme-making budget of the massive real-terms cut in the licence fee, is it not more important than ever for us to encourage television production from all sources in Scotland? Can the Minister update me on the progress of the plan initiated by the last Government to grant qualifying independent producer status to STV?

[David Mundell]

I am aware of the hon. Gentleman’s interest and expertise in broadcasting in Scotland. In answer to his question, I can tell him that an announcement will be made shortly.

[Greg Hands]

Local television is popular, and will make a real difference to communities in Scotland. The Minister will be aware that even the Scottish Government’s own Scottish Broadcasting Commission has concluded that television should remain a reserved matter. Will the Minister undertake to work with his DCMS colleagues to ensure that any framework resulting from the Shott review takes account of Scotland’s specific needs?

[David Mundell]

I agree with my hon. Friend. It was interesting to note that both the broadcasting commission established by the SNP Government and the Calman commission concluded that broadcasting should remain reserved. Nicholas Shott has visited Scotland, and has met various interested parties in the broadcasting sector there. I am sure that Scotland’s particular needs will be taken into account when his final report is issued later this year.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The television channel BBC Alba manages to be both local and national, but its funds are already parsimonious, and it is able to broadcast for only part of the day. May we have a assurance from the Government that its funding—already cut to the marrow—will be defended, and that the process of putting it on to Freeview, which has been delayed still further, will be sorted out soon?

[David Mundell]

The hon. Gentleman will be pleased to learn that I shall visit the offices of BBC Alba during a visit to the Western Isles on 5 November. The Freeview issue is clearly one for the BBC Trust, but I understand that it has not yet made a decision.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

5. What discussions he has had with ministerial colleagues on expenditure on port infrastructure in Scotland for the development of marine renewable energy projects; and if he will make a statement.

[The Secretary of State for Scotland (Michael Moore)]

I was delighted to visit my hon. Friend’s constituency last month, and to find out more about the plans there for the development of marine renewable energy projects.

Scottish Ministers can direct Ofgem to pay an amount from the Scottish fossil fuel levy account to the Scottish Consolidated Fund, which could be used for such projects. If Scottish Ministers do that, they will benefit from our arrangements for the devolution of at least £250 million for Scotland from the green investment bank.

[John Thurso]

I am sure that my right hon. Friend is aware of the immense potential of the Nigg yard in Easter Ross. Is he also aware that its current owner, KBR, has declined to use it, and is dragging its feet over selling it? Will he make it clear to KBR that a speedy completion is necessary to return the yard to use and create important jobs?

[Michael Moore]

When we visited Scrabster and other parts of my hon. Friend’s constituency, I was impressed by the serious efforts that are already being made to develop marine renewable projects in the far north. I recognise my hon. Friend’s concern about the situation at Nigg, and his comments will have been heard by the management team there. It is important for us to secure, across Scotland, as much investment as possible in the new renewables projects. I hope that the Scottish Government will respond positively now that we have ring-fenced money in the green investment bank.

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

What representations has the Secretary of State made on behalf of Scotland for the green investment bank to be located there?

[Michael Moore]

The hon. Gentleman and others are making a strong case for that, and I am certainly interested in working with colleagues in all parts of the House to make the strongest possible case for it as well.

[Mr Alan Reid (Argyll and Bute) (LD)]

I am sure that the Secretary of State will be aware of the announcement earlier this week that Danish company Skykon has suspended payments to creditors. Skykon owns a factory in my constituency that makes towers for wind turbines and it was building a new factory. Will he do his best to ensure that that partially completed factory is completed and goes into production, protecting badly needed jobs and producing towers for the wind industry?

[Michael Moore]

Like my hon. Friend, I regret the announcement that was made. I realise that that will have a huge impact on that community in his constituency. It is important that we get to the bottom of this and understand the reasons behind it, but I hope that, working with the Scottish Government and through any meetings that he and I might have, we will be able to work our way through this.

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

I ask the Secretary of State to join me in pressing for the green investment bank to be based in Scotland, to take a bit of initiative and to put some urgency and energy into that matter, because, given the level of expertise and knowledge in Scotland, it is the ideal place for the green investment bank to be based.

[Michael Moore]

First, I am delighted to have the opportunity to welcome the hon. Gentleman to his new responsibilities. Like the shadow Secretary of State, he knows the Scotland Office very well and I look forward to our encounters across the Dispatch Box and to working together where we can. The decision on the location of the green investment bank has still to be taken. His comments, those of his hon. Friends and those of Members on the Government Benches are strongly made, and I will work with everyone to make the best possible case for Scotland.

[John Glen (Salisbury) (Con)]

6. what discussions he has had with the Department for Work and Pensions on the implementation in Scotland of proposals to establish a universal credit.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The Secretary of State and I have been in contact with Ministers from the Department for Work and Pensions about a number of aspects of welfare reform in relation to Scotland.

[John Glen]

I thank my right hon. Friend to that reply. Many areas of Scotland, notably Glasgow, have suffered from the previous Government’s shameful failure to reform welfare over the past 13 years. Does he agree that, far from fearing the universal credit and the work programme, those areas, particularly Glasgow, will benefit because it will pay to be in work and there will be more help into employment for those who need it?

[David Mundell]

I do agree with my hon. Friend. Our programme is designed to support those who are in the most need but also to ensure that work always pays.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

On the question of work, or the lack of it, the Minister will have doubtless seen the national publicity around Irvine, because of the demise of the development corporation, created by a previous Conservative Administration. Does he believe that it is now time to bring back the Irvine development corporation?

[David Mundell]

The hon. Gentleman is always a strong advocate for interests in his constituency, but he will know that responsibility for that particular one rests with the Scottish Government.

[Malcolm Bruce (Gordon) (LD)]

The Minister will be aware that the pilot scheme for getting people off incapacity benefit and into work is under way in Aberdeen, and it will be a desirable outcome if people can be freed from benefit. May I share with him the experience of a constituent who came to see me this week? He said that he had just successfully got DLA, incapacity benefit and carer’s allowance, but it required three separate applications and two medical examinations, which involved two separate doctors being sent from Glasgow to carry out the examinations. Is that not an example of how incompetently inefficient the system currently is?

[David Mundell]

Yes. The right hon. Gentleman is correct to highlight the inefficiencies of the current system, which is why the coalition Government are committed to the reform of the welfare system. It is an issue that I will draw to the attention of the Minister at the Department for Work and Pensions who will visit Scotland tomorrow.

[Ian Lucas (Wrexham) (Lab)]

7. if he will discuss with the Deputy Prime Minister the merits of enabling UK-resident Scots living outside Scotland to vote in any future referendums on the relationship between the UK Government and the Scottish Executive.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The Government have no plans for a referendum on the relationship between Scotland and the rest the United Kingdom and, as far as I know, neither do the Scottish Government. The franchise for a referendum is normally provided for in the legislation setting the referendum question and rules.

[Ian Lucas]

I thank the Minister for that reply. My constituent, Mrs Massey, is a Scot and British. Why should she be excluded from any future vote on the arrangements for Scotland within the UK?

[David Mundell]

I am sure that, like me, the hon. Gentleman will do everything he can to campaign to retain Scotland’s place in the United Kingdom, and I see no immediate prospect of any such referendum.

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

I am an enthusiastic campaigner for British people living abroad obtaining the vote in all elections after they have lived abroad for 25 years. Can my right hon. Friend explain what the Labour Government spent the previous 13 years doing and why they did not implement this policy before the general election?

[David Mundell]

rose—

[Mr Speaker]

Order. May I suggest that the Minister’s reply should be focused exclusively—and, I hope, briefly—on the policy of the Government rather than on that of the official Opposition?

[David Mundell]

The Government will have noted my hon. Friend’s representations.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

8. What discussions he has had with the Chancellor of the Exchequer on the implications of the mechanisms for calculating the effects of the comprehensive spending review year on year in Scotland.

[The Secretary of State for Scotland (Michael Moore)]

The Scottish Government’s budget is calculated using the Barnett formula. The Chancellor has set out a decisive plan to reduce the UK’s unprecedented deficit and restore confidence in the UK economy. For Scotland, the spending review provides a fair deal in tough times.

[Michael Connarty]

The Secretary of State has not answered the question. I was asking about the year-on-year calculations. Is it not a fact that his Tory puppet-masters offered the Scottish National party Government a deal whereby there is less of a cut in the first year and more of a cut in future years to help the SNP in its efforts to get re-elected as the Scottish Government? Will the Secretary of State talk about the implications year on year for future years, when Scotland will be punished more than it is being this year?

[Michael Moore]

May I reassure the hon. Gentleman that his fears about political machinations are ill founded? I can confirm, however, that, in response to a request from the Scottish Government, flexibility was given to transfer some of the in-year savings from the current financial year to future years. It is for the Scottish Government to respond to, and make decisions on, such matters, and they are accountable for the spending choices they will make for the next four years.

[Angus Robertson (Moray) (SNP)]

The UK Government have known for months the social and economic consequences of defence cuts in Scotland, so will the Secretary of State confirm what specific resources were allocated as part of the comprehensive spending review to mitigate the effects of base closures?

[Michael Moore]

I welcomed the opportunity to meet the hon. Gentleman in Moray last week. I recognise that the decisions taken in the defence review following an overall assessment of Britain’s national security needs have not been good for him and his constituents, and I appreciate that there is a lot of concern about the future. I repeat today what I said in Moray: I am happy to work with the hon. Gentleman to ensure we work through the consequences of this.

[Angus Robertson]

So, one week after the closure announcement, is the Secretary of State confirming to the House today that no specific resources have been put in place and that the UK Government are providing no support on the ground in places such as Moray?

[Michael Moore]

I am happy to repeat what I made clear to the hon. Gentleman when we were in Moray: we will work with him, the taskforce and others who are interested in the future of the Moray bases to ensure we resolve things as well as possible. May I also assure the hon. Gentleman, particularly since he has raised this issue separately this week, that no decision has been taken on the future of the Tornadoes at RAF Lossiemouth?

[Mr Speaker]

Order. As usual at this time, far too many private conversations are taking place in the Chamber. That is very unfair on the hon. Member asking the question and the Minister answering it. Let us have a bit of order, therefore.

[Sheila Gilmore (Edinburgh East) (Lab)]

9. What recent discussions he has had with the Secretary of State for Business, Innovation and Skills on the implications for cross-border students of the Government’s proposals for higher education funding.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

My right hon. Friend the Secretary of State for Business, Innovation and Skills announced the publication of Lord Browne’s report on higher education and student finance on 12 October 2010. The Government plan to publish a White Paper outlining detailed proposals in the winter.

[Sheila Gilmore]

There are obviously considerable consequences for Scotland in any proposals to reduce the teaching grant because of the proposals on loans. What discussions have taken place about the possibility of large numbers of English students wishing to study in Scotland, to the detriment of Scottish students?

[David Mundell]

The hon. Lady raises an important point. Her question is one of those posed by Lord Browne’s report, and it will need to be addressed through debate and consultation. We intend to publish a White Paper in the winter leading, subject to parliamentary time, to a higher education Bill in autumn 2011.

[Mark Menzies (Fylde) (Con)]

10. What discussions he has had with the Deputy Prime Minister on whether to hold elections to the Scottish Parliament on the same day as the proposed UK general election in 2015.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

The Government have made it clear that they will work with all the devolved Administrations and legislatures to consider the issues raised by the coincidence of elections in 2015.

[Mark Menzies]

Does the Minister agree that when we get to the 2015 elections the new equal-sized boundaries will ensure a far fairer result than those held under the current set-up?

[David Mundell]

Yes, I agree with my hon. Friend, and I am sure that he will welcome, as I do, the protection of important constituencies in Scotland such as Orkney and Shetland, and the Western Isles.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I recognise that the Minister has read the Gould report. Is he now saying that he disagrees with its central finding that two ballots on different issues in different systems should not be held on the same date?

[David Mundell]

I agree with Ron Gould’s submission to the Scottish Affairs Committee, in which he said that although he would prefer the referendum on AV and the Scottish elections to be held on different days, he saw no reason why they should not be held on the same day and did not anticipate that causing the same confusion that arose in 2007.

[Alun Cairns (Vale of Glamorgan) (Con)]

11. What recent discussions he has had with ministerial colleagues on the relationship between the UK Government and the Scottish Executive under the devolution settlement.

[Robert Halfon (Harlow) (Con)]

15. What recent discussions he has had with ministerial colleagues on the relationship between the UK Government and the Scottish Executive under the devolution settlement.

[The Secretary of State for Scotland (Michael Moore)]

I have discussions with ministerial colleagues on a range of issues, including the relationship between the UK Government and the Scottish Government under the devolution settlement. We will introduce a Scotland Bill in the near future, which will implement our proposals for strengthening and deepening the devolution settlement for Scotland.

[Alun Cairns]

Does the Secretary of State believe that the public in Scotland recognise the need to tackle the budget deficit? If so, will he condemn the Scottish Executive for manufacturing disagreements with the Westminster Government and encourage them to work constructively with the Scotland Office on tackling the budget deficit?

[Michael Moore]

I certainly agree with my hon. Friend that the settlement for Scotland was better than the Scottish Government anticipated, and it should now be for them to get on with setting out their plans for not only the next year, but the next four years.

[Robert Halfon]

Does the Secretary of State recognise that residents in my constituency and elsewhere believe that alongside his plans for Scottish devolution, England deserves a fair constitutional settlement, with English votes for English laws?

[Michael Moore]

The hon. Gentleman’s passionate case has been heard in a very busy Chamber, but I am concentrating on getting on with the continuation of Scottish devolution.

[Mr Jim Hood (Lanark and Hamilton East) (Lab)]

Will the Secretary of State accept that this would be an excellent subject for discussion in the Scottish Grand Committee? Can he have a word with the Leader of the House, who is sitting two up from him, so that we can immediately initiate the next meeting of that Committee, which has not sat for many a year?

[Michael Moore]

I pay tribute to the hon. Gentleman for his unhesitating campaigning on this issue, but may I gently point out to him that the imminent publication of the Scotland Bill means that there will be more than a little chance to debate these issues?

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

Does the Secretary of State not agree that the relationship between Westminster and the Scottish Government has gone from being one of respect to one of almost total contempt? Why will the UK Government not consult the Scottish Government in advance about very important constitutional issues?

[Michael Moore]

I am absolutely astounded by the hon. Gentleman’s charge because, unlike the previous Government, we have gone out of our way to work with the Scottish Government to ensure that this takes place. [Interruption.] We cannot get around the fact that there are fundamental disagreements about the way we see the constitutional settlement developing, but I say to him that we have been sharing information and discussing things with his ministerial colleagues in Scotland regularly, and we will continue to do so—I hope that they will engage.

[Mr Speaker]

Order. There is still far too much noise in the Chamber. I want to hear Mr Frank Doran.

[Mr Frank Doran (Aberdeen North) (Lab)]

Thank you very much, Mr Speaker. The Secretary of State will be aware that—

[Mr Speaker]

First, we must take Question 12.

[Mr Frank Doran (Aberdeen North) (Lab)]

12. When he last had discussions with representatives of the oil and gas industries on the future of that industry in Aberdeen.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

Both my right hon. Friend the Secretary of State and I meet frequently representatives of the oil and gas industry. The UK Government recognise the ongoing needs of the industry and its commitment to the future of the UK continental shelf.

[Mr Doran]

I am sorry for that, Mr Speaker, but it is what happens when we do not expect to be called.

The Secretary of State will be well aware that the oil and gas industry is a global one and that its European headquarters is in my constituency. He will also be aware of the serious problem of skills shortages, and of the fact that the industry depends on the skilled people it can bring in from other countries and on exporting our knowledge. What is he doing to assist with the removal of the cap, which is seriously damaging the oil and gas industry and other industries in this country?

[David Mundell]

Oil & Gas UK has submitted replies to both consultations run by the Home Office and the Migration Advisory Committee. The consultation responses are now being considered and early outcomes are expected before the end of December. Lin Homer, the UK Border Agency chief executive, met representatives of the oil and gas sector on 9 September.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I remind the House of my entry in the Register of Members’ Financial Interests as a shareholder of Shell. May I reinforce to the Minister the concerns in that global industry now that it is so much into the export market? Not only is there the problem of work permits and getting people into this country, but, because of the way we treat people coming to this country, it is more difficult to get skilled people into other countries where we have an export market.

[David Mundell]

I take the hon. Gentleman’s points on board. He will recognise that the potential of the industry has been recognised again this morning with a statement to the House about the potential award of 144 seaward production licences in the 26th oil and gas licensing round.

The Prime Minister was asked—

[Harriett Baldwin (West Worcestershire) (Con)]

Q1. If he will list his official engagements for Wednesday 27 October.

[The Prime Minister (Mr David Cameron)]

I am sure that the whole House will wish to join me in paying tribute to Corporal David Barnsdale from 33 Engineer Regiment (Explosive Ordnance Disposal), who died on 19 October. He was a brave and highly skilled member of our armed forces whose service and sacrifice must not be forgotten. Our thoughts must be with his family, his friends and his colleagues.

This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.

[Harriett Baldwin]

May I associate myself with the condolences expressed by my right hon. Friend?

Does the Prime Minister agree that yesterday’s excellent growth numbers show that the private sector is growing and will create the jobs that my constituents need? [Interruption.]

[The Prime Minister]

My hon. Friend is entirely right. The growth figures yesterday were twice as good as market expectation. Of course, Opposition Members do not like good news, but they should celebrate it when it comes. This was strong growth, largely driven by the private sector, and it was accompanied by the Standard & Poor’s agency saying that we should no longer be in the danger zone for our credit rating, which is welcome news. Opposition Members who are waiting for a double dip have had a bit of double depression, but I am sure that we will get lots of questions about the economy this morning.

[Edward Miliband (Doncaster North) (Lab)]

May I start by joining the Prime Minister in paying tribute to Corporal David Barnsdale from 33 Engineer Regiment (Explosive Ordnance Disposal)? He died serving his country; we honour his memory and send the deepest of condolences to his family.

There are reports this morning that the Government are reconsidering aspects of their housing benefit reforms. Are they?

[The Prime Minister]

No, we are bringing forward our plans for housing benefit reform. Let me tell the right hon. Gentleman why we are doing that. Housing benefit for working-age people over the last five years has gone up by 50%. This is a budget that is completely out of control. The proposals we are bringing forward are difficult, but they need to be done, not least because we want to make sure that we protect the schools budget. We want to make sure that we protect the NHS budget. That is why we are taking difficult decisions about welfare and I hope that he will be able to tell us this morning whether he is going to support them.

[Edward Miliband]

I thank the Prime Minister for that answer. Let me get complete clarity from him. The Secretary of State for Work and Pensions is reported as saying that the Government are “open to suggestions” on the issue of housing benefit. Is the Prime Minister saying that all the aspects of housing benefit reform are fixed and are not going to change?

[The Prime Minister]

We are going forward with all the proposals that we put in the spending review and in the Budget. I am sure that we would all love some suggestions from the right hon. Gentleman.

[Edward Miliband]

This is Prime Minister’s questions—the clue is in the title. He is supposed to answer the questions. I have a specific question for him on one aspect of the housing benefit changes. The plan is to cut by 10% the housing benefit—the help with rent—that someone receives after they have been out of work for a year, even as they have been searching for work. Does the Prime Minister think that that is fair?

[The Prime Minister]

These are difficult changes, but I think that they are right. Everyone on jobseeker’s allowance is expected to work, and everyone knows that there is a problem when people claim jobseeker’s allowance and maximum housing benefit for long periods of time, which creates a serious disincentive to work. That is why we are making this change, and that is why it is right.

The key change that we are looking at is the £20,000 cap on maximum housing benefit claims. Is the right hon. Gentleman really saying—[Interruption.] I am answering the question. I know that Labour Members do not like the answer that we are sticking to our plans, but we are sticking to our plans. The point that everyone in this House must consider is whether we are happy to go on paying housing benefit of £30,000, £40,000 or £50,000. Our constituents are working hard to give benefits to other people to live in homes that they themselves cannot dream of, and I do not think that is fair.

[Edward Miliband]

The whole House has heard that the Prime Minister has dug himself in on the proposal to cut by 10% the help that people receive with rent after they have been out of work for a year. I ask him, because he will have obviously thought about this, what advice he would give to a family who are seeing 10% of their income from housing benefit being taken away. What advice would he give them, when they are seeing such a large cut in their income, on how they should make ends meet?

[The Prime Minister]

In the Work programme, we will have the best and biggest programme to help those people back into work. It will not just be the state doing it; we are going to get training companies and voluntary bodies to help those people into work. I know that the right hon. Gentleman likes figures, so let me give him the figures for London. There are 37,390 people who have been on jobseeker’s allowance for more than a year, and those people would be affected by this change—I accept that; it is difficult. Every month, there are 30,000 new vacancies in London, which makes 400,000 vacancies a year. We want to get those people back into work. What does he want to do?

[Edward Miliband]

The Prime Minister is about to make 500,000 people redundant as a result of the cuts announced by the Chancellor of the Exchequer. It is clear that his policy on housing benefit is a complete shambles. He has talked about London, but in London alone councils are saying that 82,000 people will lose their homes—they are already booking the bed-and-breakfast accommodation. How many people does he think will lose their homes as a result of that policy?

[The Prime Minister]

If we are prepared to pay—as we are—£20,000 in housing benefit, there is no reason why anyone should be left without a home. The Leader of the Opposition has talked about economic policy and cuts, and we now know from the Labour party’s own memorandum what its cuts would be. This is not the Institute for Fiscal Studies, the Government or the Conservative party; this is a Labour memorandum. It said that the cuts—[Interruption.]

[Mr Speaker]

Order. I apologise for interrupting the Prime Minister. Members must remain calm—if they are not serene, then they must at any rate be calm at all times. We must hear the Prime Minister.

[The Prime Minister]

The people responsible for making the mess should be quiet when they are told how it will be cleared up. The Labour memorandum states that the cuts implied by its spending plans would have been £44 billion in 2014-15. Those are the Labour party’s cuts, which we are having to implement. I was always told that if you have got nothing to say, it is better not to say it.

[Edward Miliband]

We can see the faces on the Liberal Democrat Benches. The hon. Member for Bermondsey and Old Southwark (Simon Hughes) has described that policy as “harsh and draconian”. No wonder he looks glum. Then we have glummer, the Deputy Prime Minister—it is no wonder that he is back on the fags. Is not the truth that the Prime Minister just does not get it? He is out of touch. Other people will pay the price for his cuts. Is it not time that he thought again on housing benefit?

[The Prime Minister]

We all had the chance to read about it in The Times this morning—the advice to the Leader of the Opposition:

“It’s important to have a cheer line that goes down well in the chamber.”

You have to have something that

“can be clipped easily by the broadcasters”,

and:

“It is important to get to your feet looking as if you are seizing on something new.”

The right hon. Gentleman has a plan for Prime Minister’s questions, but he has no plan for the economy, no plan for the debt and no plan for the mess Labour made—absolutely nothing worth while to say. That is it.

[Christopher Pincher (Tamworth) (Con)]

Will the Prime Minister join me in congratulating Ocado on creating 2,000 much-needed new jobs on the edge of Tamworth? While he is at it, will he congratulate the chief executive, Tim Steiner, on making it clear that he supports the difficult decisions that the Government are making to fix our finances and promote growth—decisions that the Labour party flunked?

[The Prime Minister]

My hon. Friend makes a very good point. Business leaders in Britain who are going to create the jobs that will employ thousands of people in our country support what the Government are doing and they want us to follow it through. I am happy to congratulate the person running Ocado, not least because I am one of its customers.

[Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)]

Q2. The Prime Minister sets great store by devolving decision making to ordinary people. That already exists, of course, with the Welsh Assembly—population 3 million and devolved budget of £14.5 billion —and the Scottish Parliament, with a population of 5 million and, even after the cuts, a budget, through the block grant, of £27.3 billion. Using the formula applied to Wales, the 5.2 million people of Yorkshire would be entitled to a devolved budget of £24 billion. Can he think of one single reason why the people of Yorkshire should not determine their own priorities and, mischievously, one reason why they should not have their own white rose Parliament?

[The Prime Minister]

I did not know that the right hon. Gentleman, for whom I have considerable respect, was making these arguments all through the past 13 years. This is a revelation. We are saying to councils in Yorkshire and up and down the country, “We’re getting rid of the ring-fences and giving you the power to spend your money in the way that you choose.” We have got rid of the bossy, centralising, interfering approach that I am afraid he was rather part of.

[Tessa Munt (Wells) (LD)]

Is the Prime Minister aware that more than 420 people died in Somerset last winter from causes related to cold and poor living conditions? Will he join me in supporting a local charity, the Somerset Community Foundation, which has a surviving winter appeal whereby all those who can forgo all or part of their winter fuel payment can donate the money for redistribution to those for whom it is not nearly enough?

[The Prime Minister]

I will certainly join the hon. Lady in congratulating the charity on the work it does. It sounds absolutely essential. I know that she will welcome, as I did, the decision by the Chancellor in the spending statement that cold weather payments would be put on the higher level permanently, not just before an election.

[Mr Eric Illsley (Barnsley Central) (Lab)]

Q3. Yorkshire Forward, the Yorkshire regional development agency, owns assets in my constituency in Barnsley that are crucial for a major redevelopment programme in the town centre. Will the Prime Minister look urgently at ensuring that the ownership of those assets is transferred from Yorkshire Forward to the local authority so that the programme can go ahead? Could that transfer be facilitated before the body’s abolition in 2012?

[The Prime Minister]

The hon. Gentleman makes a good point. The transition from regional development agencies to the new local enterprise partnerships has to be handled carefully, ensuring that such assets are put to good use. So far, the proposals for local enterprise partnerships that are coming in are extremely encouraging and will lead to more of what the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) talked about—more control locally rather than in distant regions that people do not identify with.

[Mr Andrew Turner (Isle of Wight) (Con)]

It is claimed that the EU will need a new treaty to legitimise money going to Greece. What is the Prime Minister’s response?

[The Prime Minister]

The argument being put forward, particularly by the Germans, is that a new treaty clause is needed to put the eurozone on a stronger footing. Clearly, from our point of view, we are not in the euro and we are not planning to join the euro, so any treaty change would not apply to us—just as, in terms of the new rules on the stability and funding mechanism, we have always had a carve-out from them. We shall be discussing that at the European Council this week.

The greatest priority for Britain should be to fight very hard to get the EU budget under control. It is completely unacceptable, at a time when we are making tough budget decisions here, that we are seeing spending rise consistently in the European Union. I think that is wrong and I shall be doing everything I can to try to sort out the budget for next year, and also to look at the future financing of the European Union, where we want to see strict controls. That should be our priority.

[Kate Hoey (Vauxhall) (Lab)]

Q4. The Prime Minister must realise that the British public are facing cuts in services and in their livelihoods. They do not want to see a single penny more given to the EU. In fact, they would like to see brought back some of the money that was given away, unfortunately, by our Prime Minister. Will this Prime Minister please ensure that when he goes into battle for our money, he does not—as happens to many leaders when they are involved in that bloated bureaucracy—roll over? Will he promise that if the EU demands that money, we will just say, “Sorry, we’re not paying”?

[The Prime Minister]

As ever, the hon. Lady talks a good deal of sense. It is worth recalling that since Margaret Thatcher won that rebate at Fontainebleau it has saved Britain £88 billion. That is what tough negotiation achieved. The European Parliament has insisted on a higher budget than the one set by the Council, so the first thing we have to do is to say that is not acceptable, and build a majority on the Council to get the budget down again. It pains me to say this to the hon. Lady, but we would be assisted if Labour MEPs did not keep voting for higher budgets, which is exactly what they did this week.

[Andrew Bingham (High Peak) (Con)]

Q5. Last year, the Prime Minister saw how High Peak borough council, through a pioneering alliance with Staffordshire Moorlands, had delivered efficiency savings of almost £2.4 million over the past two years. Will he assure the House that he will strive to support councils such as High Peak, which have sought to deliver better value for money and ensure that local people benefit as a result?

[The Prime Minister]

My hon. Friend makes an extremely good point. My council does exactly the same thing: it shares a chief executive, and soon more of the management team, with a neighbouring council. All councils can look at that. Frankly, it is not just councils—police forces and other organisations can look at shared services to drive down costs, so that we make sure we focus on the front line. Those are some of the reforms we need, to make sure that at a time of tight budgets we keep the good services we want.

[Angus Robertson (Moray) (SNP)]

In a few weeks’ time, the Prime Minister will decide whether he will close RAF Lossiemouth, in addition to closing RAF Kinloss, which would lead to the biggest loss of jobs in Scotland since the Tories closed manufacturing industry in the 1980s. As a consequence, that would mean that Scotland would have fewer service personnel, fewer military bases, aircraft, vessels and Army battalions and less defence spending than all our independent Scandinavian neighbours of comparable size. Will the Prime Minister explain why he is concentrating defence spending in the south and cutting defence spending disproportionately in Scotland?

[The Prime Minister]

We are going ahead with the aircraft carriers, which are being built in Scotland. I have to say to the hon. Gentleman that if we had an independent Scotland, he would not be flying planes but flying by the seat of his pants.

[Dr Julian Huppert (Cambridge) (LD)]

Q6. Can the Prime Minister reassure the House that the Government have no plans to revive Labour’s intercept modernisation programme, whether in name or in function, and that he remains fully committed to the pledge in the coalition agreement to reverse the substantial erosion of civil liberties and to roll back state intrusion?

[The Prime Minister]

I would argue that we have made good progress on rolling back state intrusion in terms of getting rid of ID cards and in terms of the right to enter a person’s home. We are not considering a central Government database to store all communications information, and we shall be working with the Information Commissioner’s Office on anything we do in that area.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

Ending child trust funds will close off a route for children in care to build up a modest nest egg, with which they could start their future life as adults. Will the Prime Minister ask his Treasury colleagues to work with me and others to devise an affordable alternative that will give looked after-children the prospect of an asset they can rely on?

[The Prime Minister]

I am very happy to ask my colleagues to work with the right hon. Gentleman because we all want to see saving encouraged, but I am afraid that when it came to the child trust fund we had to take a difficult decision, which was that that was £500 million we needed to save. My right hon. Friend the Chancellor and I sat on the Committee considering the Bill that introduced child trust funds, but we have to take some difficult decisions on spending, and that was one of them. Can we look at alternative ways of encouraging saving? Yes, we can. We are happy to work with the right hon. Gentleman.

[David Rutley (Macclesfield) (Con)]

Q7. I know the Prime Minister is aware that last week’s decision to cancel the Nimrod programme will lead to the early closure of the BAE Systems Woodford site near Macclesfield. Does my right hon. Friend agree that it is now an important priority for the Ministry of Defence to work closely with BAE to ensure that the dedicated and highly skilled staff get the best possible support for both retraining and redeployment?

[The Prime Minister]

My hon. Friend is entirely right. The MOD should work closely with BAE and with his constituents, who have worked extremely hard over many years to produce that equipment, to make sure there is a strong future. We have had to make difficult decisions in the defence review, and we have made the difficult decision about Nimrod, but in terms of BAE as a whole, we will be spending £17 billion with that company between now and 2015 on a range of projects, including the A400M. But my hon. Friend is right—we should make sure that we help those people to find new jobs.

[Luciana Berger (Liverpool, Wavertree) (Lab/ Co-op)]

Q8. Video games development is a highly skilled, low-carbon creative industry that provides more than 600 jobs in my constituency and is important for the north-west as a whole. Before the election, all three main parties pledged to introduce a video games tax relief so that we can compete internationally on a level playing field. Why have the Government reneged on that promise?

[The Prime Minister]

We had to make difficult decisions about tax relief—[Interruption.] Opposition Members groan. Can we think of one thing they will support to get the deficit down? I cannot think of a single thing. We have to take difficult decisions, and I am afraid that that tax relief, which was not particularly successful or well targeted, must go. Those are the difficult decisions that we have to take.

[Rehman Chishti (Gillingham and Rainham) (Con)]

Q9. Can the Prime Minister confirm that the Government have no plans at all to build an airport in the Thames estuary, or in Medway or Kent?

[The Prime Minister]

The Department for Transport has no plans for a new airport in the Thames estuary or in any other part of Medway or Kent and, as my hon. Friend knows, we have scrapped the plan to build a third runway at Heathrow.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

As a former PR man, does the Prime Minister agree that no matter how much Bell Pottinger tries to spin the Sri Lankan Government, the demands for an international independent war crimes tribunal intensify as more evidence of alleged assassination and civil rights abuses comes out?

[The Prime Minister]

The hon. Lady makes a fair point. We need to see an independent investigation of what happened. Everyone has read the papers and seen the TV footage, but we need an independent investigation to work out whether what she suggests is right.

[Mark Pawsey (Rugby) (Con)]

Q10. The development of land without planning permission for use as Gypsy and Traveller sites is of concern to many communities, including the villages of Barnacle and Bulkington in my constituency, where local residents have had to put up with illegal developments on their doorstep, although they are pleased with the proposals of the coalition Government to give additional powers to local authorities to deal with the matter. Will the Prime Minister acknowledge the wish of my constituents to see those powers made available at the earliest opportunity?

[The Prime Minister]

As my hon. Friend probably knows, we will bring forward the localism Bill. It is important, as I have said before, that everyone obeys the law of the land, including that on planning. That should apply to Gypsies and Travellers as well. In the localism Bill we will make sure that it is worth while for local authorities to go ahead with development—they should see a benefit when houses are built, whereas at present there is so little benefit for local areas in getting businesses in and getting homes built. There should be a benefit where they make available sites for Gypsies and Travellers, but that should not be done on the basis of lawbreaking, which it all too often is at present.

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

In July the Education Secretary promised that Wolverhampton’s Building Schools for the Future programme would be unaffected by cuts. Can the Prime Minister confirm that the much needed refurbishment of secondary schools across the city will go ahead as planned, and not suffer devastating cuts of 40%?

[The Prime Minister]

I am afraid that what happened was that the previous Government set out 50% cuts—[Interruption.] I know the Opposition do not like hearing it. They set out 50% cuts in capital spending, but did not tell us where one penny piece was going to come from. That is what happened. We have had to scrap the unaffordable and badly put forward Building Schools for the Future programme, but in the spending plans for the next four years are £15 billion additional capital for school building, so there are plenty of opportunities for additional school building, and not just secondary schools, but primary schools as well. That is what we will be making available.

[Neil Carmichael (Stroud) (Con)]

Q11. In my constituency, Stroud college, a further education college, has launched an engineering centre to encourage training and apprenticeships. Does the Prime Minister agree that in the light of the encouraging economic figures, such programmes should be supported by business?

[The Prime Minister]

My hon. Friend is absolutely right. We are making sure that money goes into FE colleges. That is essential for the skills agenda of the future, and we want to free up those colleges to have more agreements with business. In the past they were over-regulated in respect of the courses they could run and the qualifications they could offer. We want to see much greater collaboration between FE colleges so that we get the skills that we actually need.

[Mr Tom Harris (Glasgow South) (Lab)]

Until 18 months before the general election, the Prime Minister supported Labour’s spending plans. At what point did he decide to rewrite history?

[The Prime Minister]

We realised that the spending plans were unaffordable, and we came off them. We went into the last election promising to make spending reductions. It needed to be done, and I remember sitting where the right hon. Member for Doncaster North (Edward Miliband) is, week after week, asking the former Prime Minister, “Aren’t you really saying there are going to be cuts?”, and he said, “No, no cuts. There won’t be any cuts.” Do you remember? It happened week after week. Now we have the evidence from Labour’s own memo. It was planning £44 billion in cuts, and not a word about it to anyone. That is thoroughly dishonest.

[Sajid Javid (Bromsgrove) (Con)]

Q12. Yesterday, the international credit rating agency Standard & Poor’s said something that would make Opposition Members quite upset. It upgraded our nation’s credit outlook from negative to stable, but will the Prime Minister also heed its warning that that credit rating upgrade would be at risk if, in its own words,

“against our expectations the coalition’s commitment to fiscal consolidation faltered

[The Prime Minister]

That is an absolutely vital point. It was this Government’s changes that took the British economy out of the danger zone, and since the election we have seen interest rates coming down in Britain, whereas in some other countries they have been going up. Why? Because they have not taken the necessary action to get their budget and their deficit under control. What we are now seeing is businesses throughout the world recognising that this is a great country to invest in, because we are sorting out the mess that we inherited.

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

The Prime Minister will be aware that by 7 July the Education Secretary would have already understood the financial situation and the “state of the books”, as the Prime Minister is so keen to keep stating, so why on 7 July, in this House, did the Education Secretary say:

“One announcement that I was able to make on Monday was that Stoke-on-Trent, as a local authority that has reached financial close, will see all the schools under Building Schools for the Future rebuilt”?—[Official Report, 7 July 2010; Vol. 513, c. 490.]

Is there some confusion between the Prime Minister and the Education Secretary?

[The Prime Minister]

We were left a complete mess in terms of Building Schools for the Future. Here was a programme that took up three years and hundreds of millions of pounds before a single brick was laid. The cost of building those schools was twice what it should have been, so we have scrapped that programme and made available £15 billion for the next four years. That means that school building will be higher under this Government than it was under the Labour Government starting in 1997.

[Mary Creagh (Wakefield) (Lab)]

Rubbish!

[The Prime Minister]

Yes, it will be. Go and check the figures.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

indicated dissent.

[The Prime Minister]

Do your maths. You’ll find out that’s the case.

[Alun Cairns (Vale of Glamorgan) (Con)]

Q13. Figures published this week show that four fifths of economic growth is coming from the private sector. Does the Prime Minister accept that it is wrong to say that public spending is propping up economic development? Does he further recognise that more work needs to be done in supporting the private sector throughout the United Kingdom?

[The Prime Minister]

This is the news that the Opposition do not want to hear. Four fifths of that growth was coming from the private sector, and that is an encouraging sign that we should celebrate rather than look miserable about.

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

The Prime Minister talks of difficult decisions, and last week the Chancellor said that government is about choices. The Opposition agree, but we would have made different choices—

[Hon. Members]

What?

[Mr Speaker]

Order.

[Mrs Hodgson]

For instance, we would have chosen to tax the bankers more heavily in order to avoid the shameful attack yesterday on women and children in the form of the abolition of the child trust fund and the health in pregnancy grant. Does the Prime Minister agree with his Chancellor’s choices continually to penalise women and children in that way?

Please, Mr Speaker—

[Hon. Members]

Speech!

[Mr Speaker]

Order.

[Mrs Hodgson]

Please, Mr Speaker, will you ask the Prime Minister not continually to blame the Opposition? He is in government now—

[Mr Speaker]

Order. I am grateful. I call the Prime Minister to reply.

[The Prime Minister]

I am afraid to say that the choice the Opposition have made is not to make any choices—absolutely none at all. The hon. Lady mentions the importance of taxing the banks, but the point I would make is that we introduced a bank levy—within six months of taking office, that has been sorted out. The Opposition had 13 years. The Leader of the Opposition either sat in the Treasury, as one of the chief economic advisers, or sat in the Government, and they did absolutely nothing to introduce that bank levy. Was he arguing for it across the Cabinet table? We have no idea. It did not happen; we have done it. We are asking the banks to pay a fair amount. What we should be focusing on is getting the revenue out of banks so that they contribute to rebuilding our country after, frankly, the mess it was left in.

[Mr Speaker]

I call Bob Russell. [Hon. Members: “Hear, hear!”] Order. I want to hear Mr Russell too.

[Bob Russell (Colchester) (LD)]

Earlier the Prime Minister and the Leader of the Opposition had fun and games over housing benefit cuts. This is not a laughing matter for the thousands of children who could well become homeless. I am confident that this was an unintended consequence because the cost of putting children in bed-and-breakfast accommodation is greater than housing benefit. Will the Prime Minister look at this again, please?

[The Prime Minister]

I completely agree with the hon. Gentleman; this is an incredibly serious issue. We have a housing benefit bill that is out of control—up 50% over the past five years for working-age adults. The key change that we are suggesting is a cap of £20,000—let me repeat that: £20,000—that a family can get for their rent. The fact is that there will be many people working in Colchester, Doncaster or west Oxfordshire who are paying their taxes and who could not dream of living in a house that cost £20,000 to rent each year. It is an issue of fairness that we tackle this budget, get it under control, and do not ask hard-working people to support benefit levels to get things they simply could not have themselves.

Speaker’s Statement

Wednesday 27th October 2010 Commons Chamber

12:32

[Mr Speaker]

I have a short statement to make. Yesterday a point of order was raised by the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman) about the title of his proposed early-day motion. The Second Deputy Chairman of Ways and Means, who was in the Chair, undertook to look into the matter. I am allowing the proposed motion on the Order Paper with an amended title, but I want to remind the House of the right way of pursuing such matters. If any Member is not content with the advice given by the Table Office, he or she should first discuss the matter directly with the Principal Clerk of the Table Office. If still dissatisfied, the Member can ask for it to be referred to me. I would not expect such an issue to be raised on the Floor of the House until I had had the opportunity to consider the matter and all these steps had been exhausted.

Economic Governance (EU)

Wednesday 27th October 2010 Commons Chamber

12:33

[Mr William Cash (Stone) (Con)]

(Urgent Question): I have an urgent question for the Prime Minister, which is being answered in the name of the Chancellor of the Exchequer, as to what negotiating position the Government intend to adopt on the conclusion of the taskforce on strengthening economic governance in the European Union that was presented to the European Council on 21 October with the claim that the endorsement—[Interruption.]

[Mr Speaker]

Order. First, I appeal to right hon. and hon. Members who are leaving the Chamber to do so quickly and quietly. Secondly, may I say to the hon. Member for Stone (Mr Cash), who has 26 years’ experience in the House, that this is not the point at which he is supposed to dilate? He will have his opportunity. He has said what the substance of the matter is, and we look forward to the Minister responding.

[Mr Cash]

rose—

[Mr Speaker]

Order. The hon. Gentleman must not get too excited: he will have his opportunity. I have granted him his chance, and he should not worry: we will come to him in due course.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I am very grateful for the opportunity to update the House on the conclusion of the taskforce on strengthening the economic governance of the European Union, and to report on the UK’s position on the taskforce. In particular, I wish to restate that the UK is exempt from the current and future sanctions regime.

Heads of State and Heads of Government commissioned the President of the European Council, Herman Van Rompuy, to produce a report on EU economic governance and report back to the October Economic Council. Mr Van Rompuy chaired a taskforce meeting consisting of EU Finance Ministers, and the Chancellor represented the UK on the taskforce. The report has been agreed by the taskforce, and the European Council is expected to endorse it tomorrow. Copies of the report, along with the Chancellor’s submission to the taskforce, have been placed in the Library of the House this morning.

The report concludes that the EU should take steps to reinforce fiscal discipline and that the euro area in particular must face tougher surveillance of its fiscal policies, with sanctions for non-compliance with the pact where appropriate. It also recommends measures to improve EU-level co-ordination of macro-economic policies. That will ensure that any harmful macro-economic imbalances between member states can be identified and corrective action taken. Finally, the report notes that there should be a permanent crisis resolution mechanism for the euro area. The UK supports its conclusions.

A strong and stable euro area is firmly in the UK’s own economic interests, given the high level of UK exports to those countries and our close economic ties. In the years before the crisis, fiscal discipline was absent, and not just in states in the eurozone. High levels of debt have exacerbated the problems that some member states face during the economic downturn. The taskforce recommends that there should be greater focus on member states’ public debt levels in future, and the Government agree with that approach.

I am pleased to note that the report explicitly states that sanctions cannot be applied to the UK under the stability and growth pact. Domestic fiscal frameworks play a crucial role in ensuring that member states act responsibly. EU surveillance is useful, but as the House knows, national Parliaments and national institutions must hold Governments to account for their economic and budgetary policies.

Let us be absolutely clear: yes, we want to see a strong and stable eurozone. That is in our interests just as much as those of our neighbours. The UK has led the way on economic governance. Multi-year budgets and independent statistics and forecasting have already been introduced, and we have a clear fiscal mandate to eliminate our structural deficit. We are leading the eurozone, and our high standards have already received international endorsement. We will examine any proposals to help the eurozone overcome its problems.

However, as the Prime Minister has just said, we will not agree to any changes to EU treaties that move more powers from this country to the EU. The UK’s exemption from the sanctions proposal will be explicit, and there will be no shift of sovereignty from Westminster to Brussels. The report makes that clear, agreeing that

“strengthened enforcement measures need to be implemented for all EU Member States, except the UK as a consequence of Protocol 15 of the Treaty”.

While we are looking at problems in the EU, I should like to say that we have serious concerns about the proposed size of the 2011 EU budget. I was shocked to see that on the day of the spending review, the vast majority of Labour MEPs voted against a freeze in the EU budget. When countries across Europe are taking tough decisions to put their public finances in order, it would be wrong—unjust, even—to have a 6% rise in next year’s EU budget, as has been suggested. We cannot accept that and will fight it hard. We are protecting British interests in the EU and doing what is right for our country and our people, and the Prime Minister will update the House next week.

[Mr Cash]

I am most grateful. Unfortunately, the explanation that we have just heard from the Minister does not answer all the questions that arise in this matter. In particular, the Chancellor of the Exchequer was on the taskforce, and the Council’s recommendation is that these moves should strengthen economic governance

“in the EU and the euro area”,

in other words not excluding the UK,

“and can be implemented within the existing Treaties.”

I am grateful to the Minister for agreeing, as I suggested, that he should place in the Library a copy of the taskforce report and the Chancellor’s submission to the taskforce on 9 July, so that everybody can read them.

The point remains that the six regulations and directives that the European Scrutiny Committee will consider this afternoon are still on the table. Mr Van Rompuy indicated yesterday at a meeting of COSAC—the chairmen of European scrutiny committees—which I attended, that there are uncertainties about the legal position. I think I am getting his words correct and that he said that the situation did not totally respect all the traditional rules of the European Union. Mr Van Rompuy also called for agreement because, he said, people are our citizens and not just voters.

Given that there are now six legislative proposals—it is claimed that they are based on the existing treaty, but we cannot assume that they are—and that the ESC will consider them today, and that they appear to carry forward in part the Van Rompuy recommendations, what requires a new treaty?

The treaty will affect the UK and our sovereign Parliament in respect of its control over UK fiscal policy, tax and economic governance, including the question of the rebate. We are glad to hear that the Government reject the increase proposed by the European Parliament, but will the Minister reply to this simple question: will the Government veto the treaty, and if not, will they guarantee that, in accordance with the wishes of the voters in the United Kingdom, we have a referendum on that issue?

[Mr Hoban]

I am grateful to my hon. Friend for raising those points. May I just advise him that the final meeting of the taskforce took place on 18 October? I attended that taskforce, as did my right hon. Friend the Chancellor. We ensured that the language in the taskforce report guaranteed that sanctions would not apply to the UK. Paragraph 18 of the taskforce report refers

“to the specific situation of the UK in relation to Protocol 15 of the Treaties.”

In addition, paragraph 4 states that the measures set out in the taskforce report can be implemented through

“EU secondary legislation…within the existing legal framework of the European Union”,

so nothing in the report requires a treaty change. I am aware that France and Germany have suggested that there may be treaty changes, but we have yet to see the details of such proposals, which would be made to the European Council at the weekend.

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

Will the Minister explain why the Prime Minister needs a further week before he updates the House on those matters? Could that be because he has yet to figure out exactly what the Government’s position is? Surely after looking at those negotiations, he recognises that this is an embarrassing position for the Government to be in, because the coalition’s policy on new European initiatives as they are introduced is far from clear.

We are still none the wiser, even though this issue was supposed to be debated today. It remains under “Future Business” on the Order Paper under a motion tabled by the Minister, which proposes that the House

“supports the Government’s approach to improving the functioning of the eurozone and reinforcing economic stability across the EU.”

If the Government are asking us to support their approach, could the Minister tell us what his policy is? It is clear to the House that one lesson we need to learn from the financial crisis is the need for better co-operation between Governments at European and global—G20—level, obviously to ensure that we address the imbalances in the worldwide economy that were the root cause of the crisis.

Of course, the euro area needs to sort out its own difficulties. We have supported eurozone countries in that respect in the past while making it clear that the UK taxpayer cannot be expected to bear the burden, but does the Minister agree that our focus in this country needs to be on jobs, housing and growth, not further rounds of navel-gazing on European governance?

If the Government were regarded as a serious player in Europe, they would have led and not followed these developments over the weekend. There are several reports from various quarters about a set of different policy outcomes—the President of the EU says one thing, and the French President and German Chancellor look set to propose changes to the treaty—but where was the Prime Minister during those conversations?

The Government are quite clearly too scared to talk even to some of their own Back Benchers on that question, but has the Prime Minister spoken to the Deputy Prime Minister about these matters? Whatever the Minister says, there are three wings to the coalition: half of the Conservative party want to leave the EU, the Lib Dems want to go head first into the euro, and the rump of the Government, represented by the Minister, are left straddling those two positions—they are the only ones with nothing to say. Is it not clear that the Prime Minister is isolated within his own coalition? It is no wonder that he is isolated in Europe.

[Mr Hoban]

I appreciate that the hon. Gentleman has been absent from the House for some time, and he is a little rusty on some of these things, but I am sure that he will recollect that the practice followed by previous Prime Ministers was to report back to the House on the Monday after a European Council, not before. My right hon. Friend the Prime Minister will make the statement that would be customarily expected of him.

It is important to ensure that we learn the lessons from the financial crisis. It was clear in the run-up to that crisis that fiscal discipline was lax not just in the euro area, but in the UK and other states. We have led the way in this debate by introducing the Office for Budget Responsibility, with a clear fiscal mandate for eliminating the structural deficit by 2014-15. The fact that we have led the debate is recognised by international bodies such as the OECD, the International Monetary Fund and others. We have set our mark on the debate in Europe, which is the right thing to do. It is right that other member states should achieve the same high standards of fiscal discipline as we do. We are leading the debate in Europe, not following it. The previous Government were silent on that, so what is the Opposition’s position now?

[Several hon. Members]

rose—

[Mr Speaker]

Order. I would remind the House that if I am to accommodate a reasonable number of colleagues within the very limited time frame available, brevity in both questions and answers is essential.

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

Can the Minister confirm that even if the proposed treaty concerns only and exclusively the member states of the eurozone, it would still require the support of the British Government to go ahead? Can he assure me that that support will not be given without obtaining concessions in return, such as the return of powers to this country that were unnecessarily given? Can he assure me that we will not give that support without demanding a price? This is the ideal opportunity to obtain that price.

[Mr Hoban]

My right hon. Friend makes an important point, but I would point out to him that, at the moment, there are no proposed treaty changes on the table. That may happen at the European Council next weekend, and we should respond to those treaty changes as they arise. However, I go back to the comments that my right hon. Friend the Prime Minister made: we will not agree to any changes to EU treaties that move more powers from this country to the EU.

[Mr Jack Straw (Blackburn) (Lab)]

The Minister says that there are no treaty changes on the table. Theoretically that is true, but he must be aware that in the statement issued after the meeting between Chancellor Merkel and President Sarkozy last week in Deauville, they made it explicit that they intended to put forward treaty changes and that the ambition of those changes would extend beyond simply the eurozone, which will have clear implications for the United Kingdom. In that case, will the Minister re-emphasise his clear statement—which I welcome—that the United Kingdom will not contemplate treaty changes that interfere with the right of the British Government and of this House to determine our own economic policy, including our own exchange rate policy?

[Mr Hoban]

Indeed, that is why we have secured a clear and explicit exclusion in the report from the Van Rompuy taskforce—an exclusion based on the Lisbon treaty, but also based on the opt-out that we secured from the Maastricht treaty—so that the sanctions do not apply to the UK. As I have said, at the moment there are no detailed treaty changes on the table. We will have to wait and see what the French and Germans put forward at the weekend.

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

May I remind my hon. Friend that those of us who opposed the formation of the euro in principle warned that it would be a disaster, and that we have been vindicated by events? May I warn him now that the Government’s aspiration somehow to assist in creating a stable and strong euro area will be a vain attempt? The Government had better plan for the continuing disaster of a currency without a state, which is bound to be unstable in the long term.

[Mr Hoban]

My hon. Friend makes an important point. There are many sound arguments against the euro, and that is why we have ruled out joining it. However, it does us no favours to see a weak and unstable eurozone. It is important for eurozone countries to have strong fiscal discipline to ensure stability. The taskforce introduces a mechanism for eurozone countries to try to deliver that.

[Mr Denis MacShane (Rotherham) (Lab)]

Have you noticed, Mr Speaker, that all the Liberal Democrats have mysteriously disappeared from the Treasury Bench as this subject has been debated? I would welcome the views of the right hon. Gentlemen on the Treasury Bench on housing benefit, but may I say to the Minister that I welcome, I think, his clear statement to the House that he is not prepared to go and dwell on planet Cash? He has made it absolutely clear that the Government are not going to veto the treaty, and I welcome that sensible Euro-pragmatism from the new Government.

[Mr Hoban]

I am not entirely sure which planet the right hon. Gentleman is on at the moment. We need to ensure that the eurozone functions effectively, but we have secured an opt-out from the sanctions proposals, originally through the opt-out in the Maastricht treaty and reinforced by the Lisbon treaty. That is the right place for this country to be in, and that is why the coalition Government are right behind that position.

[Mr James Clappison (Hertsmere) (Con)]

May I congratulate my right hon. and hon. Friends on their refreshing approach of standing up for Britain’s interests in Europe, in contrast to that of Labour Members and their MEPs? Will they bear in mind, however, that there is little appetite for any extension of the competence of the EU into economic governance through any legal framework, whether by treaty or otherwise? There is still less trust in the institutions of the European Union, including the Commission, given the way in which the competence of the EU is for ever being expanded and the fact that previous safeguards in other areas have turned to dust.

[Mr Hoban]

My hon. Friend makes an important point. I know that he thinks about these issues very deeply, and I would encourage him to read the final report of the taskforce. It sets out our exemptions explicitly, and he will recognise that they will protect the UK’s position and help to develop a strong and stable eurozone, which is also in our long-term economic interests. The document makes it clear that we are outside the sanctions regime that applies to members of the eurozone and others.

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

I spent yesterday in Berlin talking to German politicians, and I think that the British Government will discover treaty changes pretty quickly. Those politicians feel that the stability and growth plan is dead, and that it is not the mechanism to take us forward. May I urge the Minister to answer a specific question? Given that 25 of the 27 member states either are members of the eurozone or will have to become members under treaty obligation, and that only two have an opt-out, does he agree that anything that would strengthen the financial and economic co-ordination of the 25, plus the two with opt-outs, would represent a diminution of our sovereign ability to exert our influence and would therefore be subject to a referendum here?

[Mr Hoban]

As I reiterated earlier—and as my right hon. Friend the Prime Minister has made clear—we will not endorse a treaty that transfers sovereignty from Westminster to the EU. The hon. Lady takes a close interest in these matters, and I know that she will recognise that views among member states about the desirability of treaty changes vary, and that the UK is not the only one that is concerned about this.

[Mr Douglas Carswell (Clacton) (Con)]

In June, Ministers made a big deal of the fact that the UK Budget would not need to be submitted to EU institutions before it was brought to the House of Commons. Will the Minister confirm that, in fact, the UK pre-Budget report data are part of the European semester process, and that, while we might be exempt from sanctions, we are part of that surveillance? Will he be honest and admit that we are part of the EU fiscal scrutiny process?

[Mr Hoban]

I believe that this Parliament should hear news about this country’s finances before the EU does. We have secured that situation and that was the right thing to do.

[Mr Nigel Dodds (Belfast North) (DUP)]

The Minister also mentioned the increase in the EU’s budget by 6%. Does he agree that many people in this country—in fact, the vast majority—will be deeply disappointed by the Prime Minister’s reply to the hon. Member for Vauxhall (Kate Hoey) during Prime Minister’s questions, in which he seemed to be limiting his ambition to reduce the size of the increase in the EU budget? Should not the Government just go there and argue for, and deliver, a cut in the EU budget?

[Mr Hoban]

The right hon. Gentleman needs to remember that we voted against the budget increase in Council. We have taken a tough line, not only by arguing against it but by voting against it as well.

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

The Minister has drawn our attention to paragraph 18 of the report. I am curious about paragraph 16, which refers to “New reputational and political measures”, including the threat of “enhanced surveillance”. Would the British fiscal position be subject to enhanced surveillance in certain circumstances, and what would that mean?

[Mr Hoban]

I take the view that the measures that my right hon. Friend the Chancellor has announced in relation to strengthening the fiscal framework, and the consolidation that he announced last week, will ensure that we will not be subject to any surveillance whatever.

[Kate Hoey (Vauxhall) (Lab)]

It is all very well for this taskforce to report on the fiscal discipline of eurozone countries, but what about the fiscal discipline of the European Union generally? It has not even got its accounts properly audited. What are we going to do not only to stop the budget going up but to achieve a cut in the amount of money that we have to pay to the European Union? If we want to ask people what they feel about this, let us have a referendum on whether we should be paying more to the European Union.

[Mr Hoban]

The hon. Lady makes some sensible points about this matter, but she needs to speak to some of her own colleagues in the European Parliament, because they voted against the freeze on the budget. And of course it was her right hon. and hon. Friends who gave away some of our rebate as well. That is part of the problem that this Government are trying to sort out.

[Philip Davies (Shipley) (Con)]

Whenever the Minister defends this country from a power grab and a cash grab by the European Union, he will have the enthusiastic support of Members on these Benches. Some of us are rather nervous, however, because when the Conservatives were in opposition, they opposed the European External Action Service, yet they sang its praises when introducing it in the House not long ago. They also opposed giving more money to the European Union, yet they recently rubber-stamped an increase through this House that had been agreed by the previous Government. Does the Minister agree that his Government should be judged on what they do, and not on what they say?

[Mr Hoban]

Absolutely. That is why I would encourage my hon. Friend to read this document. He will see the gains that we have managed to secure in Europe to defend our position.

[Mr Peter Bone (Wellingborough) (Con)]

Does the Minister welcome the united approach of the coalition Government working together, under which the Prime Minister sent the hon. Member for Stone (Mr Cash) to Brussels yesterday to duff over the EU President and soften up the EU so that the Prime Minister can finish the job this weekend?

[Mr Hoban]

The coalition is at its best when all Members are united behind it.

[Mr Speaker]

I reserve judgment at this stage as to whether the expression “duff over” constitutes parliamentary language, but the hon. Member for Wellingborough (Mr Bone) has got away with it on this occasion.

Afghanistan

Wednesday 27th October 2010 Commons Chamber

12:56

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

With permission, Mr Speaker, I will report to the House the Government’s assessment of progress towards UK objectives in Afghanistan. This is the first of the quarterly reports that the Prime Minister announced in his statement to the House on 14 June.

Making progress in Afghanistan is the top foreign policy priority for the Government, linked closely of course to our foreign and development policy towards Pakistan. We think that it is right, therefore, that Parliament is able to scrutinise the mission in Afghanistan in detail. From the beginning of the new Government, we have given full attention to Afghanistan in the National Security Council. We have ensured that Government Departments and Ministers are working together at the highest level and that the necessary resources are being devoted to the difficult task in Afghanistan. We have doubled the operational allowance for our troops, sharply increased our development aid and rebalanced the deployment of our forces in Helmand. In addition to these reports and regular updates by Ministers, we will also make more information available to the House in the form of written ministerial statements each month from November. I will make a further statement when the investigation into the tragic death of Linda Norgrove is complete.

Members of all parties will join me in expressing gratitude to our courageous armed forces. They are the finest that any nation could hope to have. We should also remember the families of the 341 men and women who have given their lives and the many who have been wounded. For nine years, thousands of Britons have served in Afghanistan in both civilian and military roles in extraordinarily difficult circumstances, and we owe them a great deal.

It remains vital to our national security that Afghanistan be able to maintain its own security and to prevent al-Qaeda from returning. NATO’s strategy is to protect the civilian population, support more effective government at every level and build up the Afghan national security forces as rapidly as is possible. The strategy also requires the Afghan Government to meet the commitments on governance and security that they made at the Kabul conference in July this year. My report today will cover all these areas. It represents the combined assessment of the Foreign and Commonwealth Office, the Ministry of Defence and the Department for International Development, and the next quarterly report will be delivered by the Secretary of State for Defence in the new year.

On security, we assess that steady progress is being made across Afghanistan, and specifically in Helmand and Kandahar provinces. International forces now number 130,000, and the Afghan national security forces will reach 260,000 by the end of the year, exceeding their target size for 2010. Afghan forces and the international security assistance force have checked the momentum of the insurgency, and the area under the control of the Government of Afghanistan is increasing. However, the situation remains extremely challenging. One of the effects of increased military activity is that the number of security incidents, particularly those involving direct fire, has increased sharply, so we should not underestimate the highly difficult task that our forces continue to face.

ISAF’s military effort is currently focused on Kandahar. Afghan and international forces continue to clear the insurgency out of areas adjacent to the provincial capital. Afghan security forces are taking an increased role in planning and executing the current phase of these operations and make up well over half of the forces involved. In the coming weeks, operations will focus on holding the ground that has been gained and providing a secure environment for local Afghan governance to develop.

In Helmand province, UK forces continue to train the Afghan national security forces and conduct operations against the insurgency. As my right hon. Friend the Secretary of State for Defence announced on 14 October, we are increasing by over 320 the number of UK troops directly involved in the training and development of the Afghan national security forces. That increase is part of the rebalancing of UK forces in the province and has been made possible by the handover of security responsibility for Kajaki, Musa Qala and Sangin to our US allies in order to concentrate British forces in the key population centres of central Helmand.

On 17 October, units of the 3rd brigade of the Afghan national army’s 215 corps launched a significant operation to secure settlements near Gereshk. This operation is building on the success of previous ANSF operations, which have cleared the insurgency out of former safe havens in central Helmand over the course of the summer. Planning and implementation are being led by the Afghans, with British mentors from 1st Battalion Irish Guards providing support. For the first time, engineering, artillery, countering improvised explosive devices and reconnaissance are being conducted by the Afghan national army itself. US Marines, who now form the majority of ISAF troops in Helmand, continue the hard-fought struggle against the insurgency in Sangin, while in Marja they have continued to carry out operations alongside the Afghan national army and police.

The Government are confident that we have the right military strategy in place and the right number of troops in Afghanistan. However, we must expect levels of violence to remain high and even increase as Afghan and ISAF forces tackle the insurgency. The murders by insurgents of the governor of Kunduz province and a district governor in Nangarhar province remind us of the violence that still exists even in the more secure areas of the country.

The Prime Minister will attend a NATO summit in Lisbon on 19 November when we expect NATO to agree the process of transferring lead responsibility for security across Afghanistan to the Afghan security forces by the end of 2014. It will be a phased transition, with the Afghan security forces gradually taking the lead—as they have in Kabul—in jointly selected districts and provinces, as the conditions on the ground are met. British forces will be drawn down from combat operations by 2015.

On governance, we assess that the Government of Afghanistan are making some progress on their Kabul conference commitments. The human rights support unit in the Ministry of Justice has been opened; the Afghan national security adviser has approved a revised national security policy. The Government are finalising a 100-day report, which will highlight progress and areas where further action is needed. But more still needs to be done, some of it more quickly.

Last month’s parliamentary elections passed without serious security incident. However, the independent Electoral Complaints Commission has confirmed that more than 1 million votes—almost a quarter of the total—were disqualified on grounds of irregularities and fraud. The Electoral Complaints Commission will investigate allegations against candidates and disqualify those found to have committed fraud before final results are issued. That is an important process to build Afghan confidence in the country’s institutions.

On 7 October, the high peace council was inaugurated, fulfilling a key request of the Afghan consultative peace jirga in June. It marks an important milestone for the Afghan peace and re-integration programme. It is for the Afghan people to shape a political settlement that reflects the needs, culture and aspirations of all the Afghan people. The UK will support a settlement that gives Afghanistan stability and security, that is representative, that gives no one group disproportionate influence, that upholds human rights and the rule of law, and that is in accordance with Afghanistan’s constitutional framework. The UK will work with individuals and groups who genuinely share those aims and who accept the conditions laid down by President Karzai’s Government: insurgents must renounce al-Qaeda, give up armed struggle and work within the constitutional framework. We consider on its merits any request for the UK to play a role in support of this Afghan-led process. At the same time, ISAF will continue to exert intensifying pressure on the insurgency throughout the country.

Corruption continues to be a serious problem in Afghanistan and there has been only modest progress in anti-corruption efforts. In the past year, the criminal justice taskforce convicted 440 people, including serious narcotics dealers and corrupt officials. New mining regulations have been introduced to increase transparency and accountability. The UK is helping the Afghan Government to strengthen accountability and prevent corruption through financial management reforms and to build institutions with the ability to tackle corruption and enforce the rule of law. We are pressing for the anti-corruption monitoring and evaluation committee, which has been appointed, to start work as soon as possible.

In early September, Afghanistan’s central bank was forced to intervene to stabilise the Kabul bank after allegations of corruption. The Afghan authorities must now work with the International Monetary Fund to conduct a proper audit and take any necessary action. Weaknesses in the banking regulatory system must be addressed if Afghanistan is to maintain domestic and foreign public confidence. The Afghan economy grew last year by a rapid 22.5% and tax revenues have risen sixfold in six years. The IMF predicts that the Government of Afghanistan will be able to cover non-security running costs by 2015 and all their running costs by 2023.

The House will recall that on 21 July the Secretary of State for International Development announced a £200 million increase in UK funding for Afghanistan to stabilise insecure areas, stimulate the economy and improve essential services. Early progress is being made at the Afghan Ministry of the Interior where the new Minister is keen to develop a more capable and accountable police force that will help sustain the transition of security responsibilities to the Afghan Government.

The deployment of British armed forces abroad is one of the gravest of responsibilities of Government, along with that of protecting the security of British citizens and territory. In Afghanistan, the two go hand in hand. The Government understand how important it is to retain public confidence in our mission and to ensure democratic scrutiny of it. We will continue to provide regular and frank assessments to the House. Above all, we will do our utmost to ensure that NATO’s strategy in Afghanistan is seen through with rigour and determination and that the extraordinary efforts of so many thousands of our armed forces serve to enhance the national security of the United Kingdom.

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

I thank the Foreign Secretary for his statement today and welcome this opportunity for the House to be updated and for us to show our full support for our men and women fighting in Afghanistan. They are the bravest and the best of British and they are fighting to protect our country. We are all immensely proud of their fortitude, their professionalism and their commitment.

It has been a very difficult summer for our armed forces. We have already paid tribute today to Corporal David Barnsdale, and it continues to be hard for our soldiers’ families and their communities. In my own constituency, we have lost Rifleman Jimmy Backhouse and Bombardier Craig Hopson in recent years. I pay tribute to them and their bravery, but also to every one of the 341 service personnel we have lost in Afghanistan. We must pay tribute, too, to their families, who have given so much and done so much to support our troops and our country. We should also make clear our gratitude to the aid workers and other civilian staff who take such great risks to complete important work in Afghanistan.

We are part of the international coalition in Afghanistan, with a UN mandate to prevent the country from becoming once again a safe haven for al-Qaeda to plan and launch attacks on our population and that of our allies. That central task is unchanged, and our armed forces will have the full support of Labour Members in achieving that goal—as will the Government. The people of Afghanistan do not want to return to misrule or to harbouring what are foreign terrorist groups. That is what makes the civilian and political elements, alongside our military effort, so important.

I would like to ask the Foreign Secretary first about the military operations. When I met General Petraeus on his visit to London two weeks ago, he said that considerable military progress was being made in targeting the Taliban leadership, but he warned, as has the Foreign Secretary, of the risk of increased security incidents as a result of the increased military activity. I welcome the Foreign Secretary’s update on the development of Afghan national security forces, but may I ask what progress has been made on the hold and build exercise in Marja? Will he also tell us whether Afghan capacity in Kunduz is being prioritised following the recent insurgency attacks, including the death of Mohammad Omar, the governor of the province, to which he referred in his statement?

Will the Foreign Secretary comment on the recent report from the Overseas Security Advisory Council, which stated that 18 aid projects worth $1.4 billion would have to be shut down by the end of the month because of the Afghan Government’s policy on private security contractors? General Petraeus has told the Afghan Government that pursuing that policy too quickly could harm the aid effort. ISAF is agreed on the need for a gradual phasing out, but does the Foreign Secretary agree that engaging in the process too quickly could harm development efforts?

We agree that there is no purely military solution to the war in Afghanistan. What is required is a political settlement built on trust, ownership and democratic rights. The Foreign Secretary will be aware that in Helmand there were comparatively few complaints about electoral fraud in the recent parliamentary elections, and that does credit to the professionalism of our forces and election officials on the ground. However, the Foreign Secretary is right to be concerned about the high levels of fraud nationally, and about the problems involving corruption to which he referred. He also referred to the disqualification of 1 million votes. Has he any evidence of particular difficulties experienced by women in participating in the elections, and can he tell us whether that is being investigated as part of the work of the Electoral Complaints Commission?

The Foreign Secretary is aware of the centrality of the political process and good governance to a more peaceful and stable Afghanistan. Can he tell us what progress is being made in the development of secure local political institutions, as well as sustainable public services such as schools and hospitals? He referred to the growth in the Afghan economy. Can he also tell us what plans there are for a wider economic strategy for the area to sustain that progress for the future?

On the broader issue of a political settlement, can the Foreign Secretary update the House on the progress of the reintegration programme for former Taliban fighters in Helmand? I agree with him that the process leading to a political settlement must be Afghan-led and, where possible, given international support. Crucial to Afghanistan’s security and long-term stability are its neighbours. Can the Foreign Secretary tell us when the next trilateral meeting between Afghanistan, Iran and Pakistan will take place? Has he discussed with the Pakistan Government the security situation in the north of Pakistan and the operations in the border regions? Can he also update us on the discussions that are taking place between NATO and Russia, and on how he is taking account of the sensitivities arising from recent history?

We want our troops to be able to come home as soon as possible: I know that there is agreement on that throughout the House. We also support the international agreement that Afghan security forces will be able to be in the lead by 2014, following agreement at the Kabul conference, and will argue consistently for a political settlement to accompany the increase in the Afghan police and army that is necessary for a stable and secure Afghanistan.

Will the Foreign Secretary say a little more about his approach to troop withdrawal? He has proposed a timetable for the withdrawal of combat troops, but with continued support to develop the Afghan police and army expected beyond that date. He and other Ministers have also spoken of the importance of conditions for our troops on the ground in driving decisions. He will be aware of the paramount importance of the safety of any remaining troops who are continuing in a support and training role. Can he tell the House what flexibility he attaches to the timetable that he has set out, and what consideration he will give to the safety of the remaining troops in Afghanistan in deciding the timetable for the withdrawal of combat troops?

Since operations began in Afghanistan in 2001, 341 British military personnel have died, giving their lives in service of the country. We owe it to them, to their families, and to the men and women serving today to be clear in our approach and resolute in our support. We will continue to provide strong bipartisan support for our mission.

[Mr Hague]

I strongly welcome the right hon. Lady’s questions, and, indeed, the spirit of those questions. She has expressed the unity that is felt in the House about the purpose of our mission and the support for our armed forces. I think that that matters enormously. It was always our view in opposition that it mattered enormously, and I am delighted that that is the view of the Opposition now. It matters to our forces and, indeed, to our enemies that the strong unity in the House on what we are doing is maintained, along with the recognition throughout the House of the work of our armed forces.

The right hon. Lady mentioned her constituency, some of the casualties affecting families there, and the role of families. My own constituency contains Catterick garrison, and I am very conscious of the immense supporting role performed by the families of the armed forces. In more than one tragic incident this year, we have seen how dangerous and difficult the role of aid workers can be, and the right hon. Lady was right to draw attention to that as well.

The right hon. Lady asked a wide range of questions against that background of unity. I agree that an over-hasty withdrawal of the ability of private security companies to operate, particularly in supporting development efforts, would be a serious mistake and could have a damaging effect on those efforts. Our ambassador in Kabul has conveyed that message strongly to the Afghan authorities and to President Karzai personally; so has the United States. Negotiations have taken place over the past few days about the matter, and we hope that a reasonable compromise can be found enabling the excesses of illegal private security companies to be curbed and dealt with, while those that are making it possible for embassies and some companies to function and development operations to take place can be maintained.

The right hon. Lady asked about progress in Marja on hold and build. I think that progress has been made since the military process. More than 400 shops are now open in six different bazaars in Marja, and more than half the 15 schools are open, with hundreds of students involved. There has been distinct progress in the hold phase, and in beginning the build phase. The right hon. Lady drew attention to the need for more Afghan capacity in Kunduz, and I believe that that is being addressed.

The right hon. Lady asked about allegations of electoral fraud, the large numbers involved and the possible difficulties experienced by women in participating in the electoral process. We would expect any particular difficulties experienced by women to be addressed by the Electoral Complaints Commission, but it is right to draw attention to the role of women in Afghan society and the importance of continuing to build it up in the future. It was good to see the participation of hundreds of women in the peace jirga. While we were holding the Kabul conference in late July, a parallel meeting took place of 200 Afghan women from all the provinces of Afghanistan. They too played their part in determining the future of Afghanistan.

As for economic strategy, I referred to the rapid progress that is being made in the Afghan economy. The potential is considerable. Let me say—as long as it does not embarrass him—that the Finance Minister is one of the most capable of the Afghan Ministers. He is a very impressive Minister, who presented extremely good plans for the Afghan economy at the Kabul conference in July. The mineral wealth of Afghanistan is immense, and if it can be developed even to a small degree Afghanistan could have a bright economic future, provided that it also has the necessary security.

Of course we discuss with the Pakistani Government—we do so every time we meet Pakistani Ministers—the inter-related issues of security in Pakistan and Afghanistan. I will update the right hon. Lady and the House on the trilateral meetings when they occur.

A model for reintegration in Helmand has been developed in Nad Ali, and the district reintegration committee has received 60 to 70 initial approaches from people who were previously fighting for the Taliban. A dozen have already been through the formal process, and have been assessed by the committee. We expect that formal process to be extended to other districts in Helmand now that Afghan officials have the authority granted by President Karzai’s decree of 29 June to proceed with reintegration.

On Russia, I discussed and indeed issued a joint statement on Afghanistan with the Russian Foreign Minister, Mr Lavrov, on my visit to Moscow two weeks ago, so there is a good deal of unity with the Russian Government about what needs to be achieved in Afghanistan. We can certainly expect to see a larger proportion of NATO's supplies coming from a northerly direction over the coming months.

We are very clear about the issue of timing, and the Prime Minister has been very clear in his statements about our intentions: there will not be British troops in a combat role or in the present numbers in Afghanistan by 2015, although some troops could play a training role or be part of wider diplomatic relations, as they are elsewhere. We think that it is right to make that absolutely clear. It is in line with the goal of Afghan forces leading and conducting military operations in all provinces by the end of 2014. It is a clear message to the world, and indeed to the Taliban, that we are building rapidly and quite dramatically the role of the Afghan national security forces, as detailed in my statement. I hope, therefore, that what we have said about the draw-down from combat operations by 2015 will be another aspect of our policies in Afghanistan that will enjoy wide support across the House.

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

I thank my right hon. Friend for his clear statement. He started by saying that the object of the statement was to look back at our original objectives and to see how far they had been achieved. May I remind him—not that he needs reminding—that those objectives were to defeat the Taliban, to abolish the poppy industry, to get rid of corruption in government, to get the girls safely back to school, to establish a democratic and peaceful Government, and to make our streets safe in Britain. How many of those objectives have been achieved after nine years of bloody warfare?

[Mr Hague]

My hon. Friend has long-standing opinions on this matter which are—and should always be—listened to with respect in the House, because there is a legitimate alternative view about our presence in Afghanistan. I think that the great majority of the House support what we are doing and our objectives. However, we should always respect an alternative view, and that is what he has always put forward. We have not yet achieved our objectives in Afghanistan, but he can see from much of what I have said that life has improved for many people in Afghanistan. It is true that, in matters of health care or schooling, life for the Afghan population has improved dramatically, and that many of them are living in more secure areas. However, we have not yet achieved our central objective, which is our own national security. That is why we have to continue to work at this, even though it is very difficult. Therefore, I will not claim to my hon. Friend that we have achieved swathes of our objectives. Our central objective has not yet been met and we have to continue to work at it.

[Several hon. Members]

rose—

[Mr Speaker]

Order. A very sizeable number of Members are seeking to catch my eye. I would like to accommodate everyone, but we must have short questions and short answers.

[Mr Bob Ainsworth (Coventry North East) (Lab)]

The Foreign Secretary tells us that ISAF levels are now at 130,000 and that the level of Afghan security forces will be at 260,000 by the end of the year—2:1. He and the Defence Secretary will know that the ratio in Helmand, for example, is the other way around; there is probably a greater disparity in the inverse proportion. The Foreign Secretary will also know that there is great reluctance among the Afghan security forces and many of our allies to go to some of the most difficult areas of the country. As we draw down—the Americans have made statements about draw-down as well—how will we manage the cohesion of the alliance if we are struggling to get the Afghans to take control and if some of our allies will not go to those most difficult areas? He claims that there has been a lot of progress there, which is good news. We must try to handle the process so that we maintain the cohesion of the alliance during the draw-down period.

[Mr Hague]

The right hon. Gentleman makes a good point and we will of course be very conscious of that over the coming months and years. There are now 48 troop-contributing nations and at the Lisbon summit we hope to agree the process of transition to Afghan security control in selected districts and provinces. It is important that allies deployed in provinces where Afghan forces are able to take over do not then just say, “We are able to leave Afghanistan altogether.” There will be a continuing role in other parts of Afghanistan for those forces. Therefore, that is one message in response to his question.

The other message is that the right hon. Gentleman can see from my statement that the Afghan forces are beginning to take on some very difficult tasks in difficult areas. He would not expect the ratio to be 2:1 in their favour in Helmand, where we have so many enormous challenges, because they are still in the fairly early stages of building the ability to sustain and lead their own operations, but they are beginning to show that ability and the increase in training is now a prime requirement. That is why my right hon. Friend the Defence Secretary has shifted several hundred forces into a training role and why other countries are doing the same. The number of non-commissioned officers trained by the Afghan national army over the past year has gone up by 700% and the number of officers by 175%, so the right hon. Gentleman can see that the training of those forces is beginning to grow exponentially.

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

May I thank my right hon. Friend for his statement and for his determination to keep the House regularly updated? As Chair of the Public Administration Committee, I welcome that evidence of better governance of our effort in this conflict, but what exactly is the role of the National Security Council in the governance of the conflict? Why did the Government drop the proposal that I suggested to my right hon. Friend, then Leader of the Opposition and now the Prime Minister, that there should be a war cabinet—a smaller group of Ministers meeting more regularly on a cross-departmental basis—to ensure daily supervision of the conflict?

[Mr Hague]

I thank my hon. Friend for his welcome. I have made it clear that we intend to make these regular and frank assessments of the situation throughout this Parliament and throughout this conflict—for however long is necessary—so I am glad of his welcome for that. The National Security Council has spent an enormous amount of its time, in the first five and a half months of this Government, on Afghanistan. Our first meeting, on our first day in office on 12 May, was about Afghanistan. For the British Government, that is the decision-making body on these matters. Since it combines all the relevant Departments and Ministers, that is the forum in which we are able to bring our efforts together. He can see that we work together in other ways. The Defence Secretary, the International Development Secretary and I went to Afghanistan together to assess the situation for ourselves in May and we have continued to work together in that spirit, so my hon. Friend can be assured that the National Security Council functions as our war cabinet and that Ministers are working together on a daily if not hourly basis very successfully on these issues.

[Angus Robertson (Moray) (SNP)]

Will the Foreign Secretary confirm that 14 Squadron from RAF Lossiemouth is serving with bravery and distinction in Afghanistan and that with its Tornados it is saving the lives of UK service personnel on the ground? Does he agree that, in those circumstances, it would be totally inappropriate to endanger the squadron and its home base through disproportionate defence cuts in Scotland?

[Mr Hague]

The hon. Gentleman had a reply earlier from the Prime Minister about that, and he is absolutely right to draw attention to the indispensable work of our Tornado squadrons in Afghanistan. Our experience in Afghanistan is one of the reasons it was decided in the strategic defence and security review to maintain the Tornado in our armed forces over coming years, so that is an important factor. Decisions about basing have not yet been made and he will be able to discuss that and question my defence colleagues on other occasions.

[Bob Russell (Colchester) (LD)]

Soldiers from 16 Air Assault Brigade based at Colchester garrison are currently on their third deployment to Helmand province, and I thank the Foreign Secretary for what he said about the military presence and his warm words about the families; I also thank the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) for her words. Bearing in mind that there is a three-pronged approach—military, political and economic—and that progress is being made on all three, will the Foreign Secretary ask his officials to have words with the Marquess of Reading, who heads the charity POM354, which encourages Afghan farmers to switch from growing poppies to cultivating pomegranates? That highlights an additional way to boost the Afghan economy, and to the benefit of this country’s products as well.

[Mr Hague]

I thank my hon. Friend for his suggestion, and I will make sure that my officials have a word about it. There are alternative crops and livelihoods to narcotics, and pomegranates is one of them. In other parts of Afghanistan, such as Herat, which I visited in July, saffron is a very good, and a very high value, alternative crop. A lot of the work being done by provincial reconstruction teams is dedicated to getting Afghan farmers to grow these crops instead.

[Tony Lloyd (Manchester Central) (Lab)]

The Foreign Secretary should know that his commitment to giving regular and frank reports to the House is important in maintaining a national commitment to our mission in Afghanistan. In his statement, he rightly drew attention to the essentially Afghani nature of any peace process. It is right and proper that it should be Afghan-led, and it is not proper for even Afghanistan’s allies to load too many conditions on to the process. However, does the Foreign Secretary agree that it is absolutely vital that both President Karzai and his Government—as well as, perhaps, our allies in Washington—recognise that we are not prepared for the conditions of human rights and the rule of law to be thrown out of the window in any peace process?

[Mr Hague]

Again, I thank the hon. Gentleman for his welcome for the idea of giving these statements. One reason we have introduced them is that it is important that we do not discuss Afghanistan in this House only when there is a sudden crisis or there are heavy casualties. Rather, we should discuss it regularly so we are able to see things in the round without there being an atmosphere of sudden drama. That is what we are trying to achieve by making these statements.

I agree with the thrust of the hon. Gentleman’s question on political reconciliation. It is very important that there is a political process. The political authority for that now exists in Afghanistan, and in my statement I took care to refer to the importance of the Afghan constitutional framework, which guarantees human rights, including women’s rights. I am sure that all hon. Members will strongly support maintaining that in any future political settlement.

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

Does my right hon. Friend remember that when General Sir David Richards took over as Chief of the General Staff only last year he predicted that the current strategy would take 30 or 40 years to work? Given that prediction, with which I broadly concur, what will we do if we still find ourselves in what my right hon. Friend describes as an “extremely challenging” situation in three or four years’ time? Will we still be committed to withdrawing militarily and operationally before the next general election?

[Mr Hague]

To be fair to General Richards, I think he was talking about the efforts that will be required to sustain reconstruction, economic progress and regional stability in Afghanistan. I do not think he was talking about a large British military presence or involvement in combat operations for 30 or 40 years. Again, I know that there are legitimate alternative points of view, but we consider it to be right and best to make clear our position that we will draw down from combat operations by 2015. That means that the Afghan Government know that, and it goes alongside our determination to build up rapidly the capabilities of the Afghan national security forces. It also leaves our allies in no doubt about our position. It should be remembered that if we are still there by 2015, we will have been involved in Helmand for much longer than the second world war lasted. British troops will have made an immense contribution therefore, and, in line with the goals for the Afghan forces by 2014, we should be able to speak confidently about 2015.

[Ann Clwyd (Cynon Valley) (Lab)]

As the Secretary of State has said several times in the last hour, human rights and women’s rights are important aspects of our work in Afghanistan. Everybody will agree that the empowerment of women has proceeded—women have returned to the professions and girls have returned to school. Will the Secretary of State give an assurance that in any settlement talks, particularly with the Taliban, if there are arguments for an extension of extreme Sharia law—which would, of course, disempower women—he will continue to fight for progress in women’s rights in Afghanistan, and that there will be no sell-out on those issues?

[Mr Hague]

In this country and across the House we will always stand up for human rights—of which women’s rights are an indivisible part—all over the world, including in Afghanistan. We all strongly welcome the much more extensive involvement of women in Afghan civil society and political life, of which I spoke earlier and to which the right hon. Lady just referred. We are not laying down the terms of a political settlement, however; we are not remotely near that stage. There is no political settlement currently being discussed around a table, whether by the Afghan Government and the leaders of the Taliban or anybody else. That is not the stage that we are at, so it is premature to talk about what might emerge from any such discussions, but the conditions set out by President Karzai include adherence to the Afghan constitutional framework, and we should continue to give that robust support.

[Kris Hopkins (Keighley) (Con)]

Does the Foreign Secretary agree that the recent revelations that members of the Karzai Government had received bags of cash from a dangerous rogue state compromise not only the chances of future peace in Afghanistan but the confidence of the people who are sending their young men and women to support a state that is clearly corrupt?

[Mr Hague]

I drew attention in my statement to the fact that although some progress on corruption has been made, it is by no means enough. We want to see a lot more progress on tackling corruption. That is very important, and the recent revelations about the Kabul bank have provided the most dramatic illustration of the need for that. In the absence of such progress, international confidence is undermined. It is true that a number of countries provide funding in certain forms to the Afghan Government, and it is important that that is transparent and used for legitimate Government functions and that it is not the basis of interference in the internal affairs of Afghanistan. I reiterate, however, that some progress has been made: 27 of the Afghan Ministers have now declared all their assets, and new mining contracts are being undertaken in a transparent way, published on the web so that everyone can see them. My hon. Friend is right, however, to reinforce the fact that for there to be international confidence, an intensified effort to tackle corruption is required.

[Mr David Winnick (Walsall North) (Lab)]

Unsurprisingly, I would like an earlier date for the ending of the combat role for British troops. At least a date has now been set, but I would like it to be at least two years earlier than 2015. Is it not encouraging that the Government, and presumably my party’s Front-Bench team, now accept that NATO will not win an outright military victory and that, as Mr Gorbachev has just said—and he should know—a political settlement can only really be decided by the political forces inside Afghanistan?

[Mr Hague]

I disagree with the hon. Gentleman on a couple of points. To say that we will draw down from combat operations at an earlier date than when we can expect the Afghan national forces to be able to sustain and lead their own operations would be a mistake, and I would resist his call to set an earlier date. Indeed, to be fair to his party’s Front-Bench team, I do not think they have ever maintained that there is a purely military solution to the problems of Afghanistan, and neither have we. We have always stressed that a political process is important as well, and I have often heard the former Foreign Secretary, the right hon. Member for South Shields (David Miliband), and the former Defence Secretary, the right hon. Member for Coventry North East (Mr Ainsworth), who is sitting just in front of the hon. Gentleman, say that. The difference between what Mr Gorbachev has been talking about and what is happening now is that this is not the Soviet Union imposing its will on Afghanistan: this is 48 troop-contributing nations, with more than 70 nations assembled to give various support at the Kabul conference, operating under a United Nations mandate to liberate the people of Afghanistan from what happened before, and also with the important goal of maintaining our own national security. It is a different situation, therefore, and I disagree with the hon. Gentleman’s analysis of it.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

With a clear date set for a military draw-down, is the Foreign Secretary aware of concerns in the development community that that could lead to less political interest in Afghanistan and, therefore, less commitment to long-term development aid? Can he reassure those working in development that there is a long-term recognition of how much we need to maintain that commitment to development aid?

[Mr Hague]

There is a very strong recognition of that, as my colleagues from the Department for International Development are saying from the Front Bench. Development aid to Afghanistan is being increased and for the long-term future we will have a major national interest in the stability and prosperity of Afghanistan and of Pakistan next door. Pakistan is on its way to becoming our largest recipient of development aid in the world, and we put in huge and greatly increased resources there to try to bring stability to the whole region. So, yes, our work in Afghanistan will have to continue in that form long into the future.

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

Our thoughts and prayers are certainly with our soldiers who are standing in daily danger in Afghanistan. We pay tribute to their gallantry, especially that of the Royal Irish Regiment and the Irish Guards. Will the Foreign Secretary tell the House whether our coalition forces are receiving the co-operation that they need from the Government of Pakistan in their efforts to fight the terrorism from within their borders?

[Mr Hague]

Yes, we have many discussions with the Government of Pakistan and with military leaders in Pakistan. The first thing to note is that relations have improved sharply in recent times between both the political leaders and the military leaders of Pakistan and Afghanistan—this is with each other—and that greatly assists such co-operation. Huge quantities of supplies for NATO also pass through Pakistan. The House will be aware of recent interruptions to the passing through of those supplies, but that matter has now been dealt with and we hope that it will not recur. I do not wish to stand here complaining about the Government of Pakistan, who have sustained enormous casualties. The Pakistani military have sustained enormous casualties in fighting insurgencies within their own country and they ensure that very large quantities of the necessary supplies pass through their country. We are getting a lot of co-operation.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I welcome the Foreign Secretary’s statement and add my tribute to Corporal Barnsdale, who received a full tribute from the Prime Minister. Corporal Barnsdale was part of 61 Field Squadron, 33 Engineer Regiment, which is based at Rock barracks in Woodbridge, as is 23 Engineer Regiment, which is currently deployed abroad. I welcome the statement that the Afghan security forces are starting to do more things such as countering the improvised explosive devices. Is there a strategy to prioritise some of the operations that are transferred to the Afghan forces, as opposed to geographical provinces?

[Mr Hague]

I have listed some of the geographical areas where the Afghan forces are taking on an increased role. The Afghan forces are building up in size. The army, for instance, was 134,000 strong this year—it is slightly larger now—and is meant to become 171,000 strong next year. The challenge now is to increase their specialist capabilities, particularly their intelligence capabilities, engineering, logistics and military police functions. Of course, those sorts of things are more difficult to build up, because they require a great deal more training and expertise than the training of what one might consider to be the pure infantry. That is an important part of the strategy going forward.

[Jeremy Corbyn (Islington North) (Lab)]

I thank the Foreign Secretary for his statement and for his commitment to report regularly to the House, which is extremely welcome. I was, however, very disappointed in his reply to my hon. Friend the Member for Walsall North (Mr Winnick). President Gorbachev and his country suffered more than anyone else, apart from the Afghan people, because of the military activities of the red army in Afghanistan. He has called for a political solution and a withdrawal, and countered strongly against any Russian involvement. Is it not time that we faced up to the reality that after nine years in Afghanistan, with a lot of lives and billions of pounds lost, no solution, either immediately or in the long term, is in sight? Is it not time to pursue the political road, rather than the military road, rapidly?

[Mr Hague]

The important point to make is that the political and military roads, as the hon. Gentleman calls them, go necessarily together; there would not be much of a political road without the military pressure. He has called for a political solution and he can gather from everything I am saying that we want a political settlement in Afghanistan; we want a political process that leads to that. But we will get that only from an effective military campaign, from intensifying the pressure on the insurgency and from doing all the work that we are doing to build up the capacity of the Afghan Government. If we and our allies were to withdraw now, all that work would come to an end and there would be another round of great bloodshed, including among the civilian population, and not a political solution. I ask him to see those things as going necessarily together.

[Justin Tomlinson (North Swindon) (Con)]

What is the Foreign Secretary’s assessment of the potential to maintain a full and fair democratic process in the long term?

[Mr Hague]

It is another of those challenges that I speak about. Clearly, democratic processes are now taking place. A parliamentary election has just taken place in Afghanistan with far fewer incidents, although there was still a lot of fraud. From an international viewpoint, this election was conducted in a more respectable way than aspects of the presidential election, given some of the accusations made about that. Progress has clearly been made. The role of independent members of election commissions is being more widely respected and understood, and I think that democratic principles are making inroads into Afghanistan. This will take time and it is something on which we need to have patient effort and persistence. It is a huge challenge, but some progress is being made.

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

The Foreign Secretary will be aware of the British public’s concerns about the welfare of our troops returning from Afghanistan and, indeed, that of veterans in general. I welcome these regular reports, but will he consider including in them details of progress on how we can further support our troops after they return from Afghanistan and as they become veterans?

[Mr Hague]

That is a very important point, and my right hon. Friend the Defence Secretary will include that subject in his assessment when he gives the next of these reports.

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

What is the Foreign Secretary’s assessment of last weekend’s WikiLeaks reports, which made reference to 21 incidents in Afghanistan involving British troops?

[Mr Hague]

There is no place in our policies for the mistreatment of detainees, and we have been very clear about that as a Government. We have, of course, published the guidance we give to our intelligence officers and announced an inquiry into previous allegations. But I do condemn the unauthorised release of information, which can endanger our forces and people who have worked with our forces, and which gives a one-sided propaganda gift for insurgent, so I condemn those leaks. It is our forces who are engaged, above all, in protecting the civilian population in Afghanistan, often having to accept casualties because of the work they do to protect that civilian population. The people who indiscriminately attack the civilian population and do not care whether women, children and other people are blown up by their improvised explosive devices are the insurgents and the terrorists.

[Derek Twigg (Halton) (Lab)]

May I thank the Foreign Secretary for the report and ask him to give an example of when during a conflict or war and in the middle of a battle we gave our enemy prior notice that we would be leaving the battlefield?

[Mr Hague]

For all the reasons that I have given, I think that this is the right thing to do. As I said, there are legitimate differences of view, but considering the subject in the round and the length of our deployment, as well as the need to emphasise the building up of the Afghan national security forces—to concentrate on that over the next few years and to be clear with the Afghan Government that that is our intention—we think that it is right to say what we have about 2015. Of course, it does not mean that forces fighting for stability in Afghanistan are at any point leaving the battlefield. There are now more international security assistance forces and Afghan forces deployed than at any stage in the past nine years. Given the huge increases that are envisaged in the size of the Afghan national security forces, there will continue to be an increase in the number of forces available for years to come. The forces of security and stability in Afghanistan are not leaving the battlefield.

[Andrew Stephenson (Pendle) (Con)]

As chairman of the all-party group on Pakistan, I welcome what my right hon. Friend has said today, particularly about working closely with that country, as well as what he said at the launch of the British Pakistan Foundation two weeks ago. May I have his assurances that we will continue to work even more closely with Pakistan to address the security situation in the region?

[Mr Hague]

Yes, absolutely. That is critical for the security of the region and for the prosperity and stability of Pakistan, which is a prime national interest of this country. One thing that my right hon. Friend the Prime Minister and I have been busy doing over the past few weeks is trying to ensure that it is commonly agreed across Europe that the future prosperity and development of Pakistan, and our working closely and strategically with the Government of Pakistan, are absolutely essential and in the vital interests of the whole of Europe and the western world, not just of the United Kingdom. For instance, our achievement recently of trade concessions for Pakistan, which we secured at the last European Council last month, is a good illustration of that work.

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

The Foreign Secretary mentioned the success of the criminal justice taskforce and the 440 convictions in the past year. Is he satisfied that those convicted actually served their sentences, and will he also update us on the progress made on the number of secure prison places in Afghanistan?

[Mr Hague]

We will have to satisfy ourselves about those things as we go along. The hon. Lady is quite right to draw attention to that. Where people are sentenced, we will want them to serve their sentences. We want more prosecutions to take place under the same procedures. We do not yet have enough secure prison places in Afghanistan and we are very careful about the terms under which we transfer prisoners to Afghan control. There is a need for more secure places and we will keep the House updated about that, too.

[Mr Peter Bone (Wellingborough) (Con)]

I would like to thank the Foreign Secretary for these regular updates and you, Mr Speaker, for allowing these statements to run for such a long time. It will be particularly welcomed by the families of our servicemen and women who are serving abroad. Many in this House will know the concern when their loved ones are either about to go or when they are out there. They carry on with their normal daily lives, but they never forget their loved ones. We should pay tribute to those people.

[Mr Hague]

Absolutely. Across the House, we pay tribute to them. I know that that is a heartfelt question from my hon. Friend, because his son is about to go to Afghanistan for the second time, serving in Chinooks. All of us who have flown around Afghanistan in Chinook helicopters marvel at the work that those people do. We can all be in absolute accord with what he has said today.

Points of Order

Wednesday 27th October 2010 Commons Chamber

13:53

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

On a point of order, Mr Speaker. Earlier, during the urgent question, the Financial Secretary to the Treasury gave the incorrect impression that Labour Members of the European Parliament supported an increase in the European Union budget. Is it in order for the Financial Secretary to be asked to come to the House to correct his mistake, given that Labour MEPs most certainly did not vote in favour of an increase in the EU budget, as my hon. Friend the Member for Caerphilly (Mr David) made clear yesterday?

[Mr Speaker]

That is a matter of debate and not a point of order, as I think the hon. Gentleman well knows. He has placed his concern firmly and fairly on the record.

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

On a point of order, Mr Speaker. In Prime Minister’s questions, in answer to the hon. Member for Macclesfield (David Rutley), the Prime Minister stated that BAE Systems’ loss of work under the defence review would somehow be offset by the A400M programme, which is in fact an EADS Airbus programme and not a BAE Systems programme, as the Prime Minister seems to think. BAE Systems will have little or no involvement in that programme. Will he come to the House and apologise?

[Mr Speaker]

No is the short answer to that. I will say to the hon. Gentleman—I will not call him a persistent offender, but he is certainly persistent—that that is a point of debate and arguably a point of frustration, but I am afraid that it does not constitute a point of order. He has put his views on the record and he may share them with others. If there are no further points of order, we will come now to the ten-minute rule Bill, for which the hon. Gentleman in question has been patiently waiting.

Planning (Developer Bonds)

Wednesday 27th October 2010 Commons Chamber

Motion for leave to introduce a Bill (Standing Order No. 23)

13:55

[Justin Tomlinson (North Swindon) (Con)]

I beg to move,

That leave be given to bring in a Bill to make provision regarding local authority powers to require developers to deposit funds in the form of a bond to be used if the local area is not maintained properly; and for connected purposes.

I am introducing the Bill to highlight an issue that I have previously raised in debates in Parliament and that I campaigned on actively during my 10 years as a councillor in Swindon, which relates to the lack of maintenance in unadopted areas. With housing developments set to increase substantially over the next 25 years, this is an issue that will affect any Member of Parliament who has new housing in their constituency.

When a new development takes place, all related street scene work and costs remain the responsibility of the developer until the area is adopted by the local authority. Developments are often on a large scale, and it is not unusual for an area to remain unadopted for many years. My former ward was a new build estate, growing from just 1,800 houses in 2000 to 8,500 in 2010. Throughout my time as a councillor, my postbag from fellow local residents was dominated by complaints regarding the lack of maintenance in unadopted areas—street scene issues, including those in the following three areas: incidental open spaces, such as grass verges, trees, street furniture, bushes and foliage; general street cleaning, such as that to remove litter and graffiti; and the maintenance of roads, fixing potholes, kerbstones and street lights. The last point is exceptionally apt now that the dark nights are drawing in.

A typical example, which I am sure hon. Members will have experienced, is when a resident contacts the local authority, often through the local councillor or Member of Parliament, to complain about the lack of street scene maintenance in their unadopted local area. The local authority then has to identify the relevant developer and request that the issue be addressed. That can have one of three outcomes. Ideally, the developer will take immediate action to address the street scene issues. I must stress that with many responsible and proactive developers that would be the case. However, all too often it takes repeated effort from the local authority or local residents to encourage the developer into action. In the final outcome, the developer simply never responds, or has even ceased to exist, leaving the issue unaddressed.

The frustration of local residents with the latter two scenarios is compounded by the fact they still pay the full council tax rate, which includes a contribution towards street scene works that cannot be used in an unadopted area as it remains the private land of the developer. In my constituency we have estates such as Ash Brake that have remained unadopted for 15 years. It is no wonder that residents feel they do not get the full value of their council tax when they look out of their windows to see swathes of overgrown shrubs and verges.

In fact, my last residents survey as a councillor brought in a staggering 1,200 responses to highlight outstanding street scene issues across the unadopted areas. When the local authority was unable to get the relevant developer to respond, either the issues remained outstanding or local residents formed groups such as the excellent Redhouse residents association, not just to hold developers to account but to organise action days to clear litter. I am sure that hon. Members can relate that to their own similar local experiences.

The principle of a developer bond is not new; I am proposing an extension of the powers already granted to local authorities, the first of which was granted through section 38 agreements under the Highways Act 1980. Those powers give the local authority the ability at the point of adoption to ensure that the highways infrastructure is built to an appropriate standard and is not a burden on the public purse. That covers things such as street lighting, pavement construction and drainage. However, it is relevant only when the developer is ready to seek adoption, when we often see an 11th-hour flurry of activity, as the developer is effectively forced to bring an area up to the agreed standard to allow for adoption. A section 38 agreement cannot force a developer into action before adoption, or make the developer complete the process of adoption, which is why areas in my constituency remain unadopted after 15 years.

The other power would allow for commuted sums secured through section 106 agreements. This is proving to be essential in sustaining the long-term maintenance of high-cost assets, which are often used as a wow factor by developers to generate sales, such as architectural street lighting, bridges, ponds and decorative street furniture. Without that, the standard local authority budgets would not be sufficient to maintain those items. The willingness to enter into those agreements shows that developers often appreciate the need for areas to be maintained in the long term. Those powers can be helpful and are to be encouraged, but they are limited to the stage when the roads are formally adopted for maintenance by local authorities.

My Bill would amend section 38 of the Highways Act 1980. It includes a new provision to allow local authorities to include a developer bond for the maintenance of the street scene in unadopted areas as part of a planning application. This is needed, because there are currently no powers available to local authorities to cover the transitional period between the selling of the first house and the area being adopted. In effect, I am seeking to address a discrepancy in the powers available to local authorities to ensure that estates are maintained adequately while they are unadopted.

My proposed system would allow the local authority to step in where a developer has not maintained an area to an acceptable standard, and it would then be able to recover its costs from the developer through the bond. The responsibility for maintaining the street scene would remain with developers, so my Bill would not affect developers who already maintain areas to a satisfactory standard. It would, however, provide local authorities and local residents with a safety net, if the developers do not play ball. That will help when developers refuse to bring an area up to an acceptable standard for road adoption, as they will no longer be able simply to ignore the problem. The bond would not tie developers in to long-term contracts, because it would be released, often untouched, as soon as the area was adopted.

Introducing developer bonds for the period before bringing an area up for adoption will also incentivise the developers to pass the responsibility for the area on to the local authority as quickly as possible. I emphasise that there are many good, responsible developers. In fact, they share the frustration about the damage done to the reputation of new build estates. My Bill would help to increase buyers’ confidence in new build areas, which will benefit both residents and developers.

In summation, this Bill will improve residents’ quality of life in new build areas throughout the country. As I have mentioned, it will not affect the majority of developers, who already adopt good practice in maintaining the street scene during the transition period, but it will improve good practice among developers for the benefit of residents.

In preparing the Bill I have been grateful to hon. Members who have highlighted their shared experiences of this issue. I hope that the Bill will go some way towards helping to improve the quality of life of all residents who have paid a premium to live in a new build house.

Question put and agreed to.

Ordered,

That Justin Tomlinson, Anna Soubry, Andrew Percy, Mr Robert Buckland, Andrew Stephenson, Stephen Gilbert, Caroline Nokes, Mr Philip Hollobone, Bob Blackman, Andrew Bingham, Mark Garnier and Karen Bradley present the Bill.

Justin Tomlinson accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 17 June 2011, and to be printed (Bill 99)

.

Postal Services Bill

Wednesday 27th October 2010 Commons Chamber

Second Reading

14:04

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

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

Let me begin by making it clear why we are here: Royal Mail and the Post Office are two cornerstones of our society. They are different businesses, but they are both essential to everyday life in the UK. Royal Mail is responsible for collecting and delivering letters. It provides a universal service that ensures the collection and delivery of letters and parcels from any postbox to any address in the country, and all at uniform, affordable prices. The Post Office is an unrivalled network of shops spread throughout the country. It allows people local access to essential services in the heart of their communities. The aim of this Bill is to secure the future of those two institutions and the services that they provide.

I look forward to support from Labour Members, because I know that they genuinely tried in recent years to secure the future of Royal Mail and the post office network. They no doubt agree with me that this must be the final, successful attempt to conclude that process.

[Malcolm Bruce (Gordon) (LD)]

We know that the previous Government tried unsuccessfully to privatise the Post Office. Does my right hon. Friend agree that the Opposition amendment would, if carried, prevent us from carrying out the reforms that he and I, as former Trade and Industry and Treasury spokesmen, understand require capital to invest in the Post Office, and the workers and mutual beneficiaries to take a degree of ownership and control, in order to get the Post Office out of the mess in which it has been struggling for the past 10 years?

[Vince Cable]

The amendment to which my right hon. Friend refers was tabled by the nationalists rather than by the Labour Opposition. I think that it was drafted before the nationalists were aware of our proposals to strengthen the network. I hope that when they hear what we have to say they will rethink their amendment, because we will have done a great deal to meet their concerns.

[Mr Mike Weir (Angus) (SNP)]

It will be interesting to hear what the right hon. Gentleman has to say. The National Federation of SubPostmasters has raised its concern about the split between Royal Mail and Post Office Ltd. It has pointed out that it cannot find anywhere else in the world where there is such a split between the delivery network and the post office network. Can he give us such an example?

[Vince Cable]

I will address the matters that the hon. Gentleman has described in detail. I remember him campaigning on this issue in the previous Parliament, when he lost nine sub-post offices in his constituency. We are implementing measures that will stop that happening in future. When he hears about them he will be considerably reassured.

Turning to the background to the legislation, there is, as I have said, a lot of common ground.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

The right hon. Gentleman may be aware that my constituency includes the second largest sorting office in the world. The 2,000 employees there believe that they provide a universal service at a low price. The system is not broken, and they do not understand why it is being “fixed” by the attempt to privatise it. Why are we going ahead with this?

[Vince Cable]

The hon. Lady’s colleagues in the previous Government would have answered that question for her, because they acknowledged, as we do, that the system is broken. I will take her step by step through the arguments in the original Hooper report and in the updated version, which are common to hon. Members on both sides of the House.

The country that pioneered postal services in the 19th century has been left behind in the 21st century. The rise of e-mail and the internet has led to a dramatic fall in the number of letters that we send. The previous Government were well aware of that problem, and they commissioned an independent review of the future of the universal postal service chaired by Richard Hooper, which found that letter volumes were in structural decline, that Royal Mail was in great financial difficulty and that the universal postal service was under threat. The report’s conclusion was encapsulated in its title, “Modernise or Decline”. All parts of this House accepted the conclusion that the current system was broken; that relates to the previous intervention.

The company, the union, businesses and commentators all agreed with the Hooper conclusion that the status quo then was “untenable”. What was the status quo then is still the status quo now, and Richard Hooper is clear that Royal Mail is now in a worse position. How has that happened? The previous Government endorsed Richard Hooper’s recommendations and acted on them. They brought forward a Bill that the Liberal Democrats and our coalition partners supported. Sadly, it never reached this House, so the future of Royal Mail was not secured. That Bill would have allowed private sector investment in Royal Mail. It would also have enabled the Government to tackle the pension deficit, and reformed the regulatory regime for postal services. Those are all measures with which we agree, and they form the basis of this Bill. We agree with those measures because, as Richard Hooper says, they are essential if the universal postal service is to survive.

[Emily Thornberry]

May I make the point that the pension needs to be sorted out, sale or no sale, that regulation needs to be reconsidered, and that both those things can be done without the privatisation of Royal Mail?

[Vince Cable]

I shall come to the argument for not restricting private investment access in a moment. The simple point is that without private investment we will not get the capital investment that the Royal Mail needs to modernise. That is a simple argument, but I will develop it at length.

[Huw Irranca-Davies (Ogmore) (Lab)]

rose—

[Kate Hoey (Vauxhall) (Lab)]

rose—

[Vince Cable]

If hon. Members want to make the same point, there is no point in pursuing their interventions, but if the hon. Lady’s is on a different point, I shall take hers.

[Kate Hoey]

If everything that the previous Government wanted to do was so good—and many Opposition Members opposed what they wanted to do—why are the coalition Government not simply taking up where they left off? Why are they going even further and totally privatising Royal Mail rather than leaving a majority share in the public sector?

[Vince Cable]

I shall take the hon. Lady through the arguments step by step, but the situation has deteriorated badly. I think that she lost seven post offices in her constituency, so she will know that the situation is not satisfactory and that the status quo cannot be maintained.

[Huw Irranca-Davies]

rose—

[Vince Cable]

I shall take further interventions later but I want to proceed with the next step of the argument.

Let me dwell a little on Royal Mail’s financial problems. When I came into government I was left in no doubt as to the real difficulties. I asked Richard Hooper to update his report from December 2008 because I wanted to ensure that the conclusions were still valid—and they are. Let no one in the House be under any illusion regarding Royal Mail’s predicament. I recognise that there has been some progress. Opposition Members who represent areas with sorting offices will know that unions and management are now working together better—we acknowledge that—but that the pension deficit has ballooned. It is now more than £8 billion and Royal Mail has, proportionately, the largest pension deficit of any major company in the United Kingdom. In addition, it loses almost £1 million a day on its trading activity. It is an inefficient business in a market that is declining faster than anyone predicted. Hooper now forecasts that letter volumes could fall by as much as 40% in the next five years if nothing is done. That is why we are moving further and faster.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I appreciate that the right hon. Gentleman now finds himself in coalition with the Conservatives. There is a pension fund with a substantial amount of money in it; I know there is a deficit, but will he give the House a guarantee that the coalition Government will not do what a previous Conservative Government did to the bus employees superannuation fund? Under Margaret Thatcher they took money from that pension fund, which the Labour Government later had to replace.

[Vince Cable]

I shall address the pension proposals in some detail. They are virtually identical to what the previous Government were preparing to do. We are talking about taking on a massive liability from that fund. Let me remind the hon. Gentleman, who seems to be trying to defend the status quo, that he lost 13 post office branches under the previous Government. We are trying to deal with the problem that he and others have faced.

[Mr Russell Brown]

rose—

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

rose—

[Vince Cable]

I give way to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil).

[Mr MacNeil]

My constituents in the outer Hebrides want to know what the service will look like for customers in the Hebrides, and for my postal workers, after these measures.

[Vince Cable]

As I reminded hon. Members a few moments ago, customers in the Hebrides have experienced a decline. We are going to turn that around, and I shall explain the process and investment by which we will do that.

[Mr Russell Brown]

On a point of order, Mr Deputy Speaker. I merely want to put the record straight. The Secretary of State has indicated that I lost 13 post offices but I did not; I lost two. I am anxious that he is bandying figures around.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

That is not a point of order, but the hon. Gentleman has certainly made a point of clarification.

[Vince Cable]

The hon. Gentleman might want to correct the official record if that is the case.

Let me explain why we need the Bill. We should ask what will happen if we do not act, and do not proceed with it. The Government believe that we still need a universal postal service, collecting from all post boxes and delivering to all 28 million postal addresses six days a week. We will still be required under EU law to fund the universal service if no one can provide it commercially, so the taxpayer could be left to pick up the pieces. We cannot predict how much that would cost, or when it would happen if no action were taken, but we know that it would not be cheap and we are not prepared to take that risk with taxpayers’ money—not with the public finances in the current state. That is why we are determined to press ahead with the Bill.

This is not simply about making sure that taxpayers do not have to cover the costs: it is about doing what is right for the future of the company and its employees. Richard Hooper is clear that if his recommendations are taken forward urgently, the Royal Mail has a potentially healthy future. As my predecessor, the right hon. Member for Wolverhampton South East (Mr McFadden), said almost two years ago,

“I believe that Royal Mail and the postal market can thrive in the future, provided that decisive action is taken now.”—[Official Report, 16 December 2008; Vol. 485, c. 966.]

We are taking that action.

The problems that Royal Mail faces can be addressed through the Bill. After all, it is the only company with the ability to visit all 28 million addresses on a daily basis. It has an unrivalled customer base, and it can build on its position as the leading provider of letters and parcels by providing a new range of digital products for its customers. The Bill is the only way that we can make that positive future a reality.

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

I shall save the right hon. Gentleman some trouble by telling him that I lost 11 post offices and gained a mobile van service. Many Opposition Members were not happy about partial privatisation. One reason given for it by the previous Government was that the commercial situation and market conditions were not right, so it would be difficult to get a decent buyer. What makes him think, in the current economic circumstances, that anyone else will be interested?

[Vince Cable]

We are providing a framework in which a sale could take place and we are not setting timetables or limits. Those are the conditions in which we are most likely to get value for money. This is a framework piece of legislation. That is why we are likely to do better than before. I shall come to the details regarding Royal Mail shares in a moment.

[Andrew George (St Ives) (LD)]

The Secretary of State will be aware that people in west Cornwall and the Isles of Scilly are reassured that the universal service obligation will be retained. However, the access arrangements that were agreed, with regulatory intervention from Postcomm, have left Royal Mail in the very weak position of delivering letters for its competitors at a price that, frankly, undermines its commercial viability. I note that clause 48 addresses this issue, but can he reassure me that Royal Mail will have a far better crack of the whip when those terms are negotiated?

[Vince Cable]

I assure my hon. Friend that will be the case. My colleague the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), who has responsibility for postal services, will spell out later today and in Committee exactly how the process will operate. My hon. Friend is right: at present the deregulation provisions do not give the Royal Mail sufficient protection against unfair competition. We want to make sure that there is more protection in the deregulation process.

[Huw Irranca-Davies]

Will the right hon. Gentleman give way?

[Vince Cable]

I shall take one more intervention before I move on.

[Huw Irranca-Davies]

I thank the right hon. Gentleman for giving way; I do not know why he was so reluctant to take my question earlier.

I do not have an ideological argument with the Secretary of State. My point is about the argument that he has failed to address. Why is full privatisation needed, rather than the proposal that we put on the table? He has not addressed that point. It is not Red Huw from Ogmore making this argument, but the large majority of Liberals. Conservative voters are saying the same thing: why full privatisation?

[Vince Cable]

The hon. Gentleman is right to say that this is not an ideological question. I shall come to the share sale issue shortly, but I have no ideological stance on it. I see a role for public ownership in certain circumstances: I think I was ahead of most Opposition Members in pursuing public ownership of the banks during the crisis. There is a role for public ownership in certain circumstances, but this happens to be a case when it serves no useful purpose, and we are quite prepared to adopt a pragmatic approach to get the best provision for Royal Mail and the universal service, and the best value for the taxpayer. We have no ideological hang-ups, and I am glad that the hon. Gentleman does not either.

[Mr David Anderson (Blaydon) (Lab)]

May I point out to the right hon. Gentleman that for more than a century a number of Labour Members have believed in the nationalisation of the banks?

[Vince Cable]

Is that the voice of heritage Labour—at last?

Let me summarise the substance of the Bill. As the discussion so far has revealed, Members will find much in the measure that is familiar. As I said, when drafting the Bill we drew on much the same evidence as the previous Government. The facts are not in dispute, and we have reached much the same conclusion: the company needs private sector investment, the pension deficit must be tackled and the regulatory regime must be reformed. However, this Bill is not identical to the previous Government’s Bill.

We have taken the opportunity to learn from what has gone before and to develop a new Bill that builds on this Government’s commitment to employee participation. The right hon. Member for Wolverhampton South East made a major contribution to advancing the debate on the modernisation of the Post Office. When he was Minister for postal services, he said:

“We need a longer-term plan, with a proper buy-in from the work force”.

—[Official Report, 11 February 2009; Vol. 487, c. 1449.]

That is exactly what the Bill hopes to deliver.

First, let me turn to specific issues relating to the Post Office. As I have said, the Post Office and Royal Mail are different businesses. They face different challenges, which means that our approach has to be different. The post office network is unique. There are about 11,500 branches across the country, and it operates in places where other retailers do not. It offers services that other retailers do not. Above all, the Post Office plays an essential social and economic role in our communities. For that reason, the Post Office is for sale. The Bill is absolutely clear on that point.

I am concerned, however, that the current structure of the company is holding the network back. It seems to me that the Post Office is ideally suited to a Co-operative Group style of structure, where employees, sub-postmasters and communities get a greater say in how the company is run. The Bill includes a provision that would allow for a possible future mutualisation of the Post Office. Let me be clear that no firm decision has been taken on mutualisation; there would be a full public consultation before we moved to a mutual structure. In the meantime, I have asked Co-operatives UK to explore options for how a mutualised Post Office would work best.

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

Has any thought been given to whether that would be a worker co-operative or a consumer co-operative?

[Vince Cable]

It could be either, or a combination of the two. That is why we have turned to the Co-operative Group to give us advice on the structure. However, I take it from the tone of the hon. Gentleman’s intervention that that broad approach would be welcome to him.

[Albert Owen (Ynys Môn) (Lab)]

The right hon. Gentleman talks about a mutual for the Post Office, but has he looked at a mutual or other model for the Royal Mail, rather than pure privatisation? In Wales, as he knows, Welsh Water is run by a not-for-profit organisation. It is unique and gives universal service across Wales. Could that not be done for the Post Office across the United Kingdom?

[Vince Cable]

The Royal Mail and the Post Office are different businesses and they require fundamentally different solutions. The issue for Royal Mail is capital—how we deal with the pension fund. It requires a different model.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

The Secretary of State has made slightly contradictory statements. First, he said he was consulting Co-ops UK for advice on mutuality and then he said he was consulting the Co-op Group. They are distinct organisations—one is advisory and the other is a huge retail operation. Could he clarify which he means?

[Vince Cable]

We are asking Co-operatives UK to give us advice. The hon. Gentleman is very close to the co-operative movement, so his input to the discussions will be welcome.

[Mr John Redwood (Wokingham) (Con)]

Will the Secretary of State give way?

[Vince Cable]

Oh dear.

[Mr Redwood]

I am grateful to the Secretary of State. Do I assume that he is talking about mutualising the Crown offices, which the state already owns, and not mutualising the bulk of post offices, which are independent private sector retail businesses that it might be difficult to mutualise against their will?

[Vince Cable]

Individual post offices are of course self-managed, but they operate within Post Office Ltd. It is the structure of Post Office Ltd that we are concerned about. The process clearly needs advice and further thought, which is why we are approaching it with the maximum degree of engagement and consultation, and the right hon. Gentleman will be one of the people whose advice I shall seek.

[Several hon. Members]

rose—

[Vince Cable]

I have taken a substantial number of interventions and I want to proceed.

I know that these proposals mean setting out on a new course, and that before any changes can be made the network will have to be put on a secure financial footing. Subject to consultation, it is the right outcome for the network. I hope the Post Office can make the transition before the end of this Parliament.

Let me further reassure the House about how we shall put the Post Office on a more secure financial footing.

[Huw Irranca-Davies]

rose—

[Vince Cable]

I will take interventions at the end of the next section of my speech. I have already given the hon. Gentleman answers to some of his questions.

Communities up and down the country have rightly been concerned about the shrinkage of the network over previous years, and despite the efforts of Opposition Members—notably the shadow Chancellor—there has been remorseless decline over the last three decades. The previous Government’s closure programmes shut 5,000 post offices. I commend Members on both sides of the House who fought against those closures. Those days are over. I echo the words of the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) from some years ago:

“We had a choice. One was to continue to watch decline turn to crisis and crisis turn to collapse, leaving it as someone else’s problem down the road.”—[Official Report, 15 February 2000; Vol. 344, c. 870.]

This Government do not believe in passing on the problem, so we shall fund the post office network, and when I say “fund” I do not mean setting aside millions to buy off sub-postmasters when we close their business.

The option of keeping the network on a care and maintenance basis and letting it decline is one we have rejected. I can today announce £1.34 billion of new funding for the Post Office over the spending review period. The funding will be used to reform the current network, to change the underlying economics, and so reverse the years of decline and secure its long-term future. I am grateful in particular to the Chief Secretary to the Treasury for his understanding, even in a tough spending round. I repeat, there will be no programme of closures under this Government and the Post Office will be able to invest, improve its offer and win new revenue streams.

[Several hon. Members]

rose—

[Dr Julian Huppert (Cambridge) (LD)]

Does my right hon. Friend share my sheer joy and satisfaction both about the money and about the idea that we will no longer have to campaign against Government closures of post offices? We can get on with supporting them in their work.

[Vince Cable]

Yes, indeed. That is the outcome. For the past decade I and many on the Opposition Benches have been involved in fighting for our local post offices. In many cases, constituencies have seen the loss of a dozen post offices. That will come to an end.

[Huw Irranca-Davies]

On that very point, I am grateful for the clarity of the right hon. Gentleman’s response, although the figure seems less than the support that the Labour Government put into the post office network. An individual in my constituency has just successfully kept a branch open with the investment of tens of thousands of pounds of his own money, as well as funds from the Welsh Assembly Government and some Post Office Ltd money. Will he be an independent trader under the umbrella of Post Office Ltd, or some sort of commercial, co-operative, mutual whatever? He has just put a lot of money in, and the Secretary of State does not seem to be clear.

[Vince Cable]

I am surprised to hear Opposition Members speaking against mutualisation and co-operation. I thought that was at the heart of the Labour movement’s values. We will consult on how, in practical terms, the post office network becomes a mutual structure. I made that clear. By shifting us into the structural arguments again, the hon. Gentleman is taking away from the considerable importance of the announcement that has just been made, which is that the process of remorseless and endless closures—I think he has had seven in Ogmore—is going to come to an end.

[Huw Irranca-Davies]

On a point of order, Mr Deputy Speaker. The right hon. Gentleman is spraying around statistics on post office closures and, once again, he is getting them wrong. I realise that I may be out of order, but that is unforgivable.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Let us clear this up. We both know that that is not a point of order. Many hon. Members want to speak. Spurious points of order do not help the Chamber. We need to get on with the debate. We may have a chance for everybody to put their opinions afterwards.

[Vince Cable]

I will take one more intervention.

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

On the issue of the individual, private, sub-contracted post offices, does my right hon. Friend find it surprising that Labour Members cannot understand that those post offices will remain open as independent sub-contractors with a mutual network?

[Vince Cable]

Yes. Labour Members seem to find the concept of an expanding, properly invested post office system a bit of a culture shock. They have got used to a decade of decline—they presided over it.

[Tom Brake (Carshalton and Wallington) (LD)]

Does my right hon. Friend believe that he has created enough scope for post offices such as the one in Beddington, which shut a number of years ago, to be reopened? In what circumstances does he see new post offices opening?

[Vince Cable]

As I say, investment capital availability ultimately comes down to the individual decision of individual postmasters. As my right hon. Friend the Member for Wokingham (Mr Redwood) pointed out, these are individual investment decisions, but the network will in future be put on a structurally sound, properly funded basis. That is the essence of the reforms that we are introducing.

[Mr Weir]

rose—

[Vince Cable]

I will press on. The hon. Gentleman has had his say.

In addition to funding, we are injecting new ideas. We have been re-thinking the role of post offices in providing Government and banking services, and we will be coming back shortly with a fuller statement on that problem, setting out some new and positive ideas that I hope will command support on both sides of the House and in the country.

I would like to reassure the House with respect to the relationship between the Post Office and Royal Mail. The Post Office is currently a subsidiary of Royal Mail, but they are separate companies and they are very different businesses. As part of our plans for both companies, the Bill will allow for the separation of Royal Mail and the Post Office. Separation will give the Post Office management greater freedom to focus on the branch network and providing new services, but I want to make it clear that in this case at least, separation is not a first step towards divorce.

The Post Office and Royal Mail will continue to work closely together. Each company needs the other. Post offices carried out over 3 billion mail transactions for Royal Mail last year. The two companies are closely linked in the public mind, and are bound together by an overwhelming commercial imperative. There is currently a long-term contract in place between the two companies, and there will continue to be a long-term commercial contract in place. The chief executive of Royal Mail has said that it would be “unthinkable” that there will not always be a strong relationship between the Post Office and Royal Mail.

I shall move on to Royal Mail ownership and the processes involved in the sale of shares.

[Julie Hilling (Bolton West) (Lab)]

I am slightly confused by what the right hon. Gentleman has said. First, will all post offices remain open? Secondly, will the private company always have to do business with those post offices? Is that guaranteed for ever and ever?

[Vince Cable]

No. The relationship between Royal Mail and the Post Office rests on two things—first, on mutual interest. They have strong mutual interests and depend on each other. Secondly, there is a contractual relationship. This will not change as a result of the separation of the two. Public ownership did not secure the arrangement. It is secured by mutual interest and contractual obligation. That will continue.

[Mr Redwood]

Where the property is shared between the Post Office and Royal Mail, as it is in a number of important locations, is the intention to split the site, create separate title to different parts of the site and give each its own front door, or will they share the property?

[Vince Cable]

Obviously, such detailed matters will need to be resolved as the process of separation continues. It is a practical issue and, as it is a commercial matter, Post Office and Royal Mail will look for the most sensible, practical, least cost arrangement.

For the foreseeable future, Royal Mail will be the only company capable of providing the universal postal service. That means that if we want to continue to benefit from a universal service with uniform and affordable prices, we have to equip Royal Mail to survive, and indeed thrive. There is no choice. That was the conclusion of the original Hooper review commissioned by the Opposition, and his recent update for the coalition Government.

[Malcolm Wicks (Croydon North) (Lab)]

rose—

[Vince Cable]

I will finish this section, then I will take the intervention from the right hon. Gentleman, who I know was a Minister and had close involvement with this matter.

Some Members of the House will say that Royal Mail can modernise and survive while remaining in the public sector. They will say that Government can provide the funding that Royal Mail needs, and that the modernisation agreement in place between the union and the company is sufficient to stave off the decline in the market. That is not a view that I share. I did not share it in opposition and I do not share it now, nor is it shared by Richard Hooper or the company.

Let me be clear. The Government are the wrong shareholder for the company. Given the Government’s financial constraints, we cannot invest enough quickly enough, we cannot invest flexibly enough, and every investment that we make has to be cleared by the European Commission under state aid rules. Richard Hooper is also clear that Royal Mail cannot modernise properly, and cannot take the decisions that it needs to take, while it has the threat of political interference hanging over it.

Private sector capital will bring with it private sector disciplines, which will allow the company to modernise faster to keep pace with the changes in the market. As the last Minister with responsibility for postal services wisely said:

“Unless modernisation happens, the company will be ill equipped to deal with its challenges.”—[Official Report, 11 February 2009; Vol. 487, c. 1452.]

The Bill will therefore lift the restrictions that currently exist on the sale of shares in Royal Mail.

[Malcolm Wicks]

For a range of reasons, there is a widespread acceptance that Royal Mail has to modernise. That should not be a source of controversy. But given that, according to a recent YouGov poll, 60% of the public wished the service to remain a public service, including a clear majority of the Minister’s own party’s supporters—voters—and Conservative supporters, with only 15% opting for privatisation, why have the Government rejected the option of modernising a public service? We have modernised public services before. Modernisation and public service can go together.

[Vince Cable]

That has been happening for 13 years and it has not solved the problem. The problem is deteriorating and the Government cannot provide the investment capital. The right hon. Gentleman is right about public opinion. The public are concerned about the universal service obligation. That is the essence of public service, and it will be protected. The protections will be strengthened under the Bill in a way that I will explain in a moment. When the public understand that it is the universal service obligation, rather than public ownership itself, that is being maintained, they will have considerable reassurance.

[Mr Roger Gale (North Thanet) (Con)]

I shall support Second Reading because Royal Mail is broke. It has to be fixed, which will take a considerable amount of money, and the Bill is the only way forward. The Secretary of State may consider this a peripheral issue but, since Queen Victoria, Royal Mail has borne the royal imprimatur. My understanding is that under European regulations, it is not possible to restrict ownership of Royal Mail once it goes on to the open market, so it could well be sold to the Dutch or the Germans. Notwithstanding the provisions of clause 60, how will the royal charter be maintained?

[Vince Cable]

We certainly do not have any doctrinal or other objections to foreign ownership. I spend a lot of my time trying to attract foreign investors to the country, but, as far as the royal charter is concerned, it is clear that the association with the monarchy is probably the most powerful brand that the company can possibly have, and there will be every interest in the new owners continuing to maintain it.

We need to be careful of specific issues. We need to be careful that the new owners do not abuse the royal association, and we are discussing with the palace how we build in those protections. The monarch will continue to have the right, which we are also building in, to ensure that any new stamp, for example, is cleared by the palace. So, the royal interests in the matter are fully protected. We are very sensitive to them and to their importance.

Let me return to the core of the argument, which is the sale of shares in Royal Mail. That is a departure from the previous Government’s Bill, but I should remind the House that the purpose of the Bill before us is not the sale of shares in Royal Mail for its own sake, but rather, as I pointed out to the right hon. Member for Croydon North (Malcolm Wicks) a few moments ago, the protection of the universal postal service and Royal Mail as the only company capable of providing it.

It is therefore right that we allow for the flexibility to seek the investment required to secure the future of Royal Mail and the universal postal service. So, we see no reason at this stage to set an arbitrary target for how much we must sell, by when and by which method. Those are critical decisions that need to be taken with proper advice and in the full knowledge of market conditions, assessing both value for money and the company’s needs.

Of course, Parliament will be kept informed of those decisions, and the Bill requires a report to Parliament once a decision has been taken to begin a sale process. I hope to be in a position to report to Parliament on the sale process in the first half of this Parliament. In the longer term, I do not believe that there is a need for the Government to keep a stake in Royal Mail, but I will ensure that the Government have the flexibility to ensure the right outcome for taxpayers, for Royal Mail and for its employees.

Let me turn to the interests and concerns of the employees. The employees are critical to Royal Mail’s ability to modernise and thrive, and it will come as no surprise to Members when I say that Royal Mail has a history of poor industrial relations. Members may have noticed that Unite announced two days ago that it would ballot Royal Mail managers on industrial action. That recent development aside, I have been heartened by some of the positive steps that have been taken to improve industrial relations—in particular, the agreement with the Communication Workers Union on the modernisation of the business. The agreement accepted that, unfortunately, job losses would be associated with the modernisation. It accepted, too, that there would need to be changes to working practices, and that mail centres would close. The plan has already been agreed with the CWU, and the company is implementing it now.

[Kate Hoey]

One depot that has been suggested for closure is the very large one at Nine Elms in Vauxhall. There has certainly been no agreement in London that it should close, and everybody will fight its closure very hard, because it would be just crazy for everything—lorries and vans—to go in and out of London, adding to pollution.

[Vince Cable]

I am not familiar with the details of the argument in that case. I was referring to the fact that there has been a constructive relationship between the union and management on modernisation, but such issues do exist, and they are essentially commercial ones that must be dealt with by management and their employees in the normal way. None the less, I would be interested to know whether there is a specific role in the matter for the Government, and I shall respond to the hon. Lady on that.

So, I acknowledge that there will be job losses. The company is losing money and the market is declining, and that is regrettable, but it is unavoidable. The question that we need to pose is, what happens if we do not take action? What happens if Royal Mail fails and the market collapses? That is the current trend. I know that the CWU has been in Parliament today, talking to many hon. Members about their views, and I and my hon. Friend the Under-Secretary, who has responsibility for postal affairs, met the CWU to discuss Royal Mail. We look forward to continuing to talk to its representatives as the Bill goes through Parliament.

However, I have one thing to say to the union directly today: the worst thing for its members, Royal Mail’s employees, would be to do nothing, because that is the real threat to jobs in Royal Mail. The employees of Royal Mail also deserve better than constant battles between the union and the management. They deserve to be properly engaged in the business that they work for, and to have a real stake in its future. That is the only way in which we will break for ever the cycle of antagonism and mistrust that has bedevilled the company. The Bill therefore requires the creation of an employee share scheme, which will hold at least 10% of the equity in Royal Mail in future. That is very far from being a token gesture; it is nothing less than the largest employee share scheme of any major privatisation.

The employees of Royal Mail will also be concerned about their pensions, and they have good reason to be, because Royal Mail’s pension deficit is huge, growing and volatile. Put simply, it is not sustainable. Even the recent agreement between the pension fund trustees and the company is fragile. It requires that Royal Mail pay off its deficit over 38 years, which is at least twice as long as any other UK company’s repayment plan, and the pensions regulator has already said that it has substantial concerns about the agreement.

[Mr Jim Cunningham (Coventry South) (Lab)]

Will the right hon. Gentleman give way?

[Vince Cable]

I am going to go on to explain the new mechanism. Would the hon. Gentleman like to wait until I reach the end, or does he wish to intervene on that particular point?

[Mr Cunningham]

On that particular point.

[Vince Cable]

All right.

[Mr Cunningham]

On pensions, what will happen to the assets, and what is their value? I am told that the pension plan has assets of about £26 billion. Is that true?

[Vince Cable]

Yes, it is true, but the liabilities are much bigger. I shall explain in a moment how we will deal with the assets.

The pension deficit, which is the starting point, threatens the very existence of the company. It is draining cash from Royal Mail’s modernisation and preventing it from undertaking the reforms it needs to survive. That is why the Government have to take action today. As part of the sale, the Bill will allow the Government to take on responsibility for the pension deficit. We will not only address the deficit, but reduce the size of the Royal Mail pension plan to a more manageable level for the business. The liabilities of Royal Mail are more than 50 times annual profits. By comparison, the liabilities of the average FTSE 100 company are closer to one times profits—an enormous difference.

We intend to reduce the plan to about one tenth of its size today. We will do so by creating a new public sector pension scheme that will assume responsibility for paying out the past pension benefits of Royal Mail employees. In effect, all members of the Royal Mail pension plan will have their past service moved to a new Government scheme like that of the NHS or teachers. It is the same solution to Royal Mail’s pension problems as the previous Government proposed in their 2009 Bill.

I know that hon. Members will be concerned about the detail of the proposed pension arrangements, and we will provide a note to Parliament in order to explain the practical effects of those very complex changes, but I should like to reassure the House on two points in relation to pensions.

First, let me be clear that this solution is by far the best outcome for the employees of Royal Mail. The action that we are taking in the Bill will ensure that all the benefits that employees have earned will be safeguarded. The benefits that become the responsibility of the Government will be protected in the Bill, and all members of the Royal Mail pension plan will benefit from that support—Post Office and Royal Mail employees alike.

As a bottom line, the Bill places an obligation on the Government to ensure that our action leaves members in no worse a position than they were in before. This means that the amount of benefits that they receive will be at least as good as if the Government had not acted. There will also be a restriction on the Government’s ability to make any changes to the new public scheme in future that would adversely affect members. The Government intend to use that restriction to reflect as closely as possible the current protection that members of the pension plan are afforded under section 67 of the Pensions Act 1995.

Secondly, the measure is not a Government plan to massage the Government’s accounts, for the very simple reason that the Royal Mail pension plan has a deficit of £8 billion. That is the cost to the Government of implementing the solution on behalf of the company and its employees. Let me be clear: the Government are taking on liabilities that are much bigger than the assets. I have seen reports—perhaps this is what the hon. Member for Coventry South (Mr Cunningham) was referring to—that the Government will be selling off the Royal Mail pension plan’s £24 billion of assets. It is certainly true that the surplus assets above the level needed to leave the ongoing pension plan fully funded will be transferred to the Government. It is also true that these transferred assets will be sold because it makes no sense for Government to sit on a massive investment portfolio.

I, for one, do not wish to see central Government taking such a huge investment risk with taxpayers’ money. So yes, we will sell the portfolio of assets which transfer across to Government, and this is likely to involve over £20 billion of asset sales over time. But the important point—it is absolutely crucial to this argument—is that we will be making payments to members of the Royal Mail pension plan for at least the next 50 years.

[Mr Anderson]

Can the Secretary of State explain why the liabilities are so huge? Is part of the reason the fact that Royal Mail took a 13-year contributions holiday in the 1980s and 1990s?

[Vince Cable]

I understand that my hon. Friend the Under-Secretary is very familiar with this and has spent a lot of time talking to the pension trustees. There is a whole set of reasons behind this deficit, one of which is that employees are living longer; another is that the pension fund made some rather bad investment decisions. There are contributory factors. But we are where we are: there is a massive deficit and we have to deal with it; that is the centre of the problem.

Let me add that the Government’s support for the Royal Mail pension plan is subject to state aid approval by the European Commission. The House can rest assured that we will be going to Brussels to make this case in the strongest possible terms.

Let there be no doubt: this is a good deal for the employees of Royal Mail. In almost all important respects, it is exactly the same deal as that in my predecessor’s Bill—but coupled with the legal requirement for employee shares, it is a much better deal for employees.

[Malcolm Wicks]

rose—

[Vince Cable]

It is a solution on which I hope that Members in all parts of the House can agree, including the right hon. Gentleman.

[Malcolm Wicks]

On the pension issue, which is so crucial, Labour Members will want to scrutinise the plan and the idea of selling off the assets in return for guarantees. It seems to me, however, that that plan, whether it is the right one or not, could still be carried out if the service remained a public service. I do not see why it is intrinsically and inextricably linked with privatisation. Something like this needs to be done anyway, whether or not this is the right model.

[Vince Cable]

Of course it does need to be done anyway, but as I explained a few moments ago, the key point about bringing in private capital is that it brings in investment as well as new and better methods of management. There are separate issues involved. However, the right hon. Gentleman is quite right: the pension fund deficit needs to be dealt with. If it were not dealt with—if the thing just continued—there would be a real danger that it would contribute to the collapse of the company: that is why we have had to intervene.

I apologise to the House for going on for such a long time, but a large part of that has been taken up with interventions, as I was anxious to ensure that Members who had concerns were able to raise them.

The last section of my speech relates to reform of the regulatory regime. At the heart of this Bill, just like the last Bill, is protection of the universal postal service. The Bill will maintain the universal postal service at its current levels—that means six-days-a-week delivery and collection at uniform, affordable prices. I would like to reassure the House that I have no intention of downgrading this service. I know that some Members have been concerned about their constituents receiving a reduced service, and I share that concern. I have therefore ensured that the Bill contains new and stronger protections around the service than is currently the case—stronger protections, too, than were in the Bill put forward by our predecessors.

Members may not be aware of this, but the Government already have the power to reduce the minimum requirements of the universal postal service without even requiring a debate in Parliament. Through the European Communities Act 1972, it can reduce them to the minimum requirements of the European postal directive—that means five- days-a-week delivery and no requirement for uniform pricing. I do not think that that is an acceptable situation. Another way of putting it is that we have European regulation to protect the universal service obligation. This is one occasion where we are arguing in favour of gold-plating; indeed, as my hon. Friend the Under-Secretary has pointed out, we are platinum-plating this particular set of protections.

[Robert Halfon (Harlow) (Con)]

I very much welcome the reforms that the Secretary of State has announced today and the commitment to a universal postal system. However, will he allow other companies also to provide a universal postal system if they so wish?

[Vince Cable]

We cannot do it in that way. Of course, other companies have access to the market, subject to strict conditions, but we envisage that Royal Mail will continue to be the universal service provider: that is the basis on which we are proceeding.

The Bill puts in place three new safeguards: the platinum-plating, so to speak. First, the Bill ensures that no proposal to reduce the minimum requirements of the universal postal service can be proposed until the new regulator, Ofcom, has conducted a review of user needs. Secondly, any proposal to reduce the requirements of the universal postal service must be subject to a majority vote in both Houses of Parliament. Thirdly, any reduction in the minimum requirements cannot change the uniform nature of the service. The Bill states that the service and the price must be the same across the whole of the UK. I hope that Members in all parts of the House will support these new protections for the universal postal service.

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

Earlier, the Secretary of State said that one of the central issues in the modernisation and advancement of Royal Mail and the Post Office was—I am paraphrasing—the removal of political intervention, but he is now talking about a contract that is surely still politically in the hands of politicians. How can he possibly stand there and guarantee that there will be no changes whatsoever to the universal service? I cannot, for the life of me, imagine any private company signing up for a contract that is immutable, which is surely what he is saying the changes will bring about.

[Vince Cable]

I am not making these commitments as political commitments. They are enshrined in regulation—regulation that will be strengthened and has the force of law. Of course, that is political in the widest sense if one regards this Parliament as political. The protections are going to be legal and regulatory; this is not a matter of political discretion for individual politicians.

We will also be taking other measures to secure the universal postal service. The greatest threat to postal services comes from the decline in mail volumes and the rise of e-mail and the internet. It therefore makes sense for the postal sector to be regulated alongside the broader communications market. For that reason, the Bill will transfer responsibility for the regulation of the postal services sector from Postcomm to Ofcom. Ofcom has a deep understanding of the wider communications markets and will be well placed to take decisions as regulator of postal services. The Bill will also give Ofcom a primary duty to exercise its functions as regulator of postal services in a way that it considers will secure the universal postal service—and it will need to consider the financial viability and efficiency of the universal service in taking its decisions.

We want to ensure that the new regulatory framework is proportionate to the needs of the market. We want to allow for rapid deregulation where there is competition. All mail providers need to be able to operate in a fair and effective market as soon as possible. As an ultimate protection for the universal service, the Bill includes provisions for special arrangements should a universal service provider be at risk of entering into insolvency proceedings—a remote risk but one that we have to consider. The arrangements would allow the appointment of a postal administrator whose objective would be to ensure that the universal service is maintained. We do not expect ever to have to use these provisions, but they provide an additional safeguard for the universal service. These measures mirror those that have been taken in the energy and water sectors.

[Andrew George]

rose—

[Vince Cable]

I will take one more intervention and then move to a conclusion.

[Andrew George]

I am much reassured by what the Secretary of State is saying. Further to my earlier intervention, I am merely seeking reassurance that the access agreements between the new Royal Mail and its competitors will be set in a regulatory framework that gives it a fair crack of the whip when negotiating the terms and the price. Under the present arrangement, Royal Mail is clearly, in effect, subsidising its competitors because it is delivering their mail.

[Vince Cable]

I believe I have given my hon. Friend that reassurance. Royal Mail will not subsidise its competitors, protections will be built in and there will be a genuine regulatory level playing field in a way that has not been quite true in the past.

Previous attempts at legislation on Royal Mail have not had a great history of success. I anticipate that there may be some opposition to the Bill both inside this House and elsewhere, although I believe that after 20 years of false starts, there is now a willingness to do what needs to be done. There is no easy way out, and the problems that Royal Mail faces will not go away. There will be no winners if we fail to act. Royal Mail’s employees will face continued uncertainty over their pensions and their jobs, customers will face a declining service and taxpayers will continue to bear the risks. Ultimately, Richard Hooper was clear that without this action, Royal Mail would fail.

Royal Mail needs this Bill. The company says so, Richard Hooper says so, the previous Government said so and I say so. I therefore strongly commend this Bill to the House.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I inform the House that Mr Speaker has not selected the amendment.

15:00

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

For more than 350 years, the Royal Mail has delivered the post to homes and businesses across the United Kingdom. Created by the Crown, for all that time it has been to all intents and purposes a public service run in the public interest, and it has always been seen as a huge and valuable national asset, run in the national interest. Today’s Bill would change all that. It would lead to the total sale of the Royal Mail, and a huge sum of public money would be spent to enable a private sale to take place. I believe that that sum has just gone up again by a substantial amount.

The Bill may mean the Royal Mail, this national asset, passing into foreign ownership or to short-term investors interested only in the quickest possible profit. For the first time ever, it has to provide for a special procedure to deal with the insolvency of a private Royal Mail.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

The right hon. Gentleman talks about Royal Mail being owned in the national interest and about profits in the private sector, but was not the great burden hanging over it when it was owned in the national interest that its profits were taken by the Treasury for other purposes, rather than being invested in modernising it to let it compete effectively in the market that his Government forced on it?

[Mr Denham]

The hon. Gentleman may have a point about the use of those profits, but I would rather they went to the Treasury or to the Royal Mail, not to a private company whose owners lie overseas. The defence of the national interest lies with public ownership.

Today’s Bill provides, for the first time ever, for the breaking up of the Royal Mail, with different organisations providing the universal postal service in different parts of the country. It breaks the umbilical link between the Royal Mail and the network of local post offices prized by residents and communities up and down the country, and does so in a way that threatens the future of thousands of local post offices. It is a very serious Bill, and it must be considered seriously and in detail in the weeks and months ahead.

Of course, serious discussion of the Bill must acknowledge why the coalition Government have concluded, as the previous Labour Government did, that doing absolutely nothing is not an option. The competition for the services offered by Royal Mail, including from new ways of communicating, has changed more dramatically than anyone envisaged even 10 years ago. Last year, it reported a drop of 7% in letter volumes. Other operators have been taking business upstream faster than expected. Some 87% of all mail in the UK is sent by businesses to people at home or to other businesses, and competitors have already won more than 60% of the upstream, pre-sorted bulk mail market, delivering their customers’ mail into the Royal Mail system for final delivery.

Over the fast-approaching horizon will come the full impact of technological change—e-mail, web-based advertising, text messaging, mobile phones and all the other modern ways of communicating. The worldwide postal market is expected to decline by 25% to 40% over the next five years. The problems with the pension fund, which had their origin in the 13-year pension holiday until 2001, have mounted. There was, therefore, a consensus that action needed to be taken.

[Kate Hoey]

My right hon. Friend has mentioned a number of issues, but he has not drawn attention to the EU directive on postal services, which allowed companies such as TNT to cream off all the profitable parts of Royal Mail and leave the universal service within the public sector. That directive was agreed to. Does that not show that we should examine EU directives a little more carefully in future?

[Mr Denham]

All EU directives should always be examined very carefully as a matter of principle. There is perhaps a debate to be had about whether a six-day service exceeds the strict requirements of the EU directive, but my hon. Friend raises an important point. If she will allow me, I will return a little later to how competition has developed in practice and whether we have a level playing field.

There was consensus about the nature of the action that needed to be taken. The Royal Mail needed to be transformed to become more efficient and competitive, and that transformation would need new management and vastly improved industrial relations. The taxpayer would need to take on the liabilities of the pension fund, and access to investment was needed.

However, the central question that the House must ask today and in the coming weeks is whether the Secretary of State’s way forward is the best. We will oppose the Bill, although we do not oppose every element in it. We believe that abandoning the commitment to keep Royal Mail as a publicly owned organisation is wrong. Clause 1 abandons that commitment, which was restated by the Labour Government. That will inevitably threaten the public interest, from the moment the sales process starts to the long-term future of both Royal Mail and the Post Office.

Public ownership of the Royal Mail provides the ultimate safeguard for the public interest. It ensures that even if other policy fails, it is not too late to defend the interests of the public, whether by protecting the delivery of letters six days a week to every home in the UK at a standard price, or by guaranteeing the business that can sustain a network of local post offices. Public ownership can ensure that public money is invested for public benefit, not private profit.

The front-line defence of the public interest lies, of course, in the legal framework in which Royal Mail and the Post Office operate. The Bill will transfer responsibility for regulation from Postcomm to Ofcom, as did Labour’s Bill. We will need to consider carefully in Committee whether a regulatory framework designed for a publicly owned company remains as well designed for the foreign-owned or private equity-backed company that might soon run Royal Mail.

The relationship between the public interest and Royal Mail is not governed by regulation alone. Local post offices need a continuing public subsidy, and that in turn depends on the commercial relationship between Royal Mail and the post offices. Both those issues have properly concerned Ministers and Parliament in the past. In some crucial areas, such as the relationship between Royal Mail and the Post Office, the Bill will weaken the ability of Ministers and Parliament to act in the public interest. In other areas in which Parliament might wish to defend the public interest, such as the universal service obligation, it leaves too much discretion for the regulators and Ministers to waive the public interest.

The Secretary of State made no case for why he had decided to go beyond the limited equity stake that was proposed, not without controversy, by the last Labour Government. I wait with interest to hear the remarks of my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), if he catches your eye, Mr Deputy Speaker. The Secretary of State made no case for the full privatisation of Royal Mail.

As the Secretary of State said, we recognise parts of the Bill from our own legislation, and we broadly support parts of it, including employee share ownership. The possible mutualisation of the post office network deserves positive examination at the very least.

I have set out the changes that everyone agreed were needed, but in truth many people thought that Royal Mail could not change while it was a public company. However, change has happened. Considerable progress has been made, and more is under way. An important agreement was reached this March between the Communication Workers Union and Royal Mail supporting the £2 billion modernisation plan, £1.2 billion of which has now been spent. CWU members supported the agreement by a 2:1 majority.

Differences are being felt in operations. The opening hours of delivery offices have been extended and new generation letter-sorting machines have been installed. There are new machines so that mail is sorted for the exact route that postmen and women walk, and there is better equipment, including hand-held devices to track and record items of mail. Of course, the pace of change must be maintained, but in an industry dogged by difficult industrial relations, both the CWU and management should take credit for the start that has been made.

Our debates on Royal Mail have for some time been informed by the Richard Hooper reports of 2008 and 2010. Two years ago, Hooper’s report called for two changes: the injection of private capital and, closely related to that, the involvement of private sector management. However, he rejected full privatisation, saying that that

“option would only be appropriate and feasible if modernisation had been completed.”

His recent report also identified a need for private sector capital, but was markedly more confident about the quality of existing management and the capacity for change given the changes that had already taken place. The 2010 report states:

“The specific need for corporate experience is reduced today”.

It used to be said that Royal Mail could not change without an injection of private investment and management, but change has been possible. The argument now seems to be that change is needed so that Royal Mail can be sold, but that is simply not true.

The House needs to ask what the real costs could be. The public are making a heavy investment in preparing the postal services offered by Royal Mail for sale, including through a £2 billion loan to fund the modernisation process. In addition, the subsidy for the post office network was already set to increase from £150 million to £180 million next year, and we heard today of a further investment in sub-post offices, to which I will return. The Bill also leaves the taxpayer assuming the huge liabilities of the pension fund while Royal Mail benefits from a reduced contribution.

That is a huge public investment in preparing Royal Mail for sale, yet the returns look pretty low—according to media speculation, the sale price will be around £700 million, meaning a one-off income of less than £1 billion in return for costs of many billions. The Secretary of State did not make clear the timing of the changes. I simply point out that if he goes early, he will probably get the lowest possible price, but the later he goes, the more essential it will be to complete the transformation of Royal Mail, because as he said, Royal Mail cannot simply stand still and mark time. There is no relationship between the change that is necessary and his desire to sell the whole of Royal Mail.

As the Government’s own briefing makes clear, a fully efficient and competitive Royal Mail could generate a very significant return. Companies such as Deutsche Post in Germany achieve profit margins of 13% from their mail operations, even though they face greater end-to-end competition than Royal Mail does in the UK. There are similar profit margins in the postal services of Finland, Austria, France and other European countries. Some are private and some public. That shows what efficient companies can do. However, the Bill excludes the public from any gain from a transformed Royal Mail.

[Richard Graham (Gloucester) (Con)]

Is the right hon. Gentleman aware how much investment the German post office has had in the past few years? I believe that the figure is £15 billion. Is he suggesting that the UK Government have £15 billion for such investment?

[Mr Denham]

Richard Hooper’s point, which I do not fundamentally contest, is that additional access to capital is necessary, which may well need to be private capital, but that is not the same as making a case for the total privatisation of Royal Mail, which is what the Government are doing. Government Members need to defend that.

[Mr Marcus Jones (Nuneaton) (Con)]

What share of Royal Mail does the right hon. Gentleman think should be sold?

[Mr Denham]

The previous Labour Government floated proposals for the sale of a minority stake. Given the changes that have taken place in Royal Mail, there may be ways of accessing private capital that do not depend on an equity stake. Some partnerships of that sort might well be highly desirable, but the question is whether anything the Secretary of State said made the case for a total sale of the company. I listened to him very carefully, but I did not hear a single sentence that made a case for clause 1, which is the basis on which we oppose the Bill.

[Mr Jim Cunningham]

It does not take long for employees to sell their shares, so selling shares to employees would create another imbalance.

[Mr Denham]

I understand my hon. Friend’s point, but the Opposition should explore positively, including in discussions with the unions, how employee share ownership might work. Models of trust-based employee share ownership would avoid the risks he describes. It would clearly be nonsense to provide shares to employees that could be sold on within a few months, which happened in many previous privatisations, to everyone’s great regret. We should look at the conditions, but I agree that it would be a complete nonsense to create the conditions he describes.

[Mr Cunningham]

I remember the privatisation of Rolls-Royce. The employees were given shares, but rapidly sold them.

[Mr Denham]

Clearly, any measure that allowed that kind of swift onward sale, resulting essentially in 100% private ownership of Royal Mail, would explode the Government’s rhetoric on the Bill. I can assure my hon. Friend that we will look at the proposals in great detail in Committee.

[Dr John Pugh (Southport) (LD)]

The right hon. Gentleman makes a rational and intelligent case, but if the Bill proposed a majority stake for private finance—say 51 or 55%—would it be possible to protect the public interest?

[Mr Denham]

That is an important point. If the hon. Gentleman will forgive me, I will return in a moment to how majority sale or full sale would shift the balance of power against the public interest during the sales process.

[Mr Jim Cunningham]

Will my right hon. Friend give way?

[Mr Denham]

If my hon. Friend will forgive me, I will happily take another intervention from him when I come to my point on protecting the public interest during the sale.

I said that the Bill excludes the public from any potential long-term gain from a transformed Royal Mail, but in addition the benefits could go entirely to overseas interests. Frankly, I am surprised how sanguine the Secretary of State is at that prospect, because faced with the sale of Cadbury to Kraft, he said:

“It is particularly galling…that state-owned RBS should part fund this takeover when it is clearly not in the interests of the UK economy.”

I must point out that the Secretary of State is today effectively using taxpayers’ money to transfer the ownership of Royal Mail overseas.

There are good reasons to worry about the public interest during the sales process. On one side will be potential buyers, who will have every interest in lobbying for the maximum commercial freedom for the operation and for the minimum of social obligation. The other side—we might like to think this means the Secretary of State, but it means the Treasury—has an interest in gaining the highest price. Both sides, therefore, will argue to cut social obligation to a minimum. It is not difficult to anticipate the outcome of that situation. I suspect that one reason the Secretary of State was able to say so little on the long-term interest of Royal Mail in the post office network is precisely that he is caught uncomfortably in the vice between the Treasury and potential buyers.

[Mr Weir]

I am listening carefully to the right hon. Gentleman and agree with a lot of what he says. He mentioned the pressures of the sale. Has he seen the letter from the current chief executive officer of Royal Mail, who argues for loosening social obligations now? Is that an indication of how things will go?

[Mr Denham]

I have seen that letter, and I will refer to it a little later, if I may.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Is my right hon. Friend aware that in previous discussions about possible privatisations, no interest was expressed by any of the companies, either in the UK or abroad, in running mail services? Are we not likely to have a situation in which, basically, some equity finance company will borrow large amounts of money to buy Royal Mail and then load it up with masses of debt? There is no operator challenging Royal Mail’s ability to deliver the services that it currently delivers.

[Mr Denham]

That is certainly a real risk, and my hon. Friend is absolutely right. I return to the point that I made earlier. If the Government are serious about rejecting potential purchasers who they think are wrong or who offer a poor price, the Government will have to deal with the problem of transforming Royal Mail in the meantime. They cannot let it simply stand still, given all the commercial pressures. My fear is that the Government will go to the wrong place, with an inappropriate sale at an inappropriate price, because of the figure that has been pencilled in—although it is hard to find it in the detail—in the comprehensive spending review, and that this would happen irrespective of the long-term interests of the public in this country.

That pressure to reduce the social obligations brings me to one of the central concerns regarding the public interest: the relationship between a privatised Royal Mail and the network of local post offices. We oppose the Bill in part because of its central aim, which is the sale of Royal Mail and the breaking of the key contractual link between Royal Mail and the post offices. There are around 11,500 post offices. The Royal Mail Group is required by licence to support 4,000 post offices. The managing director of Post Office Ltd told a parliamentary Committee that a commercially viable network would have only 4,000 offices.

The previous Labour Government made provision to keep a further 7,500 branches open. They are supported by an annual public subsidy of £150 million, which is due to rise to £180 million next year, and by business that is guaranteed to Royal Mail through the inter-business agreement. The Royal Mail business that is guaranteed by the IBA is crucial to the current viability of the post office network. Leaving aside the public subsidy, Royal Mail business generates 37% of the income of local post offices. However, the IBA could end immediately under this Bill when Royal Mail is sold. A privatised Royal Mail could simply take the work elsewhere. As Consumer Focus—the organisation that the Secretary of State wishes to silence—says in its briefings,

“following privatisation of Royal Mail, subsequent contracts would require a competitive tender process with no guarantee that Post Office Ltd would retain this contract”.

The Bill provides no mechanism to ensure that the continued long-term use of the post office network is an integral part of Royal Mail. That would be a disaster for non-profitable post offices in rural and urban areas alike. The Bill could have defined post offices as access points for the universal postal service. Consumer Focus says that the Bill could have specified the number of post office branches to remain. However, the Bill does none of those things. That is a fatal flaw. The axe of uncertainty hangs over thousands of post offices, which puts a huge question mark over the interesting and attractive concept of a post office mutual, because mutuals can go out of business too if their income is taken away. Hooper concluded that the Post Office should remain publicly owned, saying:

“Given the social obligations of the Post Office, there is little prospect that the network will be sustained on a fully commercial basis.”

However, a mutual is a commercial organisation, subject to commercial logic, and without guarantees of income, it will fail.

The Secretary of State spoke about an additional investment of, I think he said, £1.34 billion. I acknowledge that, although it would perhaps have been useful to have more detail. We will need to explore that figure in greater detail than we can this afternoon, as we have no detail now, although it is clearly a large amount. We will need to know the answer to a few obvious questions. Does that money come from the Department for Business, Innovation and Skills budget that was set out in the comprehensive spending review last week, or can it be found elsewhere in the CSR? Does the Secretary of State intend to continue the annual subsidy beyond the CSR? Is the making available of that money linked in any way to the participation of sub-post offices in the formation of a mutual, or will it go to every sub-post office, whether or not it wishes to take part in a mutual? Will the beneficiaries be only current post offices, or could the money be made available to new entrants and companies that wish to enter the market for providing local post offices for the first time?

The Secretary of State talked about building up the business that is done through the Post Office, which I welcome. Doing so would build on work done by my right hon. Friend the Member for Wolverhampton South East on post banking and other areas, but we need more detail. I acknowledge that the figure that the Secretary of State cited would be a very large investment, but we need to know much more about it, and I hope that we will learn more before the Bill goes into Committee. However, I return to the same, fundamental point. Investment in the network without the guarantees of future business simply sets the network up to fail and puts a question mark over the public value for money of the investment now being made. I worry that the proposed mutual may ultimately be seen as a cynical attempt to shift responsibility for future closures of post offices on to the shoulders of the mutual owners of the post office network.

Let me make a few other points. Despite what I have set out, the Bill makes it clear that many risks still lie with the public, in addition to those that I have listed. The Bill results in the nationalisation of risk and the privatisation of profit—a phrase that the Secretary of State may well remember from the recent past. Part 4 sets out the provisions for taxpayers to step in through administration if a privatised Royal Mail becomes insolvent. That is a necessary part of the Bill, given the coalition’s intention to sell Royal Mail, but it should kill the idea that once Royal Mail is privatised, the taxpayer will no longer need to worry about or bear any expense for failure. Clauses 34, 35 and 43 create the possibility for the universal service obligation to be split between different operators and for there to be different levels of universal service obligation in different parts of the country. In turn, that makes it possible in practice for Royal Mail to be split up once in private ownership, creating the risk of a commercial dynamic that will make it difficult to maintain the same quality of postal services throughout the UK.

The other major issue of customer concern is the maintenance of the six-day universal service. The Bill gives Ofcom the power to make a universal service direction, and in principle this must include the current level of provision for collections and deliveries. However, the Secretary of State has given himself unilateral and unqualified discretion to remove services from Ofcom’s direction if he takes the view that Ofcom’s order is too extensive. Similarly, if Ofcom were minded to order a universal service provider to maintain the current post office network, the Secretary of State can overrule it. The Secretary of State has given himself the power to reduce services, but not to extend them. That tells us what he is thinking.

Finally, it is in all our interests to have a Post Office that operates as efficiently and cost-effectively as possible. We have recognised the need for private sector investment in the past, and it is likely that this will be needed in future. Now that there is less emphasis on changing the management, it seems that a wider range of approaches to engaging private capital can and should be explored, but I do not believe that the need for private capital justifies the privatisation that is proposed today.

It is also essential that the Government are clear about the future burden of regulation designed to allow competitors into the market. Many argue that that now imposes a real and unnecessary cost on Royal Mail. During its mandate, Postcomm chose to apply a challenging competitive regime to a near-monopoly organisation. Today, that regulatory regime applies to many parts of Royal Mail’s activities that are open to intense competition. In some areas, Royal Mail is forced to carry mail on behalf of its competitors at well below cost price, and the market share taken by new entrants is certainly much larger than predicted. I know that the figures are contested, but Royal Mail told Postcomm in August that it was subsidising new players in the upstream market at a cost of £100 million a year. Does that regulatory regime make commercial or competitive sense any more?

Crucially, what guidance will Ministers give to Ofcom? Potential buyers will want to know that now. Without a guarantee of more commercial freedom where competition is already strong, Royal Mail will be much harder to sell. By the same token, however, greater commercial freedom for a publicly owned Royal Mail would enable it to generate a higher income. I hope that all Members on both sides of the House will agree that it would be completely unacceptable for Ministers or regulators to offer greater freedom to a privatised Royal Mail than they are prepared to offer a publicly owned Royal Mail.

If the House is being asked to choose between a privatised, foreign-owned Royal Mail and a publicly owned Royal Mail, it must do so on a fair and level playing field involving a publicly owned Royal Mail enjoying the same level of regulatory freedom, and the same financial freedom and ability to reduce outgoings that comes with the taxpayer assuming pension obligations. The transformation of that publicly owned Royal Mail must also be well under way, and it must be able to explore a wider range of ways of raising the private capital that it might need. I invite the House to oppose the Bill.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Many Members wish to speak, and I remind them that Mr Speaker has decided to impose a six-minute limit on Back-Bench speeches.

15:30

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

The House needs to recognise that the Post Office is a bust flush—

[Michael Connarty]

Rubbish!

[Mr Binley]

It is absolutely bust! In fact, the previous Government recognised that and tried to enact a Bill, but they did not have the courage to carry it through. So we want no lessons from Labour Members. The Post Office is a bust flush. Its management needs rejuvenating, its work force are demoralised and its pension fund is in massive deficit. If that does not add up to a company that is totally off the rails, then I do not know what does. It would do the Opposition good to recognise that fact, rather than pontificating about a matter that they dared not deal with.

The Post Office faces a massive challenge. Volumes have declined enormously since 2005, and they are now down by 13 million units per day. Good God! If any other business faced that kind of decline, it would instantly recognise that it was bust; it would not need me to tell it. The Post Office is now 40% less efficient than its European competitors, and its modernisation programme is proceeding exceptionally slowly.

[Mr Edward Leigh (Gainsborough) (Con)]

Does my hon. Friend agree that if I had been allowed to privatise the Post Office when I was the Minister with responsibility for it 17 years ago, we would now have a world-beating international company earning huge riches for this country? That was a wasted opportunity, and we must never fail again. We should privatise it as soon as possible.

[Mr Binley]

My hon. Friend was a wise prophet in a House that failed to listen to him, and that is a great pity. I accept his point totally.

The truth is that something needs to be done, and that was accepted by the previous Government. I first came across this matter when it was presented to the then Business, Enterprise and Regulatory Reform Select Committee in 2008. That Committee’s report highlighted the importance of the organisation to our local communities. It recognised that the poor, the elderly and the disadvantaged relied heavily on the Post Office, but it was not only disadvantaged people who felt that way. Small and medium-sized businesses also felt that the Post Office played an important part in the way they ran their businesses. Research by Postcomm estimates that the social value of the post offices up and down the country runs to about £10 billion. The case for the network is clear, well made and, I believe, totally understood by the Opposition. Sadly, however, they ran away from the issue.

There is a great need to heighten, increase and force through technical development. Of course, that could not happen in the past. Hooper said that the Royal Mail needed to modernise, improve its management and expand its range of services. I believe that the Bill will achieve all those objectives.

The relationship between management and work force needs to be improved—and the problem is not all the fault of the unions by a long chalk. Previous management, I believe, acted in a bullying way that did nothing for good industrial relations—and I said so at the time, as did my colleagues on the Select Committee. This is one reason why I came to the conclusion that there was a massive need for a real injection of good-quality management into the Post Office.

[Michael Connarty]

I just wonder where the hon. Gentleman has been. I happen to be secretary of the communication workers group in this Parliament, although unlike my predecessor I have never been a communications worker. Massive changes to the agreement took place in March. Where else in Europe can we find a management that is willing to work with the trade unions? In all other places, they have banned trade unions from their premises. These firms are absolutely out of order in their treatment of their workers.

[Mr Binley]

I understand the hon. Gentleman’s concerns. When I talked about senior management, I meant very senior management indeed. The lesson should go out to the whole House that bringing in from the private sector people who are sometimes seen as bully boys is not the best way to produce good industrial relations. That is, in fact, what happened. I see the hon. Gentleman nodding; I am glad he agrees with me.

[Mr Jim Cunningham]

I am sure that the hon. Gentleman will recall, as I do, that the previous chief executive of the Royal Mail was a very difficult man for Members to meet.

[Mr Binley]

I had the distinction—perhaps that is not the best word—of meeting the chief executive in question, and I read some of his letters to the work force. I have to say that if I had been a member of that work force, I would have been horrified to receive those letters. If they had been circulated in a company that I had anything to do with, I would have done my very best to bring the gentleman in question to book. I hope that my answer will enable the hon. Gentleman to understand that I too share his concerns.

We need a massive change in management. I believe that the Bill is designed to achieve that and might well succeed, but we still have not had the answers we need to provide any certitude in that direction. We are dealing with a pension deficit in the region of £10.4 billion. We have to find answers as to how best to deal with that, and I believe that the Bill finds those answers.

Finally—I know many Members wish to speak—I want to return to the question of management, which is central to the success of any measures put in place to save a broke and bust Post Office. I appeal to the Minister responsible for postal affairs to explain in more detail how his proposals will achieve that objective. The previous Government saw that as an important part of the process of rejuvenating the Post Office. That is why they introduced a Bill that would have meant a new injection of capital, with 30% ownership from the private sector. Sadly, that did not work. I do not believe that the previous Government worked hard enough to push it through. I understand why it did not work—because the Government did not have the courage to go further. No private company would seriously consider that small a holding for that big an investment. It was a very difficult proposition from the beginning.

The truth is that the success of the Post Office will revolve around better relationships with the workers, better modernisation and removing the great pension fund burden. I believe that all those things can happen under the Bill if—I say again, if—we get the correct level of quality management. Such management must recognise that the whole of the marketplace has moved so quickly that there are very many opportunities, but it will take creativity, courage and bravery on the part of that management to achieve the successes that the organisation can achieve. I ask the Minister to use a little of his time to explain to us how he will attract that quality management, which is so central to the success of the operation.

15:39

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

It is a pleasure to follow the hon. Member for Northampton South (Mr Binley), and I strongly agree with what he had to say about the bully-boy school of management. The hon. Gentleman is committed to privatisation, as he made clear in responding to the intervention from his hon. Friend the Member for Gainsborough (Mr Leigh). However, although I listened carefully to the Secretary of State, I do not think that he made a case for selling Royal Mail.

My problem with the Bill is that it does not seem to be directed at the individual problems faced by Royal Mail. Indeed, I believe that in some ways it would make matters worse. Specifically, privatisation does not of itself deal with the problems identified in the Hooper report.

At the time of the Bill proposed by the last Labour Government, two arguments were advanced in favour of a private sector minority stake in Royal Mail. It was argued that Royal Mail needed private sector drivers, incentives, commercialisation and benchmarking—all the disciplines associated with private enterprise. It was said that they were necessary to drive forward the modernisation programme. At the same time and in the same context, it was argued that there was a need for the managerial expertise that could be found in the private sector, which prompted a question: if that managerial expertise was really needed, why could it not simply be hired?

The Government—correctly, in my opinion—have asked Richard Hooper to review his work. He has reported progress on the crucial modernisation issue, and has had reassuring things to say about managerial expertise. The key necessity is surely to drive the modernisation through, but that will not be easy, because mechanisation brings with it job losses and reorganised work arrangements.

The challenges are well understood. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) listed some of them. Modern communications such as text, e-mail and mobile phones have led to a remorseless decline in the use of traditional postal services. That has been offset to some extent by the use of direct mail marketing and the growth of the parcel business, which is partly dependent on internet shopping—but the trend is clear, and change is therefore essential. I accept that the background of poor industrial relations makes the process harder, but in the circumstances it is surely right to support the progress that has already been made—and identified by Richard Hooper—and to find ways of reinforcing the work on the modernisation programme.

In any event, why do we need legislation to bring about privatisation? The Government have the power to sell shares now, although they are handicapped by the need to report the precise arrangements to the House and obtain our consent. The then Business and Enterprise Committee was very forceful on that point when it examined the Labour Government’s proposals, and I am pretty certain that its members’ views will not have changed.

The Bill also separates Royal Mail from the post office network, even more explicitly than is currently the case. That will not solve the problems faced by individual post offices, and it will open up new dangers. In short, the problems are insufficient turnover and a small margin on individual transactions through the outlets. It is reasonable to consider what other business could be put through traditional sub-post offices—that is not an original idea—but it will be difficult to provide services requiring a volume of users in smaller population catchment areas. The problem is usually discussed in terms of rural communities, but it affects inner-city and other urban communities as well. The Government should focus on that, rather than on separating Royal Mail from the post office network.

The burden of the universal service guarantee still rests effectively with Royal Mail, to the extent that it is effectively forced to subsidise its competitors in the parcel business, apparently—although I understand that the figures are a matter of dispute—to the tune of some 6.5p per item. That cannot be fair, and it is evidence of poor regulation.

I urge caution, although I am not opposed to the idea of share ownership. However, as my hon. Friend the Member for Coventry South (Mr Cunningham) pointed out, when employee share ownership was introduced at Rolls-Royce and by the municipal bus companies, the employees took the shares and then sold them. What matters to employees is the wages, job security and pension arrangements; those are the crucial things for them.

Part 3 of the Bill deals with the regulator and reconfigures the existing arrangements. The relationship between Royal Mail and its regulator is poor. I have looked at the arrangements in the Bill, and this looks to me—I was wondering how I could explain this in summary to the House—like the Post Office version of the Independent Parliamentary Standards Authority, with the industry having to pay for the regulator, at costs set by the regulator.

Part 4 deals with what happens when everything goes wrong. I will urge the House to pass that part of the Bill if the rest of it is passed.

15:45

[Lorely Burt (Solihull) (LD)]

I welcome the Bill, which largely represents the policy that the Liberal Democrats went into the general election with. There are differences. Under our policy, the Government would have retained a stake, but we understand the problem of making this a very attractive sale, so that part of it has gone. Under our policy, share ownership for employees would have been larger, but the measure still represents the largest share ownership ever on record, so we can live with that. Another difference is the potential to mutualise the Post Office. That is right up our street as Liberal Democrats; it is Liberal Democrat-plus, so we welcome that.

We have strongly maintained that the Post Office should never be sold and we hope that, under the new proposals, it will become stronger, thrive and even grow. The £1.34 billion announced today is extremely welcome.

[Sarah Newton (Truro and Falmouth) (Con)]

On that point, I echo the warm welcome that my hon. Friend has given to the Bill. In the remote rural part of the world that I represent, the postal network is the lifeblood of the community. Opposition Members’ response is really disappointing. They should be welcoming the commitment to no further network closures and the massive investment that will enable those post offices to come up with new services, such as financial service products for people on a low income who do not have ready access to banking—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. This is not a speech; this is an intervention. It is supposed to be brief.

[Lorely Burt]

I wholeheartedly endorse the comments of my hon. Friend.

We know that mutualisation of the Post Office cannot occur straightaway, so I wonder whether my right hon. Friend the Secretary of State could indicate what conditions need to be in place before mutualisation can take place. In his aptly titled report, “Modernise or decline”, Hooper strongly recommended private sector involvement in Royal Mail and that the Government should relieve Royal Mail of the burden of its pension scheme.

[Michael Connarty]

The hon. Lady is moving on from mutualisation of the post office network. I thought she might ask the Minister where the guarantees will be when the Post Office is mutualised or split off. I believe that we have to put in £270 million at the moment to keep the network alive. I can see no guarantee under the Bill that the Post Office will be supported. How could mutuals find that £270 million to keep the network intact?

[Lorely Burt]

We have already had the announcements of the Secretary of State, which have covered the point that the hon. Gentleman has made. The Secretary of State might wish to address that point in his summing up.

[Mark Hendrick]

Will the hon. Lady give way?

[Lorely Burt]

I cannot take any more interventions. I am sorry.

The point is that 90% of Royal Mail will become a private company. That necessitates close scrutiny to ensure that Royal Mail employees and customers and the taxpayer are protected.

Consumer Focus wants changes that protect consumers to be added to the Bill. It believes that Ofcom “must” impose a consumer protection condition on every postal operator—rather than “may”, which is the term currently used in the Bill. Please can we have “must” instead of “may”? Can we also add the requirement that Ofcom must impose the essential condition that every postal operator must guarantee the confidentiality, safety and security of mail?

I know that Opposition Members are concerned that the Bill’s provisions may be detrimental to customers in rural areas. Can we therefore insert into the Bill a definition of the minimum number of access points to the mail system—post offices and post boxes—and the criteria for geographic distribution, together with criteria under which exceptions could be sought? Can we also add a requirement on Ofcom to consult representatives of residential and small and medium-sized enterprise customers, and other particularly vulnerable customers, when conducting any review of the universal postal services order? SMEs often get left off the list, but it is important that they are consulted as well.

Customers need proper protections when things go wrong. Can we build into the Bill a requirement for postal operators to be members of an approved redress scheme to ensure complaints-handling standards can be monitored and independently investigated? Finally on the consumer front, can we build in a requirement that postal operators continue to provide appropriate information to the regulator and an appropriate consumer watchdog in order to enable independent monitoring of performance, quality of service, complaint handling and services provided to vulnerable consumers?

I want to make a few comments about the separation of Royal Mail and the Post Office. Key provisions in the Bill allow for the privatisation of Royal Mail and the formal separation of Royal Mail and the Post Office. Formal separation offers considerable advantages for the Post Office. For example, it would be managed by a board that could be more closely aligned to its own strategic objectives, and would no longer be a junior partner in group decision making. However, the Government have announced that they will seek a refreshed inter-business agreement between Royal Mail and the Post Office. Will subsequent contracts be subjected to a competitive tender process given that, as Opposition Members have pointed out, there would be no guarantees that the Post Office would retain its mail contract thereafter? I fully accept that there may be arguments against seeking to maintain the contractual relationship between the Post Office and Royal Mail in perpetuity as we cannot reasonably assume that consumer need will necessitate upholding the current access arrangements indefinitely. I also understand why, in light of future uncertainties, the Bill must not be too prescriptive, but might it include provision for the Secretary of State to seek a review of the access criteria at a future date, subject to parliamentary approval?

On the division of assets between the Post Office and Royal Mail, the Bill allows for the transfer of property or other assets between parts of Royal Mail Holdings plc. These provisions allow property transfers to be made directly by the Secretary of State or the holdings company. My worry is that the Post Office has frequently taken a minor role compared to Royal Mail, so when negotiating the property transfers, we need to ensure that the greater weight of Royal Mail is not used unfairly. Therefore, can the Government take steps now, in advance of measures contained in the Bill and the separation of the holdings company taking effect, to maintain the Post Office’s current assets?

Finally, there is speculation about who might buy Royal Mail. All the protections I have mentioned must be in place, but I would like whoever the purchaser might be to be given the best possible chance to make Royal Mail a world-beating postal service.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Will the hon. Lady give way?

[Lorely Burt]

No, sorry.

Royal Mail is currently hamstrung by regulations that make it uncompetitive against outside competitors, so can we examine those seriously? We want to make Royal Mail a much more attractive proposition for a prospective purchaser and ensure that the staff and new management, together, can make it the full and profitable service that it deserves to be.

15:55

[Kate Hoey (Vauxhall) (Lab)]

I feel like saying, “Here we go again”, because in my time in Parliament we have been through three different attempts to privatise Royal Mail in some form or other. All three attempts have failed, and I think that we will decide not to get this one through. I am convinced that the public, whatever their attitudes and their knowledge of what is going wrong on some of the issues relating to Royal Mail, do not want a fully privatised Royal Mail or, indeed, a partly privatised one. It is a pity that the previous Government’s approach—my Government—almost left it open, as many Labour Members said, for another Government to carry on and go much further. So I feel a kind of déjà vu here.

The bit of the Bill that I really welcome is the lifting of the pension fund burden, but that can be done anyway—it should have been done by the previous Government. We did not need to go through all this time, effort and waste of money on consultants to know that the Royal Mail was in a bad state. Part of that was because of the pension fund deficit. Whose problem was that? It was certainly not that of the men and women who deliver our post or the members of the Communication Workers Union; it was, purely and simply, that of Governments of all complexions, who allowed the pension holiday to be taken.

A lot has been said about modernising, but the thing that made such a difference to why the Royal Mail started to decline in many people’s view was that for some years it had shockingly bad management. All they seemed to want to do was pay themselves grotesque salaries at the top, while the limited investment that was being made was not put into the modernisation that should have taken place. The position is slightly changed now, because the new management at Royal Mail are a different kind of management. I am not saying that they are absolutely perfect; I was very disappointed in the letter that was sent out, to which reference has been made, concerning the question of wanting to free up some of the universal service points. That is worrying, but recently there has been a real improvement in relations between the management and the CWU.

A lot of the modernisation has gone ahead: new machinery and technology has been introduced, aligned with the new six-day standardised work plan; delivery methods have improved; and the equipment and the ways of working have changed. We have to examine mail and distribution centre rationalisation but, as I said in an intervention, closing the Vauxhall Nine Elms facility would be crazy, because it would involve huge additional costs of moving post out of London in lorries and vans. I hope that there is still room for discussion on that and that we will be able to prevent it from happening.

What I am trying to say is that change is taking place and there is a changed attitude. Therefore, there is now no reason why the new Government, with the right support from those on the Opposition Benches, could not create a Royal Mail, minus its pension deficit, that has the kind of support that will give it sustainability and allow it to compete with anyone else in the world. The Bill, as it stands, contains so few safeguards. How sad it is that we could end up with our famous, wonderful Royal Mail, which has had so many loyal workers over many years, is a lifeline to people in rural communities and is seen by many people living in isolated communities as the one bit of contact that they have—in the form of their postman or postwoman—end up in the hands of a foreign owner. It is not just that that ownership is foreign. They will hand our precious asset over, out of the public sector, and for what? I saw no argument for it. There is no argument.

The changes are already happening; we have a work force who realise that things need to change and they are changing. I cannot believe that some of the Liberal Democrats are going along with this, although I accept that they want to see the support for the post offices. I welcome again that support for those post offices, but it is a separate issue that should be happening anyway. I urge my party not only to oppose the Bill, which we are, but to say that we were wrong to move for semi-privatisation, because it has allowed us to go this way and has allowed the Government to pick up from where we left off.

The Communication Workers Union is signed up to all the modernisation, but we do not want to see a service that is stripped back to the minimum, getting rid of the second deliveries and a number of such issues, as well as posing an overall threat to the universal service obligation. The public do not want this and they will not let it happen. The coalition Government are taking on public opinion at their peril.

16:01

[Jonathan Lord (Woking) (Con)]

I had hoped to make my maiden speech last Friday on my private Member’s Bill, to pay homage in some small way to the great lady, the former Member for Finchley, who famously made her maiden speech on Second Reading of her successful private Member’s Bill. I am grateful to colleagues on both sides of the House for giving it its Second Reading without objection, and I am happy today to support the Second Reading of this Bill.

Let me begin by thanking my predecessor, Humfrey Malins, for his long record of service to his constituents and to this House. He was an extremely assiduous constituency MP for Croydon, North-West and then for Woking. He was listened to with great interest in this House, particularly on home affairs, on which he spoke with the legal experience of a solicitor, a district judge and a Crown recorder. He was a shadow Minister for immigration and asylum for five years, and I believe that it is typical of the man that when he lost his seat in Croydon in the general election of 1992, he immediately set about founding the Immigration Advisory Service, which to this day provides free legal advice on matters of asylum and immigration. In 1997, he was re-elected to Parliament as the MP for Woking and received a CBE for his services to immigration policy.

Humfrey was extremely well liked by his constituents and, I believe, by Members on both sides of the House. He remains a great lover of sport. Having played against the All Blacks in his youth, he went on to found and captain the parliamentary rugby union team and later captained the parliamentary golf society. There are many fine golf courses in the constituency of Woking, and I hope that Humfrey keeps up his many friendships in our town and in our villages by playing them as often as possible.

My constituency of Woking has an ancient past but a passion to succeed in the present. Although it boasts the ruins of Woking palace, which was one of Henry VIII’s favourite hunting lodges, it came into being as a modern town by Act of Parliament. In the 1840s, London’s churchyards were running out of burial space, so the Metropolitan Interments Act 1850 forbade any further burials in London and encouraged the building of cemeteries outside the city. A further Act of Parliament in 1852 set up the London Necropolis Company, which went on to purchase 2,000 acres of land at Brookwood in Woking.

Brookwood cemetery remains a beautiful and tranquil place, a place of truly national significance and importance. I believe that it is worthy of more support both locally and nationally. One of those interred there was Dr Gottlieb Wilhelm Leitner, an oriental scholar who was reputedly fluent in 50 languages. In 1889, he founded the Woking Shah Jahan mosque, which was the first purpose-built mosque in western Europe. For many years, it was the focus of the development of Islam in this country. I celebrate the fact that Woking has its first Asian mayor, Councillor Mohammed Iqbal. I pledged with him to serve the residents of our borough, and in particular our British Muslim population. It is worth noting that Dr Leitner, the founder of the first mosque in England, was Jewish. That is an interesting and wonderful thing that we should bear in mind as we seek peace and reconciliation in the world.

H. G. Wells was another famous citizen of Woking. On one of my first home surgery visits, I visited a modest, semi-detached villa in the heart of Woking, only to be told that it was the very house where H. G. Wells had penned “The War of the Worlds”, which envisaged Martians landing on beautiful Horsell common and laying waste to the whole of Woking and, indeed, vast swathes of southern England. We now celebrate H. G. Wells’s imagination with a large, modern, Martian tripod sculpture in the centre of our town.

While we are proud of our Victorian, literary and cultural heritage, we also look forward to the future. Woking borough council is innovative and has an acknowledged national reputation for leading on green issues and renewable energy. Our businesses strive to succeed—none more so than McLaren, which, building on its success in Formula 1, is now an even larger enterprise that is going to build a sports car for the road. I would very much like to own one of McLaren’s new sports cars, but unfortunately my parliamentary salary and my wife forbid it.

Woking has a vast panoply of charitable organisations, all of which are willing to make the big society a success. It is a great honour to represent Woking in Parliament, and I hope to do so for many years to come—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I am sorry, but the hon. Member’s time is up.

16:07

[Mr Mike Weir (Angus) (SNP)]

I congratulate the hon. Member for Woking (Jonathan Lord) on making his maiden speech. I have been to Woking only once, and he missed out its most famous citizen—the great Paul Weller.

Turning to the matter at hand, although our amendment was not selected, it sets out the feeling of the Scottish National party, Plaid Cymru and all the parties from Northern Ireland, including the Democratic Unionist party; although DUP Members did not sign the amendment, they support its aims. We fear for the future of the universal service obligation if the Post Office is privatised.

I contributed submissions to Richard Hooper’s original work. I agreed with much of what he said in the end, but I strongly opposed the part-privatisation proposed by the previous Government and absolutely oppose the full privatisation proposed by this Government. Today, the Business Secretary argued that regulation will protect the universal service guarantee and that there is therefore no need to maintain Royal Mail as a public company, but it is inevitable that the pressures from a fully private company will lead to a reduction in the universal service.

Over the summer, the Business Secretary appeared to recognise that the current six days a week pick up and delivery service may not survive and suggested that a five days a week service might be sufficient. That accords with the current definition of the universal service, which does not include Saturday deliveries, so the Government already envisage the service declining. That position was justified on the grounds that it would not discriminate against any area, since it would be the same service whether someone resides in Kensington or Kyleakin. However, that is not quite the case. If I reside or run a business in Kensington, I am sure that there are a number of different services to which I can turn, but it is somewhat different in rural areas of Scotland where Royal Mail is the only service that will pick up and deliver mail. That vital point must be borne in mind when we consider the Bill’s proposals.

We are dealing not only with residential customers but with business customers, many of whom, in more rural and remote areas, rely absolutely on Royal Mail, which is the only carrier that is obliged and able to deliver a service to them. Does anyone really believe that that will continue in a fully privatised environment? How long will it be before a private owner such as TNT or Deutsche Post argues that it is at a competitive disadvantage because it is the only company required to offer a universal service? How long will it be before it wants the agreement to be watered down or requires public subsidy to enable it to continue?

Such an outcome would be a disaster for rural business. Only this week, the Government talked about the need to increase broadband access in rural areas. All too often Royal Mail is considered old-fashioned—it is seen as Postman Pat and his black and white cat touring Greendale as opposed to the brave new world of broadband. Although broadband is important in rural areas, which would benefit enormously from faster access, one cannot send goods down a telephone line or a fibre optic cable. Unless some entrepreneur in this brave new world comes up with Star Trek transporters, we will still require a physical delivery service to go up and down dale and glen to pick up and deliver physical objects. At the moment, the only company that will guarantee to do that is Royal Mail. We have to take that on board and do nothing that will undermine the service if we are to encourage the regeneration of our rural areas and create jobs in the new green economy.

I appreciate that many Government Members firmly believe in the overriding primacy of private enterprise, but even private enterprise sometimes needs public help. I was intrigued by the Prime Minister’s speech to the CBI earlier this week in which he said that

“business confidence doesn’t just come from financial and human assets. It comes from physical assets too—from our infrastructure.”

I do not often agree with the Prime Minister, but I think that is absolutely correct. He recognises the need for substantial public investment in the infrastructure needed to help businesses develop. Infrastructure is not just roads, railways and broadband—it is also investment in existing systems that provide a backbone for many businesses. Infrastructure assets such as Royal Mail provide new entrepreneurial businesses in many of our rural areas with an essential service that enables them to operate, grow and create jobs. They do that in many areas that are about to be hit very hard by the reduction in public sector employment.

I am interested in the fascinating myth-busters leaflet published by the Department for Business, Innovation and Skills.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

It is good.

[Mr Weir]

Indeed. Let me quote one of the myths in the leaflet:

“Growth in parcels from online shopping will outweigh falls in letter volumes”.

The response states:

“The parcels market is much smaller than the letters market and has been fully liberalised since 1981, making it highly competitive.”

It might be highly competitive, but many carriers will not deliver to remote and rural areas, particularly to Scottish islands, except at immense cost. There is a real danger in going down the route of privatising postal services.

[Mr Alan Reid (Argyll and Bute) (LD)]

The Bill mentions, in clause 30:

“At least one delivery of letters every Monday to Saturday…to the home or premises of every individual…in the United Kingdom”

at a uniform price. What better guarantee than that does the hon. Gentleman want?

[Mr Weir]

I remind the hon. Gentleman that in the summer his Business Secretary said that the service might go down to five days a week, so he recognises that it might be reduced. He also said that European regulations rightly ask only for a five day a week service. Any privatised service will inevitably want to cut costs and there will be pressure on the Government to allow that.

[Several hon. Members]

rose—

[Mr Weir]

I shall not give way again; time is getting on.

I pointed out in an intervention that the chief executive officer of Royal Mail is calling for an overhaul of the regulatory regime, including the ability to price products freely, to put limitations on the products covered by the universal service obligation and for the USO fully to cover its costs—the cost of delivering a letter to the islands of Scotland is about £30 not 30p—and for restrictions on access to the Royal Mail network by competitors. If a privately owned Royal Mail goes down that route, the pressure on the Government and regulators could be immense and could mean a substantial rise in postal costs to rural areas. It would be the ultimate irony if the Bill meant that a privatised Royal Mail was given an ability to compete against other privatised companies that it was denied when it was a public body.

I should like to say more about post offices—[Interruption.] I would take another intervention if it gave me two more minutes. The Business Secretary failed to explain how mutualisation would work. He failed to say how a post office that has moved into a branch of WH Smith, as many have, will form part of a mutual. How will individually owned—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Time is up. [Interruption.] Will the hon. Gentleman resume his seat? I ask Members to stick to six minutes. Interventions with four seconds to go can give more time, as has just happened, and the hon. Gentleman benefited from that.

16:16

[Dr John Pugh (Southport) (LD)]

The powers that be in the Whips Office approached me last week to ask whether I would like to speak on the Bill, and then a few days afterwards they asked which side I intended to speak on. I reassure them that I shall speak largely for the Bill.

The Government are to be congratulated on introducing a Bill on postal reform. I accept that stagnation is not an option. The pension deficit is crippling. The regulatory environment is crazy, as many Members have established. The communications market is changing dramatically, and the work force are confused and demoralised.

The last time I spoke on postal services in this place, I did so on behalf of employees in my constituency who were locked in battle with the local management. I must admit that like other Members I did not find the Crozier-led management easy to deal with. Nor did I find the union especially helpful, although I have a generally high opinion of the Communication Workers Union and of Billy Hayes in particular. The battle was over an astonishingly high rate of dismissals and disciplinary actions taken against a work force who are neither work-shy nor particularly militant.

A pattern of petty penalisation and unreasonable demands had emerged, and it needed to be dealt with. Otherwise decent staff were being punished for not fulfilling unreasonable schedules, or for simple lapses of concentration, such as not wearing their cycle helmet at the right time in the right place, or for not following procedures with absolute accuracy. In some cases, that became the basis for dismissal, and bit by bit, long-term staff were replaced by casuals. I came to the conclusion that the management wept no tears at all about that, and that the dismissal of long-term, high-pension staff was in fact relatively welcome.

I came to the conclusion that unreasonable schedules were being set—almost wilfully—because Royal Mail believed that the only way it could compete was to ask staff not only to go the extra mile, but to go another and then another. I draw no comfort from the current agreement whereby Royal Mail is to beef up massively the junk mail element in every postbag. A business that plans to survive by giving its customers more of what they do not want does not seem to have much future. That is why something has to change, and there is a lot in the Bill we should welcome.

We need to do something about the insanity of postal regulation. For years, Postcomm has forced Royal Mail to upstream and downstream prices to subsidise its competitors. The line is, “Let the poor old Royal Mail struggle with the long paths, the dogs, the gates that fall off their hinges, the flats with no visible means of access and the long country roads.” While Royal Mail does that, the private market looks at what is actually profitable.

Payment for the final mile has been derisory, and as the hon. Member for Vauxhall (Kate Hoey) would point out, it is due to the bloodless application of EU law and directive that has done untold damage to the postal system of the UK. I do not want to go into the rationale for that; suffice it to say that as a consequence of the single market agreement that Mrs Thatcher introduced—or got Parliament to agree to—we are stuck with it. But as far as I can see from the Bill, we are not stuck with Postcomm. That is a significant improvement. I welcome, too, the emphasis on employee share ownership.

[Jack Dromey]

Does the hon. Gentleman share my concern that there is nothing in the Bill that would prevent ownership passing to private equity, perhaps aided by the hedge funds, and a takeover not in the national interest, including potentially by foreign ownership?

[Dr Pugh]

The hon. Gentleman is assuming that the Bill is totally finished business. If he has amendments that he feels ought to be tabled and that ought to impress the Minister, I am sure he will have the opportunity to do so.

Not only is employee ownership part of Lib Dem policy, but it is a long-standing part of Liberal policy before that, as many of my hon. Friends will recognise, and it was backed by candidates in the recent Labour leadership elections. It is good to see employee ownership in the Bill. It is 10%, but it is there.

I welcome the central place in the Bill given to retaining the universal service obligation and the measures taken to secure it. We all hope that they will be good enough.

I welcome the plans for the Post Office, but with some caveats. It is a huge franchise and it still has huge potential, but it remains the case that there is virtually nothing that it now does which cannot be done in some other way. Its viability depends on elderly customers preferring to do things in a traditional way, via paper transactions. It needs more than the good wishes of the House, the occasional subsidy and a more modern and diverse facade. It is a very distinctive type of franchise, unparalleled in any other European country, and it needs a distinctive role.

That can only be through an enduring link with the Government or with the community that post offices serve. It is not clear to me yet what long-term role the Government or the community wants the Post Office to discharge. My fear is that if central Government, local government and the community cannot identify that role, the franchise will lose its universal service provider status and part of its raison d’être. The Government need to work out what they want a sustainable post office network to do. We cannot have, as we have had in the past, some Departments promoting it and others, such as the Department for Work and Pensions, effectively sabotaging it.

I fear there is also an element of backdoor sabotage. I have had difficulty in my constituency, where sub-postmasters have tried to sell franchises to somebody else and have encountered untold difficulties in seeking to do that and prohibitive prices presented to buyers.

The fundamental issue that we are facing is privatisation. Some people approach the subject with a presumption against privatisation, and some have a presumption in favour of privatisation. I guess most of us are fairly pragmatic about it, but do we accept that the safeguards of the universal service obligation are robust? If we accept that there is an argument for the Government to absorb the pension deficit, and if we accept that the business will go better with sane regulation and employee involvement, the big question is why not retain the business in public ownership. That is the issue on which we will torture ourselves over the next few days. We hope that we will have from the Minister an exhibition of evidence-led policy where the balance of argument prevails, not the balance of numbers.

16:23

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I start with a declaration of interest. I am a Labour and Co-operative Member of Parliament, with an 18-year involvement with the Co-operative movement prior to coming to the House. Since entering the House, I have at various times been chair of the employee share ownership group and the all-party building societies and financial mutuals group. Philosophically, there are considerable elements of the Bill that I instinctively support. The Government’s recognition of the potential role of employee share ownership and mutuality in delivering postal services in this country is welcome. My regret, which forces me to oppose this Second Reading, is that the Bill’s other parts will militate against the successful implementation of either employee share ownership or mutuality.

My experience within the movement has demonstrated a couple of things to me. We cannot legislate for mutuality. We can set up a framework of legislation in which mutuality can thrive, but we cannot look at a business and say, “We will make that a mutual.” Mutuality and co-operation have to stem from the desire of those who work within an organisation to work in a certain way, driven by a certain culture. That culture may exist in Royal Mail and in the post office service, but the issue has not yet been determined.

I welcome the consultation on the Bill with the co-operative movement, but I did not feel too confident when the Secretary of State seemed not to know whether it had taken place with Co-operatives UK or with the Co-operative Group. The fact that he fails to understand the difference between the two does not exactly reassure me of a heavy commitment to that line of organisation.

As the hon. Member for Northampton South (Mr Binley) said, the previous Business, Innovation and Skills Committee examined the Royal Mail and the Post Office and made a range of recommendations, many of which the Minister alluded to, but many of which have not been implemented. That prompts the question that if their implementation is necessary to make the privatised model work, why have they not been implemented while the company has been in public ownership? Indeed, if they had been implemented, it might have made the private offer more acceptable. The Secretary of State did not sufficiently explain that situation.

My fundamental objection to the whole privatisation programme is that it basically instils a contradictory philosophy to that in the mutual and co-operative elements of the Bill. I have not seen it fully explained how the drive for shareholder appreciation and profit will be mitigated to allow for the regulatory and social obligations of the privatised Royal Mail. There has been a long debate about the universal service obligation, the six-day delivery and so on, and the fact remains that whoever buys Royal Mail in the long term will have to satisfy shareholders, but the potentially irreversible drive to make profit must call into question the regulatory framework that we have been assured will contain the privatised industry. That situation will have serious consequences for the post office service.

If the Royal Mail withdraws its current contract at some stage, or under some ownership or model, it could sound the death knell for hundreds, if not thousands, of post offices. Only 4,000 of the current 11,000 post offices are profitable. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) said that mutuals can fail, and in this context there is a high possibility of failure.

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

I hear what my hon. Friend says. Does he not agree that for a mutual to be successful, it needs to have a viable business plan, which the Bill does not include?

[Mr Bailey]

Exactly. That will be one of the determining factors in whether post office sub-postmasters and other employees want to work within a mutual framework. The fact remains that Royal Mail, driven by an imperative to make more profit, will be bound to re-examine some of its contracts with the Post Office, and there is no guarantee that they will be sustained. About a third of Post Office Ltd’s total income is dependent on those contracts with Royal Mail, and that creates a degree of uncertainty and risk that could well work against those involved in the Post Office being prepared to accept a mutual organisation.

[Damian Collins (Folkestone and Hythe) (Con)]

Listening to the hon. Gentleman’s remarks, one might think that the post office network has gone through a halcyon period. What guarantees were there for the thousands of postmasters who saw their businesses close over the past few years?

[Mr Bailey]

I do not recall anybody saying that post offices had gone through a halcyon period, but under the last post office reorganisation many sub-postmasters applied for the compensation package that was agreed for them. I very much doubt that that would still be available under a revised and privatised process.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

The hon. Gentleman says that it is impossible to create mutuals from a transfer, but did not John Spedan Lewis create the John Lewis Partnership by transferring a business into an employee-owned trust? Is not that a great example of an existing business being transformed into a highly successful mutual, if not a co-operative?

[Mr Bailey]

Certainly John Lewis did that, but he did not just hand it over—there was a process by which he ascertained the willingness of others within the business to accept it. That situation has to be created. I could equally point to the situation in the ’70s when co-operatives failed because they did not have that in place.

I oppose the Bill because it is fundamentally flawed. At the Lib Dem conference, the Secretary of State said, “Capitalism takes no prisoners,” but since then he seems to have been on a private journey. That is demonstrated by this Bill, in which he puts forward a solution based on a brand of capitalism that I would describe as cuddly capitalism, whereby shareholders will forgo their private profit in order to embrace a co-operative and mutual solution that mitigates the social impact of their drive for profits.

16:32

[Andrew Stephenson (Pendle) (Con)]

I welcome the Second Reading of the Bill and what the Secretary of State has said, which has helped to clear up a number of the points that I was going to raise.

I believe that now is the right time for a fresh debate about the future of Royal Mail, particularly the need for radical change in the way that postal services are regulated. There is an urgent need for a review of the regulations that are supposed to govern Royal Mail and the universal service but in reality prevent the company from operating in a truly competitive and open market. None of us doubts the immense service and commitment of the thousands of postmen and women and sub-postmasters across the country who work tirelessly to serve their community. I know of many in my own constituency who consistently go that extra mile not only to do their job but to serve their community in so many different ways. We owe it to these people to ensure that we get this Bill right and that that Royal Mail is given the opportunity to flourish in the future. That opportunity exists now, and we have the chance to do what the previous Government failed to do: to breathe fresh life into a national treasure that would otherwise be crushed by the weight of regulation, strangled by the noose of the historical pension deficit and starved by the absence of capital that is needed to continue the modernisation programme.

As a local MP, I know how important the universal service is; many other Members have touched on that. The one-price-goes-anywhere, six-days-a-week service to the UK’s 28 million homes and businesses has been in place since Royal Mail was established, and it is highly valued by the public and by businesses large and small across the country. However, many at Royal Mail would say that that is now threatened because of the way in which regulation is strangling Royal Mail’s ability to compete in the wider marketplace. It is also vital to note how important this service is to the men and women working in Royal Mail, who derive a great deal of job satisfaction from this part of their job.

As several hon. Members have pointed out, Royal Mail is in a precarious position: there is no hiding from the facts. Mail volumes are falling, the company has a multi-billion-pound pension deficit, and there is an urgent need for more capital to be injected into the company. I welcome the provisions in the Bill that will allow Royal Mail flexible and timely access to capital in future as it continues its modernisation to provide customers with the services they want.

That brings me to the major issue facing the Royal Mail, on which I wish to elaborate. The company is currently stifled by more regulation than its competitors, so the status quo is no longer an option. The biggest single threat to the universal service obligation, which is protected as part of the Bill, is the unfair regulatory framework in which the Royal Mail currently operates.

Deregulation of UK postal services is long overdue. I can think of no other market or industry in which a state-owned institution such as the Royal Mail is forced to offer its competitors a subsidised rate that does not even cover the cost of its business. As my hon. Friend the Member for Southport (Dr Pugh) pointed out, and as the right hon. Member for Southampton, Itchen (Mr Denham) said in his reply to the Secretary of State, Royal Mail’s rivals currently have an in-built price advantage because of the arbitrary and unfair margin that the regulator sets between the price that Royal Mail can charge its own business customers and the price that it charges competitors for the use of its network.

I am sure that the original intention of the regulations on that matter was to help encourage new providers into the market, but it seems somewhat perverse that they now mean taxpayers and Royal Mail customers are effectively subsidising foreign competitors. Those access headroom regulations allow rivals to undercut Royal Mail, no matter how efficient its business becomes. In the interest of fairness, and so that Royal Mail can operate freely and competitively, they must surely be reviewed.

[Fiona O'Donnell (East Lothian) (Lab)]

Would the hon. Gentleman like to consider the deregulation of bus services, which has not led to an increase in competition? In particular, services and competition in remote and rural areas have been reduced.

[Andrew Stephenson]

I thank the hon. Lady for that point. I believe that we need to get the right balance in regulation between protecting consumers and ensuring that we create a stable company. I therefore welcome most of the Bill’s provisions, particularly on protecting the Royal Mail’s universal service obligation.

We need to get regulation right, and I should like to ask the Secretary of State for any further assurances that he can give the House that the Bill will deliver the open, transparent, fair and competitive postal service market that is needed to allow the Royal Mail to prosper in future. I also ask Ministers to ensure that the Bill allows Royal Mail to introduce new products without always having to consult its rivals publicly for three months, as the current regulations require. That severely limits the company’s ability to innovate and compete.

It seems to me that there should be regulation and price control only where there is little or no competition. Currently, 80% of the Royal Mail’s revenues are covered by regulation, although rivals handle at least 40% of the mail, and 60% of bulk mail. Personally, I should like competitors to be given access to its network on commercial terms and at a commercial price, rather than the Royal Mail being forced to deliver its competitors’ mail at a loss.

The Royal Mail and the Post Office are key national institutions, and we must ensure that they are both on a secure and stable footing. Securing the future of the post office network is absolutely vital to me. Pendle lost 17 sub-post offices under the last Government, including, most recently, six branches in 2008. Many parts of the country fared even worse than my constituency, with the number of post offices decreasing from 17,845 in 2000 to only 11,905 today. I welcome the fact that the Post Office is not for sale as part of the Bill, and that there will therefore be no further programme of closures. That will come as a huge reassurance to numerous elderly and disabled residents in Pendle who rely on the local post office on a daily basis.

I was encouraged by what the Secretary of State had to say about investing in the network and exploring future business opportunities, and particularly by the £1.34 billion extra that he announced today. I welcome the Bill and fully support the moves that will help the Royal Mail to flourish in an open and competitive marketplace in future. I look forward to supporting the passage of the Bill, with the aim of delivering a strong and stable company for customers, the 155,000 employees, and potential future shareholders.

16:39

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

Earlier today I passed a lobby outside the House, whose protagonists were carrying placards that bore two messages. The first was “Bash the bankers, not the pensioners”, and the other was “Save our services”. Indeed, there is a lobby of pensioners in the House even as we speak. The Secretary of State highlighted the fact that post offices are of particular importance to pensioners. However, I thought he rather narrowed the importance of post offices, certainly for my constituents, because post offices are vital not only to pensioners but to people with disabilities, the unemployed and young parents. One must give credit to the new coalition Government, because their record is 100% consistent: despite their pronouncements to the contrary, all their policies attack the most vulnerable and the poorest in our society.

There are no guarantees whatever in the Bill that post offices and sub-post offices will be maintained. It is easy to say that there will be no more post office closures—I am somewhat confused on whether that covers sub-post offices—but without cast-iron guarantees, my constituents will suffer inordinately. All of us who were here in the last Parliament and who are most grateful and humble for being returned remember our struggles to save our sub-post offices. That is certainly true of my constituency and throughout London. I lost four in the last round, and six in the two previous rounds. Such closures impact on more than the individual users of the sub-post office. London is essentially a sequence of small villages, and sub-post offices tend to be a major part of the smaller, local economies. People go to the post office and do a little bit of shopping in their local shops. Once the post office goes, those other shops lose out.

The Government are telling us that the retail sector will be the essential driving force of our growing economy, but if there are no guarantees that essential counter services will be maintained, the economic fallout could be greater.

[Jesse Norman]

As it is true that no Parliament can bind its successors, and as we have in legislation a clear statement that there will no further closures, could the hon. Lady specify what guarantees she is looking for that cannot be found in the Bill?

[Glenda Jackson]

With all due respect to the hon. Gentleman, his Secretary of State stood at the Dispatch Box and gave categorical assurances that his proposals will revitalise and re-energise our postal services. He assured us not only that our postal services will not be diminished, but that they will expand and grow, and become more inventive and entrepreneurial. There is an apparent guarantee that national delivery will be set in stone. I asked him how the Government could guarantee for perpetuity a privatisation of postal services without entrepreneurs, who apparently will come rushing in, but the hon. Member for Northampton South (Mr Binley) said that entrepreneurs would run a million miles away from putting money into the Post Office.

The Secretary of State made those guarantees and cast them in stone, so why can he not do that in respect of sub-post offices? I am perfectly prepared to accept changes to post offices up to a point, but all the sub-post offices I know are additions to retail outlets, not the primary source of business for the individuals running them.

The public still firmly believe, despite the vagaries—or worse than vagaries—of the changes to our postal service, that the Post Office is a public service. The people of this country take great pride in it and believe it to be central and essential to their way of life. It matters not how many times one points out to them the decline in the number of letters we write, as everybody would apparently sooner send an e-mail because that is easier. I can understand that, but I am certain that I am not the only Member of this House who despairs of the day when e-mails were invented, because of the time it takes to send and read them. And what do we get at the end of it? I shall not go down that road, but I can see by hon. Members’ smiles that my experience is shared universally.

None the less, the public value and treasure the public service provided by post offices, and not only because, as for many of my constituents, it frequently used to be the case—this has improved slightly lately—that the only other human face that some people saw was that of the postman. In many instances, the only people whom they had conversations with were those they met in our sub-post offices. I have come across more than one example of a sub-postmaster missing seeing a particular pensioner over a comparatively short time span and alerting social services and the police because he was concerned that she might have had an accident or that something else might be wrong, and being proven right. Post offices do not simply offer a commercial service, whereby we can communicate with each other via the post; they offer a public service through which the public value each other and, in essence, take care of each other.

This Bill is yet another brick in the wall of what the Government are attempting to convince us will be their big society, if all these policies go through. However, it seems to me that what these policies will produce is the big broken society. If we lose the capacity to care for each other, what will be the point if we do manage to close the national deficit? It is the human beings of this country who are of primary importance. They are the ones who are going to get us out of this mess. Their feelings about public services are not limited to what the Government tell us are their priorities—the NHS and education. Rather, it is the public service in our postal services that they value. As others have said, there are aspects of the Bill to which one can give comparative support, but the Bill as a whole is an unmitigated mess.

16:45

[Chris White (Warwick and Leamington) (Con)]

Even after listening to the previous speaker, I think that we all share the same view, which is that we have to create a sustainable future for our post service, so that it can both serve our economy and continue to serve as a public good. We should all accept that Royal Mail has been lagging behind its competitors, and, with a potential reduction in the volume of letters of between 25 to 40% over the next five years, despite the use of e-mail and modern technology, we need to find ways to make Royal Mail change with the times. The injection of private capital will help to fund the necessary modernisation, which has already begun, but which needs to continue apace.

However, a more innovative way of achieving rising productivity—one put forward by the Bill—is by providing employees with shares in Royal Mail. Evidence has consistently shown that employees who feel a sense of ownership of a company have higher morale, and are likely to be more successful as a consequence, than those who do not feel that sense of ownership. The employee share scheme will give staff at Royal Mail a real stake in the future of their company and give employees a financial incentive to see improvements in the company and an even larger turnover. Given the clear benefit of that approach, my only regret is that the Government have not made the employee share scheme greater than 10%. However, given the financial constraints and the need to attract fresh investment into Royal Mail, I appreciate that doing so may not be practical. That said, I have some other concerns.

[Chris Evans]

Does the hon. Gentleman not think that the best thing would be to offer Royal Mail a mutualisation, as has happened with Post Office Ltd ?

[Chris White]

No, I think that the offer as it stands is sensible and practical, although as I have said, it would be better if the level was greater than 10%. However, as it stands, that is the only way that we are going to move forward.

I recognise that the injection of private capital has been sought in order to protect the universal service obligation, although I would like to use this opportunity to state how damaging it would be for communities and small businesses if Royal Mail dropped the USO. I understand that there are considerable costs involved. However, for many communities—particularly rural communities—and a vast number of small enterprises, Royal Mail is an important lifeline, with nearly 60% of small businesses wanting to continue to receive mail deliveries six days a week. Given that the small and medium-sized enterprise sector will play a large part in our economic recovery, we should avoid any changes to the USO that might damage growth or hamper development in that part of our economy.

The future of Royal Mail is not the only concern for communities and businesses, however. People also want a strong future for our post offices. In the past few years, post offices have closed in many communities, including my own, and those vital local amenities must be protected. If they are to survive, they must become more than simply a place for posting or holding letters.

The Post Office already needs a subsidy of around £80 million in order to carry out its functions, and this will increase if other income streams are not found. I believe that a Post Office bank offers a real solution and could provide a strong future for our post offices. About 25% of small businesses bank with the Post Office’s financial services, and I am confident that more would do so if the limited number of transactions that they are able to make could be expanded. A survey by the Federation of Small Businesses showed that nearly 40% of its members were in favour of a Post Office bank and would bank with it. The present arrangements mean that 50% of the profits made on financial services provided by the Post Office leave the Post Office business, and that is simply not sustainable. Moreover, the joint venture with Bank of Ireland has not been able to deliver the basic, core banking products.

An independent Post Office bank would bring banking right back to the centre of our communities and help to revive trust between the public and the banking sector. A Post Office bank would help small business, and thus our economy, and it would provide those who have difficulty accessing the high street banks with an opportunity to get hold of basic financial services, helping the most vulnerable in our society. In many of the poorest areas, people have lost access to traditional forms of banking, and a Post Office bank would provide a trusted face and a chance for those communities to use the financial services that many of us take for granted.

Such a bank would not be unique to Britain. The French postal service launched its bank in January 2006, and, by 2007, it had 11 million postal banking accounts providing significant revenue. The Italian postal service, Poste Italiane, launched BancoPosta in 2000. By 2002, Poste Italiane had shown a net profit for the first time in 50 years. So it can be done; it is just a question of putting the framework in place to achieve it.

[Mr Anderson]

Will the hon. Gentleman give way?

[Chris White]

I am sorry, but I will continue if I may.

A good postal service and a strong network of post offices is not a luxury; it is a necessity, for economic and social reasons. We need to be innovative and bold, and we need to think about sustainability. I am confident that this legislation will move Royal Mail and our post offices in the right directions, and I look forward to supporting it in due course.

16:52

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

We have had many debates on post offices and Royal Mail in the House over the years, and we have often concentrated on the competition regime governing the different mail companies that are engaged in the delivery of mail. Less often, we have concentrated on the technological shift away from all mail companies to new technologies, including text messaging and the use of the internet and e-mail, to which my hon. Friend the Member for Hampstead and Kilburn (Glenda Jackson) has just referred. This is a fundamental shift, and it lies behind many of the problems that Royal Mail now faces. Perhaps it is natural to concentrate on the things that we believe we can change, but just because we cannot change that technological shift, it does not make it any less real or any less fundamental to the challenge being faced by our post offices and by Royal Mail itself.

All this is not necessarily bad news for Royal Mail, because there is a growth in fulfilment mail, as it is called, as well as in internet shopping and in selling things through eBay. However, Royal Mail’s business needs fundamental modernisation if we are to keep the universal service obligation and the six-day-a-week delivery service that lies at the foundation of our postal system.

There are some areas of the Bill with which I can agree. The Secretary of State attempted to say that it was much the same Bill as the one proposed by the previous Government, but it clearly is not. They have some areas in common, however. The Government taking on an historic pension deficit—and, indeed, the way in which they are taking it on—is something with which I can agree. The taking on of both the assets and the liabilities puts postal workers on the same basis as nurses, teachers and so forth. This method was attacked by the previous Conservative Opposition as a raid on the pension fund, but I am glad to say that, now they are in government, they have turned their backs on that position and adopted the method we proposed.

Similarly, when it comes to regulation, it is right to move from Postcomm to Ofcom and regulate mail services in the wider context of communications technologies. Regulation, however, is about more than the heading on the notepaper or the address of the building. It is also right to put at the heart of the regulatory system the maintenance of the universal service. This Bill, like Labour’s Bill, has a reserved power for a levy to support universal service. In his report, Richard Hooper was sceptical about the need for this, seeing it perhaps as an excuse for modernisation not to proceed. We felt it was right to take such a power to ensure the maintenance of the universal service in the future.

So much for areas of agreement. The fundamental area of difference is on ownership. Clause 3 of Labour’s Bill said:

“Each Royal Mail company must at all times be publicly owned.”

Anyone wanting to see the difference between our proposals and this Bill need only scan the present Bill to try to find such a clause—they will not find it. That clause meant that any private investment had to be on a minority basis. The idea of having a minority stake was not particularly new; it had been floated as far back as 1998. Why keep a majority public stake? It gives the taxpayer an ongoing interest in the maintenance of the universal service obligation and an ongoing interest in the inter-business agreement, which is so essential to the post office network. Even more important than those two elements, however, it also gives the taxpayer an ongoing interest in the transformation of what is, after all, a public service. The taxpayer is taking on the historic pension deficit and the liabilities therein, so why should not the taxpayer share the upside of the modernisation that the Bill is designed to achieve? That explains the logic behind keeping a majority stake in taxpayers’ hands.

All that has been cast aside by the Government. Our Bill was a proposal for partnership; this Bill is a proposal for privatisation. On employee shares, yes, we were in favour of that, too, but again, only in the context of a company that would remain majority-owned by the taxpayer. What guarantees are there for the universal service obligation, the inter-business agreement and the taxpayer sharing in the upswing envisaged by the Bill?

Finally, there is a lesson for Labour Members, too. My hon. Friend the Member for Vauxhall (Kate Hoey) said that we should not have introduced our Bill. I offer the opposite lesson, however, as the truth is that if we had managed to get our Bill through, we would have had a publicly owned Royal Mail and might not have had to face the measure before us. There is a fundamental difference between what we were proposing and what is before us today. That difference is a majority publicly owned Royal Mail—a difference, I suggest, that is worth having.

16:59

[Mr Alan Reid (Argyll and Bute) (LD)]

I represent a constituency with many small, remote communities, including many islands. Clearly, Royal Mail and the Post Office are vitally important to that constituency. I have to admit that when privatisation was first mooted, I certainly questioned it. However, I am now convinced that it is the only way forward because of the state of the finances of both Royal Mail and the Government more widely. Thus, private capital provides the only way of investing in the modern plant and machinery that Royal Mail so desperately needs. Given the huge mountain of debts that the previous Government left behind, there is simply no alternative.

[Jim Shannon (Strangford) (DUP)]

One of the proposals involves the returned letter centre in Belfast, which employs 26 people. It is the most efficient returned letter centre in the United Kingdom, so the proposed changes cannot be to do with efficiency. As for savings, where are the savings in such a move?

[Mr Reid]

I am afraid that I do not know the details of what is happening to Royal Mail services in Belfast, so I shall have to pass on that, but the Minister has an hour and a half in which to find out the answer.

As I was saying, there simply is no alternative to private capital. Royal Mail is in a very difficult position. As other Members have pointed out, there is competition not just from other mail companies, but from other means of communication such as the internet and e-mail. As we heard from the right hon. Member for Wolverhampton South East (Mr McFadden), the former postal services Minister, the last Government concluded that private capital was required. There are clearly differences of opinion on whether there should still be a majority Government stake or whether the Government should have the power to sell off more than half the business, but I think that we should give the Government the power to sell off as much of the business as they consider necessary. We should bear in mind that the Bill does not mandate the full privatisation of Royal Mail, but merely gives the Government that power. I believe that we should give them the flexibility that they require in these difficult economic times.

[Mr Anderson]

Would the hon. Gentleman apply the same logic to other parts of the public sector such as the health service or defence? If the logic hangs together when applied to this service, why should it not do so when applied to those other services?

[Mr Reid]

Those are completely different examples. If the question arose in the hon. Gentleman’s constituency of allocating public funds to a scanner for his local hospital, to the troops in Afghanistan or to a sorting machine for his local sorting office, I think a survey would establish that the scanner and better equipment for the troops in Afghanistan would rank high in the pecking order. Because Royal Mail is operating in a competitive market, it is important for it to secure private sector expertise. The health service is a national health service for the whole country, which is why it should be in the public sector.

It was the last Government who introduced competition to the mail business in their Postal Services Act 2000. However, the structure that they created allowed private companies to cherry-pick the most profitable parts of the business, while leaving Royal Mail to deal with the expensive part—delivering to remote parts of the country. Royal Mail is now suffering as a result of the unfair competition created by the last Government’s regime, and I am pleased that the Bill will allow Ofcom to remove much of that unfair competition.

Under the last Government, all that we saw was worsening service. Opposition Members seem to have forgotten that. It was not the fault of the postal workers, but the fault of the competition regime that the Government had created. Mail is now delivered much later in the day than it used to be, Sunday collections have been abolished, and stamp prices rise every year by far more than the rate of inflation. Worst of all, thousands of post offices have closed. I was delighted by the announcement today of a vital £1.3 billion of new funds for the Post Office.

[Chris Evans]

Will the hon. Gentleman give way?

[Mr Reid]

No. I am afraid that I have already taken the two interventions that I am allowed.

The Post Office is extremely important, and it is also important for the whole Government to back it. Given that it has branches throughout the country, it is in an ideal position to deliver Government services. I hope that we shall not see from this Government some of the silo thinking that we saw from the last Government. I am thinking particularly of the Department for Work and Pensions. Owing to the way in which government is structured in Departments, there is often an incentive for silo thinking, and for looking only at an individual Department’s budget and not the wider budget. I can understand the pressures on the DWP to cut costs and therefore perhaps to allow services such as the payment of pensions and benefits to go to a competitor that does not have as wide a network as Royal Mail and the Post Office, but I hope that those pressures will be resisted, that the whole Government will back the Post Office, and that in particular when considering the contract for the payment of benefit cheques, the DWP will continue to give it to the Post Office. Any other private sector competitor does not have the same widespread network.

The key test of whether I would support the Bill was always going to be, “Does it protect the universal service obligation?” The Bill clearly passes that test. I intervened on the hon. Member for Angus (Mr Weir), because he clearly had not read the Bill. I draw his attention to clause 28(1), which states:

“OFCOM must carry out their functions in relation to postal services in a way that they consider will secure the provision of a universal postal service”,

and to subsection (2), which states:

“the power of OFCOM to impose access or other regulatory conditions is subject to the duty imposed by subsection (1).”

That is the USO.

[Mr Weir]

Will the hon. Gentleman give way?

[Mr Reid]

Very briefly, because I will not get an extra minute, as the hon. Gentleman did following my intervention on him.

[Mr Weir]

The point I was making is that we have a six-day service now, that the Bill guarantees only a five-day service and that the Business Secretary seemed to think that that was sufficient.

[Mr Reid]

The Bill requires

“At least one delivery of letters every Monday to Saturday—

(a) to the home or premises of every individual or other person in the United Kingdom”.

The hon. Gentleman is getting confused between the Bill and the European directive. The directive guarantees only five days. What the Secretary of State has been saying is that he already has the power under the European Communities Act 1972 to reduce the service to five days, by order, but he has no intention of using it because the Bill guarantees six days. I encourage the hon. Gentleman to read clause 30.

I am also delighted that clause 44 allows Ofcom to impose a duty on other mail operators to make a contribution towards the cost of the USO if that is necessary. I have been campaigning on that for many years. The previous Government resisted it and I am delighted that this Government have put that in the Bill.

I support the Bill and congratulate the Secretary of State on bringing it forward. I believe that it covers all angles and that it will deliver sustainable postal services in all parts of the country.

17:07

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

Reform of the UK's postal services was in the manifesto of both the Conservative party and the Liberal Democrats, so it should come as no surprise to anyone in the Chamber that we are considering this Bill so early into the coalition's temporary tenure on the Government Benches. What will be a surprise to voters is that, rather than merely allowing for an injection of private investment, the Bill paves the way for a complete sell-off of that vital public service. That goes way beyond what the Liberal Democrats were elected on; they proposed selling 49% to private investors, which is too high for my personal tastes, but at least not a dominant stake.

I have had a look through the Tory manifesto, which is imaginatively named “Invitation to Join the Government of Britain”. I think that the public were led to believe that that was an invitation to them, but as it turned out it was just to a dozen or so Liberal Democrats. From glancing through that fascinating read, it appears that “the post” got lost in it. I see references to Ministers taking posts, to first past the post, and even to the “Post-Bureaucratic Age”, whatever that is. What I do not see is a commitment to postal services, or a pledge to allow the complete sell-off of Royal Mail. Indeed, the majority of voters for both branches of the current Conservative party on the Government Benches do not support the sell-off of Royal Mail. As both parties have already shown, however, pre-election promises and pledges are not worth the paper they are written on. Therefore, I am sure that their electorates will be getting used to being treated with contempt.

As the now Business Secretary once said about the last Labour Government's vital bail-out of the financial sector, this proposal looks like the Government are intending to privatise the profits of a public business and nationalise the losses. I know that many of his colleagues in the yellow branch of the Conservative Party agree with me on that. I am also concerned that once the Royal Mail is privatised it will be another institution that is deemed too big to fail. In the event of a potential investor running out of cash in what remains a fairly unstable worldwide economy, will the Government be forced to step back in and assume control of Royal Mail, thus soaking up a second tranche of liabilities? Of course, I am not saying that the Royal Mail should ever be allowed to fail, but the Government can guarantee that that never becomes an issue only by ensuring that a significant majority stake remains in public ownership.

On the separation of Royal Mail and the Post Office, there is no international precedent for separating a national main mail operator from its retail arm. Therefore, the Government are in effect taking a stab in the dark—the latest in what looks like a long line of gambles with the future of our country.

Clause 33 gives Ofcom the power to review the universal service obligation. In the event of complete privatisation, the large private company or consortium of companies would undoubtedly have a slick and well-funded lobbying operation, which they could deploy to press Ofcom to change the terms of the USO, potentially resulting in the loss of a delivery day.

[Jim Shannon]

Does the hon. Lady agree that our current six-day service, with the delivery tomorrow of first-class post that is posted today, might change under the new regime, meaning that on a cold, wet, windy day people in Kilmood, Cloughey or Buckna would not get their delivery?

[Mrs Hodgson]

I do agree. A lot of things that we now take for granted would be under threat, including that.

Several members of the new Government were fairly open prior to the election about their contempt for Ofcom. It is not for me to speculate as to why that might be, but it appeared to coincide with the acquisition by the Tories of a certain powerful new patron who shares that contempt. At any rate, the chances of No. 10 backing Ofcom on maintaining the six-day delivery week, or of even imploring Ofcom to maintain it, seem fairly slim. Can the Minister today give a guarantee to the House that Ofcom will not be leant on from any quarter—or, better still, will he undertake to remove the flexibility entirely at a later stage of the Bill’s proceedings?

I realise that many other Members wish to speak, so I will limit the length of my remarks. The majority of Members recognise that reform of postal services is needed to secure the long-term future of Royal Mail and to maintain the universal service obligation, but the Government have no mandate to introduce the Bill as currently drafted. Allowing the sell-off of Royal Mail is not wanted by my constituents and nor is it wanted by many Members on both sides of the House or the wider public. It is certainly not wanted by the employees, even with the promise of bunging them a few shares as a sweetener. The only people who do want it are the potential investors and their friends on the Treasury Bench. The interests of this narrow constituency do not justify the Government’s taking an ideological sledgehammer to a nut that does not necessarily need to be cracked.

17:13

[Richard Graham (Gloucester) (Con)]

I am conscious that we all come to this debate with our own scars of individual experience. Mine came in the ward of Kingsholm, a few hundred yards from where the Domesday Book was written, in my constituency of Gloucester. There, only two years ago, I watched my predecessor pose beside photographers while standing under a banner that proclaimed, “Save our post office”, but then vote in this Chamber against a motion to halt post office closures. The hon. Member for Hampstead and Kilburn (Glenda Jackson) said that she was concerned about the prospect of a big broken society. What I saw that day in Kingsholm was the very model of a big broken Government.

I did not take up the position of secretary of the all-party group on post offices to sit in the Chamber and watch another programme of 5,000 post office closures be passed. I have always believed that the best way forward is through a combination of much greater investment in Royal Mail, which handles the sorting, delivery and collection, and greater commercial freedom for post offices, which are independent small businesses; they are franchises and they need to be able to channel more services to our communities over their counters.

[Jesse Norman]

Is it not fair to say that the Government are making an attempt in very good faith to reshape the commercial conditions of the Post Office, which includes the removal of the pension obligation, the creation of greater employee ownership and a liberalisation in the market? Is it not that combination that will give the Post Office potential to grow and thrive?

[Richard Graham]

My hon. Friend is absolutely right, and what he describes is precisely why he and I welcome what the Secretary of State said. I also pay tribute to the detailed work done by the Post Office Minister before this debate.

Interestingly, the right hon. Member for Southampton, Itchen (Mr Denham) called for a Postal Services Bill lite. It would be lite in every way when it comes to investment because by trying to insist on Government retention of a majority stake—precisely what the previous Labour Government proposed in their Bill, which they unfortunately failed to take forward—he is condemning Royal Mail to not being able to get that investment. No private investor would be able to match the sort of investment in Deutsche Post, to which I alluded, of £15 billion unless they had a controlling stake in the company.

As we have heard, the Bill makes it clear that the Hooper report’s essential demand for greater investment and modernisation, despite the progress made in the modernisation agreement between Royal Mail and the Communication Workers Union, is vital to the future of this great British asset. The Labour party has not left this Government the luxury of providing that investment themselves. We can provide it only by attracting it from the business sector.

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

Does my hon. Friend agree that the best way of bringing such investment into the company is this privatisation? Does he also agree that this may bring with it the rigours of the private sector in terms of efficiency?

[Richard Graham]

My hon. Friend makes a very good point, and I think that he, like me, would support the new chief executive of Royal Mail, who is taking steps in precisely the direction he describes.

My second point relates to the expansion of opportunities for our post offices, which hon. Members on both sides of the House agree are such a vital feature of our communities. The Bill paves the way for a much greater opportunity for post offices to be Government front offices, offering them as outlets for services for those in our communities, especially people who do not use the internet. That could include the certification of documents, hard copy form applications and access to all our banks, which I shall discuss in a moment. I very much look forward to the newly formed Gloucestershire Credit Union’s services being available to the poorest and most vulnerable in Gloucester through our post offices.

There is still work to be done by all parties involved, and I wish to make several specific recommendations. First, the Government should be able to confirm as soon as possible that the Department for Work and Pensions will renew the green giro service or the access to benefits in our post offices for communities. Secondly, Ofcom should agree a significant increase in the current 12p to 14p pricing of the final mile of delivery, which has been under-charged for too long. Thirdly, Royal Mail should confirm its own support—I hope that this will also have Government support—for a new 10-year contract for the inter-business agreement with Post Office Ltd. Fourthly, Post Office Ltd should come up with detailed plans for its own mutualisation. Fifthly, large banks, especially those that are partly or significantly nationalised, should confirm that post offices will be able to access all their services over the counter. Lastly, it will be incumbent on all of us in our constituencies to ensure that we give maximum support to our post offices.

There is one last point to make. We know that only a third of post offices are profitable and that more than 6,000 are not making profits. Of course, the Government’s one-off injection of £1.34 billion will help enormously and we should all be very grateful for that, but none the less these are small businesses. If a sub-postmaster decides to retire or to give up the business, this Government and this Bill can offer no guarantee that the post office will stay open. What they can do is provide a guarantee that there will be no further Government-driven programme of post office closures. It will then be incumbent on us all to try to ensure that the post offices are attractive enough to have a wave of new applicants.

I hope that I have shown where I believe there is work still to be done by all parties involved and also that this Bill offers a real way forward to respond to the three things that we all support: a flourishing collection, sorting and delivery service by Royal Mail; the universal delivery; and thriving community post offices. That is what we want to achieve, that is what the Bill offers and that is why I shall support it. There should never again be the shambles of the Kingsholm post office scenario.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. May I gently remind hon. Members that there are still 16 Members who would like to speak in the debate and that interventions lengthen speeches? So that hon. Members can help each other out, I would be very grateful if they kept an eye on the clock. If they can speak for less than six minutes, that will help enormously.

17:21

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I want to pose questions to the Government and to make some points, several of which have already been made, based not only on the general public’s fear of what postal privatisation might mean for Royal Mail, but on why previous privatisations show that this privatisation and its minimum of 10% shares offered to current employees are not great enough or dynamic enough an offer to revolutionise how such a business could go forward in restoring, as Lord Young puts it, a “sense of ownership” for public sector workers. I want to ask why mutualisation of the Post Office has not been offered to Royal Mail, too, and to draw on the broader point that the Post Office and Royal Mail are inextricably and obviously linked and that their division weakens the service. I also want to show how the mutualisation of the one and the privatisation of the other will only ensure that both fail.

Historically, if we consider examples of previous privatisations of companies in the UK with fewer than 50,000 employees, we recall that none had a percentage of shares going to employees above 10% of all shares. That precedent of 10% shares sales to workers was set in 1987 by Rolls-Royce. Today, in 2010, the Royal Mail has 150,000 employees, more than three times that amount, yet the share sale proposed for staff is 10%. Why?

Why cannot the Royal Mail be mutualised alongside its Post Office sister? Why has that option not been considered to allow evidence-led policy? That proposition would allow better interdependent models of co-operation between Royal Mail and the Post Office. I remind the House that the Post Office depends on Royal Mail to provide it with one third of its revenue.

The National Federation of SubPostmasters is seeking a 10-year deal with Royal Mail, a deal that the Con-Dem Government will not guarantee as they have still not clarified whether Deutsche Post or the Dutch-run TNT will take over, rather than have a proper stock market share float. Also, the findings of a recent UNI Post & Logistics study into postal services liberalisation throughout the world are not encouraging and should be considered to inform evidence-led policy.

Postal privatisation has already occurred in a number of countries. Normally, the national operator is transformed into a corporation and split into several companies. Privatisation then follows.

[Neil Carmichael (Stroud) (Con)]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I would normally, but I am pressed for time.

Liberalisation is often introduced piecemeal, with the private sector being handed a slice of the pie at each stage. The report found that competition was often based on price-related targeting, as a result of which many new companies home in on niche targets and cherry-pick, concentrating on business-to-business, business-to-consumer, dense urban markets or bulk mail. Previously, Royal Mail was able to use profitable bulk mail business to cross-subsidise unprofitable but socially necessary deliveries to remote areas, but private competitors have snatched 40% of bulk mail in downstream contracts. As a result, Royal Mail’s £233 million profit in 2006-07 was transformed into a loss of £279 million the following year. Privatisation and liberalisation have resulted in huge job losses and exerted pressure on wages and conditions.

[Chris Evans]

Like me, my hon. Friend is a former trade union official. He knows that—

[Madam Deputy Speaker]

Order. This is not a conversation.

[Chris Evans]

My hon. Friend knows that TNT has a terrible track record on employee relations. If it takes over Royal Mail, will productivity be affected in terms of worker happiness?

[Tom Blenkinsop]

As a former trade union official, who often likes to stand and cannot normally sit down, I agree with my hon. Friend. Between 1996 and 2006, Germany’s Deutsche Post axed more than 21,000 full-time and 12,000 part-time jobs. In some cases, the employment situation has been transformed beyond recognition. In Holland, the 27,000 mail deliverers employed by the three major companies have service contracts rather than employment contracts, thus they are without employment protection, holiday pay, disability insurance and entitlement to unemployment benefits.

[Mr Anderson]

The rigours of the private sector.

[Tom Blenkinsop]

Exactly.

In Germany, only 18% of the jobs created by Deutsche Post’s competitors are full time. Deutsche Post cut average pay by 30%, but things are even worse in the new competitors, where delivery workers in western Germany earn 40% less than their Deutsche Post colleagues and delivery workers in eastern Germany earn 50% less than their Deutsche Post colleagues. The disparity is starker still in Holland, where the total payroll cost for a postal worker employed by the main operator is €23 an hour compared with just €7.60 an hour for someone who works for its competitors, which pay by the piece.

The Bill provides no real protection for service users, irrespective of definitions of a universal service obligation. Clause 50(1) states:

“A consumer protection condition may require postal operators to be members of an approved redress scheme.”

That is useless. Any future privatised service must be a member of such a scheme in order to give the consumer redress. The word “may” allows an opt-out and no consumer redress.

Clause 50(5) states:

“A consumer protection condition may require postal operators…to provide information to OFCOM.”

Again, the word is “may”. There is no requirement that the provisions are checked.

In conclusion, we are not looking at something new today. Other countries have gone down this road, and the result is a bad one for the staff, the business, other businesses and the general public. Put simply, if people live in a rural or far-flung area, are poor or are unable to pay for a promised premium service, they will suffer. What use to a postal worker is a market share in their own demise? What use to the general public and business, as service users, is a purely profit-driven postal business with no consumer redress, rather than a postal service that serves the public?

17:29

[Rebecca Harris (Castle Point) (Con)]

I am grateful for the opportunity to speak in this debate, as the future of the postal service is a long-standing interest of mine, not least as the director of a company that was reliant on a dependable, reliable and efficient postal service. I do not underestimate the public attachment to Royal Mail and the wide interest in the implications of its privatisation. Given its universal obligation, everyone—businesses and the public—has an interest in Royal Mail’s continued success.

An objective look at the situation is necessary. Richard Hooper made it clear to the previous Government, and has made it even clearer to this one, that Royal Mail urgently needs investment to improve its service to make it more efficient, competitive and effective in a more crowded and shrinking market. I do not want to underestimate the progress that Royal Mail and the unions have already made in that respect, as Hooper has also made clear.

The key question is how that progress can be accelerated. Investment is the key, and we need to ask ourselves how Royal Mail can bid for extra Government investment against the background of the economic inheritance that the previous Government left this Government, and other pressing claims on public funds such as defence, health and education. Royal Mail’s pension deficit is growing all the time, and the situation is becoming increasingly urgent, if Royal Mail is, in the Secretary of State’s words, to “survive and thrive”.

The key proposals in the Bill cannot come soon enough, if we are to secure the future of our national postal service. These include committing to protect the universal service obligation, clearly demerging Royal Mail, protecting the post office network, taking over the burgeoning pension liabilities and enabling Royal Mail’s 150,000 employees to have share rights. The share deal will give employees a leading role in the privatised new company. They will be able to bring their combined experience to bear in ensuring its success under new management. That deal is also important if an investor is to be attracted to Royal Mail to provide the fresh cash injection that we urgently need, because any investor will want reassurance that moves to improve the business will be strongly supported by employees. The generous share deal will give investors precisely that confidence, and it is one reason the Bill is far more attractive to potential investors and Royal Mail employees than the failed attempt by the previous Government to part-privatise.

I am extremely pleased that the Government are also protecting consumers by ensuring that the Post Office is not included in the privatisation and by categorically stating that there will be no repeat of the mass closures that almost everybody across the UK had to endure under the previous Government.

[Mr Anderson]

Does the hon. Lady accept that more post offices closed in the years before the Labour Government than during their 13 years in office?

[Rebecca Harris]

I thank the hon. Gentleman for that interesting observation.

[Mr Anderson]

Does she agree?

[Rebecca Harris]

I was not here at that time, but it is an interesting historical observation.

My constituents, like most others across Essex, suffered very badly from the epidemic of disappearing post offices in the past decade, which left many vulnerable constituents isolated and caused entire rows of traders to suffer. I am proud to support the Government in reforming the Royal Mail while ensuring that vital community resources are maintained. I also look forward to any plans that the Government might consider to give local communities and post office employees a chance to benefit from the success of their local branches.

17:31

[Mr David Anderson (Blaydon) (Lab)]

What we have seen today is the Liberal Democrats covering for the long-term view of the Conservative party, which has always wanted to privatise Royal Mail. As far back as 1992 Michael Heseltine was clear about wanting to do that, but the public and Parliament would not let him. He came back in 1994 with plans similar to those put forward by the Labour Government last time round, but the plans failed then, as they did last year. Thankfully, the people of the country did not want that.

We have heard more and more today about the rigours of privatisation. What that means is taking away the service, screwing the workers into the ground, giving public money to private companies and taking money out of the country. That is what happened with the gas, electricity and water services.

[Mr Robert Buckland (South Swindon) (Con)]

I cannot let that comment pass. This is not some ideological crusade; it is about trying to create a modern Royal Mail service for the future. That is in the interests of the work force: we want to protect jobs, not lose them.

[Mr Anderson]

I am pleased that the hon. Gentleman mentions the work force because I can now ask him, if he believes in the new politics, why not ballot the work force? If they say yes to privatisation, we will all shut up and go home. We will walk through the Aye Lobby if that is what the work force want—but I think he would be on a losser.

There are other examples. When we were telling Sid to privatise all the utilities, we were also creating the pensions mess that we are cleaning up today. The 13 years of pensions holidays under previous Tory Governments led to Royal Mail facing 38 years of paying back pensions. That is the main reason for today’s comments about the public having to pick up the bill. As someone said earlier, we will get all the bad parts and the private sector will get all the good parts. That is exactly what happened with the coal industry: we privatised it and now we are buying coal from Ukraine and China. We put 200,000 miners on the dole, but that does not matter: it is the rigours of privatisation. The rigours of privatisation mean that 6,000 in China will be killed in coal mines this year, but nobody on the Government side cares about that. And what happened with the rail services? What happened with Railtrack? It failed. What happened with GNER and the east coast main line? They failed. What happened with east coast railways? They failed. The public sector had to come in and pick up the mess, and that is what will happen here.

We have also seen the development of markets in the health service. We had compulsory competitive tendering in the early 1990s—ideologically driven part-privatisation that meant that ordinary workers who had given their lives to public service were sent out to work for the Joe Bloggs cleaning company. We have seen it with foundation trusts and market-led rigours. What are they doing? The hospital in my constituency closed its laundry. Now, 5 million pieces of laundry have to be taken 140 miles, from the north-east to Leicester and back again, because it is cheaper. Those are the rigours of privatisation—forgetting the fact that 90 laundry workers have been sacked.

We shall see exactly the same thing with Royal Mail. It is clear what we can do in this situation. As I said earlier to the hon. Member for South Swindon (Mr Buckland)—he and I worked together for the Gurkhas—if he really believes that people want privatisation, he should be honest. Go out and hold a referendum: ask the work force what they think. When Royal Mail is no longer allowed to be called Royal Mail, it will no longer be allowed to put the Queen’s head on stamps. The mail service will probably be subject to VAT.

It is clear that the public do not want the measure. The workers do not want it. The majority of people on the Opposition Benches do not want it, and the truth is that half the people on the Government Benches do not want it either, but they are being driven—

[Anna Soubry (Broxtowe) (Con)]

In my constituency there are 700 postal workers at the Beeston sorting office. To my knowledge, not one of them has written to urge me not to support the Bill. Two of them came to the Commons today to ask me not to support it—two in 700.

[Mr Anderson]

I thank the hon. Lady for her intervention. If she would like to meet me outside in the Lobby, I will take her name and address and pass it to the general secretary of the Communication Workers Union. I will ask him to write to his 700 members at Beeston to ask them to contact their MP and tell her that they are happy to work for TNT or Deutsche Bank, and that they will be happy to see their pensions, shift allowances and jobs go down the river. If that is what the workers want, that is what the rigours of privatisation will deliver. The track record cannot be denied. We can pretend it does not happen, but that is the truth.

It is clear that there is nothing new in the Bill—

[Robert Halfon]

It seems that clause IV is alive and well in the Labour party. According to the hon. Gentleman’s logic, should he not nationalise everything? Why not put Sainsbury’s and Tesco under state ownership?

[Mr Anderson]

I welcome the hon. Gentleman’s view; perhaps he would like to join us. A number of us on the Labour Benches believe that doing away with vital public services has been a huge mistake. It cannot be denied. The truth is before our very eyes. The people of this country do not want their water, gas and electricity to be provided by the French and the Germans, and they certainly do not want their postal services to be delivered by the Dutch, the Germans or the French, which is where we shall end up if the Conservatives and the dupes who support them have their way.

17:37

[Damian Collins (Folkestone and Hythe) (Con)]

Following the remarks of the hon. Member for Angus (Mr Weir) much earlier in the debate, I begin by pointing out that in some ways the Bill is too good to be true. He raised concerns that people in rural areas, especially in Scotland, would no longer have a universal service if the Bill is passed. However, the answer is that of course they will. People who live in built-up areas will continue to subsidise the post of people who live in rural and distant areas. People who live in constituencies in the south-east of England, such as mine in Folkestone and Hythe, will continue, relatively, to subsidise people who live in remote areas, because we all believe in universal postal provision, and that is included in the Bill.

Our concerns are that Royal Mail will run out of money to sustain its current universal six-days-a-week service unless its pension deficit is solved and, crucially, the business is transformed. That view is not unique to Government Members; it was expressed by the former Secretary of State, Lord Mandelson, when the previous Postal Services Bill was introduced in the House of Lords last year. There is a degree of common ground. It is a question of how we go forward in a way that gives value to customers of Royal Mail and the Post Office, and the taxpayers who must pick up the liability for the Royal Mail pension pot. Under the provisions of the Bill, the taxpayer will take on a considerable liability, so it is right that in return we should consider how the Royal Mail business can be transformed and work better.

Hon. Members have spoken about all aspects of the Bill; I shall touch on only a couple of them. Going back to the remarks made by the hon. Member for Angus (Mr Weir) and my hon. Friend the Member for Argyll and Bute (Mr Reid) earlier in the debate, clauses 35 and 37 provide that if Ofcom considers that the efficiency of the universal system can be better delivered with additional suppliers coming in to support that service, it will have the opportunity to advise the Secretary of State accordingly. That can only strengthen the quality of the universal provision. A number of hon. Members on the Government Benches would not see that as a bad thing.

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

Does the hon. Gentleman accept that one of the great lessons of the privatised utilities is that none of the regulators have had sufficient teeth to stand up for the interests of consumers? Why should the regulator in this case be any different?

[Damian Collins]

I can speak only from my own experience, having previously worked in the advertising industry, where we encountered the wrath of Ofcom. It seemed only too ready to stand up for the rights of consumers, and I have every confidence that it will do so in the case of postal services too.

Opposition Members have asked repeatedly what guarantees there are. What guarantees have there been for the Post Office and Royal Mail over the past 13 years, when we have seen thousands of post offices closed? The hon. Member for Hampstead and Kilburn (Glenda Jackson) gave an impassioned speech about the removal of post office services and sub-post offices from her constituency. We would all concur with that, and we would all share the view that they play a vital role in the community, but the previous system made no guarantees to those post offices. We have seen a slow withering of the post office network on the vine, a slow reduction in the support for post offices, and their closure. We cannot go on like that.

I am interested in the provisions of clauses 26 and 27, which give authority to postal service providers and get rid of the current licensing regime. The Secretary of State believes that that will be more efficient and cheaper for businesses. I would be encouraged if the same mechanism allowed new providers to come in. During the debate, hon. Members have asked how new sub-post offices can open and how postal providers can come into the market.

In my constituency—other hon. Members may have had the same experience—to try to fight the pressure for branch closures, independent businesses fought hard to keep those post offices open. The Enbrook Valley post office in my constituency is a sub-post office run by an independent retailer. He had to fight hard to maintain that provision. He wanted to put a business case together to keep that post office working, and with the support of the local community and money raised by the local community, he did just that. I would like to see more of that, and the process made easier through the Bill.

I am interested in the work of organisations such as Pub is the Hub, which try to turn pubs into multifaceted businesses, particularly in rural communities, where the post office can play a part too. In a village in my constituency—Elham, where I live—when the post office closed, provision was transferred to a counter operating in the King’s Arms pub. Never before had it been realised that there was such demand for picking up books of stamps at lunchtime. There may well be more business models like that which we could encourage, through a mechanism that encourages new providers to come into the post office branch network market.

I agree that it is right that the post office network should not be privatised as part of the provisions of the Bill. However, that does not mean that there should be stasis around the post office network, with nothing changing. Although we welcome the money that the Secretary of State announced today to support the network, that does not mean that there cannot be innovation in provision and an attempt to attract new providers. I look forward to debating the Bill, especially clauses 26 and 27, and listening to the debate as it progresses through Parliament. May it offer some opportunity for new providers to come in, and for the Secretary of State to encourage and support that.

17:43

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I apologise to the House for being absent this afternoon. When I applied to the Speaker to take part in the debate, I stated that I would have to chair a meeting at the offices of the Department for International Development, which was the reason for my absence.

The Bill is undoubtedly contentious. Although some would like to do so, we cannot separate Post Office Ltd from Royal Mail and that part of the business that the coalition Government seek to privatise. I should declare an interest as Chair of the all-party group on post offices.

I am deeply disappointed, because, having been in the Chamber when the Secretary of State made his opening remarks, I feel that there has been something of a mad dash to introduce this legislation. I admit that he talked about the right things as far as I am concerned, such as mutualisation and everything that that offers, but I am disappointed, because he should have examined the issue in more detail before we reached this stage of the Bill.

I am not here to negotiate on behalf of either the employees of Royal Mail or the Communication Workers Union, but 10% shared ownership is almost derisory, and a greater shared ownership figure might have been more acceptable to some at the forefront of the issue.

I accept that there is a demand for modernisation and for greater efficiencies. I do not think that anyone in this House fails to recognise that. I appreciate that some Members will have visited their local sorting offices, but I say to Members from all parts that if they speak to their local staff, as I regularly do at my five local sorting offices, they will hear each and every worker, including their managers, say that they have done their utmost to adhere to what the company has asked of them. They have modernised.

We have reached the stage at which any further attempts to make some of those businesses more efficient will result in job losses, and employees are at a total loss to understand what more they can do as individuals in that work force. We have seen 50,000 jobs lost, and, if the Bill is passed and delivers what many Opposition Members think it will, we could see another 50,000 to 60,000 job losses.

I represent a rural constituency, and the universal service obligation is sacrosanct, but is absolutely nothing in the Bill provides a cast-iron guarantee that the current six-days-a-week delivery to every door will continue. I mentioned—and I wish to mention again—that I recognise that there is a black hole in the pension fund, but it is a significant pension fund, and I issue a warning to the coalition Government. I sincerely hope that they go nowhere near that pension fund to do what the previous Conservative Government did to the bus employees’ pension fund after bus deregulation.

This is a Bill with unintended consequences: the closure of post offices. I know that Government Members have mentioned what the previous Labour Government did, but if they cast their minds a little further back, they will find that thousands of post offices closed on an ad hoc basis. There was no structure to their closure at all, and I say to the hon. Member for Folkestone and Hythe (Damian Collins)—it was a point that I wished to make in an intervention on him, but I shall make it now—that the things that keep post offices open today are, without a shadow of a doubt, the access criteria. I do not know whether the Government intend to keep those criteria in place.

Some 41% of the business that our post offices transact daily is as a result of the inter-business agreement. The National Federation of SubPostmasters wants a 10-year agreement, and anything less than that will result in post offices withering on the vine. So, there is a warning: the 10-year agreement that has been asked for should be carefully considered.

Post bank is not the white knight that we all expected, but it must be introduced. In a briefing, the postal services Minister did talk about asking Departments to provide additional business for our post offices. I only wish that that could happen. If it were possible, and if we were able to make it happen, it would have happened by now.

The issue of green giros has been raised, but the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), who is responsible for pensions, refused to meet a small delegation from our all-party post offices group.

I thank you for calling me, Mr Deputy Speaker, but I urge caution on this Bill and on the unintended consequences that it could bring.

17:49

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

Today’s debate has been very interesting. I will set out—briefly, because time is short—why I support the Bill.

Years of falling mail volumes—down 15% since their peak—together with low profit margins and a huge pension deficit have mortally wounded our Royal Mail. Doing nothing is not an option if we are to retain a world-class mail service and, most importantly, retain our world-class work force within it. Real reform of Royal Mail was put in the “too difficult” pile by the previous Government, but there were some attempts to change our post office network, including the closure of 5,000 post offices. In my constituency, this included our village shop, and it was a double blow to the rural community. We have lost services such as Sunnyhurst post office, which is still missed by the residents of Darwen. Nothing could have better shown the chaos of this closure programme than the former MP backing the campaign by the Lancashire Telegraph to keep the post office in Darwen and then voting in this place against our proposal to stop such closures.

These losses of service have been most keenly felt in our rural areas, where a lack of broadband and other forms of rural isolation mean that residents are heavily reliant on the postal service to keep in touch with the outside world. I have recently written to Royal Mail after learning that postmen working in the village of Edgworth in my constituency have been instructed to return undelivered packages to Bolton rather than to our small post office in Edgworth. Residents are now expected to make a 14-mile round trip and use a sizeable part of their day to collect parcels. Other poor reforms by the previous Government included the loss of the morning delivery in many areas, including at my house, where we wait until 1 pm or 2 pm for the post.

The Government’s proposals, set out in this Bill, are a once-in-a-generation opportunity to transform the culture of Royal Mail. It will open it up to private investment and expose it to the rigours of private sector efficacy but it will, crucially, maintain the universal postal service. When looking at these proposals, we must keep in mind that the real experts in this field do not sit in this House—they are the people who work in Royal Mail. That is why I am delighted that the Bill includes the principle of 10% ownership for employees and the mutualisation of the Post Office.

Supporters of the radical changes that this Government have brought about in schools know that the expertise for running schools does not rest in Whitehall. Likewise, the Bill acknowledges our world-class work force, their passion for the business, their dedication to service and their future at the heart of Royal Mail. If Royal Mail is to modernise, it must bring its work force along with it, and I believe that the 10% ownership measure will do that. Crucially, however, it must avoid militant opposition to privatisation. During the last Royal Mail strike in Manchester, the business in which I worked moved from sending out approximately 1,000 invoices a month via mail to an online and e-mail invoice delivery system. I am sorry to say that after the strike ended, having spent time and effort on moving the system online, we never went back to posting our invoices again. I urge the unions not to swing a wrecking ball at Royal Mail. Royal Mail undoubtedly faces challenges from falling mail volumes, but we must be realistic, and I am sure that a modern Royal Mail with proper employee participation would meet every challenge ahead of it.

Although we currently have 51 licensed postal operators, Royal Mail has not previously been attractive to outside investment owing to its pension deficit. Again, doing nothing is not an option. In this Bill, the new coalition Government take on the deficit, putting the company on a firmer footing while protecting the pensions of all Royal Mail employees past and present. I support the Bill, I support the universal postal service, and I applaud the principle of employee participation.

17:54

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

I am grateful for the opportunity to speak in this debate about the future of our postal services. I speak as both a Labour and a Co-operative Member, concerned to ensure that, as co-operative ideals and models become popular, there is clarity about the opportunities that those ways of working present and the models that can be used. I speak also as a Member who has tabled a ten-minute rule Bill for presentation next Wednesday on the benefits to be gained by securing affordable credit for all citizens, through credit union services in a tie-up with the post office network. I wish to focus on that point today.

I tabled my Bill because I am deeply concerned that the Government have not yet understood the nature of personal debt and poverty in communities such as mine, in Walthamstow. I therefore urge Ministers to do more to revise their plans to ensure that the post office network can offer affordable sources of credit. From the credit review that they are undertaking, they will be aware of the need to do more to ensure that people can access a wide range of financial services. I hope, through my Bill, to convince them not to ignore those for whom credit cards and store cards are not an option, and to protect those who can access credit only at extortionate prices through doorstep lending companies. They can do that, not least, by dealing with the lack of competition in the financial services market for those who are on low incomes or have bad credit ratings.

It is worth remembering that six lenders account for 90% of the home credit market, and that there is little competition to drive interest rates down. Provident, which accounts for 60% of the doorstep lending market, has stated that, thanks to the Government’s policies, it expects a growth in its target market, which, in layman’s terms, means the poor and those unable to access credit through mainstream banks. Increasing access to credit unions that offer loans at more affordable rates by working with the post office network would help tackle that monopoly and protect consumers. The Bill provides the ideal opportunity to do what the previous Government wanted to do and build on that partnership.

Consumer Focus, an organisation that many Members have quoted today but which the Government seem to want to dismantle, has been a powerful advocate of the potential for credit unions and post offices to work together. The suggestion has been promoted also by the Association of British Credit Unions, whose work on the matter I commend.

Today, we have heard that the Government intend to protect the post office network through the provision of a subsidy, but we have no detail about how much of that will actually go to post offices and how much could be diverted, for example into the costs of a restructuring. One suggestion that I would make to Ministers is that some could be used to support the one-off investment needed to provide the common back-office platform that would allow technical integration between Post Office banking services and those of local credit unions. Consumer Focus has championed that idea because of the benefits to both credit unions and post offices.

Such a link-up would enable post offices to offer a wider range of services, including, critically, instant small-scale loans of anything from £30 to £400, which are a vital service for many of my constituents. Credit union customers would also be able to access their accounts and make payments at the post office, and in turn each transaction would generate a transaction fee, which could provide a new stream of revenue for the Post Office.

So far so great, but the question is how to make that happen, not just in one post office but across the country. I wish to push the Minister to give some detailed answers on that point. The Bill is intended to keep the Post Office in public ownership by turning it into a mutual, but the devil is in the detail of the proposals. As the Government accept, only 370 of the 11,500 post office branches are directly managed by the Post Office. The rest are sub-contracted to franchisees. That means that the vast majority of post offices depend on other businesses as well as the Post Office to remain sustainable. Without a clear and confirmed business plan that will bring in new sources of funding, there is little hope that their services, and so their stores, will continue. Ministers must understand that that generates a lot of concern among those of us interested in the potential tie-in between credit unions and post offices.

The post office becoming the front office for government would offer one stream of revenue, but it is worth remembering that the benefits business of post offices has declined since 2003, a trend that is likely to continue given the Government’s benefit reform plans. Even if that business is sustained, what they offer with one hand they risk taking away with the other. With no obligation for the reconstituted and privatised Royal Mail to work with the Post Office, we risk the core business of post offices shrinking. The Government have suggested that a privatised Royal Mail could still use the Post Office to provide its counter services and offer some protection through an internal business agreement, but given that they cannot guarantee that that will be commercially binding, it is not a certainty. That is why the Co-operative party has set out its concerns about the proposals today.

Let us be clear: those of us who are co-operators would like to see a people’s Post Office, with the public, postmasters and others having a say in how it is run. However, there is deep concern that that cannot be delivered through the privatisation of Royal Mail, because it will put so much of the business on which post offices rely at risk. Royal Mail business accounts for approximately a third of Post Office business, so clearly, any reduction would mean that thousands of post offices became unsustainable and closed. We therefore do not accept the idea that the Post Office and Royal Mail should be treated separately. Those of us who see the relationship that could be achieved between the credit union movement and the post office network see the clear link between the Post Office and Royal Mail. We therefore see the importance of setting out how to protect the 11,500 post office branches.

As I said at the beginning of my speech, there is a desperate need to support those on lower incomes to access financial services and affordable credit. I failed last night to persuade Treasury Ministers to take those concerns seriously and to meet me and campaigners to discuss them and my Bill. I hope to fare a little better today, so I ask again for Ministers to meet me and campaigners to consider how we can extend affordable credit to all in our society, and how we can support that through post office network reforms. Only in that way will we be sure that the potential tie-in between credit unions and post offices can be secured. Without such guarantees, there cannot be an open branch network to support the credit union movement, and the Opposition will return the Bill to sender.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. There is half an hour left and eight Members are trying to catch my eye. If everybody shows restraint, we might just get everybody in.

18:00

[Priti Patel (Witham) (Con)]

I will show some restraint, Mr Deputy Speaker.

I should declare an interest. I am not a member of the CWU, but I am the daughter of a former sub-postmaster whose post office business was closed down under the previous Labour Government during their ruthless post office closure programme. It will come as no great surprise to the House that I support not only the Bill but the need for root-and-branch reform of Royal Mail. We need to innovate to make Royal Mail not only economically viable but sustainable in the long term and efficient.

We heard from the Secretary of State that Richard Hooper’s report earlier this year pointed to the dire financial position of Royal Mail. Clearly, that is unsustainable. He also said that the injection of private capital to modernise Royal Mail was vital. I have sat through most of the debate, and I am stunned by Opposition Members’ lack of enthusiasm for reform and modernisation, particularly given their legacy.

There are some very good points in the Bill. It is worth noting that the pensions of Royal Mail workers will be safeguarded. After all, earlier this year, a CWU publication entitled, “Time to Deliver—Royal Mail Pension Fund Deficit”, stated that the previous Government’s

“decision not to proceed with the Postal Services Bill has meant this vital pension reform has been shelved. This position is untenable. The government must take responsibility for the deficit if the industry is to succeed.”

Our Government should be congratulated on their boldness. They have taken on that commitment and the liabilities for the record and historic deficit, which is vast.

Much more in the Bill should be welcomed not only by my hon. Friends but by Opposition Members, including safeguarding the universal postal service and the provisions of clause 30. My constituents will be reassured by the commitment to the universal postal service. As the daughter of a former sub-postmaster, I know how vital that is. I have a very rural constituency, and many of my residents will be reassured.

My constituents will also welcome the measures that safeguard the future of the Post Office in clause 4, which states that no more closure programmes will be introduced. I find the hypocrisy of Opposition Members astonishing. They are scaremongering and trying to mislead the public, but it is about time that they faced facts. We are committed to ensuring that there are no more post office closures. It is utterly disappointing to hear their tone and some of their criticisms. However, Government Members should not be surprised. We should remember that the Labour Government had the chance to reform and modernise the Post Office, but because of their union paymasters, they simply bottled out and failed.

There is a lot to be grateful for in the Bill. The accusations of ideology are utter nonsense. I welcome the Bill because it will lead to much needed, crucial reform in terms of competition and deregulation. We are getting rid of an over-regulated service and bureaucracy, and we are empowering Royal Mail workers—share ownership is absolutely vital. On that basis alone, I support the Bill. I think this is a marvellous Bill going forward.

16:49

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

It was enlightening to discover that the father of the hon. Member for Witham (Priti Patel) was a sub-postmaster. I understand that her great hero was the daughter of a shopkeeper. Let me suggest that the style that she has adopted is somewhat similar.

We have heard a lot today about the Post Office and the implications that the privatisation of Royal Mail will have for it. In most countries, collection and delivery services, as well as the network of post offices—that is, the universal service obligation—are protected by statute. That is the case in the United States of America, and in the two countries with the most successful mail companies in the world: Netherlands and Germany. The detailed rules in Germany are as follows. There must be a post office in each community, designated a “local centre” by planning regulations. There must also be a post office in each community of 4,000 inhabitants. In urban areas, customers must be no further than 2,000 metres from a post office, and in areas not otherwise covered, a mobile service must be provided. In effect, those rules mean that Deutsche Post must keep open a minimum of 12,000 post offices.

The Bill contains no specific criteria regarding post office numbers. That would not have mattered, had an integrated mail and postal entity remained in state ownership. I say that because despite what the Secretary of State said earlier, it is indeed the case that the relationship between Royal Mail and the Post Office was structured by Government ownership. Of course it was: it was structured by the criteria that the Government set and under which those two entities existed. Let me be clear: there is no requirement in the Bill for any mail company to use the existing post office network. If Royal Mail ceases to use the full postal network, the Post Office will be bankrupt.

Predictably, and in order to deflect attention from that question, the Government have today announced what seems to be a large subsidy, although I would caution hon. Members on both sides of the House about that. The devil will be in the detail, because not only does the £1.3 billion announced cover the entire period of the spending review, but there is no assurance that all the money will go on a subsidy. As my hon. Friend the Member for Walthamstow (Stella Creasy) said, the money could be used for restructuring or other management costs.

In the end, there is no substitute for sound protection of the network through regulation. It would be dangerous in the extreme to make the post office network solely dependent on the tender mercies of the Treasury. What the Government propose is a structure that puts the long-term future of the Post Office in grave danger, with the faultline concealed by the creation of a short-term subsidy. What the Minister is doing, when one dispenses with the smoke and removes the mirrors, is putting in place a policy that, down the line, will facilitate the shutting of post offices. That will happen at a point in the not-too-distant future, when the Treasury’s munificence is withdrawn.

I said earlier that most countries had statutory rules protecting the number of post offices. Until now, there has been one notable exception to that rule: Sweden. Sweden adopted plans that bear some resemblance to those advanced by the Minister. The National Audit Office passed the following harsh judgment on the practice in Sweden, saying that

“its attempts to reform its post offices network were drastic, poorly thought out, and initially were most unpopular. It is clear that”

the Swedish postal service

“was acting freely and without government interference until the unpopularity of the changes introduced in 2000 onwards became apparent. At this point political pressure was brought to bear.”

I do not know which management consultants the Swedish Government consulted, but I do know from the Wikipedia entry for the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey) that he spent his career before he became an MP privatising mail services around the world. When I last debated the issue with him, he refused to engage with these detailed questions. I now know that that is not because he did not understand them. Might it be because the Treasury is insisting that the long-term demise of 7,000 rural post offices is a price that must be paid to ensure that the equity price for Royal Mail remains high?

18:10

[Julian Sturdy (York Outer) (Con)]

Before us today is a truly national piece of legislation. Our postal service is a cornerstone of British life. It is a frequent source of frustration for many, alongside the weather and—particularly on this side of the House—the BBC, but it is also a traditional source of reassurance. Remarkably, a postal service was first made available to the general public back in 1635 when Charles I was on the throne. Over the years, it has evolved and adapted, albeit slightly slowly at times, but even today people up and down the country still depend heavily on our postal services. That is particularly the case in rural areas, including many of the villages in my constituency. Local post offices are often the commercial bedrock of such villages, the sole shop in the area and a gateway for correspondence to reach any destination in any part of the world. They are also a lifeline for elderly residents.

In the past, the closure of post offices has caused real problems for local communities, which often launch proactive campaigns to retain their vital services. We have already heard about many such campaigns in the debate today. Indeed, before being elected to Parliament earlier this year, I had visited Westminster on only one previous occasion. I was a parliamentary candidate delivering a petition to No. 10 Downing street with residents from Fulford, as part of our campaign to save our local post office. Sadly, our noble attempts failed, but I saw at first hand how passionate local residents can be about their local services, particularly the post office. I also saw the impact that such losses can have on a community.

So, let the first premise of today’s debate be that the country still values and depends on local post offices. Acknowledging that fact should not, however, make us averse to the reform that our postal service so badly requires. On the contrary; our desire to protect the Post Office should result in greater determination to reform and indeed privatise Royal Mail. By reforming the latter, we will be protecting the former. It is on that basis that I broadly support the Bill.

As with all difficult pieces of legislation, it is important to remember why we are here. Royal Mail’s financial health continues to worsen, with its market share declining. The pension deficit is more than £10.3 billion, and the regulatory regime is not fit for purpose. Royal Mail is not sustainable in its present format, and would eventually fail completely if the status quo were allowed to continue unchecked. These were the conclusions of Richard Hooper’s 2008 Government-backed review into our postal services. Richard Hooper has also recently commented on the unnecessary 20-month delay that resulted from Labour’s ditched reform plans. In his opinion, the situation has got worse, and doing nothing is simply not a tenable option. Once again, real action is required, and once again, it takes this Government to lead the way.

By opening up Royal Mail to private investment, the Government will relieve the organisation of its enormous and historic pension deficit, and at least 10% of shares will go to Royal Mail employees. Attracting an injection of private capital into Royal Mail will end the dependence on funding from the taxpayer. New commercial disciplines will be introduced to the business, alongside a new businesslike culture that is driven, focused and capable of delivering the very best service to the public. Privatising Royal Mail will, in essence, secure its long-term future. At the same time, this privatisation ensures that Post Office Ltd is not for sale and that the 11,500 post office branches across the UK will remain in public ownership. Despite what has been said by Labour Members, there will be no further programme of closures, although such a programme frequently occurred under the previous Administration.

Despite my general enthusiasm for the Bill thus far, I would like to raise one specific point of concern: the future of sorting offices. Unlike post office branches, sorting offices are, of course, operated by the Royal Mail. I have already touched on the local importance of our universal postal service and the role that post offices play in our local economies. The same principle can be applied to sorting offices, so I urge the Government to highlight the importance of retaining sorting offices—at least in every major UK city, such as my own of York—in any negotiations with private investors. I strongly believe in the Government’s localism agenda and any attempts to maintain at least city-based sorting offices would, in my view, be welcomed in our northern and rural economies, where such offices often employ many and play an important role in the efficient delivery of postal services.

In summary, the universal postal service remains a traditional, well respected and relevant part of our national life, but to allow the status quo to continue, out of some nostalgic fantasy, would be devastating in the long run. The reforms in the Bill strike the necessary balance—taking action to control the pension deficit, further modernising our postal services, providing an exceptional employee share scheme and, most importantly, ensuring the survival of post office branches across the country.

18:16

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I declare an interest, as I have worked with the Scottish branch of the National Federation of SubPostmasters over a number of years to oppose the closure of post offices introduced by the last Government, and I will continue to oppose closures. I have also worked with the Communication Workers Union, while my predecessor Harry Ewing—now, sadly, deceased—was a postman and eventually a Minister. I am deeply involved in this, and I am secretary of the liaison group for the Communication Workers Union in this Parliament.

The Bill does not provide a logical or necessary solution to the problems of Royal Mail, and it is not the only response to the Hooper report. It is, indeed, another Liberal Democrat betrayal. It is not part-privatisation, but a political decision by the Liberal Democrats to join in the carnage in the public sector.

[Lorely Burt]

rose—

[Michael Connarty]

I will take no interventions, as many Members wish to speak and I want to take just six minutes.

This is not about a part-share sale, which was the policy on which the Liberal Democrats were elected, but, to quote from the Bill, it is about allowing

“for an unrestricted sale of shares in Royal Mail”.

The Bill returns to the 1992 plan to break the link between Post Office Ltd and Royal Mail, with all the duplication of management and logistic structures that it will require, which will eat massively into the £1.2 billion set aside to set up a separate Post Office Ltd. It will tear up the operating synergies, which provide a third of Post Office Ltd revenues from services provided for Royal Mail, and there is no guarantee that these will continue. The current subsidy is £180 million a year; it will have to rise £270 million a year to sustain the post office network in future.

The problem is that there is no guarantee that the subsidies will be provided. Clauses 11 demands only an annual report and says nothing about what the Government will do to guarantee the post office network that sends the report. The sub-post offices’ postal and Royal Mail services that are vital to the commercial survival of villages and the sub-post offices in rural and urban areas will be jeopardised.

The Hooper report called for a number of things, none of which required the privatisation of the Post Office. The final report specifies three necessary elements: private sector investment, the Government taking on pensions, and changing the regulations, as the Bill does—in fact, in that respect, it is exactly the same as the previous Labour Bill. Hooper 1 recommended new management, and we have it, from a noted organisation that has been associated with high-quality services; Moya Greene has come from Canada Post to run Royal Mail. All parts of Royal Mail, including Post Office Ltd, are profitable at this moment. There is no need for a subsidy.

On the recommendation on pensions, let us look at what happened with BT’s pension deficit. The Government thought that they had taken on a liability of £7 billion, but the High Court has just ruled that the liability is an exposure of £24 billion, because it must include everyone who joined BT after its privatisation. There are no guarantees that the same will not happen with this privatisation. The clear and simple way to deal with the matter is to accept that we must nationalise the debt. If we did that now, Royal Mail would not have to pay £291 million a year to service its deficit. The changes involving Ofcom would bring in another £120 million of income, which would make £411 million available to Royal Mail to complete its modernisation.

Increased efficiency was the basis of the other recommendation in Hooper 1. In a vote in March 2010, there was two-to-one support among CWU members for the new modernisation programme. That was one of the first Hooper 1 criteria. Many opportunities were missed between 2000, the passing of the Postal Services Act and the granting of commercial freedom and the 2010 decision. Loans were given, but the management failed to deal with distribution or with sorting office networks. Sorting machines were bought from France and left uninstalled by the management. Bullying was used to downsize the number of staff in the distribution and delivery centres. The management’s actions were based not on efficiency, but simply on a desire to keep people out when they left the service. The chief executive who failed in that regard was given a £2.8 million bonus for his trouble.

The fully funded modernisation scheme based on the business transformation agreement that was reached in March is a great leap forward, but, as has been said, it will be massively painful. There will be substantial job losses. The whole thing could be handled by means of a change to allow Royal Mail to raise finance directly, without the need for privatisation or the sale of shares.

Let us examine the myth of “necessary privatisation”. Share sales do not guarantee investment; they merely move the ownership of shares to another body. Following Hooper 1, it was impossible to find any organisation, even TNT, that would take an interest in buying shares in Royal Mail. The failure came about not because those organisations feared that they would not gain enough control, but because they realised that there was not enough money to be made from the delivery of mail under the present universal service delivery obligation.

So what will happen? A private equity company will buy into Royal Mail. It will probably borrow money, and then load the debt on to Royal Mail. The Business Secretary will deliver a lot of money to the Treasury rather than to Royal Mail. It is likely that the service will then be split between the part that makes money by picking up and sorting the mail and the part that deals with delivery, which will be dumped on regional sub-contractors who will fail both financially and in terms of delivery. The whole service will then collapse.

18:22

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I have two great interests in the Bill. I speak as chair of the all-party group on employee ownership, which plans to examine the Bill in more detail, and also as head of the Herefordshire save our post offices campaign, which fought hard for several years to prevent local post office closures.

I was surprised by the partisan nature of some Opposition speeches, because there are many aspects of the Bill that Opposition Members should embrace and support. The Government deserve enormous credit for the speed and energy with which they have addressed a thorny and difficult issue. There is a marked contrast between that and the record of delay and compromise under the last Administration, during a period when the financial position of Royal Mail only became worse.

I welcome many aspects of the Bill, including the granting of access to new capital for efficiency and modernisation, the excellent arrangements for employee ownership, and the Government’s tough and difficult decision to take on the pension deficit—a nettle that the last Government signally failed to grasp. They preferred to keep it off the balance sheet, like the £230 billion of private finance initiative debt with which we have had to deal. There is a real possibility that, once those changes have been implemented, Royal Mail and the Post Office will be able to turn the corner. The idea of a new mutual structure for the Post Office is particularly innovative and important. This is a human capital business, which requires the human touch and the service that a mutual can bring to it.

However, serious concerns remain. The universal service obligation, which many Members have mentioned, must be preserved. I remind the House of what happened in the telecoms industry, whose privatisation was in many ways highly effective. The universal service obligation in telecoms does not cover either broadband or mobile telephony, but those are exactly the areas in which rural places such as Herefordshire have had a poor deal over the past decade.

I want to draw particular attention to the issue of back-door closures of post offices. We have a vivid case study of that in my constituency. The village of Pontrilas has an excellent post office and shop, with a sorting office, plenty of parking and disabled access. It is a vital community resource in a very rural area. Recently, the sub-postmaster was sacked by the Post Office for a very small mistake in procedure, from which he derived no personal benefit at all. In any other organisation, that would mean a slapped wrist. His case has gone to appeal but it appears that appeal in the Post Office means one person sitting in judgment on hundreds of cases across the UK. If he loses his job, the effects will be disastrous not merely on him—a man who has had no income for the past six weeks, nor is any to come from the Post Office—but on the shop, which would close. The sorting office would go, too, as most probably would the Longtown post office and its sorting centre up the road in one of the most rural areas of this country.

Therefore, I ask the Minister to take an interest in the situation and to look at the position at the Pontrilas post office. I ask whether he agrees with my view that such back-door closures should be prevented and should be included within the remit of preserving the post office network. I also ask whether he shares my view that we need to grow our post offices, push more business through them and use them to support our towns and villages.

[Mr Deputy Speaker (Mr Nigel Evans)]

To resume his seat at 6.30, Mr Chris Evans.

18:26

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

I know that time is short, so I will be as quick as I can. I apologise to any Member if they cannot understand my accent.

This Bill is one of the great “might have beens.” It might have set out a positive policy on employee share ownership. Instead it does not tell us how the shares will be distributed and what employees can do with them. It might have strengthened the link between Royal Mail and Post Office Ltd. Instead it raises new concerns about the viability of many post offices.

The Government's plan for the wholesale privatisation of Royal Mail threatens to turn a public service into a private monopoly. The Government have come up with myriad reasons why Royal Mail should be privatised. First, we were told that privatisation was necessary because Royal Mail could not compete. Royal Mail delivers 99% of the mail to 28 million houses, six days a week. Which competitor in their right mind would want to take that on? The idea that Royal Mail is unable to compete with the private sector is complete and utter nonsense.

We were also told that the privatisation is the only way that Royal Mail can access capital, yet the entire modernisation programme of Royal Mail for the next three years is fully funded. Royal Mail is a profitable business and those profits could and should be retained for future investment.

The proposal to separate Royal Mail from Post Office Ltd, the postal service’s counter network, is of huge concern to many sub-postmasters throughout my constituency. Any retail network losing its main customer base would struggle to remain viable. The Post Office relies on Royal Mail for a third of its income and the fact is that a privatised Royal Mail will be free to use other outlets for its counter services. Should that be followed through, there will be mass closures among local post office branches, and I hope that the Government Members who said that they would campaign to save post offices are getting ready to campaign once the Bill goes through.

I welcome the proposal for mutualisation of Post Office Ltd, but that does not mean that I do not have reservations. Currently sub-postmasters have £2 billion of their own money invested in the post office network and it is vital that they be granted a far greater say in how Post Office Ltd is run. The success of the Co-operative Group provides an excellent model for Post Office mutualisation. However, any attempt at mutualisation would inevitably fail unless backed by solid actions to get the post office network on its feet, with a viable business model. There will be no mutual option for Post Office Ltd if there is no credible business plan. A 10-year inter-business agreement is an absolute must to ensure Post Office Ltd’s viability as both a business and a universal service provider, but the Government have so far refused to look at that. I hope that the Minister does that tonight.

The most important argument against the proposed sell-off is that the public do not want it. The polling is clear on that. They do not want it in Islwyn and they do not want it in the rest of the country. They understand that prices will go up and that the quality of postal services will go down if Royal Mail is sold, and they are right to take that view. The privatisation of Royal Mail makes no political or economic sense and the Bill is nothing but a wasted opportunity.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. A couple of Members have sat here throughout the debate but, unfortunately, were not called. I know they will be disappointed, but I will make sure that this counts in their favour when they next put in to speak. I call Nia Griffith.

18:29

[Nia Griffith (Llanelli) (Lab)]

I am very sorry to have to say this, Mr Deputy Speaker, but my name is pronounced “Nee-ah Griffith.” I just wanted to put that on the record for everybody.

[Mr Deputy Speaker]

A Welshman getting it wrong! I do apologise.

[Nia Griffith]

Thank you.

Today we have been debating a Bill that will lead to the sale of Royal Mail. Many Members have mentioned the fact that the Royal Mail letter service has faced increasing competition from e-mail and text in recent years, and the decline in letter volumes has continued even between the publication of Lord Hooper’s original report in 2008 and the update published last month. Many Members have spoken today, and I hope I will be forgiven if I do not mention every one of them by name, but I do want to pick up a few of the points that have been made.

The hon. Member for Northampton South (Mr Binley) serves on the Business, Innovation and Skills Committee and he obviously recognises the need for change. He also made the point that good management is vital, and asked the Minister to make clear how he proposes to secure the quality management that is needed. We all want to hear the answer to that question.

My right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) wanted to find ways of taking modernisation forward. He pinpointed what we all need to know: how to provide more business for the post office network. The Bill does not provide an answer to that.

The hon. Member for Solihull (Lorely Burt) wanted more information about mutualisation, and I recognise that she and her party have long supported mutualisation. Like many of us, she cannot see exactly how these proposals will work for the post office network.

My hon. Friend the Member for Vauxhall (Kate Hoey) highlighted a problem to do with sorting offices, as did other Members with sorting offices in their constituencies. They are concerned about the consequences of the Bill for sorting offices. We also had a brief interlude from the hon. Member for Woking (Jonathan Lord), who made an enlightening and enjoyable maiden speech. [Hon. Members: “Hear, hear.”]

The hon. Member for Angus (Mr Weir), speaking for the Scottish nationalists, stressed concerns about the pressures on a privatised service to reduce the extent of the universal service, and highlighted the particular needs of rural areas, as did many of my hon. Friends. The hon. Member for Southport (Dr Pugh) raised concerns about the future viability of the post office network and stressed the idea that local government and communities need to decide exactly what they want a post office network to do.

My hon. Friend the Member for West Bromwich West (Mr Bailey) has a long tradition of work with the co-operative movement, and he expressed a fundamental philosophical objection to privatisation: the problem of how to square the inevitable drive to make profits and satisfy shareholders with the provision of a service for the public.

The hon. Member for Pendle (Andrew Stephenson) emphasised the problems of the current regulatory regime, and my hon. Friend the Member for Hampstead and Kilburn (Glenda Jackson) emphasised the importance of the post office network for pensioners and the local economy.

The hon. Member for Warwick and Leamington (Chris White) spoke in support of the proposed employee share scheme, although he was disappointed that only 10% of the stake will be going to such a scheme. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) explained that if the taxpayer has taken on the burden of the pension deficit, the taxpayer should share in the upside of the transformation of the Royal Mail. He made a compelling case for keeping the majority stake in Royal Mail in public ownership.

My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) wondered what would happen if a privatised Royal Mail got into financial difficulty, and my hon. Friends the Members for Blaydon (Mr Anderson) and for Middlesbrough South and East Cleveland (Tom Blenkinsop) expressed concerns about job losses, and workers’ pay and conditions in the private sector.

We heard speeches in favour of the Bill from the hon. Member for Gloucester (Richard Graham)—who did, however, request a specific list of several actions to be taken—and the hon. Members for Castle Point (Rebecca Harris), for Folkestone and Hythe (Damian Collins) and for Rossendale and Darwen (Jake Berry).

My hon. Friend the Member for Walthamstow (Stella Creasy) was very concerned about how post offices can be made viable with the loss of Royal Mail business, and I now wish to discuss that particular problem. The Bill, as it stands, provides no guarantee of a continuation of a daily delivery of letters six days a week to every home in the United Kingdom. The Bill, which puts Royal Mail entirely into private hands, provides no guarantee that a wholly privatised Royal Mail would continue to use the post office network to provide its counter services. The Bill breaks the historic link between Royal Mail and the post office. In fact, Royal Mail could use a high street chain whose branches are largely confined to town centres. The Bill even proposes the surreal spectre of a post office network without any Post Office services. With the loss of the one third of its income that comes from Royal Mail business, the post office network could see a closure programme on an unprecedented scale.

Perhaps we were supposed to be taken in by this and lured into some false sense of security, but today the Secretary of State announced new investment.

[Andrew Griffiths (Burton) (Con)]

The hon. Lady talks about closures in the post office network on an “unprecedented scale”, but could she remind us just how many post offices closed under her Government?

[Nia Griffith]

I can certainly remind the hon. Gentleman that a viable post office network consists of some 4,000 post offices, and that our Government put in the funding to keep 11,500 post offices open. Not only that, but we guaranteed a £150 million subsidy per year up to 2011, increasing it to £180 million for 2011-12, and designated access criteria to ensure that people would be within a short distance of their local post office, which provided that some 90% of the population would be within a mile of a post office. Without those criteria there would have been wholesale closures before now.

[Nick Boles (Grantham and Stamford) (Con)]

Would the hon. Lady like to tell us the answer to the question asked by my hon. Friend the Member for Burton (Andrew Griffiths)?

[Nia Griffith]

Perhaps if the hon. Gentleman had been here earlier, he might have heard some information that would have helped him to understand what he has just asked.

[Robert Halfon]

rose—

[Nia Griffith]

No, I will not give way; I wish to return to discussing today’s announcement about the money, because it is important. Of course new investment is to be made and it will build on the investment that the Labour Government put in, but with no guarantee that the Royal Mail will continue to use the post office network, that could be good money wasted. Furthermore, will the Minister please clarify whether this is new money for the Department for Business, Innovation and Skills that was not in last week’s comprehensive spending review—or will it lead to cuts in other business spending?

The Secretary of State gave us little insight into when the mutualisation of the post office network might take place, and no detail at all about the nature of the scheme envisaged. Most notably, he completely failed to make a convincing case for the wholesale privatisation of the Royal Mail; nor has any other speaker done so. Labour Members recognise the crucial role that public ownership has in safeguarding the public interest, and in making sure that taxpayers’ money is invested for public benefit and not for private profit. For that reason, we oppose the Bill.

18:39

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

I start by thanking the hon. Member for Llanelli (Nia Griffith), and all the other hon. Members, for their contribution to today’s debate. The quality of the debate is testament to the importance that this House attaches to two of Britain’s great institutions: Royal Mail and the Post Office. May I particularly congratulate the hon. Member for Woking (Jonathan Lord) on his maiden speech? He may not be aware of it, but I visited a post office in his constituency to look at one of the pilots for our reforms. Will he send my regards to Mr Patel at the West End post office, who has certainly influenced my thinking?

Both sides of the House recognise the extent to which our constituents value Royal Mail’s universal postal service. No one who witnessed the passionate debates over the previous Government’s post office closure programme can underestimate how deeply communities across our country feel about their local post offices. That is why the Government feel so strongly about the Bill: we believe that what is at stake is no less than the very survival of the universal postal service and Britain’s network of post offices. If we do not reform those two institutions, attract private capital and private sector disciplines into Royal Mail and tackle the underlying economic challenges to the post office network, their future in a digital world of e-mail and internet services is bleak.

Some Members wanted me to blame past management for all Royal Mail’s ills. My hon. Friends the Members for Northampton South (Mr Binley) and for Southport (Dr Pugh), in particular, wanted me to criticise the quality of the management in the past. I am not going to take up that kind offer. What I will say is that the current chief executive, who was appointed by this Government—Moya Greene, who came from Canada Post—is an excellent chief executive and is already taking the tough decisions that need to be taken. It is interesting that she and Royal Mail support the Bill. They know that we need to get capital into Royal Mail. They know that it needs to be released from Treasury control.

[Mr Binley]

Will my hon. Friend correct a mistake that he has made? I asked him to explain how he was going to get the exciting new management into the Post Office to ensure its future, and I did not particularly want him to comment on my criticism of past management.

[Mr Davey]

My hon. Friend has corrected the record, and I can say that we have that good management with Moya Greene.

The real challenges of the digital world, as the right hon. Member for Wolverhampton South East (Mr McFadden) said, apply to all postal administrations across the world. It is the deep challenges that face Royal Mail and the Post Office that make the position of the Opposition at best incredible and at worst downright irresponsible. They know the problems that Royal Mail faces: the decline in letter volumes as e-mail volumes grow exponentially, the large losses the company has made in recent times, and the incomparably large pension deficit. We know that they know, because just last year they said the same thing, and put a Bill before Parliament to address those very same problems. I have that Bill here—but unfortunately it was not brought down the corridor from the other place for us all to debate in this Chamber. If it had been, the similarities in the Bill would have meant that many of the questions raised in this debate could have been debated then. So, let me address some of the questions that I have been asked.

The hon. Member for Vauxhall talked about foreign ownership. She may remember that when her Government tabled their Bill there was concern on the Labour Benches that TNT and Deutsche Post might buy Royal Mail, so she has an issue to raise. What is often forgotten in this debate is that British investors already own 30% of Deutsche Post. That is the real world: investors invest in good companies.

The hon. Member for Blaydon (Mr Anderson) had worries that the royal associations would somehow be broken as a result of privatisation. The Queen will continue to approve all stamps that bear her image, as she does now. The Royal Mail brand is valuable and we will put safeguards in place against its misuse. We have initiated discussions with the Palace for that very purpose. I should tell the hon. Gentleman, who claimed that more post offices closed under the Conservative Government, that he is wrong. In 18 years of Conservative government fewer post offices closed than in 13 years of Labour government.

Coalition colleagues might be concerned because of the similarities between our Bill and the Labour Bill. They are so similar that we half expected the Labour party to feel duty-bound to support our Bill.

For example, there are almost identical proposals on pensions, except that our proposals are slightly more favourable to Royal Mail employees. The clauses on regulation are also similar, except that our Bill introduces new safeguards for the universal postal service that were strangely absent from the previous Government’s Bill. Our Bill rebalances the regulatory framework, putting the universal service and its financial sustainability at its heart.

Those ought to be major areas of agreement, but we did not get that tonight. We heard some bizarre criticisms from Opposition Front Benchers. They said that we are not addressing the problems of the regulatory system, but it is their regulatory system. They do not appear to have read the Bill, because we are making changes to that regulatory system.

The right hon. Member for Wolverhampton South East brought in Ofcom in the previous Government’s Bill. It has a duty to reduce unnecessary regulation, which will assist the legislation. The Bill requires cost transparency and accounting separation to deal with many of the regulatory problems that my hon. Friends the Members for Southport and for Pendle (Andrew Stephenson) raised in the debate.

Surprisingly, Opposition Members also raised concerns about the pensions solution. The hon. Member for Vauxhall said that it is possible to achieve a solution on pensions without a sale. It would be irresponsible to ask the taxpayer to take on an £8 billion deficit without securing private capital and disciplines and without transferring future risk from the taxpayer. This is a package deal, which is what Hooper argued for and what we are delivering.

Richard Hooper made it clear that action is needed if we are to secure the future of a universal postal service. His document, “Modernise or Decline”, sets out those options. When the hon. Member for Angus (Mr Weir) questioned whether a privatised Royal Mail would threaten the universal service obligation, he was ignoring the evidence put forward by Sir Richard Hooper. I can only think that he has not read the Bill. If he had read it, he would know that it is all about safeguarding the universal postal service of Royal Mail and the Post Office, recognising the particular importance of those services to our rural communities.

The six-day, one-price-goes-anywhere universal service obligation is enshrined on the face of the Bill, but we have not stopped there. The Bill introduces new safeguards to protect that service, ensuring that any future change must be properly debated by Parliament, must retain the uniformity of the service and must take into account the interests of postal service users, which, of course, includes rural communities. The scaremongering of the Scottish nationalists flies in the face of both the facts and the text of the Bill.

Returning to the substance of today’s debate, despite our producing a Bill that is better than the previous Government’s Bill—better for Royal Mail employees’ pensions and better for the protection of the universal service—the Opposition are determined to oppose it. Where are the huge differences that are causing the Opposition such problems? We want to provide Royal Mail employees with shares, so workers can benefit from the prosperous future for Royal Mail that our reforms will enable. The previous Government talked about involving employees, but they argued with the unions about giving employees shares and then argued with themselves. This Government are united, and we are going to do it through the largest employee share scheme by percentage of shares of any major British privatisation. For the first time ever, I believe, we are mandating an employee share scheme on the face of a Bill. As a member of a party that championed employee share ownership for decades in opposition, I could not be more proud to present this radical measure to the House tonight. I pay special tribute to my hon. Friend the Member for North Norfolk (Norman Lamb), who did so much to develop those issues when we were in opposition.

I also thank my hon. Friend the Member for Warwick and Leamington (Chris White), who explained how important employee share ownership can be in driving productivity. He was concerned that only 10% of shares will go to the employee share scheme, but I can tell him that the Bill refers to “at least 10%”. I was pleased by the support for employee shares from my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman). His chairmanship of the all-party group on employee ownership shows that he knows about that area. He raised a constituency case, which I will take up if he writes to me.

Another key difference between Labour’s Bill and our Bill is our mutualisation proposal for the Post Office. Sub-postmasters, Post Office employees and communities can all have a say in how their post offices are run. The Co-operative model is a huge example of the big society and something that the old Fabians would have classed as public ownership, but the Labour party is going to vote against the Bill.

Let me clarify the mutualisation proposals for the Opposition, who do not seem to understand what they are all about. Post Office Ltd, the national company that franchises to individual post offices and chains of post offices, would become a mutual if our proposals go ahead. We believe that having a national mutual similar to the Co-op would have many practical benefits and would align the incentives of sub-postmasters with those of the company and their main franchisor. When it comes to modernisation and putting services online, it is important to have aligned incentives.

[Malcolm Bruce]

Will the Minister give way?

[Mr Davey]

No, I am sorry.

My hon. Friend the Member for Solihull (Lorely Burt) raised concerns about the conditions for mutualisation. Of course we will have to ensure that there is a viable post office network, otherwise we could not make mutualisation work, so that is one of our conditions. Clause 7 makes it clear that a mutualised post office network would have to be “for the public benefit”, so that is also a clear condition.

Despite the fact that our Bill is better for Royal Mail employees, Royal Mail, the Post Office, customers and the taxpayer, the Opposition still oppose it. What is their problem? The right hon. Member for Wolverhampton South East, the former Minister of State for Employment Relations and Postal Affairs, said that it is about ownership but he did not ask the next question: what is the difference between the shareholdings to which the previous Government and this Government were prepared to agree? That principle concerns about 0.2% of the shares—the extra shares that they were not prepared to sell but we are. The sale of those shares will free Royal Mail from Treasury control and will enable it to be the master of its own fate and to invest for the future without coming cap in hand to the taxpayer. New Labour has been dying for some years but with the opposition to this Bill, old Labour has returned. I thought that I would be in danger of being called Red Ed with the bail-out of the pension plan, but the real Red Ed is on the Opposition Benches—ideology before reality, dogma before common sense and, worst of all, vested interest before national interest.

The idea that public ownership has delivered a successful Royal Mail and post office network clearly is not right. Perhaps Opposition Members are aware that Royal Mail shed 65,000 jobs during the 13 years of Labour government, so public ownership did not deliver for workers. Let us consider the experience under privatisation around the world. Since Deutsche Post was floated in 2001, it has seen investment of £11.6 billion. That just will not be possible for Royal Mail if it remains in the public sector, but through our measures, it will become possible.

The right hon. Member for Southampton, Itchen (Mr Denham) made another accusation against the Bill—it would lead to post office closures. What a cheek! Ten post offices closed in his constituency under the previous Labour Government and about 5,000 post offices were shut in total. As so many colleagues have made clear throughout this debate, Labour is the party of post office closures. This Government will not make those same errors. That is why my right hon. Friend the Business Secretary today announced our £1.34 billion investment programme for the post office network. That money will not pay for a closure programme—we will not throw money down the drain as Labour did—but it will bring a lasting change to the network and will tackle the underlying economic issues it faces. That is why the right hon. Gentleman and his colleagues will see, when we make our full statement on policy for the post office network shortly, a Government working as one—joined-up government is what they used to call it.

[Mr Denham]

We look forward to hearing the more detailed statement. Will the Minister confirm that his Department suffered one of the largest departmental cuts in last week’s comprehensive spending review—25% of revenue and 50% of capital? Will he also confirm that the money announced today will come from that same pot of money? What other cuts that he has not yet announced will be made in BIS to finance it?

[Mr Davey]

Unlike the hon. Gentleman’s Government, we do not wish up new pots of money left, right and centre. Of course it is in the BIS settlement.

The Opposition made much of one point tonight. Apart from their ideological contortions over ownership, they have tried to suggest that separating Royal Mail from the Post Office will somehow be the catalyst for post office closures. Let me explain why they are wrong.

First, a privately owned Royal Mail will not act against its own commercial interests. It will not give up valued retail space in the heart of communities the length and breadth of Britain, creating a vacuum that its competitors would gratefully fill. To think otherwise one would have to be living on Planet Consignia. Have Members heard of Planet Consignia? It is where the previous Government once tried to place Royal Mail. This Government, along with most people in Britain, understand the value and tradition of royalty, and will not make such daft mistakes.

Secondly, Royal Mail has made it clear that the current long-term commercial contract between Royal Mail and post offices will continue. Only this week, the chief executive of Royal Mail, Moya Greene, told me that

“the support that the Government is giving to Post Offices Ltd should mean that the Post Office should become an even stronger retail channel for Royal Mail.”

She went on to say that it was “unthinkable” that there would not be a strong relationship between the Post Office and Royal Mail in the future.

Thirdly, if the Opposition are seriously saying the Government should write into the Bill that there should be a statutory permanent contractual relationship between Royal Mail and the Post Office, they would be risking not only a legal challenge from competitors, but setting the Post Office in aspic. Do they not realise that as Royal Mail’s letter volumes decline, so too will the mail business for the Post Office, so it needs to be given the opportunity to build new revenues? Do they not realise that new sources of revenue will be critical if we are to achieve a financially viable post office network?

I have a confession. I am a postal anorak. Before having the honour of being elected to the House in 1997, I was a management consultant and I specialised in postal companies. I worked on projects for Royal Mail’s equivalents in Taiwan, South Africa, Belgium and Sweden. Although I co-authored a report for the US Postal Service to put to Congress on the commercialisation and liberalisation of postal companies and markets around the world, I have to disappoint the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont); I never worked on a privatisation programme—[Interruption.] Regrettably. Back then, in 1997—[Interruption.]

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I cannot hear the Minister, which means that the House cannot hear him either. The Minister must be heard.

[Mr Davey]

In 1997, Royal Mail was a company that could hold its own with most postal administrations around the world. It needed reform and it needed investment, but it was not balance sheet insolvent or loss-making and it was not as fragile as it is today.

Mr Deputy Speaker, what happened between 1997 and 2010? I will tell you. There was dereliction of duty by the Labour Government, on a massive scale. There were post office closures, lack of investment in Royal Mail and the pension deficit ballooned.

This Government will not shirk our responsibilities. We will take the tough decisions. We will invest in the Post Office. We will free Royal Mail for the investment it needs. I commend the Bill to the House.

Question put, That the Bill be now read a Second time.

18:58

Division 102

Ayes: 321

---

Conservative: 269
Liberal Democrat: 52

Noes: 238

---

Labour: 223
Scottish National Party: 5
Democratic Unionist Party: 3
Independent: 2
Plaid Cymru: 2
Social Democratic & Labour Party: 1
Alliance: 1
Green Party: 1

Bill read a Second time.

Postal Services Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Postal Services Bill:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 9 December 2010.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Mr Newmark.)

Question agreed to.

Postal Services Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Postal Services Bill, it is expedient to authorise the payment out of money provided by Parliament of—

(1) expenditure in connection with the provision of benefits under the Royal Mail Pension Plan,

(2) other expenditure incurred by a Minister of the Crown by virtue of the Act,

(3) expenditure incurred by the Postal Services Commission by virtue of the Act,

and

(4) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Mr Newmark.)

Question agreed to.

Postal Services Bill (Ways and Means)

Motion made, and Question put forthwith (Standing order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Postal Services Bill, it is expedient to authorise—

(1) the imposition of charges to corporation tax and stamp duty land tax in connection with the restructuring of the Royal Mail group,

(2) the making of provision in connection with the restructuring of the Royal Mail Pension Plan,

(3) the imposition of charges on providers of postal services and users of such services by the Office of Communications, and

(4) the payment of sums into the Consolidated Fund.—(Mr Newmark.)

Question agreed to.

Suicide and Self-harm in a Recession

Wednesday 27th October 2010 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Newmark.)

19:15

[Mrs Madeleine Moon (Bridgend) (Lab)]

I am grateful for the opportunity to raise this important issue. In the past few months, the House has debated public spending cuts, job losses and the scaling back of services, but the human and personal costs are often forgotten among the facts, figures and policies, with a profound and tragic impact on individual lives and families.

When people take their own lives and self-harm, their reasons are complex and often individual, but running through too many incidents are worries about money and debt, the loss of status and esteem often associated with unemployment, and fears about a house or job loss. The increases in personal debt, bankruptcy, homelessness and unemployment that can follow can substantially increase the incidence of suicide and self-harm. A survey for Mind this year showed that one in 10 workers had approached their GP as a direct result of the recession, mostly for depression.

The points that I wish to make this evening are drawn from papers written by academics working in a range of institutions, including the universities of Bristol, Oxford and Manchester, which have departments focusing on suicide and its prevention. I am also indebted to the tremendous work of the Samaritans and the Royal College of Psychiatrists. The academic community draws on research on the effect of recession on cultures across Europe, as well as those in east and south-east Asia, Australia, America and elsewhere. The data go back to the great depression of the 1930s and are right up to date.

The steps that I will urge the Government to take are recommended by leading experts in the causes and prevention of suicide and self-harm. I thank those experts not only for their support and access to their research, which has helped me to prepare for the debate, but for their dedication and commitment to preventing self-harm and saving lives.

Self-harm includes intentional acts of self-poisoning or self-injury, irrespective of the motivation or the degree of suicidal intent. It includes suicide attempts as well as acts in which little or no suicidal intent is involved, such as when people harm themselves as a form of interpersonal communication of distress, to reduce internal tension or to punish themselves.

The Royal College of Psychiatrists points out in its report “Self-harm, suicide and risk: helping people who self-harm” that the incidence of self-harm has continued to rise in the UK over the past 20 years. For young people, the rate here in the UK is said to be the highest in Europe. The RCP points out that

“the needs, care, well-being and individual human dilemma of the person who harms themselves should be at the heart of what we as clinicians do. Public health policy has a vital role to play and psychiatrists must be involved and not leave these crucial political and managerial decisions to those who are not professionally equipped to appreciate the complexities of self-harm and suicide.”

It goes on to point out that

“we must never forget that we are not just dealing with social phenomena but with people who are often at, and beyond the limit of what they can emotionally endure.”

Research has shown clearly that economic cycles give a clear indication of suicidal trends, and recession has been shown to be accompanied by an increase in suicide rates across the world. Falling stock prices, increased bankruptcies, and housing insecurities including evictions, the anticipated loss of a home and higher interest rates are all associated with increased suicide risk. Study has shown that being in debt is associated with mental health problems and suicide ideation, which contribute to someone taking their life.

We know that the unemployed are two to three times more likely to die by suicide than people in employment. Unemployed men are particularly at risk. Unemployment can result in poorer mental health and contribute to anxiety, depression, low self-esteem and feelings of hopelessness, all of which increase the likelihood that someone will think that their life is no longer worth living.

For those who have no history of mental health problems, there is a 70% increase in suicide risk if they are unemployed. The great depression of the ’20s and ’30s resulted in a steep increase in male suicides. The people most at risk of suicide are those who are experiencing financial problems, those in poverty, those struggling with the rising cost of living, those who have recently lost their jobs or who are affected by a downturn in business, those who are in low-status occupations, and those with existing mental health problems. People who are self-employed or who live in single-person households, those experiencing relationship breakdowns, and those who are isolated and without strong social networks are also particularly at risk.

Initially, people often turn to drugs and alcohol to mitigate the emotional pain and confusion that they feel. Some argue that improving access to psychological therapies is the best way of helping those who suffer from mental health problems as a result of the recession. Treatments such as cognitive behavioural therapies can benefit people, but as Professor Drinkwater of the university of Bristol has made clear,

“unless you do something about the environment in which they live they are…likely to relapse. Without real jobs, decent housing, and adequate incomes people are going to be at risk of becoming ill again”.

[Andrew Stephenson (Pendle) (Con)]

I congratulate the hon. Lady on securing this important debate. In addition to what she says, I suggest that businesses have a role to play. In Nelson in my constituency, six deaths in the past six years resulted from people falling from a multi-storey car park by the Pendle Rise shopping centre. Despite that, when Pendle borough council proposed new safety measures in July last years, the car park owners refused to support such measures, saying that town hall chiefs were “wasting their money” because people with a desire to commit suicide would always “find a way”. Does she agree that such an attitude from certain businessmen is completely unacceptable?

[Mrs Moon]

Anyone who can take any step to turn someone away for that brief moment in which they might think again should do so. I agree with the hon. Gentleman that whatever barriers are needed in that car park should be in place, and I thank him for his intervention.

I would direct the Minister to research carried out by Professor David Gunnell et al on the effect of the economic crisis in east and south-east Asia in the 1990s, to recent work by Professor Keith Hawton, David Platt and Camilla Haw, and to the work of Professor Purkis and the steps taken in Australia to deal with, and indeed to reduce, suicide in a recession.

There is broad agreement in academia, psychiatry and mental health charities on what steps need to be taken to reduce suicide and the effect of a recession on suicide and self-harm rates. Suicide prevention must remain a priority of public health policy in all countries in the UK. There should be structures at national, regional and local level and mechanisms for the flow of information, evaluation and best practice in reducing suicide and self-harm. That best practice must be known, shared and implemented. It is essential that research into what works and why people are taking their own lives be funded.

The current national suicide prevention strategy for England is coming to an end. I urge the Government to ensure that this work continues to be funded and taken forward. Overseeing and administering the strategy, including issuing annual reports, costs very little, but the potential cost-effectiveness of continuing it is enormous. It is important that the strategy should help to ensure a continued focus on all those working in the field. The Samaritans and the Royal College of Psychiatrists stress the need for all people attending accident and emergency departments, as well as those admitted to hospital following incidents of self-harm or attempted suicide, to be referred to trained mental health professionals and sources of help. It is sad to say that many people—especially those who self-harm—are seen as attention-seeking, and do not get the help and support that they need. They do not get onward referrals, and instead return again and again. The risk of their self-harming becoming suicide ideation and suicide is very high. It is critical to ensure that people receive the help and support that they need, once they take that first step of approaching A and E.

Mental health needs in general, and a specific strategy to prevent suicide and self-harm in particular, should form a central part of the upcoming White Paper on public health. I would be grateful if the Minister confirmed that that will be the case. In addition to those facing unemployment and debt, or relationship problems, the needs of those at particular risk—they include asylum seekers, those in minority ethnic groups, those in institutional care, sexual minorities, veterans and those bereaved by suicide—should be actively addressed as part of the strategy.

I call on the Government to establish a UK-wide forum to bring together agencies from the four nations that are involved in suicide prevention policy, research and practice, to help us formulate a way forward through the difficult years ahead. The Departments responsible for public health in each of the four Administrations must lead a cross-departmental strategy to raise awareness of self-harm and ensure that front-line staff in education, social work, prisons, Jobcentre Plus, the police and other relevant agencies receive appropriate training in dealing with self-harm and those at risk of suicide.

Included in such a strategy should be the monitoring of harmful internet sites that encourage or incite suicide and self-harm. I would like to pay my personal thanks to my hon. Friend the Member for Garston and Halewood (Maria Eagle) for her help in taking that issue forward in the Coroners and Justice Act 2009. However, we now urgently need to address the legal status of those sites on a European level, so that we can increase our control over them and prevent them from reaching out and damaging the lives of people across the UK. It is important that Government websites, including the NHS Direct and Department of Health sites, should include authoritative, accessible and user-friendly information on the help and support available both to those who self-harm or who are contemplating taking their own lives, and to their friends and their family.

The NHS has a guide, entitled “Help is at Hand: A resource for people bereaved by suicide and other sudden, traumatic death”. That excellent guide, which could possibly be updated and reviewed, gives advice for those who are suddenly bereaved. It is an excellent example of the kind of information that should be available. Unfortunately, not enough front-line staff know about it, so the information is not getting to those who need it. Services coming into contact with those who have been bereaved by suicide should know about the document and be able to distribute it. It is vital to ensure that GPs’ surgeries, the police, social workers and coroners have access to it, and that families receive it.

Professors Gunnell, Platt and Hawton, in an article recently published in the British Medical Journal, stress the importance of social policy measures to create new jobs, of adequate welfare benefits for unemployed people, and of the provision of alternatives to early entry into the labour market, especially for young people, such as increasing the number of university places. It is important to give people a sense of hope. They also argue that employers and trade unions must be mindful of the potential risk to mental health of redundancy, and that workers should be given the help and support that they need.

I was pleased by the help and support that I received from the former Member for South Dorset to ensure that front-line Jobcentre Plus staff had access to support and training to give them an understanding of mental health needs, and of the risk to the mental health and emotional stability of those who had newly been made redundant or become unemployed. I should like to know whether that help, support and training will continue to be available to Jobcentre Plus staff.

In concluding my remarks, I want to stress that most people who lose their jobs, their homes or their businesses in a recession do not commit suicide or self-harm, but we must be aware of the increased risk in the current economic climate. This must be addressed by the Government. I am aware that new figures are coming out tomorrow, and I look forward to seeing whether the tremendous reduction in suicides in this country is continuing. I fear that perhaps it is not.

I also encourage the Government to enter discussions with the media on the reporting of suicides, to prevent the potential for social contagion. In the past few years, many of the national newspapers have become much more aware of what they are doing when they report such cases. I do not wish to criticise, but it is important, in a recession, that we do not exaggerate or even raise the link between the loss of a job and a death. I believe that the Government could take a lead in that area.

I would also ask all Ministers, when looking at policy, to bear in mind the emotional devastation and exhaustion that drives a person to suicide, and the enormous loss for friends and family, and to avoid trivialising that pain and despair as the Secretary of State for Transport, the right hon. Member for Runnymede and Weybridge (Mr Hammond) did in a recent article on train delays. I do not want to see that repeated.

It has been my aim in this debate to raise awareness, and to concentrate focus across government on the potential consequences of policy decisions if they are not mitigated by the help and support recommended by the Royal College of Psychiatrists, leading academic researchers and voluntary agencies working in this field. Finally, I invite the Minister to attend a meeting of the all-party parliamentary group on suicide and self-harm prevention, to discuss what the Government are going to do to reduce suicide and self-harm, so that we can engage and work together to reduce the incidence of such terrible loss and damage.

19:33

[The Minister of State, Department of Health (Paul Burstow)]

I congratulate the hon. Member for Bridgend (Mrs Moon) on securing the debate. I want to pay tribute to her, and to thank her for the work that she does in leading the all-party group on suicide and self-harm prevention. Her name sticks in my mind because, when I first became a Minister, I answered many questions that she had tabled on these issues. When I saw that she had secured this debate, I was conscious that she had been pursuing this matter vigorously and diligently for many a year. She brings that important issue to the House’s attention tonight. The fact that she has constituency experience of the matter, given the tragedies that have taken place there in recent years, lends added weight to her argument.

The hon. Lady was right to bring us back to the personal stories behind the statistics, and to recognise that, while strategies are important, they offer little consolation to those who are affected personally and directly by suicide and self-harm. She rightly paid tribute to the work of the Samaritans and other organisations. She was also right to highlight the need to share best practice and research; I entirely subscribe to that view.

There is plenty of evidence across the world that in times of recession and high unemployment, rates of mental illness and suicide tend to rise. In this country, Office for National Statistics figures tell us that suicides rose 6% between 2007 and 2008 when the recession began to bite. Tomorrow, as the hon. Lady said, the Department of Health publishes its “Mortality Monitoring Bulletin”, updated to include the data for 2009. I am unable to share it with the House now, but it will be in the public domain then. This will include new information on suicide rates, giving us the full picture of how the course of the recession affected the nation’s public health. The figures illustrate in the most dramatic way the human tragedies that took place in the economic downturn.

We now need to ensure that economic recovery is matched by psychological recovery from a long and painful recession. The 2010 Legatum Institute’s report, published earlier this week, showed that there is plenty of work to do. It gave a salutary warning that in terms of happiness and the general well-being of our fellow citizens, the UK is sorely lacking compared with other countries. In our services, too, across society, we have to ensure that we start valuing GWB, or general well-being, as highly as we do GDP. Specifically, as the hon. Lady argues, we must do everything we can to return to the pattern of declining suicide rates that we saw for most of the last decade.

To help us do so, I can first confirm for the hon. Lady that we will publish a new suicide prevention strategy in the new year. As the old strategy comes to an end, we need to update it and make sure that it is fit for purpose. We will certainly take into account the points she has made. I will want to look at the studies to which she referred and ensure that suicide prevention is referenced in the forthcoming mental health strategy, too.

The new prevention strategy for suicide will include new measures, particularly those to support high-risk groups. I will ask officials to discuss the hon. Lady’s suggestion of how best to collaborate with the devolved Administrations to ensure that we share learning and best practice across the countries. The strategy will also look at how we can restrict access to some of the methods people use to self-harm or commit suicide. The hon. Member for Pendle (Andrew Stephenson), who talked about a particular constituency example, illustrates why we need to erect barriers, quite literally, to deal with suicide hotspots. I am shocked and appalled by the attitude that the business in his constituency adopted to that necessary investment in prevention. The strategy will also involve working with all forms of media to ensure that we get responsible reporting to prevent copycat suicides.

Let me say something about the issues raised about the internet and how it can be used to promote suicide and provide information about methods. There is now greater clarity in the law. Section 59 of the Coroners and Justice Act 2009 simplified and modernised the law on encouraging or assisting suicide by online means. The Government continue to work with internet service providers through the UK Council for Child Internet Safety to remove harmful or illegal content. We continue to work with search engine providers, encouraging them to link only to appropriate, supportive websites when somebody uses “suicide” as a search term.

There is clearly a difficulty in how to strike the balance correctly, which does not really lend itself to arbitrary Government action. Banning all discussions and content on suicides from sites popular with young people risks driving them to parts of the internet that are far less safe and certainly not moderated, so more harm could be done. There is a need to update existing guidance, and we plan to publish updated guidance for technology providers to keep children safe online. We expect internet providers to follow that advice and remove harmful content as quickly as possible. I will certainly look at the hon. Lady’s points about the provision of helpful advice on the Department of Health and associated websites.

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

If the organisations that we are trying to get to remove content refuse to do so, will the Minister name and shame them?

[Paul Burstow]

I will certainly consider that, and we will discuss with colleagues across Government the approach and tone we should adopt with ISPs.

In reducing suicides, we have a specific focus on the health service, but we need a much broader programme of work across Government to improve general well-being while ensuring that the right services are in place for people who experience mental illness.

Everything that we know about the pattern of suicide rates demands a twin-track approach covering both clinical and societal issues. On the clinical side, we will do more to ensure that the NHS gives people the support that they need, and a new outcomes framework should make clear that the NHS must give mental health services the same priority as physical health services. There should be no difference in the esteem that we attach to those services. That approach will help us to shift cultures and priorities, ensuring that accident and emergency and hospital staff are trained to deal with self-harm or other indications of poor mental health, and are able to refer patients to the appropriate services rather than creating the revolving door to which the hon. Lady referred. GPs also need to be properly trained to help them to identify those at risk of suicide, and to provide appropriate drug treatment and psychological support in line with National Institute for Health and Clinical Excellence guidelines.

The hon. Lady was right to say that talking therapies are a critical part of the onward journey for those at risk. In 2009, the last Government initiated the Improving Access to Psychological Therapies programme. Where they exist, IAPT services work extremely well, but coverage around the country is still patchy. Earlier this year, I was able to announce additional investment of £70 million in the current financial year to ensure that we could continue the roll-out of IAPT, in order to deliver a commitment in the coalition programme. I am pleased that the Chancellor confirmed last week that we are now committed to investing more additional resources to allow the continuing expansion of IAPT up to 2014, including its extension to cover people of all ages rather than just those of working age.

However, we must not over-medicalise what is also a social and cultural issue. The Foresight report from the Office of Science shows that mental health problems are closely linked to a range of social problems. Debt and unemployment are key triggers for suicide, as are social isolation, family breakdown and substance misuse. Those are best addressed and best prevented in the community, not in the clinic. In developing our new mental health strategy, we will also consider how we can change cultures and develop resilience and relationships in communities to prevent mental illness and suicides.

We will, for instance, target those with alcohol or drug problems, and create better links between treatment services and mental health services. We will support vulnerable families by providing more health visitors and family nurse partnerships to give children the stable upbringings that provide a basis for good mental health in later life. We will also address the stigma associated with mental illness. It is that stigma—that reluctance to express emotions and accept help, advice and support, especially among men—that can be such a serious cause of the problems in our mental health services and, ultimately, even a cause of suicides. We also need to harness the expertise and experience of the third sector and voluntary groups to create local grass-roots plans and action to support better public mental health.

One of the biggest priorities will be returning more people with mental health problems to employment. We know that long-term unemployment has a hugely corrosive effect on a person’s mental health. Those who are unemployed for an extended period are 35 times more likely to commit suicide than those in stable employment. The sad legacy of the last decade has been the huge rise in the number of people trapped on benefits, along with all the damage that that does to a person’s self-esteem and self-worth.

We will build on the good links that have been established in some areas between IAPT and employment services. Many primary care trusts are already making connections with their local Jobcentre Plus, and I want to ensure that such relationships are formed in all IAPT centres as the roll-out continues. However, we also need businesses and organisations to invest in the good mental health of their staff, particularly during times of anxiety and change. Research shows that employers who invest in staff well-being receive a ninefold return on their investment in terms of increased productivity and reduced sickness absence. We want to drive that message home in the context of the employers’ occupational health responsibilities.

The human effect of dealing with the deficit crisis is not something that the Government can take lightly. I know that many in the public sector will be feeling anxious and concerned as a result of the spending review, and that demands the utmost vigilance from us in our support for people’s mental health in the months and years ahead. We are committed to mending the psychological as well as the economic scars of the past recession, improving mental health services, promoting greater community resilience to mental illness, and doing much more to help unemployed people regain their confidence and return to work.

I am grateful to the hon. Lady for securing the debate, and for the leadership that she provides in this regard. I hope that we shall be able to deliver the changes that we all want to see, and ensure that we have good-quality mental health in this country.

Question put and agreed to.

19:44

House adjourned.

Ministerial Correction

Wednesday 27th October 2010 Ministerial Corrections

Wednesday 27 October 2010

Housing

Wednesday 27th October 2010 Ministerial Corrections

The following is the answer given by the Minister for Housing and Local Government, the right hon. Member for Welwyn Hatfield (Grant Shapps), relating to questions from the right hon. Member for Don Valley (Caroline Flint) and the hon. Members for Finchley and Golders Green (Mike Freer) and for Plymouth, Moor View (Alison Seabeck) during Communities and Local Government Question Time on 21 October 2010.

[Grant Shapps]

Absolutely. Until now there has been only one way to get into social housing, and for most people that way has not led to their getting a social home. That is why housing waiting lists doubled under the last Government from 1 million to nearly 2 million. There was only a single offer, and not enough homes were being built. We have introduced affordable rent, which means that rents can be up to 80% of the market rent. That is a more viable option, and it means that less money can produce more homes and that new investment will go into providing homes for the most needy in society, who were so badly let down by a Government who produced only a 14,000 net gain in affordable homes during a 13-year period in office.

[Official Report, 21 October 2010, Vol. 516, c. 1113.]

Letter of correction from Grant Shapps:

An error has been identified in the oral answer given on 21 October 2010.

The correct answer should have been:

[Grant Shapps]

Absolutely. Until now there has been only one way to get into social housing, and for most people that way has not led to their getting a social home. That is why housing waiting lists doubled under the last Government from 1 million to nearly 2 million. There was only a single offer, and not enough homes were being built. We have introduced affordable rent, which means that rents can be up to 80% of the market rent. That is a more viable option, and it means that less money can produce more homes and that new investment will go into providing homes for the most needy in society, who were so badly let down by a Government who produced only a 40,000 net loss in affordable homes during a 13-year period in office.

Westminster Hall

Wednesday 27th October 2010 Westminster Hall

Wednesday 27 October 2010

[Mr James Gray in the Chair]

Housing (CSR)

Wednesday 27th October 2010 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Jeremy Wright .)

09:30

[Mr James Gray (in the Chair)]

In answer to a request from the Minister, it would be perfectly in order for gentlemen to remove their jackets. I was told to put you in order in relation to that, Mr Betts.

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

I am pleased that we are meeting under your chairmanship this morning, Mr Gray. At the outset, I wish to draw attention to my interests in the Register of Members’ Financial Interests. I am grateful to have this opportunity to raise an issue of huge importance and very real concern to our constituents and the whole country: the impact of Government policy and the comprehensive spending review on housing investment and supply.

I have been closely involved with housing for almost all my working life, during which I have seen a number of ups and downs. However, at no time during the past four decades can I recall there being a bleaker outlook for people looking for a new home or a solution to their housing problems. As MPs, all of us know from our constituency surgeries and our wider contacts in our communities how many people face housing difficulties, whether that expresses itself in the despair felt by many prospective home buyers who cannot find a home at prices they can afford or in relation to those people who think they have found a home at a price they can afford only to have their hopes dashed when they cannot obtain mortgage finance. Such despair might also be reflected in the anxiety of tenants and home owners, who fear that they will no longer be able to afford to stay in their home against a background of rising unemployment and harsh cuts in housing benefit. Alternatively, there is the desperation felt by families living in overcrowded or squalid conditions who have an urgent need for a move but see no prospect of getting an offer of a social tenancy and are nervous about whether they can afford the cost of a private one.

All those and many other problems are familiar to us, but what is particularly alarming is the prospect—I fear it is a very real prospect—of things getting much worse in the months and years ahead as a consequence of the coalition Government’s policies and the comprehensive spending review. We have just come through the most serious recession of my lifetime, and housing was inevitably badly affected. Private house building in England fell from just over 150,000 new starts in 2007 to just 60,000 in 2009. That clearly has had a serious impact on the situation, but things would have been far worse if the then Labour Government had not taken a series of bold measures to counter the downturn.

As a result of the fiscal stimulus and more specific policies targeted at the housing market, repossessions, which had been forecast to rise to similar levels to those seen in the recession of the early ’90s, peaked at around half that level. Investment was made through the Homes and Communities Agency in schemes such as Kickstart, the national affordable housing programme, and HomeBuy Direct, which meant that social and affordable housing programmes were maintained and confidence began to return to the market.

In the early months of this year, house builders were reporting month-on-month improvements in house sales and in the output of new homes; it appeared that we had turned the corner. Then came the general election and the formation of the coalition Government. Since then, a series of ill-considered, unco-ordinated, untested and, frankly, irresponsible policy initiatives and cuts have destroyed the prospect of recovery, brought the housing market to the verge of a double-dip recession and spread alarm and concern around almost every sector of the community that is in need of better housing.

Two weeks ago in this Chamber, my right hon. Friend the Member for Barking (Margaret Hodge) highlighted the disastrous consequences of the housing benefit cuts announced in the June Budget. As we had a full debate on that subject then, I will not go over the same ground again. However, I will reiterate her words on the spectre of rising homelessness, indebtedness, insecurity and forced migration, all of which have been prompted by the coalition Government’s policies. Of course, since then, the already bleak prospect has been compounded by the announcement of further benefit cuts and caps in the spending review. It is hardly surprising that fears for the future viability of the private rented market are being voiced by landlords and tenant representatives alike. The situation would be bad enough if that was the only policy change emanating from the Government, but there have been many more.

Confidence in the private house building industry has been severely damaged over the past five months by ill-thought-out changes to the planning regime, a continuing mortgage famine, fears about rising unemployment and severe cuts to the Homes and Communities Agency budget, which had been supporting many new housing and regeneration schemes. Last week, on 20 October, The Times reported that Bellway—Britain’s sixth largest house builder—had

“delivered what one analyst described as an ‘unremittingly bleak’ assessment of the housing market. The Newcastle-based company said that while it had enjoyed a strong spring selling season, consumer confidence had ‘slowly ebbed away’ after the general election and subsequent media discussion of how the Government planned to tackle Britain’s budget deficit.”

The Daily Telegraph reported last week on 22 October that the Bank of England is warning that home prices are likely to remain static or decline in 2011, as home loans become harder to secure after the spending cuts. The article goes on to state:

“The warning will add to growing fears about the fragility of the housing market after values dropped last month by the biggest monthly amount ever recorded.”

The Guardian also reported last week on 22 October that:

“Britain’s struggling housebuilding industry is ‘bewildered’ by government plans to radically change the financing of new council houses as experts warn the measures could have a ‘devastating impact’ on the future supply of social housing.”

[Mr Mark Field (Cities of London and Westminster) (Con)]

I have some sympathy with what the right hon. Gentleman has said. Clearly confidence is fragile, but that is partly because there has been a reality check since the election and the Government have been upfront with the public about the need for austerity. However, I share—I hope that he does, too—the positivity that lies behind the very determined strategy for growth that the Prime Minister has been articulating in the aftermath of the comprehensive spending review. His comments and that strategy will help to restore confidence. The austerity message is important given the fact we were living far beyond our means.

[Mr Raynsford]

I cannot agree with the hon. Gentleman, whom I know well and for whom I have a lot of respect. The truth is that the economy was recovering during the early months of this year, as the figures show. I am not giving my own opinion; I am talking about the opinion of experienced business people, house builders, lenders and analysts who all say exactly the same thing: the housing market was recovering and there was the prospect of growth. In the past five months, that has been taken away by a series of measures—Budget measures introduced by the Government, changes in planning policy and changes affecting institutions that have been summarily abolished. A series of ad hoc, poorly co-ordinated and ill-thought-out proposals have damaged confidence in the market. Any person who is seriously worried about housing should feel very alarmed about that.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate my right hon. Friend on securing this vital debate; he is speaking with his customary expertise on this very important subject. Further to the comments of the hon. Member for Cities of London and Westminster (Mr Field), is it not the case that there has been a conjunction in the restriction of supply—for all the reasons my right hon. Friend has set out—and vicious cuts in the ability of the poorest people to meet the costs of the supply that is available? The consequence of those two factors has been to carry out a vicious attack, particularly on the housing needs of the poorest in our community. Once what is happening gets across to the wider public, it will cause outrage.

[Mr Raynsford]

My right hon. Friend, who has great experience in both the financial field and housing, makes an extremely telling point. I have a huge amount of sympathy for what he is saying. From what I will say later, he will hear that I agree wholeheartedly that the impact of the measures announced by the new Government will disproportionately affect poorer people.

After Ministers have been confronted with such dire evidence of the negative impact that their policies have had over the past six months, one might expect that they would be reconsidering some of their impetuous early decisions and the harsh cuts package. One certainly might expect a Liberal Democrat Minister to wonder why he and his colleagues have lashed themselves to the mast of a Tory ship heading directly on to the rocks, steered by a demented helmsman, while the captain appears blithely unaware of the immediate perils, fixing his gaze instead on some distant coastline and imaginary sunlit uplands and—to use the words of the hon. Member for Cities of London and Westminster—prattling on about growth tomorrow, unaware that the reality is one of cuts and unemployment coming today.

Instead of changing course, Ministers continue to press ahead on their doomed journey, ignoring all the evidence of impending disaster and pinning their hopes on the so-called housing bonus incentive, which is about as unconvincing as the imagined sunlit uplands. The scheme has been promised as the panacea for the housing market for the past six months. In the summer, the Minister for Housing and Local Government promised anxious house builders that it would be launched before the summer recess. We were then told that all would be revealed in the autumn. Now we are promised a consultation in November. All the while, confidence is draining away from the housing market.

Perhaps the Minister can reveal today how that supposed panacea will work. Will it, as the Housing Minister originally claimed, apply to all new homes? That was the prospectus. I now gather that it is more likely that it will apply only to net additions to the housing stock. If that is the case—I would be grateful if the Minister confirmed that—what will that do to regeneration? What will it do to areas where there is a need to develop brownfield sites and clear properties or to improve older, substandard ones as part of that process? In such areas, it will probably be years before there is any net addition to the housing stock. What possible benefit will there be in such areas from a bonus scheme that is based solely on net additions to the stock?

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

It might shorten the right hon. Gentleman’s speech a little if I say that it is a new homes bonus.

[Mr Raynsford]

That is as clear as mud. Is it additional new homes, or new homes? The original prospectus specified all new dwellings.

[Andrew Stunell]

The right hon. Gentleman obviously was not listening. I did not use the term, “additional new homes”; it is a new homes bonus. He should trust the words of the Housing Minister.

[Mr Raynsford]

If that is the case, I am pleased to hear it, but there has been much speculation in the housing press, based on the Housing Minister’s remarks at the Conservative party conference—not an occasion that I attended—indicating that it would apply to net additions to the housing stock. There is an obvious concern, and I hope that we will have greater clarity than we have so far received on the subject.

[Mr Andrew Smith]

There is a further problem with that bonus idea. We have all been present at planning meetings at which those who are opposed to new housing developments say that they are being built for the money. Chairs of planning have been able to stand back and say, “No, the planning issues are being judged on their merits.” Will not they now have to put their hands up and say, “Yes, we are doing it for the money.”?

[Mr Raynsford]

My right hon. Friend makes a valid point. People who are opposed to housing developments will inevitably see a council’s decision to grant consent as tainted if it is to receive a financial sum as a result of doing so. That will always be a problem with such a scheme, and I highlighted the difficulties that it would create almost a year ago when I spoke with the Housing Minister, who was then the Opposition spokesman.

There are many other areas of uncertainty. How many homes will the scheme generate? We have been given some pretty flamboyant promises by the Housing Minister, but how will the Government’s estimates for the number of new homes generated compare with the 160,000 homes for which plans have already been ditched since the general election, primarily because of changes in planning rules? Tetlow King Planning has estimated in a report for the National Housing Federation that a further 120,000 to 140,000 planned homes could be lost in the coming year.

What will be the impact of cuts to funding schemes for local authorities? Which authorities will gain and which will lose? How will the bonus be split between district councils and county councils, bearing in mind that the former have to give planning consent, but that the later have to meet most consequential infrastructure costs? I hope that the Minister can give us more detailed answers to those questions, but I fear that we may have to wait rather longer, as we have waited in vain for the emergence of detail on the scheme for the past five months.

One question that I hope the Minister will answer is this: given all the questions and doubts that have been raised in so many quarters, including by those who have a real understanding and professional involvement in the field, why has the scheme not been piloted to test whether there is a realistic prospect that it will deliver the benefits that the Housing Minister constantly assures us it will bring? How can the Government claim to believe in evidence-based policy making, when they have not a shred of empirical evidence to support the case for the housing bonus incentive?

As if the damage caused by the harsh housing benefit cuts and their maladroit destabilising of the housing market was not enough, the Government have also embarked, in clear breach of Conservative election pledges, on a dismantling of the whole basis of social housing in England. Why Liberal Democrat Ministers and Members are choosing to go along with those disastrous policies is a mystery. Perhaps the Minister can give an explanation. Enjoying security in one’s own home is an asset that almost all hon. Members take for granted, as do the great majority of the population. The old adage that an Englishman’s home is his castle reflects a deep-seated belief that a secure home is a bedrock of a decent society.

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

Is my right hon. Friend aware that a growing body of research demonstrates the negative impact upon children’s well-being of high enforced mobility? The savings gained as a result of some of those measures and the removal of security of tenure will be more than offset by the damage done to children’s health, emotional well-being and educational achievement.

[Mr Raynsford]

My hon. Friend speaks with considerable knowledge and experience of the subject, and I wholly endorse what she said. That is an area where there is great cause for concern. It is rather depressing that it is coming from a Minister whose language reveals the rather cavalier approach that he is adopting towards his policies.

In March this year, in the run-up to the general election, the current Housing Minister said:

“Conservatives will ensure that living in social accommodation means that you’ll get a ‘freedom pass’ to get on and do more with your life.”

That is the first time that I have heard a notice to quit described as a freedom pass. That is an indication of the Orwellian language that the Government are using to justify some of their wholly unacceptable policies.

All of us recognise that security is so important for people’s life prospects, so why should the coalition Government, without any manifesto commitment or reference in the coalition agreement, move to take away that precious security from a group of our fellow citizens who arguably need it more than anyone? The only credible argument advanced by those who advocate the policy is that it will free up social housing, making more homes available to those in need, but any serious analysis of the Government’s proposals shows clearly that it will not have that effect—on the contrary, it will discourage mobility—and that, even if it did have the intended effect, it would have disastrous social consequences.

Let us take those arguments in turn. If existing tenants are not to lose their security, and if new lettings are to be made on a new basis without the traditional security and at 80% of market rents, existing tenants who might have considered moving to a smaller home, so releasing larger accommodation for those in need, will obviously have second thoughts if the result will be a loss of security and a rent increase. The policy would have the opposite effect of that intended. If, however, to counter that perverse incentive to remain in an under-occupied home, tenants are allowed to keep their security when moving and not have a rent increase, there will be grotesque anomalies. Wholly different rents and tenancy terms will be perpetuated solely on the arbitrary criterion of whether the tenancy is offered to a transferring tenant or a new applicant.

Worse still will be the consequences of using the new insecure tenancies to require tenants to move on if their income increases or if they are judged to have enjoyed sufficient time in social housing. What chance is there of creating mixed and balanced communities, rather than ghettos of deprivation, if anyone who gets on is told to leave? If only the poor and the unemployed can occupy social housing, that is a recipe for residualisation and a total disincentive to aspiration.

[Mr Andy Slaughter (Hammersmith) (Lab)]

My right hon. Friend has come to the nub of the issue, which is that this is not about creating balanced communities but about social engineering. On new build housing, I use the example of my local authority, Hammersmith and Fulham, which is aiming for 40% affordable housing over the next 10 years. All those units will be intermediate housing, which is for people on incomes between £20,000 and £80,000 a year, yet 40% of households in the borough are on incomes below £20,000. The people most in housing need will not be provided with housing.

[Mr Raynsford]

My hon. Friend makes a valid point and shows the linkage between the policies on housing benefit, which will put enormous pressure on people on lower incomes to move out of high-cost areas, and the impact of the changed social housing policy that the new Government are introducing, which will have exactly the same effect.

I can match my hon. Friend’s observation by referring to the experience in my constituency. In the SE10 postal district, which is at the heart of the Greenwich and Woolwich constituency, average market rents are estimated at £380 a week and 80% of them would involve a rent of more than £300 a week for a supposed social letting. No one in low-paid work would consider such a tenancy unless they were to have most of the costs covered by housing benefit. Of course, if that were the case, there would be a huge surge in the cost of housing benefit, which hardly tallies with the coalition Government’s current objectives, nor the caps that they are applying.

Indeed, if people did move in on the basis that they would get most of their costs met by housing benefit, the double whammy from some sanctimonious Minister would be a call for further housing benefit cuts or caps on the grounds that people on benefit should not be able to live in such expensive areas. So who will occupy any homes that are built on that basis? Some may go, perfectly properly, to people in what is often described as the intermediate market. One of the more encouraging trends in recent years has been the development of mixed-tenure communities with opportunities for people to occupy housing on a range of different terms: social renting, intermediate renting, market renting, low-cost home ownership and outright ownership.

The whole point of such diversity is to provide for a range of needs and for people in different economic circumstances. It makes a lot of sense to provide intermediate renting solutions as part of mixed developments. However, it makes no sense to substitute intermediate renting for the social renting options that are available to those on low incomes. If in Greenwich, where social rents for council and housing association tenancies are currently in the range of £80 to £110 a week, all new lettings involved a substitution with lettings at 80% of market rents, the poor would lose out, and, even so, the scheme would probably fail because low-cost home ownership would provide a more attractive proposition to those who can afford a rent in excess of £300 a week.

Once again, we see a policy that has all the hallmarks of being made on the hoof. There is no serious analysis of its likely consequences, let alone empirical tests or pilots to see whether it works. It carries all the marks of the coalition Government proposing far-reaching and fundamental changes to institutions and policies that have potentially devastating consequences, with no supporting evidence base.

In their five months in office, the coalition Government have already had a disastrous impact on housing in this country. The recovery from recession has been stalled, house building is in crisis, social housing is facing a death warrant, private renting is being undermined by housing benefit cuts and hundreds of thousands of tenants are fearful about whether they can continue to afford their rent and many more are under the threat of having to move or facing the bleak prospect of homelessness. It is difficult to think of a more inept and deplorable record in such a short period of time. One can only hope that Ministers will come to their senses and recognise that this is no way to run housing policy. Our country and our people deserve better.

09:54

[Tony Baldry (Banbury) (Con)]

Banbury and Bicester are both growing towns. I now have the 15th largest constituency in the country in terms of population, and, collectively, we most certainly are not nimbys. Planning permission has been granted for thousands of new homes in Banbury and Bicester, for the refurbishment of some 300 houses and for the building of some 700 new houses at the former RAF Upper Heyford site. In addition, Cherwell district council, Oxfordshire county council and Bicester town council are supporting the development of the new Bicester eco-town as an exemplar housing development, demonstrating low-carbon housing and a sustainable community.

We are waiting to learn whether a fully funded flood defence project, supported financially by the district council and businesses such as Chiltern Railways, will get the go-ahead following a public inquiry. If it does, that will enable a new regeneration scheme of mixed residential and commercial properties on the canal-side that runs through the centre of Banbury. Further to that, Defence Estates appears to want to release some sizeable land holdings on the outskirts of Bicester. If it is realistic about the price, the land could be used for shared equity housing and new social housing.

I am sure that Cherwell district council will want, wherever possible, to take advantage of the new homes initiative, a programme under which the Government will give local housing authorities a multiplier of 1.25 times the amount the occupants pay in council tax for six years, in addition to the council tax payment itself.

In my area, planning permission has been granted for hundreds of houses. However, at present, construction of new houses on new sites in my constituency is painfully slow. As a consequence, the prospect of wider community gains, such as a new community hospital in Bicester, has been delayed. Why is that? Simply, it is because house builders are hoping that the market for new houses will strengthen before they start to build, so we have a Catch-22 situation.

The first issue that I would suggest has to be grappled with is the availability of mortgages so that people can buy homes or get the funding for sensible shared equity schemes. Mortgage lending dropped to a 10-year low last month; it was the lowest September total since 2000. So while mortgage rates have dropped in recent weeks, banks and building societies appear to be continuing to tighten their lending criteria. The rates are being reduced but the criteria are being tightened, and the Bank of England has warned that lenders are expected to tighten further their criteria, making it even harder for people to get mortgage funding.

If people cannot obtain mortgage funding, they will not buy new homes and developers will not develop sites. That obviously will make life much more difficult for those who aspire to own their own homes. It also makes it much more difficult to provide new social housing. For some time, in areas such as mine, new social housing has almost entirely been a planning gain; a proportion of new social housing is built as part of large-scale new developments. Therefore, if one does not have significant new housing developments in Banbury and Bicester, one will not have the much-needed new social housing that goes with them. There is no new housing and no new social housing without new development.

What can be done to get the building societies and the banks to play their part in a housing recovery? No one is suggesting a return to the daft income multiples for lending that we saw several years ago, which certainly did not help anyone but simply led to artificially inflated house prices, but we do need the banks and building societies to be prepared to lend at responsible multiples to enable people to start buying their own homes again.

The banks’ targets for lending for 2010 seem unchallenging. My first question to the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hazel Grove (Andrew Stunell), is what he and my right hon. Friend the Minister for Housing and Local Government are doing to encourage the banks and building societies to adopt lending criteria that will get the housing market going again. That must be in everyone’s interests. Frankly, any discussion about housing numbers will be somewhat academic unless builders feel able to build houses for sale and buyers can access reasonable mortgage finance.

That takes us to the rest of the housing market: social housing and the private rented sector. I have enormous respect for the right hon. Member for Greenwich and Woolwich (Mr Raynsford) and his knowledge and expertise in this area. However, I must say to him very gently that I do not think it sensible to start using words like “sanctimonious” and “demented”, given that the record of the last Labour Government on the housing front was one of lamentable failure. He started his speech by saying that he could never recall “a bleaker outlook” for housing. In fairness, this Government have been in office for just a few months—and that was commentary after 13 years of a Labour Government. Furthermore, that type of hyperbole will not help any of us, really.

Housing figures for the last year of the Labour Government fell by nearly a quarter on the previous year, with only 128,680 new properties becoming available. That was the biggest decline since the Department for Communities and Local Government began collecting data 10 years ago, when it was part of the Office of the Deputy Prime Minister. Moreover, that decline was against a Labour target of 240,000 new homes, which was itself pretty modest. Also, waiting lists for social housing doubled under Labour to five million people, so in fairness it is not for ex-Labour Housing Ministers to be so censorious.

We started off with an inheritance of a huge waiting list for social housing and huge pressures on public finances, and they are both inescapable realities of today. Consequently, it is inevitable that public investment will be limited, although I understand that £1.1 billion will still be allocated to social housing each year for the next four years. Clearly, all of us have to find new ways to try to ensure that public investment goes further. Why have a record of what we would like to have in halcyon days if it is not possible to deliver?

Every Member of Parliament, whether they represent a constituency in inner London or a constituency such as mine, would acknowledge that there are great pressures on social housing. Furthermore, I am sure that pretty well every colleague in this House will acknowledge that one of the predominant issues in our constituency surgeries is the desire of people to access social housing and to have—understandably—a decent home.

At present, social housing is provided by a number of housing associations, and there is a private rented sector with a multiplicity of private landlords. However, very few sizeable businesses have moved into the private rented sector. Why, for example, have the pension funds not become more involved in investing in becoming private sector landlords?

As I understand it, local authorities will be able to borrow against the income that they attract from the new homes initiative to help fund new housing projects, and to encourage those with private finances and property developers to become involved. I say to my hon. Friend the Under-Secretary, who will respond to this debate, that we have heard a lot from Ministers about the new housing bonus. However, we have not had as much detail as I suspect local councillors, council officers and others would find helpful about what local authorities are expected to do to respond to what seems to be a Government offer for local authorities to start to behave in a different way, in terms of local authorities being a catalyst for getting new housing projects going on their own patch.

For many years, local authorities have certainly been planning authorities, and they have sought to encourage registered social landlords to become involved with major new housing developments, but what is being proposed is something new for local government. As my hon. Friend the Under-Secretary will know, it sometimes takes a little time for councillors and council officers to realise what is being asked of them and what they are being invited to do, and if local authorities are being asked to approach local housing supply and housing projects in a different way, it behoves the Government to ensure that the new housing bonus, including how it will work, is fully understood. For example, will local authorities be allowed to borrow against that new housing bonus? If the anticipated bonus will run for six years, can a local authority borrow all the money up front? Will there be freedom to do so? What will the Treasury say about that, and so forth?

There are a number of other issues that we must face up to. I am conscious that others wish to speak in this debate, so I will try to keep my comments short. However, we need to be adult about this. At present, those who access social housing usually have security of tenure for life; indeed, in certain circumstances, they can pass on their tenancy to the next generation. Generally, they also have rent levels that are markedly below those being paid in the private rented sector. By contrast, those in the private rented sector often pay significantly higher rents and have to be assisted by housing benefit, but often they have a security of tenure that is no greater than an assured shorthold tenancy of six months.

In addition—I suspect that this applies to the constituencies of most colleagues, given the way that housing allocation policies work—it is now often extremely difficult for working families on modest incomes to access social housing. A working family—a husband and wife both at work on modest incomes, with two children—have little choice nowadays but to rent in the private rented sector, with significantly less security of tenure. For those reasons alone, and particularly because of that disparity, there are issues that need to be properly debated. As I understand it, what my right hon. Friend the Minister for Housing and Local Government is seeking to do, in part, is remove some of the types of distinctions that have, over time, grown up almost by accident as we have developed housing policy.

There are a number of questions that are genuinely about all of us wanting information and knowledge. For example, I see that my right hon. Friend intends to introduce a new tenancy for social tenants called “affordable rent”. As I understand it, that will effectively almost give a person a short-term tenancy as a social tenant, but there are a number of issues to consider.

At the moment, if one becomes a tenant of a social landlord, one is generally enabled to remain a tenant of a social landlord for as long as one wants. Of course, that is one of the reasons why people are understandably very anxious to be able to access a social housing tenancy; they know that they will then be able to remain in that sector pretty much for as long as they want. However, what happens when someone ceases to be a tenant of an affordable rent tenancy? Do they remain in the social sector? Or what then happens in terms of definitions of statutory homelessness and so on?

We must engage collectively with the substantive issues and not the non-issues, but that is not a criticism of colleagues in the House today. Whether this measure is a new homes “bonus” or a new “homes” bonus is a matter of fact; it should not require a whole load of debates across the House. So I just say to the Under-Secretary that the more the Government, and in particular my right hon. and hon. Friends in the Department for Communities and Local Government, can do to explain all this, the more we will be able to focus on the substantive issues, rather than debating things that are fanciful.

[Mr Andrew Smith]

The comments of my honourable colleague from Oxfordshire about the availability of mortgages and the need for more detail on the housing bonus were well made. I am not quite clear whether he supports the idea that because some people in the private sector are insecure, it is a good idea to make people in the social sector insecure. If he supports that, does he accept that it will have appalling consequences on families? We could all go round an estate and see which houses have shorthold tenancies, because the gardens are a mess and the houses are dilapidated. Does that not threaten to have an awful effect on communities?

[Tony Baldry]

The point that I am trying to make is that at present we have an artificial division in the housing market. On housing estates in the right hon. Gentleman’s constituency and mine, families that would have been the anchors of traditional 1950s estates on which those of our age grew up—working families from Cowley and so on—find themselves in an insecure position as assured shorthold tenants. Whether the categories of tenancies and tenants are endurable in the 21st century is a legitimate debate. I am trying to understand exactly what the Government are proposing. I am seeking knowledge, because our councillors and constituents will soon come to us asking for an explanation, and I would like to be able to provide one.

That takes me to housing benefit, and I have some questions for my hon. Friend the Under-Secretary. I have heard my right hon. Friend the Minister for Housing and Local Government say that the Government intend to increase rents in both the private rented sector and, particularly, the social sector, to nearer 80% of market rents, but families will be able to access housing benefit. I am not clear about this; I  need an explanation of the suggestion that a greater return from housing investment would attract more investors from the private sector—banks and so on. That may be a worthwhile objective, but if that is funded by housing benefit, I do not understand how it will reduce the housing benefit bill. I want to understand how those two policy imperatives relate.

When public finances are tight, we cannot pretend that we can do as Harold Macmillan was able to do in the halcyon days of the 1950s and build as many new homes as we want. Sadly, that option is not available to us, but if we are not to have a frustrating non-debate, the more information that the Government can provide about what is intended, the better.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Will the hon. Gentleman give way?

[Tony Baldry]

I am about to finish, because I know that other right hon. and hon. Members want to speak.

The Government have given a lot of information about the new homes bonus, and I think we all understand it. What we now want to understand is: what is intended for the relationship between social tenants and private sector tenants; how the Government will go forward; the nature of the various new tenancies, including under the affordable rent scheme; and how housing benefit rules will relate to those who pay higher rents, so that we can attract investors into the housing market.

10:14

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

The Government’s comments on housing in the spending review suggest that the most pressing problem—indeed, almost the only one—is the increased bill for housing benefit. I congratulate my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) on securing this debate, and on the usual expert way in which he dissected the Government’s policy and its lack of an evidential base.

The housing benefit issue has arisen not because more people have claimed it over the past few years, but because the amount being claimed has risen as rents have risen. Rents have risen because of a shortage of housing in this country, which is the same reason why house prices have risen in the private sector. The Government should address that fundamental problem, and not try to find appalling ways of cutting benefits and forcing people into housing difficulties. I shall give two examples.

The Deputy Prime Minister was upset in the Chamber yesterday when the words “socio-economic cleansing” were used. Undoubtedly, there will be a substantial dispersal of families from the centre of London to the outer boroughs because of the Government’s policy of housing benefit not covering private rents to the same degree as previously. That policy will apply not just in London, and the Deputy Prime Minister should be upset because the problem will also occur in Sheffield. It will not be just the overall target figures for the maximum amount of housing benefit that can be paid that will have an impact, it will be the 30th percentile because of the large disparity of rents in cities such as Sheffield where people will be dispersed from the affluent parts in the Deputy Prime Minister’s constituency to the rest of the city. Those people will not be just the workshy, feckless families that the Government like to stereotype, but people in professional jobs who lose their jobs in the next few months and also lose their homes. That is the reality of the situation.

My second example is the very unacceptable policy—I say no more than that—of dealing with people in under-occupied properties by telling them that the size of property that may be funded by housing benefit will be limited. Let us take a couple in their late 50s who have brought up their family, who have now left home. That couple may be in work, but planning to retire at 65 and to move at some stage to a pensioner’s bungalow if they can find one. They will want two bedrooms because their grandchildren come to stay, and that is perfectly reasonable, but there is a shortage of bungalows, so they will have to wait some time, even when they have retired. Suddenly, they become unemployed—that is a prospect that will hit many people in the next few months—and cannot afford their rent because it is no longer covered by housing benefit. They have a family home in which they have invested and which contains their furniture and family memorabilia. They may have a garden that is their pride and joy, and which they use for recreation. Suddenly, they will be moved to a one-bedroom or two-bedroom maisonette or flat somewhere with the all the costs involved at the very time that they lose their jobs.

Such family situations will occur, and if people move, do they move to a property where the new rent will be 80% of market level? Will the Minister explain whether that will apply to transfers for existing social housing tenants, and to mutual exchanges and assignments? Will it be covered by housing benefit in total, in which case, will the Department for Work and Pensions pay if extra money comes into social housing through the introduction of the new higher rent levels? That is all unclear, and it is incredible that such a major housing policy is introduced with a few words in a spending review.

What do 80% rent levels mean? In his statement, the Chancellor said:

“New tenants will be offered intermediate rents”.—[Official Report, 20 October 2010; Vol. 516, c. 953.]

Does “will be offered” mean that they will have a choice about whether they accept those rents, or will they have to have them? Will landlords have a choice? “Will be offered” seems to imply that all new tenants will have such rents, but the spending review document that the Treasury produced says:

“Social landlords will be able to offer”.

It introduces the word “able”, so what is the Government’s policy? Will social landlords have to introduce rents at that level for new tenants, or will they be able to offer them if they choose? What will happen if they choose to do so?

We understand that there will be a cut of at least 50% and probably more in the amount of money available from the Government for social housing through the social housing grant. That extra money from rents, presumably partly funded by the DWP, is supposed to fill the gap. What is the situation regarding social housing grant? If a social landlord decides that they will not increase rents for new tenancies to the new 80% of market level, they will presumably forgo some of the money that they could otherwise have received to build new social housing. That is apparently the purpose of increasing rents to that level. If they do that, and if in future the option is available to keep rents at the current level and tenancies on the same basis for new tenants—we do not know whether it will be available—will they forgo access to a social housing grant? Will availability of the social housing grant be dependent on landlords being prepared to bring in new rent levels and tenancy conditions for new tenants? We need some clarity on the matter as it is unclear.

A policy has been introduced through a few comments in the spending review. It has significant implications for housing but it has not been thought through—at least, if it has been thought through, we have had no explanation about how that was done. We need a clear explanation from Ministers about whether it will be compulsory for landlords to introduce those rents, whether that will have an effect on housing benefit, whether the rules will apply to existing tenants who move, and whether the policy will be linked in some way to access to a social housing grant, whether landlords introduce the measures or not. Those are key questions that have received no response.

The Government have told us that they do not have housing targets—apparently they are out of fashion, along with regions and one or two other things. However, when the Housing Minister came to the Communities and Local Government Committee on 13 September, he accepted an important point. Success will be achieved by building more homes than the Labour Government built before the recession; failure will be building fewer homes. Therefore, the target is to build more than 200,000 homes. That is what was happening previously, so by default, that is the new target introduced by the Government.

We all know, for obvious reasons due to the recession, that there has been a fall-off in house building. We must find appropriate ways to get that building back. The Communities and Local Government Committee is conducting an inquiry into the abolition of regional spatial strategies, and housing targets at regional level being cascaded down to local level. I do not want to prejudge the outcome of the inquiry, as that would be wrong. However, we have received a lot of evidence from people who were unhappy with the operation of the regional spatial strategies. People felt that they were heavy handed and did not take account of local needs. There was also a lot of concern that the Government had abolished the strategies without thinking through the replacement.

One telling comment was made about the new homes bonus which, importantly, we understand is for every new home, not just additional homes. If the new homes bonus is set at a level that would achieve the number of homes needed in this country, even on the Government’s new target figure of over 200,000, it would not be affordable given the money that Ministers have indicated is available. If the new homes bonus is set at an affordable level, it would not achieve the number of new homes necessary. There is a disjunction between what the Government think they can offer, and what is likely to be achieved.

A letter from the Secretary of State sent to local authorities last week stated that the new homes bonus may be paid not on the basis of homes built, but rather on consents given. Is that the case? If it is, we could find that a lot of consents are given in areas where homes will never be built. Money will be spent but nothing will be delivered. That situation also needs clarifying.

The policy may not have an immediate impact because, as we all know, there is a shortage of demand at present. People are concerned about their futures, living standards and jobs. There is a fall-off in demand for housing; prices have been dropping recently. The major concern about the availability of mortgages has already been mentioned. According to the Council of Mortgage Lenders, some of the proposals from the Financial Services Authority may have even bigger implications for mortgage availability in the future.

Let us assume that in three or four years’ time, economic confidence eventually returns, families feel able to return to the housing market and there is mortgage availability. If over the years, fewer and fewer planning permissions have been awarded because of the change in Government policy, we will see a massive spike in house prices and we will go back to the same problems that we hit in the 1990s. In five years’ time—I am sure that the Minister will be conscious of the relevance of that date for the Government—we could have a situation where fewer homes, in particular affordable homes, have been built, prices have started to rise sharply and rents in the private sector and elsewhere have gone up. People’s misery will have been compounded by the changes to housing benefit. That is not a happy record on which to fight an election.

10:24

[Mr Mark Field (Cities of London and Westminster) (Con)]

I congratulate the right hon. Member for Greenwich and Woolwich (Mr Raynsford). As he rightly says, we have not so much crossed swords as spoken on many occasions on various Bill Committees and in Westminster Hall. Like him, the issue of social housing lies close to my heart. On one level, I was disappointed to see that the capital grant funding has been halved, although I entirely understand the reasons behind the Government’s decision given the deficit that we face—I suspect that the right hon. Gentleman will not follow me on that.

I am delighted at the introduction of further rent flexibility to generate a greater borrowing capacity. I take on board the point raised by the hon. Member for Sheffield South East (Mr Betts) and I hope that the Minister will indicate whether the powers are mandatory or, as I suspect, part of the panoply of options open to housing associations.

In January 2009, I initiated a debate in Westminster Hall that highlighted the need for social landlords to be allowed to use their stock more flexibly. At the time, I argued that the current economic climate—which I suspect has not changed much over the past two years—provided us with a once-in-a-lifetime opportunity to create a more flexible rental market. I advised:

“Housing associations are often frustrated that the income they receive from renting a property barely covers maintenance costs and that the rental income from a four-bedroom house is only slightly more than that from a two-bedroom flat… A relaxation in rent policy will increase incentives to build to higher standards and reflect the relative value of a social tenancy.”

My hon. Friend the Member for Banbury (Tony Baldry) referred to that point in his comments.

“Rent differentiation would also provide an incentive for a couple to downsize when they no longer need to stay in a large property when their children are grown up. That would hopefully free-up valuable family-size accommodation to address the problems of overcrowding.”—[Official Report, 14 January 2009; Vol. 486, c. 76WH.]

Such problems of overcrowding are particularly acute in the middle of cities such as London.

I went on to use the example of the housing arrangements of one of my constituents who had recently passed away. She lived as a secure tenant on the Peabody Wild Street estate, at a rate of £75.50 a week, which included services. That estate is moments away from Covent Garden piazza, and the market rent for such a flat would be around £320 a week, probably more by now. When she passed away, the flat was re-let at £116 a week to a tenant with support needs. The difference between the social and market rent was £200 a week, or £10,000 a year. That situation has been worsening over the past couple of years.

With the neediest households receiving priority for housing in my constituency and many other constituencies in the capital, my worry is that such places have become home almost exclusively to either the super-rich or the very poor. That polarisation is not a healthy state of affairs. I do not want to be too London-based; I am sure that the same point applies in Sheffield and many other big cities. All hon. Members will have constituents who earn multiples of the average national wage, who cannot get on the property ladder or afford inner-city rents, but who are regarded as far too wealthy to qualify for social housing. The gap between social and market rents and the inflexibility of the social rent structure has meant that the cost of renting in London remains a significant issue.

I accept that some of the Government’s policies are still in gestation. One hopes that they will take on board some of the concerns reiterated over the years by myself and the right hon. Member for Greenwich and Woolwich. Too often in these debates we end up talking about the interests of existing tenants who are understandably anxious about the idea of their situation changing. In doing so, however, we ignore those less vocal people who make huge sacrifices of time and money to commute to their jobs in the inner cities, or those whose families have been in a local area for generations, but who are forced to move away because of the unaffordability of city centres, particularly in London. It is right to identify the interests of those who will be affected by the new policy, but we should not forget those who have suffered under the existing regime.

The polarisation of our inner cities is a direct result of decades of well-meaning Government intervention from parties on both sides. If some of the Government’s proposals make it easier for young, hard-working people on middle incomes to afford to live in the centre of London, that is a good thing. This week, the right hon. Member for Barking (Margaret Hodge) warned that the Government’s policy will create middle-class ghettos in our inner cities. In truth, the young middle classes have been virtually excluded from my constituency over the past decade. We have the absurd situation where the taxpayer massively subsidises the unemployed to live in the centre of London, while working people pay extortionate amounts to commute to their jobs because they find rent levels unaffordable in the centre of town.

Some of the G15 housing associations have come up with a number of new schemes. I hope that some of that innovation will allow young people and young families, who are particularly important, to live at affordable rents while being able to save so as to move to another property or perhaps to buy a share in one in the future.

However, I also accept that the speed at which the cap is being put in place perhaps ignores some of the logistical problems for local authorities—huge logistical problems for some local authorities—in arranging new accommodation, but also coping with a sudden influx of new claimants. About 80% of the people living on housing benefit in my constituency receive a sum in excess of the housing benefit cap. I suspect that that is relatively unusual, but we are still talking about relatively high percentages even in other parts of the capital. For those individuals, this is an incredibly unsettling time. For the areas to which they will move, there will be huge social upheaval, which will affect health services and education as well as, obviously, the basic housing in the locality.

It is likely that, given the option of being able to rent out central London properties at 80% of the market value, social landlords will, to a large extent, choose to do so. At one level, that is no bad thing, because it will allow them to invest in new stock and improve the derisory levels of house building seen in recent years, but equally, as a number of hon. Members pointed out, some unintended consequences may come into play.

[Mr Raynsford]

I will not detain hon. Members, because others want to speak, but will the hon. Gentleman clarify whether he agrees with my view that it is right to encourage tenure diversity, as I said in my speech, but it is wrong to substitute the new near market rent tenancies for social tenancies at low rents, because then the poor will be excluded?

[Mr Field]

I think that there is a real risk of that. We want diversity; we want diversity of communities. The right hon. Gentleman is right to say that the issues will have to be properly identified and nailed down before we move forth.

I appreciate that other hon. Members want to speak, so I shall just make two quick observations. With regard to provision of housing by my own local authority, Westminster city council remains confident that local authorities can deliver more affordable housing, even in a period of economic austerity, provided that they are able to think and act creatively. For too long, as we know, local authorities have over-relied on section 106 agreements and registered social landlords to deliver social housing. In that respect, the establishment of the Westminster Community Homes charity locally and its development arm, Westminster Homes Development, will be critical.

My other observation, which slightly concerns me, is that a number of local authorities look on the revolution that is about to take place as an opportunity to welcome the practice of housing finance being treated as off balance sheet, bringing Britain into line with much of the rest of Europe and allowing local authorities greater flexibility to borrow against the existing stock. I confess that I would not support that. I put on record in this Chamber as long ago as 2007 my grave reservations about off balance sheet financing for private finance initiative and public-private partnership projects by the previous Government. The cost of those will become apparent over the next 25 years. At a time when we need to improve our infrastructure, we have huge costs for schools, hospitals, prisons and road building that have already been put in place. I therefore think that we should above all try to avoid that technique.

[Mr James Gray (in the Chair)]

It may be helpful to hon. Members to know that I intend to call the shadow Minister at 10.40 am.

10:33

[Mrs Madeleine Moon (Bridgend) (Lab)]

I apologise to hon. Members, because I have another appointment that I cannot get out of, so after making my presentation, I must leave. I request that hon. Members accept my apology for that.

The hon. Member for Banbury (Tony Baldry) has said that it is in everyone’s interest to keep the housing market moving and commented on the huge waiting list for social housing in his constituency. In some areas of my constituency, the wait for social housing is up to 14 years; in one of my local towns, people can wait 14 years to get into the social housing market. The problem has been exacerbated by the selling of council housing, which has reduced the number of houses locally. We do not have any council housing stock. We had a housing stock transfer and all the stock went to a social housing landlord—Valleys to Coast. I met with it recently to discuss the success of the public-private approach to funding housing associations and how that could be undermined by a combination of the drastic changes to housing benefit and the knock-on effect on the confidence that lenders will have in the social housing sector. The success is based on housing associations having been previously perceived to present a low risk to lenders.

In a letter to my local housing associations, the Council of Mortgage Lenders has said that it estimates that

“housing benefit typically underpins 60% of rent income for housing associations.”

That means that housing associations have a steady and robust income flow, which helps them to attract new investment. The CML has stated categorically to my local housing associations that changes in the payment of housing benefit

“will result in a loss of confidence and appetite for lending to and investment in the sector.”

The proposed changes mean a squeeze on everyone concerned: the new tenant facing a rent increase to up to 80% of the market rate, current tenants coping with the impact of the benefit cap and housing associations facing difficulties in securing investment because of a loss of confidence in their sector. Confidence in the sector is being undermined, yet somehow the Government believe that thousands of new homes will be built in the next four years. In my view, the cuts will fundamentally undermine confidence in a successful sector and condemn thousands of tenants to a lifetime of poverty. The chief executive of the National Housing Federation summed up the result of what has been announced by saying that

“it shows that providing affordable housing is no longer a government priority.”

Before I came into the House, I worked for many years in social services. I am ashamed to say that I remember when social workers took children into care because their families were homeless. I never want that to happen again, but I am now living in fear that it will.

One of my constituents took the challenge of moving out of social housing and took out a mortgage with Redstone. When he took it out, it was not at a bad rate—5.15%. He then, as happens to many people, became unemployed. He lost his job and has struggled since to find employment. Unfortunately, his payments have now been reduced because of the change in mortgage interest payments. His mortgage payment is £158 a week, but he now receives only £94 a week, leaving him with a weekly shortfall of £63 a week. However, his benefit support is only £64 a week. He has been told by Jobcentre Plus to go to the mortgage lender. The mortgage lender has sent him back to Jobcentre Plus. He is trapped. He is unable to sell. The mortgage cannot be met. He faces repossession and losing his home. I have written to Redstone, asking what it can do to help.

I used to spend much of my time in my surgeries dealing with people who were desperate to get into social housing. Increasingly, I see people who have made a decision to try to get into the market living in fear of losing those market-based homes because they are in a housing trap. That is what worries me most. At every turn, the lowest-income people in this country face a trap that will lead them into homelessness. Labour Members are desperate to avoid that. I hope that the Government are listening and will address the housing needs of those families.

10:39

[Alison Seabeck (Plymouth, Moor View) (Lab)]

It is a pleasure to be called to speak under your chairmanship, Mr Gray, for the first time in my new role.

I start by congratulating my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) on securing the debate on a matter of such fundamental importance to our country and local communities.

Let us be clear: there is a shortage of supply. We have been through the worst recession since the 1930s. However, in the teeth of the global recession, the Labour Government supported the building of 50,000 homes in the first six months of this year through the Homes and Communities Agency.

The housing sector has been like a patient on life support—but this month the Government pulled the plug. In the comprehensive spending review, they have failed to offer the sector any sense of direction. Instead, we have had the revocation of planning rules, whereby hundreds of thousands of much-needed homes will be scrapped, while the new homes bonus scheme has been long delayed. Given the time lag inherent in the eventual payment arrangements for that policy, when does the Minister anticipate that the first foundations of such homes will be laid?

The Government have shown over the past few months that they have the capacity to destroy confidence in the housing market, to reduce the number of new homes being built and to eviscerate the very concept of social homes. Rent at 80% of market rates is simply not affordable for many hard-working families on low incomes or, indeed, for pensioners. Many families will not accept new, more expensive and less secure tenancies, leaving them with the unpalatable choice of remaining in overcrowded accommodation. Does the Minister believe that that would represent a fair deal for tenants? Tenants do not seem to matter any more.

If the economy is to grow—the hon. Member for Cities of London and Westminster (Mr Field) highlighted the importance of growth—we need to ensure that people can be mobile. The changes proposed by the Government represent a significant block to moving by choice to access new jobs. I said “moving by choice” deliberately—we will see people having to move, because they have no choice, to areas of poorer housing, with few job opportunities, since that is where all the cheap accommodation will be. According to London Councils’ briefing on housing benefit changes, local authorities are already looking to the outer ring of London and beyond for suitable temporary accommodation, moving families away from the areas that they know to bed and breakfasts in seaside towns—something we have not seen since the early 1990s.

My hon. Friends cited many examples of the impact of current and future policies, and they all supported the general thrust of the speech made by my right hon. Friend the Member for Greenwich and Woolwich that we need to have a viable intermediate and social housing sector to meet needs. He also highlighted the month-on-month improvement in sales up to the general election, followed by the fear of a double-dip recession as the implications of Government policies are understood in the sector.

The hon. Member for Banbury (Tony Baldry), in his genuine search for knowledge and answers to questions, highlighted not only the importance of the good use of public sector land in his area, but, importantly, the issue of mortgage funding and the concern that there is a narrow view in the Financial Services Authority that is not allowing sensible risk or flexibility in the lending sector.

My hon. Friend the Member for Sheffield South East (Mr Betts) spoke of others’ expertise, but his contribution to the debate gave us the benefit of his own. His unpicking of the detail of the housing benefit and its associated costs was forensic, highlighting the confusion in the advice given in Government documents. I hope that we get some prompt clarification of some of his points from the Minister.

The hon. Member for Cities of London and Westminster also mentioned the uncertainty about the precise implications of Government policy. He touched on repairs and maintenance as well, but my understanding is that the money raised from the new higher rent will not be earmarked for maintenance. If that issue is not tackled, we will see a drift back into a huge backlog of disrepair. He also mentioned housing finance being treated as off the balance sheet—I would welcome the Government’s clarification on that position.

My hon. Friend the Member for Bridgend (Mrs Moon) made a powerful speech highlighting the personal misery that can be caused by Government policies and the housing trap.

Every stone that I have lifted since coming into my post has revealed another issue that does not seem to have been understood or addressed by the Government. The Minister must see the contradictions between the different strands of his Government’s policies. He must see the damage that his policies are doing to the aspirations of families who just want to secure a roof over their heads.

Many right hon. and hon. Members value the diversity of their constituencies—a point made by the hon. Member for Cities of London and Westminster—and they know that the changes advocated by the Government and the Minister will tear it apart, through a housing and benefits policy that will, essentially, ghettoise those in social housing and on low incomes. We need to value mixed communities and the Government’s policies do not deliver that.

To return to tenancies before I wind up, the Minister was once a vocal supporter of secure tenancies and low social rents. We have to ask, if there were a Conservative majority Government and he were still in opposition, would he have kept true to his earlier beliefs? We know what those beliefs were—the Minister was a serious, cautious, discriminate and highly selective signer of early-day motions while in opposition. He signed more than 2,800 in the last Parliament and, in 2008, put his name to early-day motion 355. Perhaps he does not recall it, but let me quote it:

“That this House points out the urgent need to boost the economy by a massive programme of public investment to improve existing council homes and estates and build a new generation of first-class council housing to provide secure tenancies and low rents”—

sentiments supported by many hon. Members in the Chamber.

The Minister has a waiting list of around 9,000 in his own authority. The average weekly rent for a property there is about £54, yet he now advocates rents at 80% of the market: an increase in London of about £200 a week for a two-bedroom property and of about £50 in Hazel Grove. How many of his constituents will be able to afford to remain living in his constituency? Perhaps his majority, too, is being gerrymandered?

As a member of the Government, the Minister will have to vote in favour of the removal of the security of tenure. He will oversee a 60% reduction in the Government’s funding for new affordable homes. Call it a U-turn or a volte-face, but whatever we call it, we know the decision is wrong for this country, making a mockery of the phrase, “We’re all in this together.”

No, it does not really matter when the Minister changed his mind. Was it before or after the coalition discovered that the debt was lower and economic growth higher than they expected when taking office? Was it before he ceased to be an Opposition MP or, as I suspect, when the chance of cosying up to the Secretary of State for Communities and Local Government proved too much to resist?

Can the Minister confirm, in addition to responding to the excellent points made by right hon. and hon. Members, that the 67,000 homes to be built in the next two years are in fact a carry-over from the previous Labour Government’s plans? They are Labour’s houses. Can he confirm that the remaining 80,000 homes that the Government hope to build will not be for social rent at all and that to call a rent of 80% of the market rate affordable is disingenuous? Can he confirm that any lack of take-up of the new tenancy will create a shortfall in the Government’s funding plans for new housing? Can he confirm that the revocation of the regional spatial strategies will cause the cancellation of more than 300,000 planned homes between now and next year, as the National Housing Federation suggests?

What is the Housing Minister’s plan B? According to the response that he made to the Select Committee on Communities and Local Government, it is to keep upping incentives until the local authorities bite. At what point will a decision be taken to increase the incentive? What is the figure for new builds that will give rise to a review of the payment? What hope does the scheme have if local authorities and, to a certain extent, developers know that Ministers will increase the money that they receive if they simply wait? The consequences of the Government’s actions will be felt for a generation. I look forward to the Minister’s response.

10:48

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

A lovely bit of slapstick—I really enjoyed that—but we should start with a few facts. In 1997, the hon. Member for Plymouth, Moor View (Alison Seabeck), looked on the outgoing Government’s record as a disaster, as I did. They had built 830,000 homes but sold 1.2 million, and 400,000 homes were lost to the social rented sector, which had a waiting list of just more than 1 million. The Labour party and the new Labour Government said that they would tackle the situation. They built 377,000 homes for rent and 182,000 homes for the low-cost home-ownership market—a total of 559,000 homes for the social sector built during Labour’s years in office. However, they sold 605,000 homes under the right to buy and other legislation. During Labour’s period in office, the number of homes in the social sector reduced by 45,530.

The right hon. Member for Greenwich and Woolwich (Mr Raynsford) said that the priority, as regards social housing, should be the very poorest, so we should judge Labour’s record on what it did to the social rented sector, and exclude low-cost home ownership. If we do that, we find that the number of homes in the social rented sector during Labour’s period in office fell by 227,000. Fewer homes were available for rent, so I will not take the characterisation offered by the right hon. Gentleman, who is an expert in many things, but who has forgotten how to count.

[Mr Raynsford]

Will the hon. Gentleman please tell us how many of the homes he mentioned were uninhabitable because of the appalling condition they were in, and how many homes were improved under the decent homes programme? Will he tell us about the millions of homes in decent condition that are now available for social rent because of investment by the previous Government?

[Andrew Stunell]

I welcome that, and I am happy to report that we are continuing the investment in the decent homes programme.

Let me get to the right hon. Gentleman’s central proposition, which is that there was somehow no evidence of a need to change housing policies. The previous Government’s housing policy depended on continuing with the claim that they had dealt with boom and bust. As it turned out, they had dealt only with the boom. There is no public money available—those were the words of the outgoing Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne). Indeed, during this debate, the Government will have borrowed another £24 million to fund the services that we deliver, but for which we have no income. An extra £400 million will be borrowed today, and another £400 million extra will be borrowed tomorrow and every day this year. This year, £150 billion will be borrowed. The money is not there.

What about targets? We have heard some nonsense from the Labour Front Bencher about thousands of homes having been cancelled. What she actually means is that many of the homes in the Labour targets have not been built. Last year, when Labour was in power, 78,000 fewer homes were built than were in the Government’s target. Only 57% of the target was met. We know, therefore, that the Opposition’s figures depend on an economy that Labour bust, on public money that we do not have, and on public targets that did not work.

[Alison Seabeck]

Will the hon. Gentleman give way?

[Andrew Stunell]

I am happy to give way to the hon. Lady and I am listening out for her apology.

[Alison Seabeck]

Will the hon. Gentleman confirm that 70 local authorities have withdrawn planning applications on the basis of a letter sent to them by the Secretary of State?

[Andrew Stunell]

That, of course, is what was wrong with the targets: they built up resistance in local communities—although not in all of them, of course; colleagues in Yeovil and Chesterfield could not build the houses that they wanted because of the absurd national targets.

The hon. Lady quoted early-day motion 355. Outside Westminster tube station, the National Housing Federation has posted a plea to us all for more affordable and social homes. I want to say very clearly—I shall be saying this on many other occasions—that when it comes to producing more affordable and social homes, a party that finished up with 45,000 fewer such homes than it started out with 13 years before is not in a good position to criticise the coalition Government. When we go in five years’ time, we will leave more homes in the social sector than we started with.

The National Housing Federation briefing, which hon. Members have perhaps drawn on, says:

“Our modelling suggests that the Government’s claim that up to 150,000 homes will be delivered over the four year period is achievable”,

and it adds:

“If one in four new lettings across the sector…are made at 80% of market rent”.

The reference to “one in four” is interesting. Opposition Members imagine that the Government will impose a new model compulsorily on every housing authority. That is absolutely not the case. If the National Housing Federation, which is, let us face it, not a particularly good friend of the Government at the moment, says that we can get our 150,000 homes with a quarter of rents at an affordable level, it ill behoves Opposition Members to spread lies and deceit about the issue.

[Mr Betts]

Can we make sure that the Minister is telling the whole truth about this? The National Housing Federation said that the figures might be achievable if one in four new tenancies was let under the new rents, but it also said that all the new houses that were built—the whole 150,000—had to be let under the new rents. Effectively, on the Minister’s definition that we should treat as social houses only those houses that are let on existing tenures at existing rent levels, no new social houses will be built under the programme proposed by him and his colleagues. Is that not true?

[Andrew Stunell]

I do not really understand the hon. Gentleman’s point, because—[Laughter.] The reason I do not understand it is that it is complete nonsense. The homes that we are building will be available for affordable rent, and we have already set out some of what we want to do. However, I acknowledge straight away that hon. Members could have done with more detail, which is why we are producing a consultation document—hon. Members should note the word “consultation”—to set out many of our proposals and some options, and we are inviting opinions about how legislation should ultimately be shaped.

I was perhaps a little over-exuberant earlier when talking about how the new homes bonus will apply. It will apply to conversions, change of use and other net gains. I am quite content to confess that my adrenalin got the better of me earlier.

I need to deal with some of the other points made, so let me pick them up as best as I can. The hon. Member for Banbury (Tony Baldry) made some important points about mortgage availability. The crucial task for the Government is to ensure that we have a sustainable and growing economy. That is absolutely at the heart of the comprehensive spending review.

Let me make it clear to colleagues that the total being invested in infrastructure is being maintained. We have reprioritised expenditure on measures that will support growth and investment in jobs—particularly green jobs—and in industry. That has come at the expense of the traditional amounts spent on housing investment. All Members probably wish that we had a larger housing programme, but our programme will deliver more homes in the social sector in the next five years than Labour did in its 13 years. That is bound to be true, given that the number under Labour fell by 45,000.

My hon. Friend the Member for Cities of London and Westminster (Mr Field) made it clear that this country has created a housing tenure model that makes little sense. On the one hand, we have people who are excluded from any opportunity of getting social housing. The hon. Member for Plymouth, Moor View, correctly said that 9,000 people in Stockport are waiting for homes. She could have added that there are only 11,000 social homes to go into. People whose names are on the list have no realistic expectation of ever getting into council housing.

We must build more social homes, and we will be building more social homes. We must use the ones we have more efficiently, and we are providing local authorities and housing associations with a way to enable them slowly to do that when homes are re-let. We are, of course, also trying to ensure that the sign outside the House in Westminster tube station is responded to, not just through an early-day motion, but through a policy that delivers more social and affordable housing, exactly as requested.

Work Capability Assessments

Wednesday 27th October 2010 Westminster Hall

11:00

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

I am delighted to have secured this Adjournment debate on the work capability assessment, and even more delighted that it takes place under your chairmanship, Mr Gray. It is the first time that I have served under your chairmanship, so I am looking forward to the next half hour.

Before we launch into a massive programme of moving people from incapacity benefit on to employment and support allowance or jobseeker’s allowance, with the launch of the pilots in Burnley and Aberdeen, it is a good time to take stock of where we are, what has happened in the past and where we will go in the future. One of the things that most alarms me is the speed at which we are making the reforms. They were of course introduced by the Labour Government. The change from incapacity benefit and income support to employment and support allowance, with the support group and the work-related group, was introduced in October 2009 by Labour. We fully support all those welfare reforms. However, I would like the Minister to respond on a question of nuance and of how quickly and in what context the reforms are being made.

It is also important to highlight the reason why we moved from incapacity benefit and income support to employment and support allowance in the first place. It was because a large number of people were languishing on passive benefits and had little contact with anyone in their area who could help and support them to move from passive benefits into work. Hon. Members on both sides of the House have always agreed that work is still absolutely the best way out of poverty.

The headlines in the newspapers about individuals who get up to £10,000 of benefits a week are headlines because such cases are extremely rare. Most people on benefits, whether passive or active, are poor. We call them vulnerable; we mean poor. Those people are not rich. They are not wealthy. Their poverty is a different kind of poverty, especially in the case of someone on a passive benefit that does not require them to go to a jobcentre every week to sign on and have a face-to-face conversation with a personal adviser. It is a poverty not just of resource, but of experience and aspiration.

People in such poverty do not have access to the things that people with jobs take for granted. Their social networks dry up, and their personal development stops. What I am talking about is not just amounts of money and moving people off benefits and into work; it is about lifestyles. It is about the people whom we have spoken to who have moved from incapacity benefit into work and who talk about getting their lives back. It is fundamental and goes to the heart of what I want to say about the motivation behind moving people from incapacity benefit into work.

One of the things that most worries me is that the motivation now seems to be to get the welfare bill down, and nothing else. I agree that the welfare bill is very high and must be an important consideration—it is taxpayers’ money—but we must prioritise individuals. We must see the person, not the benefit. The group of people in question is a very large one, but they are all individuals, with different issues and problems, and different barriers and reasons for being on incapacity benefit rather than going to work.

The reason that the pathways to work project, in which I was quite heavily involved in Derbyshire—it was one of the first English pilots—was so successful was that personal and financial advisers in jobcentres looked at claimants as individuals; they did not think only about what benefit they were claiming. The project was not just about getting those people into work and off the joblessness figures. It was about considering what kind of support people needed, including what financial assistance they needed to get them the retraining that they wanted. It involved considering the local work force and the jobs available locally and working with local colleges. That is why it was so successful.

The problem is that that approach is extremely expensive. There is no doubt about that, but we always tried to argue that that was an up-front cost to bring about a saving way down the line. When we see what it does for individuals, it is stuff that money cannot buy. I would like some reassurance from the Minister that he is continuing with that motivation and not just the motivation of getting people off benefits and into work to make a big saving on the welfare bill.

Beyond the correctness of the principle of getting people back into work, there are serious issues about Atos Healthcare. It has always been a problem, and I am the first to admit that, even under the Labour Government, it was an issue. Atos is the only provider of medical assessments that is big enough to provide the sort of support that the Department for Work and Pensions needs in contracting out the work. However, in the massive change from incapacity benefit to employment and support allowance, which involves moving on from medical assessments to work capability assessments, we are asking Atos, which is already struggling with the amount of work that it has, to take on a huge amount of extra work. How will the Minister fill that capacity? Will he take more doctors out of the NHS, or is he thinking of supplementing the existing work force with a migrant work force? Both approaches are and always have been problematic, but given the massive increase in the amount of work that Atos is being asked to do, how will the Minister provide for it?

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate my hon. Friend on securing this important debate and endorse all that she is saying with such passion. Will she take account of the fact that an advice centre in my constituency is winning 96% of its appeals against the work capability assessment? Does not that underline the fragility of the Atos process, which she has highlighted, and does not it show the need for the DWP to apply much closer quality assurance to the assessments?

[Natascha Engel]

That was exactly what I was going to come on to. Changing the description of the process from a medical assessment to a work capability assessment was welcome; it refers to what people can do and not what they cannot do. However, Atos has not moved away from an on-screen tick-box exercise. The number of people who come to my constituency surgery saying that they have been to a work capability assessment where the doctor has not even made eye contact with them is disgraceful. However, I am very worried about the issue that my right hon. Friend has raised. Up to 75% of cases taken up on appeal by the Derbyshire unemployed workers centre are successful, and the figure is 40% nationally. I recently asked the Secretary of State at DWP questions how many people that involves.

The errors that are already occurring will merely migrate to the new system. There has been no demonstration that there will be any underlying robustness. The numbers and the traffic involved will make things very difficult. I seek an assurance from the Minister about what people are saying anecdotally—I have no evidence for it—which is that there must be some kind of incentive: Atos is being told that it must get people off benefits. I want an assurance that Atos is not being told or incentivised to move people off incapacity benefit or employment and support allowance and on to the jobseeker’s allowance.

[George Hollingbery (Meon Valley) (Con)]

I am here to make representations on behalf of a client who has had to go to appeal. It is worth noting that the high level of appeal successes in the constituency of the right hon. Member for Oxford East (Mr Smith) and of those that we heard of anecdotally from the hon. Lady may be a reflection of the capability of those who assess whether to appeal, as I understand that only 5 or 6% of assessments are successfully appealed. That may put a slightly different gloss on the figures.

[Natascha Engel]

It does, unless one knows the demographic of the group. A big problem for those who have been out of work for a long time is that it has a really awful impact on their self-esteem and even on their ability to get out of bed, as they can get very depressed. One problem for those who are moved en masse from incapacity benefit to jobseeker’s allowance is that they do not have the confidence to appeal the decision. It takes groups such as welfare rights organisations to help them. Of those who are helped, the number who are successful on appeal is an absolute disgrace.

[Toby Perkins (Chesterfield) (Lab)]

I wish to expand briefly on a couple of those points. In Chesterfield and Derbyshire, unemployed workers have had success in 75% of cases. I turn specifically to Atos Healthcare and its motivation. It did an assessment on behalf of Royal Mail for one of my constituents and found that he was not fit to work. Royal Mail retired him on the grounds of ill health, saying that he would never work again. However, when that person went for a work capability assessment, Atos said that he scored no points. The same company assessed him twice; on behalf of Royal Mail, it said that he was not fit to work and should be laid off, but on behalf of the Department for Work and Pensions, it said that he was fit to work and gave him no points. That puts the company’s performance in context.

[Natascha Engel]

I might have used that example, but I thank my constituency neighbour for his contribution. It is a serious matter, and errors are a fundamental problem. The system must be right if we are to move huge numbers from incapacity benefit.

[Jim Shannon (Strangford) (DUP)]

rose—

[Natascha Engel]

I shall give way briefly, but I must make some headway.

[Jim Shannon]

I thank the hon. Lady for giving way. Does she agree that it is not a tick-box exercise, although it seems like one at the present time, with people being asked whether they can stretch, bend or kneel? There are two parts to the assessment. One of them concerns emotional matters, such as depression and mental health; the other is physical. Perhaps the best way to do that would be to make contact with the person’s GP or physician, who would have better knowledge of the claimant. It would certainly help.

[Natascha Engel]

Yes, I agree.

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

Would the hon. Lady like to comment on a case from my constituency of a gentleman who had to change his colostomy bag 16 times a day who is now going through the appeal process? In my view, we have to find a way of short cutting the system for terminally ill patients and those who are very ill, using common sense to get them away from that tick-box process.

[Natascha Engel]

Absolutely. That goes back to my original point about the pathways to work scheme, which was successful because it considered the individual, rather than how to get people moved off benefits and into tax-paying employment.

I wish to ask a couple of questions, the first of which is a wider economic one. The Government will be moving people from incapacity benefit, or from employment and support allowance via the work capability assessment, to the jobseeker’s allowance, at a time when the Government have admitted that there will be 490,000 job losses in the public sector, and there will be a massive knock-on effect on the private sector. Even the Minister has to admit that employment will be going down rather than up. Where will the jobs come from?

My second question may seem a minor point, but the Government will be taking £25 a week from those on incapacity benefit or employment and support allowance by putting them on JSA. That may save the Government £25 a week per claimant, but that money will not go back into the local economy. Such people have so little money that they spend it all. In rural ex-pit villages such as those in my constituency, many people are on passive benefits, but it is those people who keep the local shops going. Such shops will now close. How will that help growth? How will that help the economy? How will that provide more jobs?

We are already struggling. Many people will have been on passive benefits for well over two years, yet they are still more likely to retire or die than get jobs. They may get batted into the nearest towns where there is work, but that work will be taken by people fresh out of university who are far closer to the labour market. How exactly will it work?

Huge cuts have been announced to the Ministry of Justice budget. We have already heard that the tribunal system will be overloaded by appeals against people being taken off employment and support allowance and put on JSA. Many of those appeals are successful. However, at a time when the Ministry budget is being cut, how on earth will it work? Is the tribunal service ready for that enormous spike in its work?

To sum up, I would like to hear the Minister give those on passive benefits the idea that there is some light at the end of the tunnel. The vast majority want to work. They are not workshy; they simply need the correct help and support. Of those on benefits, 45% have some sort of mental health condition, which often fluctuates. How are we personalising the service to get those people off benefits and into work? I shall list my questions, and if I do not receive answers, I shall intervene on the Minister or write to him.

11:17

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

I shall do my best to answer the questions asked by the hon. Member for North East Derbyshire (Natascha Engel).

I start by saying that there is a huge amount of agreement between us. Let us be clear: the proposals are not an exercise in money-saving. I have said time and again that they are about saving lives, not money. Yes, we will save money if we reduce the number of people who are welfare-dependent, but the starting point surely must be to try to help people make a better lot of their lives. That, effectively, is where the proposals came from.

If we look back to the last Parliament, there was—and, I believe, still is—cross-party consensus on the need to make the changes. The original proposal to assess current incapacity benefit claimants came in the Green Paper that I launched in 2008. James Purnell, who was Secretary of State shortly after that, took up the proposal for the migration and put in place many of the mechanics that were needed.

Given the hon. Lady’s comments, I believe that there is still cross-party consensus on the need to do something about the issue. Frankly, I regret that the assessment was not done years ago, because it is not right for anybody to be left on benefits, doing nothing, year after year without us seeking to find them a way back into work and helping them to make a better lot of their lives.

The hon. Lady is also right to say that we inherited the work capability assessment; it was set up by the previous Government, and was initially meant to operate with the employment and support allowance system for new claimants. It was designed by the previous Government and they put it in place, but it was not completely right; there were things that were wrong with it and needed to change.

One of the first things that I did after taking office this summer was make a number of changes to the work capability assessment—changes that were recommended by the previous Government following work that they did in their last few months in office. I looked at the changes and felt that they were sensible. They included: simplifying the language in the work capability assessment; making greater provision for people awaiting, or in between, courses of chemotherapy; making the higher rate of employment and support allowance available to more people with particular communication and mental health problems; and taking into account how people have adapted to a disability.

My view was that that was not enough, and I share the hon. Lady’s concern. It is not in my interests or the interests of the Government to get this wrong. I do not want to do down people who should not be trying to get back into work. I want to help those who have the potential to work, and to ensure that the work capability assessment is as effective as possible. There is no hidden motivation. I am not saying that we should make the test as tough as possible so that we can get more people off benefits and into work, thus saving money. I can categorically assure the hon. Lady that that is not the case.

There is no such thing as a perfect system, but we are working as hard as we can to make the system as effective as possible. Let me tell the hon. Lady some of the things that I have done to ensure that it is. Since the election, we have commissioned a further review of the work capability assessment. It is being carried out by a leading occupational health specialist, Professor Harrington of Birmingham university. We have assembled an advisory group to work with him, which includes Paul Farmer, the chief executive of Mind. I particularly wanted him to be on the review, because mental health is a big issue. Getting the facts right on mental health is essential. I do not want to say that people with mental health problems should not be able to work. Equally, I want to find the right dividing line to ensure that we do not do the wrong thing by people with mental health problems who would have genuine difficulty in working.

[Jeremy Lefroy (Stafford) (Con)]

I want to emphasise the importance of the assessment of mental health problems. A constituent of mine told me that he could have sat down and cried to prove that he had mental health problems. He did not and, as a result, he was categorised as having no mental health problems. That was despite the fact that his general practitioner had categorically said that he did.

[Chris Grayling]

I have told the mental health charities that I am happy to hear their proposals on how we can change the wording of the assessment to strengthen the way in which we deal with people with mental health problems. I am happy to look at such proposals and incorporate any sensible changes. I said to Professor Harrington and his team that I want them to bring forward recommendations on how to improve things and to knock off any rough edges so that we can make the system as fair as possible.

The majority of people—it is far from all—who are on incapacity benefit with mental health problems have issues with long-term chronic depression. We have a straightforward choice. We can either leave them at home for the rest of their lives—the hon. Lady mentioned that many people end up just retiring rather than ever moving off benefit—or we can try to do the right thing and help them back into work. I passionately believe that the second is the better option. In a moment, I will address the hon. Lady’s concerns about personalisation, because I agree with her on that.

What I am saying applies across the piste: we are either saying that we will leave these people passively on benefits for the rest of their lives, or saying that we will do something to help them turn their lives around. It may be that going back to work will involve them doing something different from what they were doing before. If, for example, they were doing a manual job and they had an orthopaedic problem, they may have to do something different, and that may be a huge wrench that damages their self-confidence. The hon. Lady was right to say that many people who are on long-term benefits have lost networks and self-confidence. I do not buy into the headlines that say, “They are all scroungers.” Hon. Members will not find me using such language.

The biggest issue is about detachment from the workplace. Some people who have been in work previously and who have become utterly detached start to lack confidence; they do not know what to do or how to go about getting work. Sometimes, people have grown up in an environment in which worklessness has been the norm, and they do not have the knowledge to be able to take the first steps into the workplace. Helping them not only with the assessment but over the hurdle of getting back into work is a huge challenge, and that is what our work programme is all about.

Let me touch on one or two of the other areas that the hon. Lady raised in relation to the assessment. Atos has no financial incentive to get more people through the assessment and back into work, nor would I countenance it having one. It is Jobcentre Plus that takes the decision and not Atos, and Atos does not design the test. The recommendations that we get from Professor Harrington’s review—as long as they are sensible, and I am confident that they will be—will inform our decision making about how the test should be shaped.

[George Hollingbery]

My constituent, Gary Dennis, was recently diagnosed with motor neurone disease. He went to his work capability assessment and passed with flying colours—he got zero out of 13. I understand the Minister’s reluctance to categorise any disease as one that should not be assessed through the WCA, because everyone needs the dignity of work if they can have it. None the less, there are diseases, such as motor neurone disease, that have particularly aggressive pathways. There is a case for emergency reassessment. Within six weeks of Mr Dennis’s work capability assessment, he was completely incapable of work. Will the Minister consider such cases?

[Chris Grayling]

I am grateful to my hon. Friend for giving me prior notice of his concerns. One of the things that I am happy to consider—I have said that we will carry on reviewing this process as we go forward—is some kind of emergency brake for people who suffer an immediate and very sharp deterioration in their condition. We should be able to reflect that, and I will ask officials to consider how we deal with such a situation. The goal is to do the right thing by people. What I do not want to do is say of any condition, “Nobody with that condition can ever work.” I do not want to give people an automatic path into the support group because where we can, and where circumstances enable us to do so, we should be trying to help people into work. Clearly, when things change rapidly, we need to see whether there is a way in which to address that.

[Duncan Hames (Chippenham) (LD)]

I am glad that the Minister says that Atos does not have an incentive to fail people. We have heard so much about the cases in which Atos has failed and in which people have successfully appealed against its assessment. Surely there should be some penalty for the service provider, because the system, and the appeals that errors cause, are a great waste of taxpayer’s money.

[Chris Grayling]

We cannot simply regard this as a question of errors by the assessors. The hon. Member for North East Derbyshire mentioned the issue of the number of medical professionals available. A more diverse range of medical professionals is being used, including those with expertise in mental health and orthopaedics; it is not simply doctors who are being used. One problem with using GPs is that we are putting them in a difficult position, because they are in danger of compromising their long-term relationship with a patient if they say, “Actually, you can go back to work.” We are very reluctant to go down the GP route. I am confident that having a mix of professionals will help us to deliver what the hon. Lady has asked for.

Getting the appeal numbers down is about getting the system right. I have asked Professor Harrington to consider how we can improve the system to reduce the likelihood of appeals. Appeals will never disappear, because some people will not want to accept what has happened. What we can do is seek to make the system as good and as effective as possible.

Let me touch briefly on the work programme and the support. The hon. Lady made a valid point about the need to provide personalised support. The work programme is designed to offer providers the freedom to tailor a programme to the individual, and not simply implement a programme designed in Whitehall. One of the reasons why programmes went wrong over the past 10 years was that they were too centrally directed. Officials would say, “You will do this. You will have five interviews and a period of work experience.” I want to trust the professionals, particularly those from the smaller, voluntary sector groups who probably work with some of the harder-to-help claimants, and give them the freedom to decide what works, rather than having to follow what Whitehall dictates.

[Natascha Engel]

We have only two minutes left, and I am really desperate to get an answer to the tribunal service question. I accept that we have lots of areas of agreement, but not, I think, when it comes to the tribunal service. This is not about the fact that some people will not accept that they are fit to work. Some 40% of people who appeal are successful. That means that they are told that they are fit to work, appeal, and are then told that they are not fit to work. That is a very serious number of people. What is the Minister doing to ensure that the tribunal system is up to the massive spike in numbers that it will receive?

[Chris Grayling]

First and foremost, I am trying to ensure that the cases do not get to the tribunal in the first place by making the assessment as effective and as accurate as possible. We also have officials working closely with the tribunal service to address that issue. We are running a number of pilots within Jobcentre Plus to look at ways in which we can improve the process and work more effectively with people who have been passed as fit for work to reduce the number of cases that will ever go to appeal. I am happy to share more of that with the hon. Lady as the weeks go on.

Let me touch on the last two points that the hon. Lady made. She asked where the jobs will come from. Some 280,000 new private sector jobs have been created in this country in the past three months, and the number of people claiming benefits has barely changed. That cannot be right, and it has to change. The private sector can create opportunities. Our job is to ensure that claimants are ready for them. As for the loss of £25 a week, sickness benefit should be for people who are sick. If there are two people sitting side by side in the Jobcentre, both of whom are deemed fit for work, it is not right if one of them is better off than the other. That is why we are clear that the proposals are a sensible step to take. At the end of the day, I want a system that treats people fairly and decently, and also helps them back into work. I do not believe that anybody is better off at home on benefits, doing nothing.

11:30

Sitting suspended.

Elected Mayors

Wednesday 27th October 2010 Westminster Hall

[John Robertson in the Chair]

14:30

[John Stevenson (Carlisle) (Con)]

I am grateful, Mr Robertson, for the opportunity to debate what I believe is the very significant issue of elected mayors. It is a topic that, to all intents and purposes, flies below the radar. However, it has the potential to affect our democracy profoundly, not only at the local level but at the national level, in what I would like to think is a positive way. The number of Members here for this debate demonstrates that the topic is flying below the radar and yet, as I say, it could have a profound effect on our constituencies up and down the country.

At present, there are 13 elected mayors. They affect at least 50 constituencies and if there are a further 12 elected mayors, as proposed by the Government, another 50 to 100 constituencies would have an elected mayor in their area, affecting local politics and their debates. That would make a total of 150 constituencies, and if we reach that point there may be a critical mass.

The idea of a mayor is extremely well established, not only in this country but all over the world. However, in most respects there is a huge difference between our style of mayors and those in other countries. Our tradition is very much one of having a ceremonial mayor who carries out civic duties. Quite often the post is held by a councillor, usually in the last year of their term in office and who therefore is coming to the end of their career.

In most other countries that have mayors, however, the mayors exercise varying degrees of executive authority. In those countries, the large cities often have executive mayors, with the obvious examples coming from the United States, where the major cities, including New York and Chicago, traditionally all have mayors with executive powers. We can also look to our Commonwealth countries, such as Australia and New Zealand, or to other European cities, many of which have mayors who are executive and not ceremonial in the way that ours are. Often those mayors are seen as an integral component of local democracy. The most recent example of the election of a new mayor was in Wellington in New Zealand. That election was an extremely closely-fought battle, with the count going on for a number of days after the election was over. As a result, a great deal of publicity was generated. Therefore, I see no reason why mayors with real executive powers cannot become part of our democratic landscape and, in the time-honoured British fashion, become a traditional part of our democracy.

For completeness, I just want to cover the recent origins of the elected mayor concept in Britain. The idea was first introduced by the Labour Government under the Local Government Act 2000, which allowed local authorities to instigate a referendum for an elected mayor by means of a simple resolution of the council. The Act also allowed local residents to petition for a referendum. When local residents wanted to do that, they needed 5% of the electorate to sign that petition and only then would the council be duty-bound to instigate such a referendum.

That was the situation in 2000 but it was altered by the Local Government and Public Involvement in Health Act 2007, which allowed councils to introduce the new mayoral system by passing a simple resolution and without the requirement to hold a referendum. However, to achieve that there would need to be a two-thirds majority on the council in favour of that resolution. That Act also stated that there should be no more than one referendum in any 10-year period.

I genuinely believe that, back in 2000, the Labour Government wanted the idea of elected mayors to catch on and become widespread. I believe that they thought that the idea of elected mayors was an opportunity to transform local government and they thought that such a transformation would happen. I also believe that they thought that elected mayors would become commonplace and that by now we would have many mayors up and down the country. In 2006, they actually expressed their disappointment that that had not happened.

So what success has there been? To be entirely honest, even as somebody who fully supports the concept of elected mayors, I must accept that the answer is that success has been very mixed. Since 2000, there have been 37 mayoral referendums. Of those 37 referendums, there was a yes vote in 13 with a no vote in the remainder. There are two possible reasons why that has been the case. First, is the fact that only a third of those referendums have been successful an indication that overall people are against the idea of elected mayors? Secondly and quite simply, there have been only 37 referendums, when there could have been up to 400, or at least 100 to 200, if the idea of elected mayors had taken hold. Therefore I must accept that the number of referendums that we have had is a bit of a disappointment, and that, of those that we have had, only a third have come up with an affirmative answer.

I acknowledge that the idea of elected mayors has had a mixed start, but I believe that there are obvious reasons for that, many of which can be overcome. Quite simply, at the outset the Blair Government did not push the idea of elected mayors in the way that I thought they would. I do not know what the internal politics of the Labour party or the Labour Government were at that time, whether people felt that it was not the right idea and it was consequently put on the backburner, but I genuinely believe that the Blair Government wanted the idea of elected mayors to succeed. However, for whatever reason they did not push the idea at that time and to all intents and purposes they lost interest in it. I also think that, at that time, none of the national parties—Conservative, Labour or the Liberal Democrats—were actively engaged in promoting the idea of elected mayors, although I think that that attitude has begun to change.

What is probably the most important factor of all is that there has been local opposition to the idea of elected mayors, coming from local parties of all persuasions, many—although I hasten to add not all—councillors and quite often from council leaders, local opposition leaders and indeed chief executives and senior officers on councils. Together, those people quite often stymie the hope of having referendums and particularly the hope of having successful referendums. Quite often, the lack of publicity about the idea of elected mayors, which in turn has prevented a proper debate about elected mayors and their genuine pros and cons, has reduced the success rate that I like to think could have been achieved. Finally, the threshold for a petition for a referendum is set at too high a level, at 5% of those on the electoral register. That is just one of the issues that I will ask the Minister to address when he responds to this debate.

As I have said, however, matters are starting to change. The London mayoralty has undoubtedly boosted the concept of elected mayors and credit for that has to go to both Ken Livingstone and Boris Johnson. They have raised the profile of the idea of elected mayors. It affects London, but I think that it is now permeating out to the rest of the country. People see them as national figures as well as a figure for the city of London. I genuinely believe that this new Government are also starting to take a lead on this issue and I hope that the Minister will confirm that when he replies. Through Boris Johnson and Ken Livingstone, the London mayoralty, and the various elections up and down the country, there is growing interest in the idea of elected mayors in both local and national media, and also among local politicians and local people. Middlesbrough and Hartlepool are obvious examples of places with high-profile mayors who have made a difference. Furthermore, those voting in the recent referendum in Tower Hamlets chose to go down the route of having an elected mayor, which I hope is an indicator of the future, although I must say that there was a very interesting election in Tower Hamlets thereafter. However, other people can comment on the merits of that.

Circumstances have now changed and with increased awareness of the idea of elected mayors, among the public and at Government level, we have a real chance to change things. However, before I refer to the many advantages that I believe elected mayors would bring to our democracy, I will touch on some very basic reasons why change in local government governance is both desirable and necessary. Our present local government system was set up in the 1970s. Time has moved on and we now live in a very different world. Technology has also moved on, including the development of 24-hour media, as have people’s expectations. Clearer and quicker decision making is now a necessity and, in many respects, it is part of everyday life. There have been changes to the way that councils run. We now have executives and scrutiny panels. However, I do not think that those changes actually go far enough to reflect the modern world and the way that we deal with things now. Given that background, elected mayors would help modernise local government enormously, and there are many clear-cut advantages to having them. They are open and transparent. Local people, not councillors, choose in an election who they want as their local democratic leader. It might not always give the result that we as politicians want, but that is what democracy is all about.

Elected mayors provide greater accessibility. It is obvious who is in charge. The mayor carries the responsibility for running the council and cannot hide behind the machinations of local politics. Four-year terms also go some way to help, as they give the individual time to implement programmes properly. It is interesting that a number of mayors, particularly independents, are being re-elected at the end of their four-year term. A mayor brings strong leadership—not always, but in most cases. Mayors have the authority to get on and do things in their local community. They also provide visible and clear leadership, which goes a long way to improve the clarity of decision making.

Ironically, having more elected mayors could enhance the role of councillors. I would like to think that there would be fewer of them. To take my county of Cumbria as an example, we have six district councils, one county council, one national park and 400 councillors to represent only 500,000 people. Clearly, if elected mayors were accepted in my part of the world, fewer councillors would be needed, but their role would be greatly improved. Some would still be involved with executive authority in the mayor’s cabinet, but that would enhance their scrutiny of the mayor. It would also allow councillors to be more critical of a mayor from their own party, because they would not be bound by the three-line whip in quite the same way as under the present regime.

Mayoral elections to date have illustrated that mayors can bring personality as well as party politics into play. Again, that reflects the modern age. Personality is already a huge part of our democratic process, as evidenced clearly by the leadership debates during the general election. If ever there were a case of personality politics, that was it. Arguably, the same thing goes on with MPs up and down the country. Personalities matter, and I think that they bring something to the political system. Interestingly, of the 13 elected mayors, three are Conservative, three are Labour, two are Liberal Democrat, one is English Democrat and four are independent. That reflects the huge role that party politics will still play. Parties will still be the dominant force behind elected mayors, but the role allows room for independence, which reflects to a certain extent the politics that people want now. The evidence suggests and the experience in other countries reflects that main parties will still dominate mayoral politics, but there is room for others to get involved. That could make politics, particularly local politics, far more interesting and reconnect politicians with the general public. In many respects, it would be direct democracy.

Overall, in my view, elected mayors will bring better governance to local authorities, but could also affect national politics in time, effectively creating greater movement between national and local politics. A mayor with executive experience running a major authority could bring a lot to Parliament and national Government. Equally, a national politician could bring national experience and standing if elected as mayor of one of our major cities.

To summarise my view of the advantage of elected mayors, I quote the words of Michael Heseltine:

“To create dynamic local leadership and to attract high-calibre individuals, we believe that directly elected executive mayors for…authorities is the best governance model”.

Ultimately, what matters to the public is effective democratic leadership. Although executive mayors have been going for only a short period and there are only 13 of them, the evidence suggests that they have been a success and have made a difference in many cases. They are far better known than their predecessors the council leaders, their councils often have higher profiles and they often campaign on their own initiatives, which they subsequently implement as mayors.

However, it is the future that matters. I welcome this Government’s approach to local government and their move to decentralise and return power and responsibility to local authorities and communities. We are a hugely over-centralised country, so the forthcoming decentralisation and localism Bill is welcome news. There is momentum for change not just here in Westminster but in all other parts of the country, and I certainly view localism as a way forward. Elected executive mayors can play a significant role in the localism agenda. My questions to the Minister therefore involve that issue, and I hope that he will give me a positive response.

The Government propose a potential 12 new elected mayors. What about York, Chester, Blackpool and my own constituency, Carlisle? Why should they not also be involved and have the opportunity to decide whether they want an elected mayor? Places with strong identities that might benefit greatly from an elected mayor will be omitted. Is the Minister willing to extend the number of places where referendums will be held and elected mayors will be possible?

What additional powers is the Minister willing to pass to such mayors? Are they to be glorified council leaders, or can we give them extra powers such as appointments to local bodies or additional tax-raising powers? Where a mayor is elected, will the Minister consider the size and role of the council? It appears sensible to reduce the number of councillors while giving them an enhanced role in scrutiny and more generally. Will the Government be considering that? These matters are being handled by politicians, but what about the people? Will the Minister reduce the number of local people required to petition for a referendum from 5% to 2%? That would allow individuals in places where local politicians are preventing a referendum the opportunity to petition and campaign for one.

Generally, do the Government want elected mayors established throughout the country? If that comes to pass, it will transform British politics in ways that many of us do not realise and which have a profound effect not just locally but nationally. The Government say that they are committed to localism. I hope that they are also committed to changing the governance of our local authorities through elected mayors. We now have an opportunity to create a renaissance in local government. As part of that, the time has finally come for elected mayors. I hope that the Minister will give me that confidence and assurance.

14:47

[Sir Peter Soulsby (Leicester South) (Lab)]

I congratulate the hon. Member for Carlisle (John Stevenson) on securing this debate on a subject that, as he rightly says, has been below the radar so far, but has the potential to make a profound difference to local government. As I listened to his thoughtful and well-reasoned contribution, I found myself in almost complete agreement with every word. As he may or may not know, I have something of a background in local government, having spent many years there, and much, if not all, of what he said rang true.

I believe, as the hon. Gentleman does, that the previous Government ought to have encouraged the introduction of elected mayors much more than they did, and I join him in welcoming the present Government’s commitment to the extension—albeit a somewhat limited extension, as he pointed out—of elected mayors to other local authorities.

The hon. Gentleman is right to point to the experience of London. Of course, in many respects, it is different from many other parts of the country that might introduce elected mayors, but now that we have had elected Mayors of London from two different parties, we have seen the opportunities that being elected and having a distinct and individual mandate give for providing leadership to a locality. In many other parts of the country, candidates have come forward from established political parties and, in some cases, from outside to perform the role of elected mayor, and they have been able to provide leadership and revitalise local interest in local government. That is undoubtedly a good thing.

As I said, like the hon. Gentleman, I regret that the previous Government, having introduced the concept of elected mayors, did not push it more firmly. I do not pretend to have any more insight than him into the reasoning behind that, but it is water under the bridge. What we can do is consider the areas where elected mayors have been established, recognise how much of an impact they have made, and encourage others to follow their lead.

The hon. Gentleman referred to the fact that the previous Government, as well as making it possible for elected mayors to be established, required local authorities to change their governance structures. Local authorities moved towards a separation of the executive function from the scrutiny function. They argued that that would give greater transparency to decision making and make it more timely, and would ensure that there was greater scrutiny and more accountability.

Well, I have to acknowledge that that has not always been the reality of the situation; indeed, many local authorities have experienced changes that have led to less, rather than greater, transparency and accountability. That is to be regretted. Many councillors up and down the land who were not part of the executive function felt significantly disempowered and, for too many of them, scrutiny had become what those who are not part of the executive do. In many cases, the changes that have taken place have not been an effective use of their time and there has not been effective scrutiny of the executive function within their local authorities. As I said, that is very much to be regretted.

I welcome the fact that the Government have at least committed themselves to enabling and encouraging local people to have elected mayors in 12 of our largest cities if they wish, subject to a referendum. I hope that when the Minister replies, he will be able to tell us more about the additional powers that might be associated with that, because there is an opportunity for greater devolution to local government in those areas. I hope that that will be another step towards further devolution to local government more generally.

It is vital that where new mayors are established—whether under the existing legislation or under new legislation—the role of the back-bench councillor is considered. There needs to be genuine scrutiny enshrined in the new legislation and we need to ensure that mayors have a real job to do in holding the executive to account. It should therefore be possible to attract and retain councillors of good calibre—a problem that all parties have experienced—who are able to do their job effectively. They should be able to speak up for their local communities and also hold to account those who are in an executive position in their authority.

When the Minister replies, I hope that he will mention the existing legislation—the Local Government and Public Involvement in Health Act 2007—under which, I think, before the end of this calendar year, non-metropolitan districts and unitary authorities that are former non-metropolitan districts have the opportunity to opt for a mayoral system without the need for a referendum. They have the opportunity to opt for a mayoral system, as opposed to the so-called strong leader model.

I hope that the Minister will take the opportunity to encourage those non-met districts and unitary authorities to take that option, because under the strong leader model there will be—and, indeed, are already, in the authorities that have adopted it—individuals who exercise, in effect, mayoral powers without the mandate and the accountability that ought to go with it. It is surely undemocratic for a person with mayoral powers to be selected by the majority group—the controlling group on a council—after an election. They ought to be selected by their party, or put themselves forward as an individual from outside the party, and be elected at an election by the electorate. Surely that is the democratic way. I hope that the Minister will encourage the authorities that have the opportunity to do so to take that option and not wait for the new legislation.

As will be evident, I am very much a supporter of elected mayors, as they provide leadership not just to local authorities but to local communities. They have an individual mandate from those local communities to speak on their behalf, not just in the council chamber, but out in the wider world. Elected mayors fundamentally have a far greater accountability to the people they represent, and the system is much more democratic than any of the other arrangements we have seen in the past, or in recent years.

I hope that the Government’s proposals for the 12 largest cities are just the beginning, as does the hon. Gentleman, and I hope that other places will follow. The elected mayor model is democratic and much more in tune with the sort of world we live in today than the structures of local governance developed over recent years or, in many cases, inherited from previous centuries.

I return to where I started and congratulate the hon. Gentleman on introducing the topic for discussion. I note that the debate is not well attended, but I am sure that, as the Government bring forward their proposals and develop the arguments in favour of elected mayors, we will have the opportunity to debate the concept on other occasions, including, perhaps, in Westminster Hall, but certainly in the main Chamber when the new legislation is introduced. I hope that other elected Members will join in making a powerful case for the democratic form of governance that is elected mayors.

14:56

[Martin Vickers (Cleethorpes) (Con)]

I, too, congratulate my hon. Friend the Member for Carlisle (John Stevenson) on securing the debate. It is only proper that I should declare an interest in the sense that I am, and will remain for a few months longer, an elected member of North East Lincolnshire unitary council. As background information, I should say that I have served as a councillor for 25 years—and it don’t seem a day too long. I have served both in a two-tier system as a former member of Grimsby borough council and, more recently—in fact, for the past 11 years—as a representative on North East Lincolnshire council. That experience has certainly taught me that single-tier authorities are ultimately the way forward and that they should be led by elected mayors.

[John Stevenson]

Does my hon. Friend think that we should ultimately move to unitary authorities across the country and get rid of the two-tier system? That would allow elected mayor systems to develop in the various unitary authorities.

[Martin Vickers]

That is my personal preference. I accept the fact that there are geographical difficulties in large counties, in the sense that individuals find it more difficult to become local personalities when parts of the county could be 70 or 80 miles apart. For example, within Lincolnshire county council, the distance from Gainsborough in the north to Spalding in the south is about 60 or 70 miles. I can understand the difficulties, although far be it for me to suggest that Lincolnshire should be broken up into unitaries. That debate is for another day.

As politicians, we are here to articulate the concerns of our local communities. In recent years, there has been much talk of new politics. In the same way as beauty is in the eye of the beholder, “new” can mean whatever an individual chooses it to mean. However, we can transform politics by introducing more direct elections. As my hon. Friend said, there will be personality contests—he mentioned the Boris versus Ken show, which transfixed the nation—and whether we like it or not, personalities have always played a major role in politics. Leadership, in part, results from the individual personality of the person concerned.

I welcome the fact that moves are being made to introduce elected mayors into our big cities; but, like my hon. Friend, I would like to know why it is only happening in those places. In Lincolnshire—in the provincial towns of Cleethorpes, Grimsby and so on—we think that the big cities get more than their fair share as it is. We would like another advocate for our communities, and perhaps elected mayors in provincial areas, working in tandem with Members of Parliament, would be more of a thorn in the side of Governments, of whatever complexion, and we hope that that would be beneficial to local communities.

Much is made of the potential downsides of having elected mayors, such as the possibility that extremists would be elected, but why do we assume that the electorate would vote for extremists? The British people, on the whole, are moderate in their political views, and there is no real evidence that extremists would be elected. If they were, they would soon be found out and lose favour with the electorate. With regard to claims that individuals could be corrupt, I am sure that sufficient reserve powers could be included in any Bill to take care of that.

We have an opportunity to give our politics back to the people by having more direct elections. We need to break down the barriers. As both Members who have spoken in the debate acknowledged, there is an inertia in local authorities, and most councillors are particularly opposed to the concept of elected mayors because that would break down the rather cosy current arrangements. From the general public’s point of view, that is exactly what should happen; we need to break down those cosy arrangements and bring in people who truly represent their communities. We need more individuals to be elected as party candidates through open primaries, bringing more people into the electorate’s choice. We need to reduce dramatically the threshold for initiating a referendum. Councils should still have the opportunity to initiate a referendum, but we need to make it much easier for the population at large to kick-start that process.

There is a fair amount of unanimity in the debate, and I agree that the present arrangements for scrutiny within councils have not worked. That is understandable, as back-bench councillors, under the present cabinet arrangements, really have only one opportunity to speak on behalf of their constituents, so they use meetings that should be for scrutinising the executive to bring up, for example, why the bus stop in the high street has been moved. I do not blame them for that, as I have done it myself. The proposal for directly elected mayors is an opportunity to transform local government, and I hope that the Minister will offer my hon. Friend and I some encouraging words.

15:02

[Chris Williamson (Derby North) (Lab)]

I, too, congratulate the hon. Member for Carlisle (John Stevenson) on securing the debate, which has been interesting, although sparsely attended, and I have enjoyed the contributions immensely. He summarised effectively the background to the present situation and the previous Government’s proposals on executive mayors, as set out in the Local Government Act 2000 and the Local Government and Public Involvement in Health Act 2007. I agree with his comments on an enhanced role for councillors. Perhaps I should declare an interest, as I am still an elected member of Derby city council, which is a unitary authority. Having been a councillor for nearly 20 years, I absolutely believe that it is fundamentally important that we enhance the role of local councillors. I am not sure about his support for personality politics, which occasionally creeps into our political system. I think that politics should be more about values and what we stand for when we run for political parties or as independents, rather than the cult of personality.

[John Stevenson]

I take the hon. Gentleman’s point, but does not he agree that personality politics has already entered our political system as a result of the televised leadership debates that were introduced in the run-up to the general election? The personalities of the leaders dominated the headlines for days.

[Chris Williamson]

Indeed, I do agree, but in a way that supports my point, because to some extent that obscured the policies and values that the political parties represented. It was more about the individuals who were speaking in those television debates. To some extent that is regrettable, but perhaps it was inevitable, now that the genie is out of the bottle.

The hon. Gentleman mentioned localism, which is something I support, so long as it is democratic localism. I do not like the notion of locally elected institutions being bypassed. People understand local authorities, and I would like more powers to be vested in them, rather than for their current duties to pass, for example, to the voluntary sector.

My hon. Friend the Member for Leicester South (Sir Peter Soulsby) has extensive experience in local government and is highly respected in that world. He represented Leicester as the leader of the council with great credit for many years. He referred to the need for improved scrutiny, and I agree that there could be some improvements, but it is important to note that the previous Government did extend the scope of scrutiny. Part of the problem is the time required to fulfil the scrutiny role effectively, because most councillors hold down full-time jobs, so perhaps we should look at the time made available to them to fulfil that role. That comes to the thorny question of allowances, because unless people have substantial means or are retired, they will find it difficult to spend the necessary time to make scrutiny as effective as it could be.

[Sir Peter Soulsby]

Does my hon. Friend accept that one of the problems with the scrutiny function in many local authorities is that, frankly, it has not been separately resourced? I am not suggesting that it is easy for local authorities to find resources for anything at the moment, let alone their internal functions. Does he agree that if scrutiny is to be meaningful in local authorities, as it is meaningful in the House, it needs some degree of separate and independent support, so that it is both valued and well informed?

[Chris Williamson]

My hon. Friend makes a pertinent point, with which I agree entirely. In many local authorities, such scrutiny has been seen as something of a poor relation, so he is right that it is essential that it is adequately resourced. In a context of squeezed budgets, however, that can be difficult, but it is a valid point nevertheless and something that local authorities must take on board.

The hon. Member for Cleethorpes (Martin Vickers) referred to single-tier authorities. Support for the notion of single-tier authorities is growing, and I am sure that he will be somewhat disappointed by the Minister’s recent decision to reject the application of Exeter and Norwich to become unitary authorities. Given his experience in local government, the hon. Gentleman probably understands better than most the benefits that flow from such an authority. His comments on extremists were well made. It is up to the main political parties to ensure, when a mayoral election takes place, that we reach out and get our message out to the general public and persuade them to support the mainstream and progressive values that we represent, certainly on this side of the Chamber. If we can get our message out effectively, we can overcome the threat posed by extremists. That threat is posed only where turnouts are low, so it is vital that we engage with people in the political process to ensure a reasonably good turnout. If we can improve turnouts, the extremists will fall by the wayside.

In my view it is abundantly clear that since the general election the Government’s policy on elected mayors has turned into something of a Brian Rix farce. Earlier this month, the Minister was caught, metaphorically, with his trousers down when he told the media that current council leaders would be transmogrified into executive mayors by order of the Secretary of State. He said that that would be followed by a “confirmatory referendum”. Just a fortnight ago, he told the Yorkshire Evening Post that the referendum question would be, “We’ve set up these things, do you want to stick with them?”

Cue the knee-jerk intervention by the Secretary of State for Communities and Local Government. Following the inevitable backlash to this oxymoronic top-down approach to localism, the Secretary of State told the House of Commons last week that he had ruled out the possibility of imposing mayors. In fact, he said that it was “out of the question”. True to form, however, he went even further later the same day and indulged his penchant for overstatement by saying that he

“had in the top left-hand drawer of my office a pearl-handled revolver with which to shoot the first person to suggest a restructuring of local government. The last time I checked, the revolver was fully loaded and waiting for such a person.”—[Official Report, 21 October 2010; Vol. 516, c. 1155.]

Despite the Secretary of State’s menacing warning, the Minister seems to be alive and well, and it looks as if he has had a lucky escape.

To be serious for a moment, this past fortnight clearly illustrates that the Government’s policy on elected mayors is in complete disarray. We have the Secretary of State threatening to shoot anyone who proposes any form of local government reorganisation, while the Tory leader of Birmingham city council has said:

“If anything it’s a distraction to the real issues of local government.”

Then, we have the Prime Minister, who has pledged to hold mayoral referendums in 12 English cities. Furthermore, before his outburst last week, the Secretary of State himself was setting out plans for local government reorganisation. On 17 August, he told the Financial Times that he was planning to introduce executive mayors in the country’s 12 biggest cities by 2012. In a statement to the House, he said:

“We will put local councils in the driving seat to join up public services… We want elected mayors to trail-blaze such initiatives, not least since elected mayors in our cities will be embraced by the public”.—[Official Report, 11 October 2010; Vol. 516, c. 3WS.]

The reality is somewhat different from the Secretary of State’s hyperbole, however. As things stand, there does not seem to be a huge appetite for executive mayors. In fact, since 2001—the hon. Member for Carlisle set out the history—24 out of 37 referendums have rejected the idea. Stoke was one of the 13 places to vote in favour of an elected mayoral system, but even there residents subsequently voted to scrap it. Will the Minister therefore clarify precisely what the Government’s latest policy position is?

[John Stevenson]

I am curious. I take the hon. Gentleman’s point, and I commented on the fact that only one third of referendums for elected mayors had produced a yes result, but I would be interested to know the Labour party’s view going forward with the idea of elected mayors. Labour Members were clearly up for elected mayors back in 2000, when the Blair Government introduced the idea. As I mentioned, they thought that it would be a great success. However, I am interested in the Labour party’s view now.

[Chris Williamson]

The hon. Gentleman is right that there was a groundswell of support for elected mayors in the previous Labour Government. We introduced legislation to enable elected mayors to be introduced, and we subsequently strengthened it in 2007. As we have heard from my hon. Friend the Member for Leicester South, a strong body of opinion in the Labour party supports elected mayors. However, it should be down to local people to decide, and we should not necessarily impose anything. At the very least, the elected members in an area should come to a view on elected mayors. Going forward, I think that that would remain our position, although we are now in opposition and we are looking at our policies. We will no doubt give this issue greater scrutiny as time goes by, but as things stand, it would be down to local people to decide what type of governance they wanted for their local authority, and I hope that that would remain the position.

Will the Minister clarify precisely what the Government’s policy position is? Will he implement the Conservative party’s manifesto pledge, which said:

“we will give the citizens in each of England’s twelve largest cities the chance of having an elected mayor.”

If the answer is yes, will he explain why the Secretary of State ruled out any local government reorganisation when he addressed the House last week? Will he give a guarantee that mayors will not be imposed in the country’s 12 largest cities without a referendum? Finally, will he concede that, in the current climate, elected mayors would be placed in an impossible position because of the unprecedented cuts in local government funding that he has signed up to? Those cuts will destroy vital public services, increase unemployment and undermine economic growth.

15:15

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

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate my hon. Friend the Member for Carlisle (John Stevenson) on securing a debate on this important topic. It is perhaps rather sad that the debate is so sparsely attended, because localism and the role that directly elected mayors can play in it is a significant issue for many communities, and it perhaps deserves a better audience than we have managed today.

By the sound of it, there is a bit of a contest between hon. Members over who has been in local government longest. I can only say that I spent 16 years as a borough councillor. If I am allowed to count my eight years on the London assembly, I can nearly get to the 25 or so years that the hon. Member for Leicester South (Sir Peter Soulsby)—

[Sir Peter Soulsby]

Thirty.

[Robert Neill]

I cannot quite beat the hon. Gentleman. That would be difficult to do.

No hon. Member actually declared an interest in the sense of saying whether they had been a mayor. I should say at once that I have not been a mayor, although I have been the leader of an authority. The nearest I got was being a mayor’s escort once, and I hope that my wife did not find me too inadequate in that role. That, of course, was under a ceremonial mayoral system.

Although we can smile at the differences, some important issues arise here. Across the country, ceremonial mayors do a valuable job and are often entirely independent, non-partisan representatives of their community. They can be forces for cohesion and fine ambassadors for, and representatives of, their communities. Whatever changes are made, one does not want to lose that element of the equation. Equally, it is perfectly fair to say that there has been considerable debate, and that there is a strong case for considering the mayor as an authority’s directly elected political head and chief executive, as is the case elsewhere in the world. My hon. Friend the Member for Carlisle is therefore right to say that the issue can have a huge impact on local democratic life.

My hon. Friend raised a number of interesting points and asked a number of questions. I should make it clear that there has, of course, been some debate and consideration, and various alternatives have flown around in the air. Some are picked up and some are not, at the end of the day. The final decision on the detailed implementation of our commitment on mayors is yet to be taken, and we will announce that decision to the House in due course. However, the commitment, in principle, to the concept of directly elected mayors in England’s 12 largest cities is in the coalition agreement. As has been observed many times, we have said that we will create directly elected mayors in the 12 largest English cities, subject to confirmatory referendums and full scrutiny by elected councillors. I will address those two issues as I go along.

[Chris Williamson]

Will the Minister clarify what he means by confirmatory referendums? As he will be aware, they have been the subject of some debate in the media. Will he confirm that there would be a referendum before any mayoral system was imposed on any local authority area or city, and that proposals will not go forward unless a majority of people voted in favour?

[Robert Neill]

If the hon. Gentleman will bear with me, I will address the issue of the timing of referendums. However, I want to put it in the context of the rest of the policy.

Having set out the policy position, let me say that our commitment recognises the positive contribution that, international experience suggests, elected mayors can make, in terms of strong local leadership and instigating real change—something that my hon. Friend the Member for Carlisle and others have observed. There are many examples of successful elected mayors, some of whom are in this country. I have had the pleasure of working with Mayors of London of both political persuasions. Other examples come from our other authorities. Clearly, there are also examples abroad. One need only look to London’s best comparator city, New York, or observe the real resilience that directly elected mayors bring to the great cities of many of our continental friends and partners in France, Germany, Italy, Spain and so on, where that governance model is regarded as the norm.

That experience supports the case for mayors in our largest cities, which is founded on mayors having greater potential to achieve successful economic, social and environmental outcomes in their cities than do other forms of government. I think that that is the result of the sharper accountability, greater legitimacy and stronger leadership that direct elections bring. Mayors can both be entrusted with greater powers and be expected to exercise them more effectively than perhaps councils generally are. In our largest cities, creating mayors and equipping them with the powers that they need will enable them to seize opportunities so that those cities can fulfil their potential as drivers of genuine economic growth.

We believe that elected mayors are an effective model—a model that can result in greater prosperity and improved social outcomes for our great cities, and a model that can restore the prestige of our cities, bettering the life of those who live and work in them. However, the decision on whether to have a mayor must ultimately rest with local people. That is why our commitment is to create mayors subject to confirmatory referendums. The timing of the referendums is important, as my right hon. Friend the Secretary of State recognised when he said in the House last week, in response to a suggestion that we would impose mayors,

“of course we will not—that is completely out of the question. The proposals will be subject to referendums.”

I can do no more than refer hon. Members who have asked about the timing to what my right hon. Friend said last week. He put it very simply:

“Once we know the views of the people in those 12 cities, we will move on to the election of a mayor if people vote for that.”

I should have thought that that was pretty crystal clear.

[Chris Williamson]

I do not want to labour the point unnecessarily, but I would appreciate some clarification. There is speculation that the leaders of the councils in the 12 biggest cities in England will be, as I said in my speech, transmogrified into directly elected mayors. I should appreciate it if the Minister would clarify that that will not happen, and they will not be transferred in that way or given the title of elected mayor until such time as a referendum has taken place.

[Robert Neill]

The hon. Gentleman knows as well as anyone that there has been a great deal of speculation about all aspects of elected mayors and the broader decentralisation agenda. I simply repeat what the Secretary of State said, which could not have been clearer:

“Once we know the views of the people in those 12 cities, we will move on to the election of a mayor if people vote for that.” —[Official Report, 21 October 2010; Vol. 516, c. 1117.]

Reference has been made to the 12 cities. Our commitment is to have mayors in the 12 largest cities, and there are different arguments about where they are. Some points have been well made in the debate about the type of city that has a sharp focus and a sense of identity. Equally there will be questions about whether cities have the size or position to take on the range of powers that may be available.

I shall not go into the argument about unitaries as opposed to two-tier authorities at this stage. It is another legitimate debate, and I do not hold a dogmatic view on it. I have experienced good authorities of both kinds. I remind the hon. Member for Derby North (Chris Williamson) that what the Conservative party has always said on the subject—and what the Secretary of State was referring to in a very catchy reference he made to his attitude to local government reorganisation—relates to the situation under the previous Government, when unitary authorities were imposed on some areas by force, without the consent of the people in those authorities. There is a difference between unitary reorganisation and the present issue, which is about giving people in existing, well-established city authorities the choice on whether to have a directly elected mayor.

I draw the attention of the House to the Green Paper, “Control Shift”, that we published in opposition, setting out 12 potential cities that might have mayors. The Green Paper is referred to again in the coalition agreement. Those 12 cities are Birmingham, Bradford, Bristol, Coventry, Leeds, Leicester, Liverpool, Manchester, Newcastle upon Tyne, Nottingham, Sheffield and Wakefield. We did that on the basis that those cities are of a particular size, which we have calculated. We did not include the city of Sunderland, which is large, but which had a vote on a mayor in 2001. The people there took a view and rejected the proposal. So there is a logic to what we have proposed, and our thinking is that we would give people the choice in those 12 cities. We shall set that out in detail in the localism Bill, which was announced in the Queen’s Speech.

My hon. Friend the Member for Carlisle referred to the possibility of extending the plan to other cities, but they can already have elected mayors if they wish. Under existing legislation, councils may choose to hold a referendum on whether to adopt the directly elected mayoral model, or they may resolve to adopt the mayoral model. We do not propose to remove that option. We also intend to keep the current arrangements whereby local people can trigger a binding referendum on whether to have an elected mayor for their area by submitting a petition to the council with the signatures of at least 5% of the area’s electors. I understand that there is such a petition under way in my hon. Friend’s constituency.

[Sir Peter Soulsby]

On the point about the opportunities open to local authorities under the existing legislation, as the Minister will be aware, non-metropolitan districts, and unitaries that were non-metropolitan districts, will be required to make a choice between a strong leader or an elected mayor before the end of this calendar year. Will the Minister go a little further than he has done and encourage them to take the opportunity to consider seriously the option of an elected mayor and perhaps, when they have examined it carefully, to take the bold step of adopting the model as of May next year?

[Robert Neill]

As I am a localist, I genuinely do not want to impose a blueprint on those local authorities, but the hon. Gentleman, who was himself a strong leader even before the term was invented—he was a very effective leader of Leicester city council under the previous powers—will be aware that arguments can be made in that direction. There is an opportunity for the case to be made by local authorities if they wish. Equally—this is the point that we are stressing—the decision should rest with the local people.

[John Stevenson]

The Minister touched on the point about the petition by local people. At present, 5% of electors must sign it if there is to be a referendum, but does he think that that is a prohibitively high proportion? It is quite difficult for a group of people in a locality to get together to obtain 5% support. Would not it be better to reduce that figure and thus encourage local people to petition for a referendum?

[Robert Neill]

I will consider my hon. Friend’s point. I point out that 5% would be about 4,200-odd people in Carlisle, but my hon. Friend knows the area better than I do, and I stand to be corrected. It is a moot point whether that would be an impossible threshold to reach. It is legitimate that there should be some form of threshold to provide at least some evidence of a genuine desire among the population to go down that route. There are some costs in a referendum, although that is not the biggest issue involved, so before embarking on one there should be some evidence of public support. It is possible to argue either way about the matter, and I shall think about my hon. Friend’s point.

However, it is important to be careful. There must be some safeguards in the process. I mention that in the context of the referendum in Tower Hamlets and the mayoral election there, which I believe everyone in this Chamber would agree was not the best advertisement for the mayoral model. The concern that I draw to my hon. Friend’s attention, and to the attention of my hon. Friend the Member for Cleethorpes (Martin Vickers), who made a point about the unlikelihood of extremists being elected—I broadly agree that the electorate are generally sensible enough to see through them—is that there can be a risk of manipulation of the petition for a referendum without some proper safeguards.

In Tower Hamlets, there were some 17,000 names on the petition, easily beating the threshold, but some 6,000 were ruled invalid by the returning officer because of various blatantly fraudulent devices that had been employed to get signatures. That may not be the situation in Cleethorpes, but in some parts of the country there is a risk of pressure from individual sections of the community that may propose a petition for not entirely cohesive ends. We have to have some safeguards, but I think we can keep an open, practical mind as to the best way of dealing with the matter.

A question was raised about the important issue of mayoral powers. My hon. Friend the Member for Carlisle made a fair point on that. It is important that elected mayors have all the powers that they need to lead and enhance the prestige of their cities. Mayors need to be able to make real improvements to the lives of those who live and work in their city, and to make an impact on the city’s economy and its capacity to act as an engine of growth more widely.

One of the reasons, but not the sole reason, why we proposed the 12 largest cities is that it so happens that they are all unitaries. Unitaries are not necessarily the only model, but it may be convenient, particularly at an early stage when people are not used to elected mayors, to have elected mayors in cities where the mayor has the whole range of responsibility for local government services; in that way, things could be more naturally concentrated in one person’s mind. We want to strengthen mayors’ powers, and my right hon. Friend the Secretary of State set out the kind of powers we meant in a speech during our party conference. The hon. Member for Derby North helpfully quoted what he said, so I need not repeat the kind of areas at which we are looking.

We envisage that mayors will work closely with neighbouring council leaders on issues such as transport, the strategic approach to planning, and wider economic priorities. Of course, it is important to remember that all the great cities do not live in isolation from their hinterland, whether in economic, social or simply spatial terms. Whatever happens, mayor or leader, there has to be a system such that cities can work sensibly with neighbouring authorities. The alternative would involve exactly the kind of upheaval due to further local government reorganisation and changing boundaries that my right hon. Friend the Secretary of State had in mind when he referred to the armaments industry, if I can put it that way. We want to find sensible ways for mayors to work across boundaries.

My hon. Friend the Member for Carlisle is a strong proponent of decentralisation, as was evidenced in his maiden speech to this House. He argued strongly that in order to improve local economies and education, we must decentralise, take decisions back to communities and allow local people to make local decisions—in simple terms, return power to people. I endorse those sentiments wholeheartedly. They form a vital part of the Government’s localism agenda. I would go further and say that creating mayors in our largest cities is a key vehicle for facilitating that much-needed decentralisation. The hon. Member for Leicester South, and my hon. Friends the Members for Carlisle, and for Cleethorpes, were hoping that the Government would endorse the idea of mayors. The Government have clearly indicated that, in the right place—it is for the people to choose what is the right place—directly elected mayors can indeed make a significant difference.

Several hon. Members raised the important issue of accountability and scrutiny. With power comes responsibility, and a crucial element of the elected mayoral model is strong and effective scrutiny of the elected mayor and his or her actions by elected councillors. Effective scrutiny will provide the means for ensuring that the electorate have detailed knowledge of their elected mayor’s policies and activities. Direct accountability and scrutiny will be enhanced by stringent transparency requirements. The Government have already announced their intentions in respect of publishing online any spend over £500. Clearly, that has to apply as much to mayor-led authorities as it does to any other authority.

The hon. Member for Leicester South made a point about the role of the back-bench councillor and ensuring that scrutiny is effective. I have a great deal of sympathy with his comments about the need to give back-bench councillors a real role in the system. I have heard from councillors of all political persuasions and none that they can feel—and perhaps, in effect, be—excluded from the decision-making process. That can happen under the leader-and-cabinet model as much as it can under a mayoral model. Whatever the system, we need to find some means of addressing that.

It is important, too, that scrutiny is genuinely effective and moves beyond post-event, post hoc scrutiny, which can be rather meaningless at the end of the day. It is important that, wherever possible, we give elected members the chance to have input in the decision-making process before decisions are completed. That is why, in the spirit of localism, we are saying that local authorities should have the ability to choose whether they stick with the leader-and-cabinet model or with a committee system. That is for them to choose, but either a leader-and-cabinet or a mayoral model can be made to work, provided they properly involve councillors. My London borough of Bromley, for example, calls its scrutiny committees “policy development and scrutiny committees”, which more closely mirrors what should happen, in terms of trying to involve members at an earlier stage of the process.

My hon. Friend the Member for Carlisle mentioned councillor numbers and asked whether we would seek to reduce the number of councillors in areas where elected mayors are in place. Once again, I refer to the comments of my right hon. Friend the Secretary of State in response to a question on that issue. He stated:

“Decisions on the number of councillors in any local authority are handled by the independent Local Government Boundary Commission, in which process I have no role.”—[Official Report, 21 October 2010; Vol. 516, c. 1116.]

That is the case; Ministers do not have any role in setting either the boundaries or the number of councillors under our current arrangements. If councils wish to open up the matter of the number of members that they have, they can ask the Local Government Boundary Commission to review the authority’s ward boundaries and number of members. They do that by direct application to the commission; the process does not involve the Government, and it is probably right that there should be independence in that regard.

[Sir Peter Soulsby]

On boundaries, can the Minister take this opportunity to confirm that the proposals that are likely to come forward for the 12 cities are likely to be based on the existing boundaries of those cities? There have been rumours that there may be extensive extensions of some areas. I do not expect that to be the Minister’s intention, but I would like to give him the opportunity to confirm that it is not his intention.

[Robert Neill]

The hon. Gentleman’s understanding is the same as mine. There has been debate outside this House—academics and others have suggested other things, such as regional mayors, city region mayors and so on—but I am happy to make it clear that our intention relates to the cities’ existing boundaries.

The commitment remains strong. There is a real case to be made for mayors, but the people of the cities ultimately must make the choice. There can be a great advantage in having a directly elected political leader of an authority; it can mean a sharper focus, a clearer line of accountability and a greater profile for the political head of the authority, and therefore for the authority and its services.

The issue of personality was raised. I mention it because we should remember that if a community decides to go down the route of having an elected mayor, the electoral process must include proper safeguards; I largely agree with the hon. Member for Derby North on that. Although personality is inevitably part of politics nowadays, I hope that that is kept in proportion because, ultimately, values are what count. The recent election in Tower Hamlets, in which the successful independent candidate, or certainly people linked to him, launched a libellous and wholly unfounded series of personal attacks on the Labour candidate, does not help the argument. We have to keep personality in proportion, and that comes back to the need for safeguards in such circumstances—in referendums, in elections for directly elected mayors and, once they are in place, in the scrutiny process. That is not a reason not to go down the route of having directly elected mayors, but we must bear it in mind when finding the right checks and balances.

Let me reiterate our commitment to having mayors in the 12 largest cities, subject to referendums and scrutiny of the kind that I described. That commitment will benefit those cities, helping to return them to their rightful place among the world’s economic powerhouses and, ultimately, helping to improve the lives of the people of this country.

15:41

Sitting suspended.

Rarer Cancers

Wednesday 27th October 2010 Westminster Hall

15:58

[Mr John Leech (]

Manchester, Withington) (LD): It is a pleasure to see you in the Chair this afternoon, Mr Robertson. I start by thanking my hon. Friend the Minister for contacting me in advance of the debate for an indication of the matters that I want to raise on a wide-ranging subject. The title is particularly wide. I also thank the numerous organisations that contacted me with information for the debate and apologise to those whose issues will not be addressed this afternoon.

In this short debate, I want to make some time available to my hon. Friend the Member for Gillingham and Rainham (Rehman Chishti), who wants to say a few words, and to take the opportunity to raise two specific issues, the first of which is lack of awareness among MPs of the issues surrounding funding for the treatment of rarer cancers in general and the lack of understanding of the complex processes and institutions that make decisions about the availability of drugs, especially to sufferers of rarer cancers.

The second, related, topic is the recent health technology appraisal by the National Institute for Health and Clinical Excellence of the use of azacitidine for the treatment of myelodysplastic syndrome. That is a bit of a tongue twister, so I shall refer to it as MDS. NICE’s appraisal and decision-making process for azacitidine highlights the problems and inequalities facing sufferers of rarer cancers in getting access to what are often life-saving treatments. NICE’s refusal to recognise orphan drug status has created a great disparity in the treatment options for the sufferers of rarer cancers. With the move to value-based pricing not due to come into effect until 2014 and with the lack of details about how it will work, it is essential that that inequality is addressed.

The initial £50 million of funding from the cancer drugs fund has been distributed to the strategic health authorities, and today sees the opening of the consultation on the main cancer drugs fund. I suggest that today is the perfect day to restate the case for far greater funding for rarer cancers.

I start by mentioning the need for MPs to have a greater awareness of rarer cancers, and of the processes and institutions that evaluate the drugs needed to treat them. A number of patients and their family members attended the MDS UK lobby of Parliament yesterday. As part of that lobby, MDS UK launched the results of a survey, which showed that two thirds of MPs had no understanding of the term “health technology assessment”, and one third had no understanding of the term “quality-adjusted life year.” I confess that I was one of those people until I was contacted by MDS UK.

MPs are expected to have a broad knowledge of many subjects, but we cannot claim, or expect, to have a detailed knowledge of all subjects—some of our constituents may argue that we do not have much knowledge of any subjects. With large-scale reforms of the NHS due to be discussed and voted on, it is vital that MPs gain a greater knowledge of such subjects, and understand how those who suffer from rarer forms of cancer are currently discriminated against.

There is a need for greater awareness about how the details of value-based pricing and decisions on how to allocate the cancer drugs fund may, or may not, remove barriers to treatment for those with rarer cancers. I do not intend to spend any more time on that aspect of the debate, other than to highlight the rarer cancers toolkit collated by MDS UK, which I hope the Minister is aware of and has seen. Although today I am concentrating on MDS, there are other rare cancers such as pancreatic cancer, ovarian cancer or mesothelioma that also struggle with either a lack of access to drugs, or with the need to raise awareness among the general public.

I want to mention the fiasco surrounding the NICE appraisal of azacitidine. The process has already taken 18 months and, as a solution is not necessarily assured until March 2011, it may end up being a two-year process in total. In the meantime, up to 1,500 patients will have missed out on the opportunity to access azacitidine during that decision-making process.

The mishandling of the evidence by the evaluation team, as highlighted by the appeals committee, has not helped. The process is long-winded and ponderous even without an appeal. More worryingly, setting aside the length of time involved, the decision-making process itself is flawed, especially NICE’s refusal to recognise orphan drug status. The MDS Forum, the Royal College of Pathology and the British Society for Haematology, which collectively represent the UK’s top haematologists, have all written to NICE to highlight the unsuitability of NICE’s health technology assessments for considering orphan medicines. Haematologists from centres of excellence across Europe have signed a letter echoing that view. Of the 50 orphan-status drugs that are licensed by the European Medicines Agency, only three have been recommended by NICE.

There is an exceptionally strong case for further reform to the NICE process to ensure that it captures the full value of new and innovative medicines for patients with rarer cancers. It is widely accepted that there are problems with the NICE process and that it is unfair to those who suffer with rarer cancers. Extremely high costs are associated with the research and development of drugs, and the relative lack of expertise means that drugs for rarer conditions cost even more. The fact that some drugs are for small patient groups means that sales are relatively low, and the unit cost of such drugs is incredibly high. Nevertheless, the innovative value added by those drugs is great. They are not “me too” drugs, with a relatively low incremental clinical improvement to the patient compared with the drug that is replaced. Such drugs are unique and often provide the only treatment available to the patient. Azacitidine for MDS is a perfect example. The only alternative to it is usually “best supportive care”, which treats only the symptoms and not the disease.

I do not know why the process cannot be adjusted to take orphan status into account, and I would be grateful if the Minister could address that question in his response. It seems that the UK is almost unique in that decision. The problems with the NICE process are not unknown, and I know that the Minister and his Department are fully aware of them. The decision to move to value-based pricing, and the introduction of end-of-life criteria and patient access schemes are recognition of such problems. However, end-of-life criteria and patient access schemes have not succeeded in making appraisals more flexible to innovative treatments for rarer cancers, especially cancers where the small number of patients eligible to take part in trials means that there is often considerable uncertainty surrounding the data.

An interesting example of the current problems with NICE’s methodology is the fact that even if azacitidine were to be given to the patient for free, its quality-adjusted life year cost would still be £20,000. I do not understand how that can be the case; perhaps the Minister will explain.

Unfortunately, value-based pricing is more than three years away. That will be too late for some patients. Furthermore, the devil will be in the detail as to how the scheme will work and how effective it will be at addressing the needs of small patient groups. In the meantime, short of further reform of the NICE process, the only option for MDS patients and similarly disadvantaged sufferers of other rare cancers is the cancer drugs fund.

Before I move on to the cancer drugs fund, I urge the Minister to ensure that value-based pricing is constructed in such a way that drugs such as azacitidine become available to UK citizens, just as they are available across the rest of Europe. Azacitidine provides a vast improvement to patient outcomes compared with current treatments, and it is therefore the very definition of “high value”, which value-based pricing must be designed around.

I urge the Department of Health to ensure that the cancer drugs fund is used to help sufferers of cancers such as MDS. MDS is a life-threatening illness and it is terribly served by the NICE process. The only available treatment is currently being denied to patients, and although I hope that NICE reverses its decision, I fear that ministerial intervention may be needed to bring access to azacitidine to MDS sufferers. It is exactly the kind of treatment that the cancer drugs fund was designed to support and must provide for. Of course, MDS sufferers will have to wait even longer while NICE makes its decision, before they are even allowed to apply to the fund.

In conclusion, I urge the Minister to ensure that NICE methodology is reformed to make it more suitable for assessing medicines for rarer cancers, or that cancers such as MDS are taken out of the NICE health technology assessment process. I request value-based pricing to be constructed in a way that ensures that innovative drugs with a high benefit to patient outcome, such as azacitidine, are correctly appraised. In the meantime, I ask for the cancer drugs fund to be used to correct the inequality faced by sufferers of rarer cancers due to the disparity in the appraisal process of drugs for those rarer cancers.

16:09

[Rehman Chishti (Gillingham and Rainham) (Con)]

It is a pleasure to speak under your chairmanship, Mr Robertson. I thank and congratulate the hon. Member for Manchester, Withington (Mr Leech) on securing this debate on such an important and sensitive issue. Applying the basic principle that brevity is a virtue, not a vice, I shall keep my submission short. I place on the record my thanks to organisations such as Macmillan Cancer Support, which have been very helpful in providing information for me to consider and base my submission on.

My first point is that representations have been made to me that people who suffer from rarer forms of cancer should be given priority in the Government’s proposals for the new drugs fund, on the basis that they are the ones who are the most disadvantaged by the current NICE drug appraisal system.

Secondly, the services available through the clinical nurse specialist system are very unlikely to be given to people with rarer forms of cancer. I urge the Minister to consider extending that system and ensuring that people with rarer forms of cancer have access to it. That is especially important because new research shows that clinical nurse specialists save the NHS money by co-ordinating services more effectively, along with significantly improving the patient experience and outcomes.

Thirdly, I seek an assurance from the Minister that the full maximum of the money allocated in the coalition agreement to the cancer drugs fund will be available. It is vital that we ensure that people who need those drugs get them at the earliest opportunity.

16:11

[The Minister of State, Department of Health (Paul Burstow)]

I am grateful for the opportunity to respond to the debate. I congratulate my hon. Friend the Member for Manchester, Withington (Mr Leech) on securing it and I particularly thank him for giving me notice of the focus of the debate, because, as he rightly says, the range of issues that could be covered in a debate on rare cancers is very wide. I hope that my remarks will therefore address his particular concerns.

The argument that my hon. Friend makes about the iniquities facing people with rare cancers is a clear riposte to the challenge posed by those who say that the NHS needs no reform because it works perfectly. That is often said to me, but my hon. Friend has set out a compelling case why there are areas in which scrutiny, change and reform are undoubtedly necessary. In fact, there are significant failings in the current system of drug pricing and access. The Government are determined to put them right so that we can help more people to get fair access to drugs and treatments that will help them.

In that regard, my hon. Friend rightly draws attention to today’s launch of the cancer drugs fund consultation. It is an important moment for the 27,000 people diagnosed with rarer cancers each year. The £200 million a year investment that we shall be making from 1 April 2011, on top of the £50 million that started to go into the system from 1 October this year, means that the NHS will be in a position to provide more support than it has been able to in the past. We will ensure that more patients get drugs and treatments not otherwise available on the NHS.

The Rarer Cancers Foundation has said that our interim funding for the cancer drugs fund will benefit more than 2,000 cancer patients this year alone. Clearly, the £200 million investment that we are making from next April will benefit thousands more. My hon. Friend—

[Emily Thornberry (Islington South and Finsbury) (Lab)]

Will the hon. Gentleman give way?

[Paul Burstow]

I am afraid not, because in these debates one has to have obtained the permission of the hon. Member who secured the debate and then the Minister. For that reason, I cannot give way.

[Emily Thornberry]

Please excuse my inexperience. I have just one question—

[Paul Burstow]

I would be more than happy to discuss it with the hon. Lady after the debate.

My hon. Friend is right to stress that we need to ensure that the fund and the eventual value-based pricing approach are accessible and intelligible. He is right to challenge all of us to test our own understanding of QALYs and technology appraisals. My officials did supply me with a plain English version of what QALYs are, but I will not detain hon. Members by reading it out today. My hon. Friend is right to say that MPs need to understand the detail of how the new cancer drugs fund will work in practice, so that they can advise constituents effectively and their constituents can make the maximum use of it.

The rarer cancers toolkit, which my hon. Friend described, contains a lot of useful information to help MPs to understand cases brought to them by their constituents. I place on the record my gratitude to MDS UK for taking the time to develop it. I hope that it is a successful toolkit that is widely taken up and used by colleagues in the House.

In addition, today’s consultation launch is an ideal opportunity for hon. Members to interrogate the proposals, offer constructive challenges and add their own thoughts on how we can take the issue forward. I certainly encourage my hon. Friend and the hon. Member for Gillingham and Rainham (Rehman Chishti) to consider it in more detail and be prepared to comment in more detail. I will ensure, however, that the comments made about it today are fed into the consultation.

I was asked a specific question about the role of clinical nurse support. Every cancer patient should have access to appropriate care, support and information. We are considering the evidence to see whether one-to-one nurse specialist support can improve care for cancer patients, as well as ensuring that there is efficient use of NHS resources. We shall say more about that as we publish our NHS cancer reform strategy review later this year.

My hon. Friend rightly highlighted value-based pricing as one of the ways in which we can address a number of the issues. The cancer drugs fund provides us with a bridge to that more sustainable system, which we hope to have in place from 2014, when the current pharmaceutical price regulation scheme ends. Our intention is to develop a system that makes a much closer link between the price that the NHS pays and the value that a new medicine delivers. That is the key to securing better access to medicines for patients and a better deal for the taxpayer.

Developing a new medicines pricing system is clearly not a simple task. It is important to ensure that when the new system comes in, we get it right. There is international experience on which we can draw, but it will be groundbreaking work and we shall want to engage with stakeholders to ensure that we get it right. I agree with my hon. Friend that the new pricing system must be carefully designed so that it provides fair outcomes for all patients, including those with rarer forms of cancer.

There is, though, a balance to be struck, as I am sure my hon. Friend would acknowledge. The pricing model needs to support innovation in the pharmaceutical sector; it needs properly to reward research and development in respect of new treatments. We need to ensure that the incentives are there to encourage firms to invest in the future treatments that will fulfil unmet needs and save and improve people’s lives. However, we also need to deliver better value for the taxpayer. In the current financial climate, that is even more the case.

My hon. Friend makes valid points about the unit costs of drugs for rarer conditions and how we tally up the development costs with the relatively low sales of those drugs. I will ensure that his comments about those matters are fed into the future discussions about the design of and consultation on value-based pricing of drugs. Later this year, we shall publish a consultation document, setting out our plans in detail. I hope that he and people from the many charities representing those with rarer cancers take part in that consultation and help us to shape the system in a way that makes a difference for those whom they represent.

My hon. Friend made comments about the treatments available for MDS; indeed, he said that none was available. I am informed by officials that some people with low or intermediate-risk MDS and no symptoms may not need treatment, but they will be monitored. Most MDS patients will have treatment to control or improve the symptoms. That is called supportive treatment. Chemotherapy may be helpful for some people, depending on the type of MDS that they have. A small number of patients may benefit from stem cell transplants, and the aim in those circumstances is to cure the disease. There are things that are done, but I accept my hon. Friend’s general point about the need to have access to appropriate drugs as well.

Let me answer the points that my hon. Friend raised about NICE. NICE performs a very difficult but essential job. Its independence is a key strength in the system. It should not be subject to micro-management and meddling by Ministers on a case-by-case basis. For that reason, I will not be able to give my hon. Friend the comfort that he wants—a ministerial intervention to direct NICE to behave differently with regard to the particular treatment under discussion. However, I note my hon. Friend’s criticism of the way in which the appraisal has been handled. That is the very reason why we have to have within it the appeal mechanisms that exist. That appeal mechanism has allowed some of those issues to be flagged up and reconsideration to take place.

I appreciate what my hon. Friend has said and his frustration, which I suspect is shared by many hon. Members and, more importantly, by those hoping for access to the drugs, about the length of time that it can take to get an appraisal through. NICE has attempted to streamline its appraisal process in recent years and, in many cases, is now able to start work before a new drug is licensed. For the majority of new cancer drugs, NICE aims to publish draft or final guidance within six months of licensing.

The process tends to be more protracted when there is an appeal against the decision, as there was in that case, or when there are particularly complex issues surrounding the drug in question. While we would welcome greater speed, none of us would advocate dispensing with the vital features of NICE’s work, such as public consultation and an independent appeal stage.

It is worth pointing out, however, that people can access the new funding for cancer drugs before NICE makes a final decision. Let me be absolutely clear: in other words, people do not need to wait for NICE to say no before they can apply to the cancer drugs fund. We have also made it clear to primary care trusts that they should not refuse to fund a drug locally simply because no NICE guidance is yet available.

I am also aware of the problems about providing drugs for which there might be limited evidence of effectiveness. Again, today’s consultation is asking about and seeking comments on that, to see how the fund is developed and what advice we give to the members of the panels that make the decisions. We are open to ideas and, through this debate, I put to my hon. Friend and others the idea of participating in the consultation.

Turning to orphan status drugs and drugs appraisal, my hon. Friend rightly drew attention to the fact that NICE has recommended only three of the 50 orphan drugs licensed by the European Medicines Agency. I understand his point, but we need to put his point into context. NICE has issued final guidance on, I believe, only seven drugs that have a current orphan designation, recommending only three of them, including one drug for more than one indication. NICE also issued positive guidance on the drug Sutent, which was an orphan drug when designated, but has since had that designation withdrawn.

My hon. Friend asked why NICE approval processes could not be adjusted to take into account orphan status. I point out, as he rightly mentioned, that the end-of-life criteria give NICE flexibility in appraising life-extending drugs for patients with terminal cancer. One of the criteria that must be satisfied for NICE to apply those extra flexibilities is that the treatment must be licensed, or otherwise indicated, for small patient populations. He suggested that such flexibility has not been helpful with orphan drugs, but it has helped make a number of drugs available to patients, including orphan drugs such as Yondelis for soft-tissue sarcoma and Revlimid for multiple myeloma.

I know that NICE is always open to ideas and I encourage my hon. Friend to engage directly with it, along with MDS UK, about their concerns. I will certainly ensure that a transcript of the debate is passed to NICE, so that it can see for itself the concerns of my hon. Friend.

To sum up, such issues are incredibly difficult and emotive. I know that from my own constituency mailbag and from constituents who come to see me, battling to get the medication that they think is appropriate for them on the advice of clinicians. The cancer drugs fund begins to transform and unlock new opportunities in that regard. Decisions concerning treatments often affect patients’ chances of beating their cancer. That and the possibility of patients having more time with their families are the very motivation behind the drugs fund.

The Government are clear. We need a system that treats people with rarer cancers in a fairer way, as my hon. Friend said today. He offered us a helpful and insightful spur to ensure that we have a clear focus as we progress in developing policy in the area. The fact is that many thousands of people have lost out over the years, owing to how cancer drugs are priced and funded. Starting with the £50 million already made available this year, and continuing with the £200 million cancer drugs fund from next April, we want to end that unfairness. More people will be able to get the drugs that they want to extend or improve their lives.

I hope that my hon. Friend has found the debate useful. We must ensure that the system works around the needs of patients and is evidence-based and properly accountable. I look forward to continuing the discussion. I hope that he and others will respond properly to the cancer drugs consultation and our work around designing the value-based pricing system to come.

16:24

Sitting suspended.

Barton Biomass Plant

Wednesday 27th October 2010 Westminster Hall

16:30

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

I am grateful, Mr Robertson, that time has been allowed for this afternoon’s debate, and I am pleased that my hon. Friend the Member for Edinburgh East (Sheila Gilmore) and my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) are present. My right hon. Friend is here because his constituency neighbours mine and will be impacted by the proposed power station that is the subject of today’s debate. My hon. Friend the Member for Edinburgh East faces similar problems in her community.

I shall start by setting out a little of the background to the subject. Peel Holdings proposes building a biomass renewable energy plant at Barton in my constituency on the banks of the Manchester ship canal. The plant would primarily burn recycled wood—for example, wood that had been treated with paint or varnish—and some virgin timber. I understand that other plant-derived material will also be burned. According to the applicant, the plant will handle 200,000 tonnes of material per annum, have an operational life of 25 years and provide renewable energy for approximately 37,000 homes. A planning application to the local authority, Trafford metropolitan borough council, is expected to be made soon.

No one questions the wish to make more use of renewable energy sources, but since I was elected in May the proposed plant is without doubt the single biggest issue in my postbag. Hundreds of local people have contacted me about it, the majority being opposed. Local campaigners have established the Breathe Clean Air Group to oppose the building of the power station. A public meeting earlier this month in my constituency attracted hundreds of local residents, and the vast majority of them oppose what is planned.

The concerns being expressed by campaigners and local people fall into three groups. First, there is concern about emissions from the plant and whether the technology that is to be employed will be adequate to clean them satisfactorily, and there is concern about the impact of the emissions on public health. Secondly, there are concerns about the monitoring processes in relation to the emissions. Thirdly, people have a range of concerns about the effect of the plant on local amenities—on local housing, businesses and transport—and problems resulting from congestion. I appreciate that many of those are local planning matters.

I note that the area is already spectacularly unfavoured, as the site of a planned methane plant and a sewage works, and is located right next to an already busy motorway junction. I was interested to note that Peel Holdings has suggested that the materials bring brought to the plant for incineration and the waste being removed could be transported on the canal in due course. I hope that the company will provide more details when the proposal comes to the planning stage, which I expect to happen in the next few weeks.

I wish to refer today to the level and monitoring of the emissions, and I invite the Minister to respond to those concerns. I am pretty confident that Peel Holdings will seek to show that the plant will comply with minimum legal emissions standards. The consensus in the debate initiated in Westminster Hall yesterday by the hon. Member for Congleton (Fiona Bruce) seemed to be that Ministers believe that the Health Protection Agency has convincingly failed to establish any link between emissions from incinerators and public health. However, significant concerns remain among my constituents. I ask the Minister to expand on that analysis.

My constituents point to the latest European Union directive on air quality, incorporated into the UK’s air quality strategy, and to EU directives on waste that require member states to use the best available technology to achieve maximum emissions of no more than 1 to 5 mg per cubic metre, but they also say that the United Kingdom has allowed a limit of 10 to 15 mg per cubic metre. Campaigners tell me that each additional milligram worsens health outcomes and mortality rates. The worry is that although the Barton plant may fall within the UK limits—indeed, I expect that it will—it does not represent the best in technology and that the risk of adverse cardiac, respiratory and other health conditions could result.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

My hon. Friend explains the concerns of her constituents with her customary skill and brings to the Minister their real concerns on the impact on public health. Of course, these issues are a trouble not only to her constituents, but to many of mine, particularly those who live in the Sale area. Does my hon. Friend agree that it is vital that we have an accurate assessment of the risks involved, so that decisions are made in light of the full facts?

[Kate Green]

Steam vapours are of course no respecters of constituency boundaries. Indeed, the Breathe Clean Air Group has shared with me a footprint plan suggesting that the effect of the emissions would be felt across much of Greater Manchester, as far south as Manchester airport and well into the city centre.

There are significant anxieties about the health analysis that has been made. It is not sufficient for my constituents, who are very concerned about the proposal, or for others in the Manchester vicinity, simply to be told that the Health Protection Agency has reviewed the available evidence. I hope that the Minister will be able to help this afternoon by giving much fuller information on that aspect.

Will the Minister explain how the ongoing review processes on the latest evidence about the health impact of emissions will be maintained following the Health Protection Agency’s abolition, which was announced the other day? My understanding is that local public health directors will take a significant role, and I would be grateful for any information that the Minister provided about where they could obtain the most up-to-date evidence, research and advice necessary to inform future debates.

I turn to the arrangements for monitoring the emissions. I acknowledge that Peel Holdings has been very forthcoming in its responses to my questions. It has indicated that it will be putting in place sophisticated computer monitoring systems, and it says that the Environment Agency will have the power to make regular and unannounced checks. I hope that the Minister will confirm that the agency will continue to fulfil its inspection function, and that there will be no slackening of the inspection regime following the announcement the other day of a redefinition of its functions. That is important to my constituents, and I look forward to what the Minister has to say. I also wish to know how as much as possible of the data that are captured and monitored can be made transparent to the public, especially to my constituents, and how the Environment Agency will ensure that they cannot be suppressed if standards are not met.

Let me refer to the issue that was at the heart of yesterday’s debate on incinerators that was initiated by the hon. Member for Congleton. It was said that Government policy, both in relation to incineration and renewable energy sources, will be reconciled to empowering local communities to make decisions about their local areas.

[Sheila Gilmore (Edinburgh East) (Lab)]

One concern that has been raised by my constituents about the proposed construction of a biomass plant nearby is that the concept of renewable energy as a good thing is being used to cover up, or to disguise, practices that are by no means environmentally friendly. Does my hon. Friend agree that there is a danger in that? Only 30% of the fuel for the plant proposed in my area would come from recyclable elements, which might be polluting, and up to 70% will be from virgin wood, some of which may be sourced from South America, which does not sound very environmentally friendly. Does she not agree that, because of greenwash, there is a danger that things will be agreed that are by no means green?

[Kate Green]

I thank my hon. Friend for that helpful intervention. There is a sense that a number of proposals, many of them very different in their detail, are being branded with a collective greenwash, as she so eloquently describes it, which is, perhaps not intentionally, serving to brush aside debate. The Breathe Clean Air Group and Peel Holdings have supplied me with a considerable amount of scientific information, very little of which I can make sense of. I strongly suspect that that will be the case for many of my constituents who are closely attending to this debate. It would be helpful if we had the fullest possible public information in terms that are easy to access and understand, so that we can have a genuinely well informed debate about renewable energy sources and their green impact.

I am particularly interested in an issue that has been raised by the Breathe Clean Air Group about the European requirement to make use of the best available technology. Its view is that the best available technology may not be represented, even in the context of energy renewables, and I should very much like to understand more about that, as would many of my constituents and those of my hon. Friends.

I am keen to understand how the information and the wider context will be played out in relation to the role of local communities in making decisions about the issues that directly affect them. Yesterday, in responding to the debate initiated by the hon. Member for Congleton, the Minister said that where applications were made for such plants—he was talking at that time about waste incineration—the Government wanted to ensure proper, informed and vigorous debate in the community. I very much welcome that. In Trafford, such a debate is already taking place. None the less, it seems that there could be a tension between Ministers’ avowed commitment to localism and the assertions about health standards and emissions that were being made by the Minister yesterday. Perhaps the Minister will expand on how he expects the will of local people to be properly taken on board in planning decisions and in any potential planning appeal.

I ask such questions in advance of a planning application being submitted in relation to the Barton renewable energy plant, because local people are very concerned that the decision has been stitched up. What guarantees will the Minister give my constituents that that is not the case and that local concerns about the proposals will be given appropriate weight?

16:44

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

It is a huge pleasure to serve under your chairmanship, Mr Robertson. We worked closely together on the Energy and Climate Change Committee before the last election. I know that you have a great personal interest in all these energy-related matters, and I am delighted that we have a chance to debate them in front of you this afternoon.

Let me begin by thanking the hon. Member for Stretford and Urmston (Kate Green) for securing the debate and for the way in which she has introduced it. Her constituents will feel that she has done them a very important service by initiating a debate in this Chamber, raising their concerns and giving us the chance to debate them broadly. I also welcome the constructive contributions from other hon. Members, who adopted exactly the right tone for such a debate.

I hope that the hon. Lady understands that I am not in a position to comment on individual planning applications. There is a legal process for applications to go through, and it would be wrong for Ministers to intervene in individual matters which quite properly fall under the control of local authorities. None the less, I am keen to respond to some of her points, and to set out the importance of biomass and the safeguards that are needed to reassure her constituents about the role that it might play.

I agree with the hon. Lady about the importance of a well-informed debate. Her constituents need to feel that they can understand the issues that are being addressed. Plain English should therefore be used in all documentation. I recognise that the subject requires quite technical information, but everyone has an obligation to put that forward in the most straightforward way possible. The only way that we can gain public acceptability is if people can understand exactly what is being proposed and feel that they can genuinely have their views heard. I will seek to reassure her, in my contribution, that that is absolutely the intention of our planning changes.

Our objective as a Government is to see that there is constant upward pressure on standards. Such an objective does not stand still; we do not lock it in at any particular point in time. Standards must evolve over time. The types of technology being introduced now are of an infinitely higher standard than those of the past, and that is a process that we want to see taken forward.

Biomass has a very important part to play in our commitment to develop renewable energy. Bioenergy more generally has an important role to play in that regard. Biomass offers a significant opportunity for this country. Energy crops, wood and municipal waste play a vital role in that process, and we encourage people to consider that. I understand the point that the hon. Member for Edinburgh East (Sheila Gilmore) made when she said that such materials should come from sustainable sources. We are considering the right standards that we must put in place in that respect, and we will introduce new mandatory sustainability standards next year. People have to be reassured that we are pursuing this in a way that is globally sustainable. We are not just looking at a particular local issue without understanding the wider implications.

Our challenge is to ensure our energy security and to reduce our carbon emissions. We want to rebuild our energy infrastructure in a way that creates green jobs and helps to build economic prosperity. The efficient use of sustainable biomass will play a key role in meeting that challenge. We want Britain to be a global leader in the transition to a low-carbon economy. We are committed to producing 15% of our energy from renewable sources by 2020 and to reducing our carbon emissions by 80% by 2050. Sustainable biomass is the single most important contributor to our renewable energy ambitions. Heat and electricity from biomass can provide nearly a third of UK needs from renewables by 2020—about 4.5% of overall energy demand.

Today, biomass provides around 3% of UK electricity and 0.6% of heat demand. Bioenergy offers the rare benefit of being a renewable technology that it is not intermittent. It can generate electricity or heat on demand at any time of the day or night. We welcome the security of supply that that brings. We also recognise that delivering our ambition for renewables will not be easy. Substantial changes will be required as the UK moves away from the familiar technologies that are used today. Decisions taken now will shape the country’s energy future for many decades to come, and it is vital that we make the right decisions and carry people with us.

I recognise that the investment challenge is large, not only for renewables but for all the types of low-carbon generation that the UK will need. We will require local communities and the private sector to work together to deliver the right energy development if we are to achieve our aims of energy security, climate security, and green growth. That is why we have committed so strongly to devolving decision making from central to local level as much as we can. We want to see communities and individuals having a stake in our collective low-carbon future, and we want them to choose the technologies that work for them in their neighbourhoods. The Minister with responsibility for planning, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), will publish detailed proposals about how that process will work, but the involvement of local communities and their right to determine how they evolve is absolutely at the heart of the process.

We recognise, however, that with choice comes responsibility. It is important for local communities carefully to consider proposed projects in their neighbourhood. Each planning application should be judged on its merits, and not all sites will be considered suitable. A vigorous debate over the pros and cons of all projects is essential to ensure that all the issues are teased out.

In recognition of the important role that communities play in hosting renewable energy developments, we will bring forward proposals to allow communities to retain the business rates associated with renewable energy projects. The hon. Member for Stretford and Urmston talked about the impact on communities of traffic and related issues, but the benefit from those business rates could significantly help to address those issues locally. We believe that the communities that host developments for the wider, national good should be recognised through the retention of business rates for the contribution that they have made.

I will now look more directly at some of the issues that the hon. Lady raised about public health. A great deal of concern has been expressed about the effect on air quality, the natural environment and the health of communities in the vicinity of an incinerator. I recognise that those are absolutely crucial concerns, both for the hon. Lady’s constituents and for people elsewhere around the country, and I can reassure her that all modern waste incinerators and biomass incinerators are subject to the most stringent pollution controls. Emissions from waste incinerators are more strictly regulated than emissions from coal, gas or any other form of power generation from combustion.

The proposer—that is, the company bringing forward the plan for the Barton plant—must produce an environmental statement covering transport and social and environmental issues. In addition, modern incinerators must comply with the waste incineration directive, which sets strict emissions limits for pollutants. It is in that regard that the best of class and the best of kind must be considered. The Environment Agency will not grant the permits required for an incinerator to operate if a facility is not compliant with the waste incineration directive.

It might be helpful if I set out the extremely rigorous process that a 20 MW facility—that, I believe, is the scale of the plant proposed at Barton—that primarily uses wood waste must go through. Such a facility would be likely to be subject to the environmental permitting regulations and, as I have mentioned, the waste incineration directive. Both the regulations and the directive are regulated by the Environment Agency. The legislation sets strict environmental standards for all plants burning waste, including waste wood, and standards relating to a range of pollutants, such as nitrogen oxides, sulphur dioxide, heavy metals and dioxins.

If the Environment Agency were to issue a permit, it would need to cover issues such as: the limits on emissions to air, water, sewers, land and groundwater; the disposal of ash; operating conditions, such as temperature, oxygen and polluting gas concentrations; conditions on the fuel that can be burned; monitoring and reporting requirements; conditions to achieve control of noise emissions; and energy efficiency.

The Environment Agency would then regulate the plant by: requiring continuous monitoring of the main pollutants for which limits are set and periodic monitoring of other substances; making regular announced and unannounced inspections; investigating non-compliance with any condition of the permit, and taking enforcement action if needed, including by issuing notices, prosecuting serious breaches or, potentially, revoking the permit.

The hon. Member for Stretford and Urmston also raised her concern about data suppression. There are absolutely extraordinary powers in that regard, so regulatory bodies such as the Environment Agency can be absolutely certain that nothing was being suppressed. That is an integral part of the process, and we believe that the monitoring of these issues is central. We also believe that if there is to be public acceptance of the green agenda, which we are very keen to pursue, the public must believe that standards will be rigorously enforced.

[Sheila Gilmore]

One of the difficulties for local communities is that this is a highly technical area, and a lot of the detail of what is required is also highly technical. I wondered whether the Minister had any proposals about how information on these issues can be made available in an accessible manner to local communities, so that they can judge what is happening. I say that because obviously one of the difficulties is that this area is so highly technical that people feel almost suspicious of what is going on. Are there ways in which public education could be carried out by the Government to assist local communities?

[Charles Hendry]

The hon. Lady raises an extremely important point. There is a very important role in that regard for the green non-governmental organisations—people who are trusted in this area. I suspect that the power companies would give rise to a question mark, in terms of public trust in the message that they are giving, and I think that the Government come with that health warning, too. The green NGOs therefore have a very important contribution to make, and if their representatives could come to community meetings, put information on their websites or produce materials saying, “We have looked at these issues—the health matters and the environmental issues—and we are satisfied that these plants meet the criteria and can make a positive contribution towards the development of the green, low-carbon economy,” that would help to reassure people. However, I will reflect on the hon. Lady’s point and see whether there are things that we can do through our departmental website to point people in the right direction towards independent sources of information, so that they can gain the reassurance that the hon. Lady is seeking on their behalf.

I also want to talk about some of the concerns that have been expressed generally about the emissions from biomass waste. Emissions from energy from waste plants have fallen considerably in recent years as a result of the stringent standards that have been applied. Biomass burning actually causes only a small fraction of air quality impacts in the UK; the majority of those impacts are caused by transport.

Studies of the health of communities living in the vicinity of energy from waste plants have failed to establish any convincing link between emissions and adverse effects on public health. Indeed, the latest scientific evidence on the health effects of modern municipal waste incinerators has recently been reviewed by the Health Protection Agency. Its report, published in September 2009, concluded that modern plants that are well run and regulated do not pose a significant threat to public health.

The hon. Member for Stretford and Urmston asked about the future of the work of the HPA. At this stage, a significant amount of work is being carried out by my ministerial colleagues to ensure that the critical work of organisations such as the HPA will be continued by different organisations. The decision to remove and get rid of some of the public bodies involved in this area does not in any way demonstrate that we do not value the work that they do; rather, it shows that we think that very often that work can be better done elsewhere. My ministerial colleagues are bringing forward clear proposals about how the work of organisations such as the HPA can be continued. Although it is clearly not possible to rule out completely adverse health effects from incinerators, any potential damage from modern, well run and well regulated incinerators is likely to be so small that it would be undetectable.

The hon. Member for Edinburgh East raised the issue of the sustainability of biomass, which I also want to touch on. We believe that biomass that is grown, harvested, processed and transported sustainably can be a very important low-carbon energy source. However, we recognise the critical importance of taking action to ensure that rapid growth in bioenergy does not result in the loss of important habitats, either at home or abroad, or in the release of more carbon than it is saving. That is why we will introduce sustainability criteria to ensure that the biomass power generation supported by the renewables obligation is sustainably sourced. All solid feedstocks used by generators that are above 1 MW capacity will be required to make greenhouse gas savings of 60% compared to fossil fuel and to avoid deforestation or impacts on diverse habitats and high-carbon stock resources, such as peat. Similar standards will be introduced for biomass that is used for heat.

I understand that the proposed Barton biomass plant intends to use waste wood as its main source of feedstock. I am aware that the wood panel industry prides itself on the use that it makes of wood, but there are still considerable amounts going to landfill currently, and we are keen to reduce those amounts. More generally, we think that waste should be considered more as a resource than as the problem that it is seen as today. Too much wood continues to go to landfill, and landfill itself is a blight that affects many communities. Our constituents are rightly concerned about ensuring that the amount of wood going to landfill is reduced, ultimately to nothing. As I say, we must see waste as a resource and, where it cannot be recycled, we must see how it can be reused, including as an energy source. In that respect, we believe that biomass has an important contribution to make.

This has been a constructive and helpful debate. If people in the constituency of the hon. Member for Stretford and Urmston have further issues and concerns, notwithstanding the fact that I cannot comment on individual applications, I will be more than happy to receive correspondence from the hon. Lady or her constituents. However, I hope that my comments have been helpful in putting in context the role that we believe biomass can play in the future, and in outlining the very stringent controls that are in place regarding emissions from, and the health consequences of, biomass.

Question put and agreed to.

16:59

Sitting adjourned.

Written Ministerial Statements

Wednesday 27th October 2010 Written Statements

Wednesday 27 October 2010

Offshore Oil and Gas Licensing

Wednesday 27th October 2010 Written Statements

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

After thorough consideration of the applications made in the 26th offshore oil and gas licensing round, I have decided to offer 144 production licences. This demonstrates the continuing attractiveness both of the United Kingdom continental shelf as an oil and gas producing province and of DECC’s licensing system.

My officials have carried out a screening assessment on the blocks for which applications were received.

The screening exercise found that significant effects on protected nature conservation areas could not be excluded in relation to 99 blocks. Detailed environmental assessments will be required before a decision can be reached in relation to the licensing of these blocks. These assessments will examine the implications for the protected nature conservation areas of awarding oil and gas licences. Accordingly, I will not be offering licences for these blocks at this time.

Inquiries Act 2005

Wednesday 27th October 2010 Written Statements

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

I am today laying before Parliament the Government’s memorandum to the Justice Select Committee on post-legislative scrutiny of the Inquiries Act 2005.

The Inquiries Act 2005 introduced a comprehensive statutory framework for inquiries set up by Ministers to look into events that have caused or are capable of causing public concern. There are wide-ranging measures in the Act aimed at restoring public confidence in inquiries by making inquiry process swifter, more efficient and less costly while meeting public need for thorough and far-reaching investigation.

Automatic Enrolment

Wednesday 27th October 2010 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Today, I am pleased to be able to publish the report of the independent review into making automatic enrolment work. The recommendations of the review team are a sensible and balanced package of proposals. In particular, the changes in scope and the deregulatory measures proposed will ensure the introduction of automatic enrolment is stable and proportionate. Therefore, I am pleased to announce that the Government will now proceed with implementation of the reforms on this basis.

The main recommendations are:

The earning threshold for automatic enrolment should be aligned with the personal allowance for income tax and the threshold from which pension contributions become payable should be aligned with the national insurance primary threshold. Workers may opt in to saving and receive an employer contribution if they earn between these two thresholds.

Automatic enrolment should apply to all employers regardless of size, as previously proposed.

There should be an optional “waiting period” of up to three months before a worker needs to be automatically enrolled. Workers may opt in during the waiting period.

There should be a simple system for employers to certify their money purchase pension scheme meets the required contribution levels.

NEST is necessary to support successful implementation of automatic enrolment.

A copy of the review team’s report will be available on the Department’s website at: www.dwp.gov.uk/policy/pensions-reform/latest-news, later today. Copies will also be available in the Vote Office and the Printed Paper Office from 10.30 am today.

I am grateful to Mr Paul Johnson, Frontier Economics, who led the review team, and to Mr David Yeandle OBE, Engineering Employers’ Federation, and Mr Adrian Boulding, Legal and General Group plc, who came together to make this review a success.

House of Lords

Wednesday 27th October 2010 Lords Chamber

Wednesday, 27 October 2010.

15:00

Prayers—read by the Lord Bishop of Wakefield.

Houses of Parliament: Cycle Hire

Wednesday 27th October 2010 Lords Chamber

Question

15:06

Asked By

[Lord Butler of Brockwell]

To ask the Chairman of Committees whether there are any plans to install a docking station for the Barclays Cycle Hire scheme on the Lords controlled part of the Parliamentary Estate.

[The Chairman of Committees (Lord Brabazon of Tara)]

My Lords, Transport for London recently contacted the House of Commons regarding the possible installation of a Barclays Cycle Hire docking station on the Parliamentary Estate. While we cannot permit a station for public use in the secure area of the Estate, we are looking at whether an alternative location can be found outside the secure area. The nearest docking station to the House of Lords is in Smith Square.

[Lord Butler of Brockwell]

My Lords, I thank the noble Lord for that encouraging reply. I declare an interest as a subscriber to the Barclays Cycle Hire scheme. I have tested the walk to Smith Square and it takes the better part of 10 minutes. Would the noble Lord agree that it would be for the convenience of Members of this House and their staff to have greater ease in using this facility? I realise that some may see this as an additional option in achieving a reduction in the membership of this House, but I assure the House that that is not my primary intention.

[The Chairman of Committees]

I would not like to comment on the second part of the noble Lord’s question, but as I said in my original Answer we are actively looking, with Transport for London, at the possibility of finding a station. However, it will have to be outside the Parliamentary Estate since, for obvious reasons, it cannot be within the secure area. One hopes that we will succeed in finding one in the neighbourhood.

[Viscount Falkland]

My Lords, the noble Lord must have made some examination of the numbers of Members of your Lordships’ House who might like to use the pool. There is not much point in going much further if it is just the noble Lord, Lord Butler, and myself who will cycle. If there are a significant number, it would be sensible to bring one of the pool docking stations nearer. As someone who cycles every day on my own bicycle, I know that it is very health giving. In asking the noble Lord whether he also cycles, I can say that it is a very good way of controlling one’s weight and—with reference to the remark of the noble Lord, Lord Butler—possibly does add to one’s longevity. It is jolly good fun and makes you feel better.

[The Chairman of Committees]

My Lords, clearly, looking at my weight, I do not use a bicycle in London, but significant numbers of Peers and staff do. Of course, most of them own their own. This scheme operates only within zone 1 in London. Seventy-seven bicycle spaces are available to Members of the House and the staff. They are not currently used to capacity, but they are available and there is no shortage.

[Lord Haskel]

My Lords, as a user of the Barclays bicycle scheme, may I ask whether the Chairman of Committees has, as part of his inquiries, looked into the possibility of reducing the government car pool and getting Ministers to use the bicycles?

[The Chairman of Committees]

My Lords, far be it from me to suggest a reduction in the government car pool. I understand that it has already been substantially reduced, making it in my opinion doubtful to want to be a Minister.

[Lady Saltoun of Abernethy]

My Lords, is it not time that we had a taxi rank on the Parliamentary Estate? Not all of us are young enough or spry enough to ride bicycles.

[The Chairman of Committees]

My Lords, a taxi rank takes us a little way away from the original Question on the Order Paper, but there are facilities at Peers’ Entrance for summoning taxis which I hope noble Lords find satisfactory.

[Lord Skelmersdale]

My Lords, may I have an assurance from the Chairman of Committees that this is a matter purely for your Lordships’ House and your Lordships’ authorities and has nothing to do with another place?

[The Chairman of Committees]

No, my Lords, I cannot give that assurance. If there was a possibility of having a docking station in the vicinity, it might be either on part of the Commons estate or part of the Lords estate. However, it would probably be excessive to have one on each.

[Lord Davies of Oldham]

My Lords, we respect the Chairman of Committee’s reservations about the proposal, but does he recognise that the Government and Opposition are as one in seeking to encourage cycling? Therefore, this proposal is constructive. I wish him well in his efforts to find a docking station somewhat closer than the existing one. I say for the benefit of the House that there is a most discreet and effective docking station right next to the National Gallery. I cannot think of a more enjoyable trip by bike than that between here and the National Gallery on a very wide and safe road.

[The Chairman of Committees]

I am glad that the noble Lord supports the scheme and that he has time during a busy working day to bike between the National Gallery and here; generally, I have not. However, as I said earlier, we are pursuing this. I will make certain that Transport for London and, obviously, the House authorities take note of the enthusiasm expressed at this Question and will redouble their efforts to try to find a docking station.

[Lord Tomlinson]

My Lords, if we are to introduce Barclays as a form of advertising on the Parliamentary Estate, has the noble Lord given any thought to what other use can be made of advertising on the Parliamentary Estate in order to make a contribution to public sector deficit reduction?

[The Chairman of Committees]

The noble Lord, Lord Tomlinson, invites me to stray somewhat from the Question on the Order Paper. The Barclays scheme is nothing to do with the Houses of Parliament; it is to do with Boris and Transport for London. That is it.

[Lord Roberts of Llandudno]

My Lords, as we are encouraging cyclists to wear helmets when they are on the back of a bike, how can we encourage people to do so, or how can we provide helmets for those who rent bikes in order to facilitate transport around Parliament?

[The Chairman of Committees]

My Lords, I have studied a number of questions recently in this House on the Barclays cycle scheme and I know that the subject of the wearing of helmets has come up frequently but, answering as I am for administration of the House, it is not a matter for the administration of the House whether Members should wear helmets or not. I think that most noble Lords are probably grown up enough to make their own decision about that.

Prisons: Population

Wednesday 27th October 2010 Lords Chamber

Question

15:14

Asked By

[Lord Dubs]

To ask Her Majesty’s Government what measures they are taking to reduce the prison population.

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, the Ministry of Justice will publish a Green Paper later this year setting out plans to reform sentencing and rehabilitate offenders more effectively. We hope and intend that a range of proposals in that document will be discussed which, if implemented, would have an impact on overall prison numbers.

[Lord Dubs]

My Lords, the Minister will be aware that the Justice Secretary’s statement that he intends to reduce the size of the prison population was most welcome. Does the Minister agree, though, that reducing the prison population will not necessarily save money? There are groups in prison, such as the mentally ill and drug addicts, who need treatment to get them to mend their ways rather than to be incarcerated.

[Lord McNally]

My Lords, I agree with the noble Lord, and that is why in part of the sentencing review we intend to look at the treatment of the mentally ill, in co-operation with the Department of Health, in terms of early identification of mental illness and making sure that people are diverted from the prison system into proper mental health treatment. The review will also look at drug rehabilitation. Part of the reassessment will be to see if we can provide systems of treatment which help to end drug dependency which, as the noble Lord will know, has been one of the factors in the revolving door of crime.

[Lord Thomas of Gresford]

My Lords, the recommendation of the Corston report in 2007 was that female prisons should be replaced by,

“suitable, geographically dispersed, small, multi-functional custodial centres”.

That recommendation was rejected by the previous Government in August 2008. Will the Green Paper put that forward again for consideration?

[Lord McNally]

My Lords, I pay tribute to the noble Baroness, Lady Corston, and the contribution she made to the discussion on women in prison. Four thousand women in custody is far, far too many, and we are developing a strategy which will ensure that the women’s estate has custodial and community settings, is fit for purpose and meets the needs of women offenders. However, I have to be frank with my noble friend that at this point in time we face the same problem as the previous Administration in providing the kind of small multifunctional custodial centres which the noble Baroness recommended.

[Lord Elystan-Morgan]

My Lords, I invite the Minister to give most urgent consideration to setting up a searching and comprehensive review of two questions: first, we incarcerate more people per 100,000 than any other country in western Europe and, secondly, our prison population has more than doubled over the past 25 years. Will he give an undertaking that future policy will be built upon a solid foundation, rather than upon the shifting sands of economic crises?

[Lord McNally]

My Lords, that is exactly the aim of the Green Paper that we hope to publish before the end of the year, in trying to get a sensible and sane discussion about prison numbers. It would be greatly helped if, every time there is an attempt at a rational debate of these issues, our national media did not turn it into a hysterical numbers game and suggest irresponsibility on the part of whichever Government are in power. I hope that when our Green Paper is published this House will play its usual constructive role in discussing these issues.

[The Lord Bishop of Wakefield]

My Lords, following the Minister’s comment about mental health cases and the desire to shift those from prison and custodial sentences, can we look forward to early proposals from the offender health division to implement last year’s recommendations by the noble Lord, Lord Bradley, in his excellent review of this issue?

[Lord McNally]

My Lords, yes indeed. The Ministry of Justice is working with the Department of Health and the Home Office to ensure that front-line criminal justice and health agencies focus on identifying those people with mental health problems at an early stage of the criminal justice pathway, and is exploring ways of diverting into health and social services those for whom this would be the better option.

[Baroness Hughes of Stretford]

My Lords, the Minister will know that at long last the Youth Justice Board has had some success in reducing the very large number of young people whom we incarcerate in this country. Given the Government’s announcement that they will disband the Youth justice Board, who now will be responsible for continuing this very welcome downward trend in the number of young people in prison in this country?

[Lord McNally]

My Lords, I pay tribute to the work of the Youth Justice Board. As the noble Baroness said, during its time it has overseen a very welcome drop in youth offending. It is not disappearing: its work will be reabsorbed into a unit within the Ministry of Justice.

[Lord Bach]

My Lords, of course it is common sense that if reoffending rates fall, fewer people will go to prison. However, how are the Government planning to get reoffending down when the comprehensive spending review plans to cut 10,000 jobs from the Prison Service and the National Probation Service? Does the Minister understand—I am sure that he does—that it is utterly and completely unrealistic to argue for cutting the number of prison inmates by 3,000 while at the same time decimating the National Probation Service?

[Lord McNally]

My Lords, first, the job figures cover a five-year period, and in some cases the reductions will be absorbed by natural wastage. Some of the excessive language that has just been used ignores the fact that the Administration will genuinely look at alternatives to prison. What has struck me in the very short time that I have been in this job has been seeing examples—often very small examples—of interventions with prisoners that have an extraordinary impact on reoffending. There was an example on “Today” last week of a charity finding accommodation for prisoners before they were released. Among the prisoners with whom it was working there was a 20 per cent reoffending rate rather than the 80 per cent in other categories. I believe that there are alternatives and I hope that the Green Paper will give scope for an intelligent and non-hysterical debate about these factors.

Mobile Homes

Wednesday 27th October 2010 Lords Chamber

Question

15:22

Asked By

[Lord Graham of Edmonton]

To ask Her Majesty’s Government what steps they are taking to ensure that mobile home owners are able to sell their properties at the market rate.

[Lord Graham of Edmonton]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and in doing so declare an interest as the secretary of the All-Party Parliamentary Group for Mobile Homes.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, the Mobile Homes Act 1983 makes statutory provision to enable mobile home owners to sell their homes subject to the buyer being approved by the site owner. Where approval is not forthcoming, the resident seller has a right to apply to the county court to seek its approval in the stead of the site owner.

[Lord Graham of Edmonton]

My Lords, I am grateful to the Minister for that reply, but I am sure that she has been told by her department of the case in Bromsgrove where the site owners harried vulnerable and distressed people to sell their homes cheaper than they were worth. Thanks to the good services of the Mercia police force, they were brought to court. They had deliberately burnt down two mobile homes. As a consequence, seven men were sent to prison for a total of 64 years. I realise that that is an extreme case, but will the Minister recognise that details of many other cases have been sent by me and others to the department, and it would be very nice if she could give me an assurance that resolution of this problem is high on her very busy agenda?

[Baroness Hanham]

My Lords, we are very well aware that there are some mobile home site owners who are not kind, efficient or businesslike. The matter referred to by the noble Lord, Lord Graham, is of course an extreme example of what is happening. Some site owners are making it extraordinarily difficult for mobile home owners to sell, by refusing permission or by making it very difficult for them. We are aware of this and will make efforts to do something about it.

[Baroness Maddock]

My Lords, first, does my noble friend agree that mobile homes are often low-cost and eco-friendly, and that they are often a home choice for elderly people? Secondly, what steps are the Government taking to make sure that the regulations surrounding mobile home sites and site owners are brought more into line with the standards that we require from landlords and leaseholders in other parts of the housing sector?

[Baroness Hanham]

My Lords, I agree entirely with my noble friend that mobile homes are largely occupied by elderly people. These homes do not have a huge initial capital value but, by the time their owners come to sell them, they are probably the only asset that they have. It is the Government’s intention to amend the Mobile Homes Act 1983 to change the appeal procedure by tenants or residents from the county court, which is expensive and slow, to the residential property tribunal, which is cheap. In fact, I do not think that it costs anything and it can be very quick and easy to use. It is absolutely essential that these owners, who are very vulnerable, have the speediest possible access to the law.

[Lord McKenzie of Luton]

My Lords, in view of the very serious examples raised by my noble friend Lord Graham, will the Minister also now commit to taking forward proposals which were under way but not completed by the previous Government to strengthen local authority licensing powers to encompass, in particular, a fit-and-proper-person regime for site operators?

[Baroness Hanham]

My Lords, I am aware that there was quite a lot of legislation for mobile homes which was ready to go at the last election. As I said, we are committed under a statutory instrument, which is now waiting to come to the House, to make some changes to the law to ensure better regulation.

Armed Forces: Harrier Fleet

Wednesday 27th October 2010 Lords Chamber

Question

15:27

Asked By

[Lord Lee of Trafford]

To ask Her Majesty’s Government what is their estimate of the savings resulting from the withdrawal from service of the Harrier fleet.

[The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)]

My Lords, I am sure that the whole House will wish to join me in offering sincere condolences to the family and friends of Corporal David Barnsdale, 33 Engineer Regiment (EOD), who was killed on operations in Afghanistan.

Turning to my noble friend’s Question, we expect to make savings in the region of £900 million between now and 2018, the Harrier’s previous out-of-service date. This figure is subject to commercial considerations and we expect it to be refined during implementation of the SDSR. The decision to retire the Joint Force Harrier has been very difficult and has not been taken lightly. I express my gratitude to the service men and women, past and present, associated with the Harrier force. This decision is in no way a reflection on the valuable contribution that they have made to the defence and security of our nation.

[Lord Lee of Trafford]

My Lords, first, I join these Benches in the earlier tribute. To ditch the Harrier fleet and all the crew expertise that has been built up over the years for a saving of a mere £100 million a year and to denude our carriers of their aircraft and strike capability is surely madness and makes us look absurd in the eyes of the rest of the world. Perhaps we should consider getting rid of our flight decks and replacing them with sun decks. More seriously, would it not be possible to maintain a smaller fleet of Harriers for contingencies?

[Lord Astor of Hever]

My Lords, in a perfect world, no defence Minister would have wanted to retire the Harriers, but this decision was driven by the economic legacy left by the previous Government. Military advice has been that the Tornado is the more capable aircraft. The greater size of the Tornado force allows continuous fast jet support for forces in Afghanistan, which is highly valued by ISAF, and an ability to meet other contingencies. With regard to keeping a smaller fleet of Harriers, the withdrawal of an aircraft type delivers greater savings than partial reductions.

[Lord Tunnicliffe]

My Lords, we on these Benches join the Government in offering our sincere condolences to the family and friends of Corporal David Barnsdale, 33 Engineer Regiment (Explosive Ordnance Disposal).

I am sure that the whole House has sympathy for the Minister when he meets our allies and explains to them that we shall retain one carrier and build some carriers, but that we will not have any aircraft on them. I understand that HMS “Illustrious” may be retained and that we are committing to build two further carriers. Perhaps I can press him on what it would cost to retain a small fleet of Harriers solely to operate from those ships, which would retain our strike skills. We know that one or two fast jets over the battlefield have an enormous impact. We have the spares and we are going to pay the contractors—that is what the weasel word “commercial” means—and the Royal Air Force knows how to manage small fleets. Surely there would be space at one of the Tornado bases. What would it cost to take on board such a sensible compromise?

[Lord Astor of Hever]

My Lords, I welcome the noble Lord to the Dispatch Box as his party’s spokesman on defence. I very much look forward to working constructively with him.

We will add cats and traps to the carriers, and although that will delay the entry of carrier-strike capability by three years, it will allow us to use a carrier variant of Joint Strike Fighter which has a heavier payload and a longer range than the STOVL variant. Overall, the carrier variant of JSF will be cheaper, reducing through-life costs by around 25 per cent over the STOVL variant.

[Lord Craig of Radley]

My Lords, I thank the Minister for his very fine comments about the Harrier force. No one would wish to see them go. Under the circumstances, where the choice has to be between Tornado and Harrier or more Tornados, surely the Tornado produces a better result, bearing in mind how many aircraft need to be supported in Afghanistan. Does the Minister recall that the Sea Harrier force was withdrawn some four years ago?

[Lord Astor of Hever]

Yes, my Lords, I recall that. The military advice is that the Tornado has a greater capability. The primary capability advantages of the Tornado GR4 over the Harrier GR9 include greater payload and range and integration of capabilities, such as Storm Shadow, fully integrated dual-mode Brimstone, the Raptor reconnaissance pod and a cannon.

[Lord Naseby]

My Lords, a number of us on these Benches have been RAF pilots who understand the decision that has been taken. However, the concern of many of us is to ensure that, in the future, there is training to ensure that when the new aircraft come on stream we have a stream of pilots capable of flying them. Can we be reassured that that issue, if not currently being addressed, will certainly be addressed in the not-too-distant future?

[Lord Astor of Hever]

My Lords, I can give my noble friend that assurance. We are working on that at the moment and we envisage working with our international partners to make that possible.

[Lord West of Spithead]

My Lords, the decision to get rid of the Harriers and not the Tornados is bizarre and wrong. It is the most bonkers decision that I have come across in my 45 years in the military and I can assure this House that I have been privy to some pretty bonkers decisions in that time.

In terms of cost, if we remove the Tornado force, we would be looking at about £7.5 billion by 2018. With the Harriers, we are looking at less than £1 billion. In cost terms it does not make sense. We are told that the Harriers cannot do the job in Afghanistan. That is just not true; they can do it. Indeed, I have spoken to a lot of Army officers over the weekend who say that they very much value the particular capabilities of an aircraft designed for CAS to do that. We are removing a total capability.

This is not a party-political issue; it is crucial to the defence of our nation. I would like the Minister not to give a quick answer but to promise to go away to look at this decision. In terms of cost terms and capability, it absolutely does not make sense. There is nothing wrong in sometimes feeling that one has gone the wrong way. I ask the Minister to ensure that this is looked at again very quickly, because decisions are being made to remove a capability as we speak.

[Lord Astor of Hever]

My Lords, I share the noble Lord’s admiration for the Harriers. We have had to make some very difficult decisions. Noble Lords should be reminded of the legacy that we inherited: a black hole in the defence budget of £38 billion. The last year of the Labour Government in which the noble Lord served saw the overspend in defence increase by £3.3 billion. That is the largest ever recorded increase. The top 15 equipment programmes are £8.8 billion over budget and have a cumulative delay of 32 years.

[Lord Reid of Cardowan]

My Lords—

[Lord Burnett]

My Lords, we are pledged to defend the 14 Crown Dependencies, 13 of which are islands. They are scattered around the world and include the Falkland Islands. I welcome the retention of our expeditionary capability at brigade strength and the support that the Prime Minister expressed again for the Royal Marines in the other place on 19 October. From our shared experience, my noble friend will be aware that it is vital for amphibious troops to have fixed-wing air support. I hope that he can confirm to the House today that he and other Ministers in his department will continue to use all their influence to ensure that at all times British troops engaged in expeditionary operations will have British carrier-borne fixed-wing aircraft in support.

[Lord Astor of Hever]

My Lords, I share my noble friend’s admiration for the Harrier fleet, and wish that I was able to give him a more positive answer. None of our decisions taken as part of the SDSR reduces our ability to deter or defend against an attack on the Falkland Islands. In terms of combat air, the Falkland Islands are defended by Typhoon aircraft. We also have a range of further capabilities to deter any aggression, such as submarines.

[Lord Reid of Cardowan]

My Lords—

[Noble Lords]

Time.

Science and Technology Committee

Wednesday 27th October 2010 Lords Chamber

Membership Motion

15:37

Moved by

[The Chairman of Committees]

That Lord Willis of Knaresborough be appointed a member of the Select Committee in place of Lord Methuen, resigned.

Motion agreed.

EU: Economic Governance

Wednesday 27th October 2010 Lords Chamber

Statement

15:38

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my honourable friend the Financial Secretary to the Treasury to an Urgent Question asked in another place earlier today. The Statement is as follows:

“Mr Speaker, I am very grateful for the opportunity to update the House on the conclusion of the Task Force on Strengthening Economic Governance of the European Union and to report on the UK’s position on the task force and, in particular, to restate that the UK is exempt from the current and future sanctions regime.

Heads of State and Government commissioned the President of the European Council, Herman Van Rompuy, to produce a report on EU economic governance and report back to the October European Council. Van Rompuy chaired a task force meeting consisting of EU finance ministers. The Chancellor represented the UK on the task force. The report has been agreed by the task force. The European Council is expected to endorse the report tomorrow.

Copies of the report, along with the Chancellor’s submission to the task force, have been placed in the Library of the House this morning. It concludes that the EU should take steps to reinforce fiscal discipline and that the euro area in particular must face tougher surveillance of its fiscal policies, with sanctions for non-compliance with the pact where appropriate.

The report also recommends measures to improve EU level co-ordination of macroeconomic policies. This will ensure that any harmful macroeconomic imbalances between member states can be identified and corrective action taken. Finally, the report also notes that there should be a permanent crisis resolution mechanism for the euro area. The UK supports the conclusions of this report. A strong and stable euro area is firmly in the UK’s own economic interests, given the high level of UK exports to these countries and our close economic ties.

In the years before the crisis, fiscal discipline was absent—and not just in the eurozone. High levels of debt have exacerbated the problems some member states faced during the economic downturn. The task force recommends that there should be a greater focus on member states’ public debt levels in future and the Government agree with this approach. I am pleased to note that the report explicitly states that sanctions cannot be applied to the UK under the stability and growth pact. Domestic fiscal frameworks play a crucial role in ensuring that member states act responsibly.

EU surveillance is useful but, as the House knows, national Parliaments and national institutions must hold Governments to account for their economic and budgetary policies. Let us be absolutely clear: yes, we want to see a strong and stable eurozone. That is in our interests just as much as in the interests of our neighbours. The UK has led the way on economic governance. Multi-year budgets and independent statistics and forecasting have already been introduced. We have a clear fiscal mandate to eliminate our structural deficit. We are leading the eurozone, and our high standards have already received international endorsement.

We will look at any proposals to help the eurozone overcome its problems, but, as the Prime Minister has just said, we will not agree to any changes to the EU treaties that move more powers from this country to the EU. The UK’s exemption from the sanctions proposals will be explicit; there will be no shift of sovereignty from Westminster to Brussels. The report makes this clear. It agrees that,

‘strengthened enforcement measures need to be implemented for all EU Member States, except the UK as a consequence of Protocol 15 of the Treaty’.

While we are looking at problems in the EU, we have serious concerns about the proposed size of the 2011 EU budget. I was shocked to see, on the day of the spending review, the vast majority of Labour MEPs voting against a freeze in the EU budget. When countries across Europe are taking tough decisions to put their public finances in order it would be wrong—unjust, even—to have a 6 per cent rise in next year’s EU budget, as has been suggested. We cannot accept that; we will fight this hard. We are protecting Britain’s interests in the EU, doing what is right for our country and our people, and the Prime Minister will be updating the House next week”.

My Lords, that concludes the Statement.

15:43

[Lord Eatwell]

My Lords, I am most grateful to the Minister for repeating as a Statement the Answer given to a Question asked in the other place. Before dealing with the issues referred to in the Statement, might I correct a factual error? The noble Lord stated that,

“on the day of the spending review, the vast majority of Labour MEPs”,

voted,

“against a freeze in the EU budget”.

The noble Lord is misinformed. In fact, on Tuesday, Labour MEPs voted against proposals for an increased EU budget. Moreover, Labour MEPs tabled amendments to cut more than €1 billion from wasteful areas such as agriculture and export subsidies. Perhaps the noble Lord would like to reflect on the fact that, on the day of the comprehensive spending review, Tory MEPs voted to increase the European Parliament’s entertainment budget by 50 per cent. Will the noble Lord correct his colleagues in another place?

In the Statement, the noble Lord argued—entirely correctly, in my view—that,

“a strong and stable eurozone … is in our interests just as much as in the interests of our neighbours”.

It follows that we in the UK have a major economic interest in the fiscal policies and arrangements of the eurozone. Will the Minister tell the House what role the UK has played in EU discussions on the co-ordination of eurozone economic policy to date? What measures of policy co-ordination throughout the European Union would Her Majesty’s Government support? What role, for example, did the Government play in the recent weakening in the German position on sanctions imposed on those countries running fiscal deficits in excess of those defined in the stability and growth pact? Does he support the view of President Sarkozy and Chancellor Merkel that a new EU treaty would be required to develop a new stability regime in Europe?

Matters of economic stability are global matters. Important decisions affecting the future of the UK will be taken at the G20 summit in Seoul next month. Given that many of the matters to be discussed at the Seoul summit, including the development of international financial regulation, are matters in which the EU now has an overarching role, will the UK be co-operating with our EU colleagues who are members of the G20 to present a united voice in Seoul?

15:46

[Lord Sassoon]

My Lords, I am grateful for the agreement of the noble Lord, Lord Eatwell, that the UK has a very strong interest in seeing a strong and secure eurozone. I will certainly draw to the attention of my honourable friend the Financial Secretary his interpretation of what happened in the European Parliament last week.

I think that the question that the noble Lord asked about our input to the strengthening of the co-ordination of macroeconomic affairs in Europe is best illustrated by the considerable input that my right honourable friend the Chancellor of the Exchequer gave to the task force’s deliberation. Among the input that the Chancellor of the Exchequer gave, he called for greater transparency and independence of the national institutions that are involved in the national budget-making process. He made it clear that national budgets should first go through national parliamentary processes before they go to Europe, so that, in the case of the UK, the UK Budget remains first a matter for Parliament before it is reported to Europe. Thirdly, he called for stronger macroeconomic surveillance in Europe. He called for a reinforcement of the stability and growth pact. He called for debt aspects of the stability and growth pact to be given more emphasis and he made some comments on governance arrangements. The UK contribution to the ongoing discussion of these important matters has been very considerable and we are completely content with the output that has come from the task force proposal.

There is absolutely nothing in the task force report that would require treaty changes. There are other matters that are being informally canvassed by certain member states and others, including the idea of a permanent crisis resolution mechanism or suspension of voting rights. There are all sorts of ideas that would require treaty changes but these have not yet been put on the table. If they are put on the table, we will deal with them at that time.

15:48

[Lord Ryder of Wensum]

My Lords, what precisely are the sanctions for non-compliance referred to by my noble friend?

[Lord Sassoon]

My Lords, the critical point is that the sanctions that apply apply only to the eurozone members. They do not apply to the UK, which has a specific carve-out and will continue to have a carve-out, as now reconfirmed. There are no sanctions that apply to the UK.

[Lord Harrison]

My Lords, I inform the Minister that Sub-Committee A of your Lordships’ European Union Select Committee, which I have the pleasure of chairing, is currently undertaking an examination of proposed EU economic governance in the light of the Van Rompuy report and the earlier Commission statement. We hope to report in the first quarter of next year. Will the Minister elaborate on the United Kingdom’s position on treaty change? I listened carefully to what he said, which was that he would not entertain any such change where the Government believed that the United Kingdom’s independence was compromised in any way. If a treaty change were proposed that would strengthen the eurozone—a common ideal across the House—would the Government entertain it?

[Lord Sassoon]

My Lords, if anybody proposes a treaty change that has not yet been proposed, it will be considered on its merits. To be completely clear, any proposed treaty change that has any suggestion of transferring powers from the UK to Europe will be subject to a referendum. If something is proposed, we will look at it on its merits and respond accordingly.

[Lord Newby]

My Lords, does the Minister find it strange that the UK is in the unique position of being able to impose fines on everybody else within the EU in co-operation with other EU member states and yet, however fiscally ill disciplined a future UK Government might be, the EU cannot impose sanctions against us? Are there any effective pressures under this set of proposals that, in future, the EU will be able to bring to bear against a British Government who were behaving profligately?

[Lord Sassoon]

My Lords, I welcome the question from my noble friend. It enables me to restate that it is perfectly right and proper that the UK should be subject, as it is, to the financial disciplines of the stability system in the EU. This means that we are required to exercise fiscal discipline. Indeed, the July council expressed itself satisfied. It said that the new UK Government’s proposals for deficit reduction were adequate to meet our responsibilities. It is quite right that we should go that far but, equally, we are not members of the eurozone. The system of sanctions that applies in the eurozone escalates to fines, as my noble friend said. The sanctions can start by requiring interest-bearing deposits, then non-interest-bearing deposits and finally fines. It is completely appropriate that those should apply to the eurozone and not to the UK.

[Lord Tomlinson]

My Lords, the noble Lord said clearly on two occasions that treaty changes are not on the table and that we will consider them with an open mind if they are. However, will he accept that treaty changes, if they are proposed, will reopen the whole of the Lisbon treaty box and require parliamentary ratification? Will he also be a little more robust in telling us that he can see no circumstances at present in which Her Majesty’s Government will consider treaty changes?

[Lord Sassoon]

My Lords, it is likely that proposed treaty changes will be discussed at the meeting of heads of state at the European Council tomorrow. My right honourable friend the Prime Minister will be there. If treaty changes come forward, the coalition agreement is clear. We will look at any other proposals if they do not transfer powers from London to Brussels. That is the position.

[Lord Williamson of Horton]

Since the Statement refers not only to governance but, briefly, to the budget, and since media and other comment on the budget also refers frequently to the risk to the United Kingdom rebate, will the Minister confirm that there is no possibility of a change to the UK rebate, except with the agreement of the United Kingdom Government, because it is subject to unanimity?

[Lord Sassoon]

Indeed, my Lords, that is the position. It is worth reminding ourselves that since my noble friend Lady Thatcher won that rebate at Fontainebleau it has saved Britain £88 billion. That is what tough negotiations in Europe achieved. The previous Government agreed to significant changes to those arrangements, which mean that the abatement has come down very significantly. However, my right honourable friend the Chancellor said after the ECOFIN meeting on 8 September that we will make it clear from the start that:

“We are not going to give way on the rebate. No doubt others will want to put it into the mix but they’ll be wasting their time. People better know that at the beginning of the process or they are certainly going to discover it at the end”.

Noble Lords can see that my right honourable friend the Chancellor will be in the robust tradition set for us by my noble friend Lady Thatcher on these matters.

[Lord Marlesford]

My Lords—

[Lord Liddle]

My Lords—

[Lord Richard]

My Lords—

[Lord De Mauley]

My Lords, there is time to hear from all noble Lords.

[Lord Richard]

My Lords, did I hear the Minister saying that the Government would consider changes to the treaty that did not involve a transfer of sovereignty from this country to the EU? Did he say that? If he did, what are the implications of that for the Prime Minister’s commitment that there would be a referendum on the Lisbon treaty if there were any changes to it? There is a distinction between any changes to the treaty and changes that transfer sovereignty from Britain to the EU. Which is it?

[Lord Sassoon]

My Lords, there will be a referendum on all proposed treaty changes that would transfer competence to Brussels. In terms of whether we look at treaty changes, if any treaty changes come forward and are proposed at the council tomorrow or at any other time, the UK Government will of course look at them and consider whether they propose to move competences. Depending on which category they fall into, we will act accordingly.

[Lord Marlesford]

Does Britain have the power to veto any increase in the EU budget?

[Lord Sassoon]

My Lords, as I understand it, the financial framework and perspective have to be agreed unanimously. Discussions are starting on the framework that will cover the years 2014 to 2021.

[Lord Liddle]

Will the Minister confirm that tomorrow at the European Council the leaders of France and Germany are going to propose treaty changes on the debt crisis resolution mechanism? Is it not slightly odd that the British Government are going to that meeting without having a view on those proposals?

[Lord Sassoon]

My Lords, I sometimes struggle to speak for all the policy matters covered by Her Majesty’s Treasury, which are wide enough. I absolutely cannot speak for what the leaders of France and Germany are going to say when they come to the council tomorrow. I am sure that the Government will be prepared to answer any proposals that come forward. We will hear more about this after the meeting on Monday.

[Lord Stoddart of Swindon]

My Lords, would not any proposals coming from France, Germany or anywhere else for a treaty change require to be passed by unanimity? If so, can we have an assurance that the Government will not agree to any such change? If they do—to take up the point made by the noble Lord, Lord Richard—can we have an absolute assurance that there will be a referendum?

[Lord Sassoon]

My Lords, I do not think that I can add anything to my earlier answers on this matter. I have tried to make the position as clear as possible. We will treat any proposed treaty changes on their merits and depending on whether they suggest any changes in competences between the UK and Brussels.

[Lord Stoddart of Swindon]

Does that require unanimity?

[Lord Sassoon]

Yes.

[Lord Grenfell]

Does the increase proposed in the European Union budget violate the current financial framework or is it within the limits that were set?

[Lord Sassoon]

At the moment, the proposals floating around sit within the various statutory limits for Europe. However, just because those statutory limits are set at some theoretical level, that does not mean that it is at all appropriate in the view of the Government for people to go around suggesting 6 per cent increases in the budget next year or anything remotely like it. At a time when the UK and many other members of the EU are tightening their belts appropriately, the EU budget should do the same.

[Lord Hannay of Chiswick]

Does the Minister agree that there are perfectly respectable arguments against treaty change at this stage that do not need to delve into the intricacies of Britain’s relationship with the European Union? Given that what is being sought is greater stability in the eurozone, which is in our interest, respectable arguments against treaty change—such as that the ratification by countries quite different from ourselves might be problematic and might lead to a loss of confidence in the euro as a result—ought to be deployable by any member state.

[Lord Sassoon]

My Lords, the task force has come forward with some significant proposals for strengthening the framework within the eurozone. I echo the noble Lord’s sentiments in respect of the task force proposals, but those proposals, which would be a significant step forward, do not themselves require any treaty changes. There may be other suggestions, such as the idea of a permanent crisis resolution framework, which may require treaty change. The UK Government absolutely support the euro area’s desire to take positive action to overcome its problems through the creation of an appropriate framework. If that has treaty consequences, we will look at it in that spirit.

[Lord Tomlinson]

My Lords, the Minister did a bit of a soft-shoe shuffle in replying to the question asked by the noble Lord, Lord Marlesford. He talked about the next financial perspective, whereas I am sure that the noble Lord was arguing about next year’s budget. In the interests of clarity, will the Minister tell us how Her Majesty’s Government voted in council in relation to the budget for the year 2011? Did they show financial discipline or did they vote in favour of it?

[Lord Sassoon]

My Lords, forgive me, but I cannot recite how we voted on each matter at each council meeting. However, I will write to the noble Lord in answer to that question.

Afghanistan

Wednesday 27th October 2010 Lords Chamber

Statement

16:03

[The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)]

My Lords, with the leave of the House I will now repeat a Statement made earlier today by my right honourable friend the Foreign Secretary on Afghanistan. The Statement is as follows:

“Mr Speaker, with permission, I will report to the House the Government’s assessment of progress towards UK objectives in Afghanistan. This is the first of the quarterly reports that the Prime Minister announced in his Statement to the House on 14 June.

Making progress in Afghanistan is the top foreign policy priority for the Government, linked closely of course to our foreign and development policy towards Pakistan. It is right, therefore, that Parliament is able to scrutinise the mission in Afghanistan in detail. From the beginning of the new Government we have given full attention to Afghanistan in the National Security Council. We have ensured that government departments and Ministers are working together at the highest level and that the necessary resources are being devoted to this difficult task. We have doubled the operational allowance for our troops, sharply increased our development aid and rebalanced the deployment of our forces in Helmand.

In addition to these reports and regular updates by Ministers, we will also make more information available to the House in the form of Written Ministerial Statements each month from November. I will make a further Statement when the investigation into the tragic death of Linda Norgrove is complete.

Members on all sides will join me in expressing gratitude to our courageous Armed Forces. They are the finest any nation could hope to have. We should also remember the families of the 341 men and women who have given their lives and the many who have been wounded. For nine years thousands of Britons have served in Afghanistan in both civilian and military roles in extraordinarily difficult circumstances, and we owe them a great deal.

It remains vital to our national security that Afghanistan be able to maintain its own security and to prevent al-Qaeda from returning. NATO’s strategy is to protect the civilian population, support more effective government at every level and build up the Afghan national security forces as rapidly as is possible. It also requires the Afghan Government to meet the commitments on governance and security that it made at the Kabul conference in July this year. My report today will cover all these areas. It represents the combined assessment of the Foreign and Commonwealth Office, the Ministry of Defence and the Department for International Development, and the next quarterly report will be delivered by the Secretary of State for Defence in the new year.

On security, we assess that steady progress is being made across Afghanistan and specifically in Helmand and Kandahar provinces. International forces now number 130,000, while the Afghan national security forces will reach 260,000 by the end of the year, exceeding their target for 2010. Afghan and ISAF forces have checked the momentum of the insurgency and the area under the control of the Government of Afghanistan is increasing. However, the situation remains extremely challenging. One of the effects of increased military activity is that the number of security incidents, particularly those involving direct fire, has increased sharply. We should not underestimate the highly difficult task our forces continue to face.

ISAF’s military effort is currently focused on Kandahar. Afghan and international forces continue to clear the insurgency out of areas adjacent to the provincial capital. Afghan security forces are taking an increased role in planning and executing the current phase of these operations and make up well over half of the forces involved. In the coming weeks, operations will focus on holding the ground that has been gained and providing a secure environment for local Afghan governance to develop.

In Helmand province, UK forces continue to train the Afghan national security forces and conduct security operations against the insurgency. As my right honourable friend the Secretary of State for Defence announced on 14 October, we are increasing the number of UK troops directly involved in the training and development of the Afghan national security forces by over 320. This increase is part of the rebalancing of UK forces in the province and has been made possible by the handover of security responsibility for Kajaki, Musa Qala and Sangin to our US allies, in order to concentrate British forces in the key population areas of central Helmand.

On 17 October, units of the 3rd Brigade of the Afghan National Army’s 215 Corps launched a significant operation to secure settlements near Gereshk. This operation is building on the success of previous Afghan national security force operations which have cleared the insurgency out of former havens in central Helmand over the course of the summer. Planning and implementation is being led by the Afghans with British mentors from 1st Battalion Irish Guards providing support. For the first time, engineering, artillery, countering improvised explosive devices and reconnaissance are being conducted by the Afghan National Army itself.

US Marines, which now form the majority of the ISAF forces in Helmand, continue the hard fought struggle against the insurgency in Sangin, while in Marjah they have continued to carry out operations alongside the Afghan National Army and Police.

The Government are confident that we have the right military strategy in place and the right number of troops in Afghanistan. However, we must expect levels of violence to remain high, and even increase, as Afghan and ISAF forces tackle the insurgency. The murders by insurgents of the governor of Kunduz province and a district governor in Nangarhar province remind us of the violence that still exists, even in the more secure areas of the country.

The Prime Minister will attend the NATO summit in Lisbon on 19 November, when we expect NATO to agree the process of transferring lead responsibility for security across Afghanistan to the Afghan security forces by the end of 2014. It will be a phased transition, with the Afghan security forces gradually taking the lead, as they have in Kabul, in jointly selected districts and provinces as the conditions on the ground are met. British forces will be drawn down from combat operations by 2015.

On governance, we assess that the Government of Afghanistan are making some progress on their Kabul conference commitments. The human rights support unit in the ministry of justice has been opened. The Afghan national security adviser has approved a revised national security policy. The Government are finalising a 100-day report which will highlight progress and areas where further action is needed. But more still needs to be done, some of it more quickly.

Last month’s parliamentary elections passed without serious security incident. However, the independent electoral commission has confirmed that more than 1 million votes, almost a quarter of the total, were disqualified on grounds of irregularities and fraud. The Electoral Complaints Commission will investigate allegations against candidates and disqualify those found to have committed fraud before final results are issued. This is an important process to build Afghans’ confidence in their country’s institutions.

On 7 October, the High Peace Council was inaugurated, fulfilling a key request of the Afghan Consultative Peace Jirga in June. It marks an important milestone for the Afghan peace and reintegration programme. It is for the Afghan people to shape a political settlement which reflects the needs, culture and aspirations of all the Afghan people. The UK will support a settlement which gives Afghanistan stability and security, is representative, gives no one group disproportionate influence, upholds human rights and the rule of law, and is in accordance with Afghanistan’s constitutional framework. The UK will work with individuals and groups who genuinely share these aims and who accept the conditions laid down by President Karzai’s Government. Insurgents must renounce al-Qaeda, give up armed struggle and work within the Afghan constitutional framework. We consider on its merits any request for the UK to play a role in support of this Afghan-led process. At the same time, ISAF will continue to exert intensifying pressure on the insurgency throughout the country.

Corruption continues to be a serious problem in Afghanistan and there has been only modest progress in anti-corruption efforts. In the past year, the Criminal Justice Task Force convicted 440 people, including serious narcotics dealers and corrupt officials. New mining regulations have been introduced to increase transparency and accountability. The UK is helping the Afghan Government to strengthen accountability and prevent corruption through financial management reforms and to build institutions with the ability to tackle corruption and enforce the rule of law. We are pressing for the anti-corruption monitoring and evaluation committee, which has been appointed, to start work as soon as possible.

In early September, Afghanistan’s central bank was forced to intervene to stabilise the Kabul Bank after allegations of corruption. The Afghan authorities must now work with the IMF to conduct a proper audit and take any necessary action. Weaknesses in the banking regulatory system must be addressed if Afghanistan is to maintain domestic and foreign public confidence.

The Afghan economy grew last year by a rapid 22.5 per cent, and tax revenues have risen sixfold in six years. The IMF predicts that the Government of Afghanistan will be able to cover non-security running costs by 2015 and all running costs by 2023.

The House will recall that, on 21 July, the Secretary of State for International Development announced a £200-million increase in UK funding for Afghanistan to stabilise insecure areas, stimulate the economy and improve essential services. Early progress is being made at the ministry of interior, where the new Minister is keen to develop a more capable and accountable police force which will help sustain the transition of security responsibilities to the Afghan Government.

The deployment of British Armed Forces abroad is one of the gravest responsibilities of government, along with that of protecting the security of Britain’s citizens and territory. In Afghanistan, the two go hand in hand. The Government understand how important it is to retain public confidence in our mission and to ensure democratic scrutiny of it. We will continue to provide regular and frank assessments to the House. Above all, we will do our utmost to ensure that NATO’s strategy in Afghanistan is seen through with rigour and determination and that the extraordinary efforts of so many thousands of our Armed Forces serve to enhance the national security of the United Kingdom”.

That completes the Statement.

16:14

[Baroness Symons of Vernham Dean]

My Lords, I thank the Minister for repeating the Statement and for the very helpful detail contained in it. We on this side of the House want to express our sympathy and condolences to the families and friends of the members of the Armed Forces who have lost their lives in Afghanistan. We are very proud of their courage, determination and steadfastness, and our thoughts are with those who have suffered such a terrible loss as a member of a family at this time. We also welcome the Minister’s commitment to make a Statement when the investigation into Linda Norgrove’s death is complete. She was a very brave woman who was clearly held in very high esteem, and many people would wish to have further detail when the time is appropriate.

We welcome the detail on the military deployment and the assessment that insurgency has been checked in a number of areas in Afghanistan. However, the Minister will not be surprised to know that there are still concerns about the process of security transition in Afghanistan. The Statement makes clear what NATO’s strategy is—to protect the civilian population and build up the national security forces as rapidly as possible. We all want to see our troops home as soon as may be, but we want that withdrawal to be based on success of knowing that the sacrifices made have been made on a lasting basis. Is the Minister really confident that a satisfactory security transition will be achieved by 2015, as the Statement and the Deputy Prime Minister have said? That part of the Statement must be put into the context of other parts of the Statement that say that the situation is challenging—or “extremely challenging”, as I think it says—and that the number of security incidents, particularly those involving direct fire, has increased sharply in recent weeks. That has to be worrying.

The Statement mentioned that a number of United Kingdom troops are directly involved in the training and development of the Afghan national security forces. The Statement says that that number has increased by some 320 UK personnel. Can the Minister assure us that the cost of those additional 320 individuals is in addition to the £200 million announced as being additional expenditure over the next four years? If they are not additional expenditure, they would take up a huge slice of that £200 million. I cannot be precise but, at a rough estimate, it might be anything between £8 million and £10 million a year.

I turn to the question of the elections. We were told that the final declaration on the elections would be on 30 October. However, the individual provincial preliminary results are ready and available online. Does the Minister have any assessment from those preliminary results of what the eventual outcome is? They are available online but not in English—but I imagine that those clever people in the Foreign Office would have been able to do some calculations by now.

The Minister will also be aware that the Wall Street Journal has reported that we may expect many new faces among those elected. As he said, nearly a quarter of the results are invalid because of electoral fraud. I think that about 1.3 million ballot papers have already been discounted and some 2,500 polling stations have had their results disqualified in full—that is one in seven; a very high number. There are other really awful reports that in some areas voters have been forced into polling stations at gunpoint and that individuals inside the polling stations observing what is going on—the observers and the officers in charge of those stations—have been forced at gunpoint from the polling stations while ballot boxes have been interfered with and stuffed with false ballot papers. Does the Minister have any corroboration of that from our embassy staff, who are interested in this and have observers on the ground? We all know, of course, that this sort of corruption is endemic, and that there is an argument that at least some progress is being made if it is clear that ballot boxes that have been corrupted are being taken away. Therefore, this is not an entirely gloomy picture, but it is very worrying when the level of fraud appears to be so high.

The noble Lord mentioned the Electoral Complaints Commission and the Independent Election Commission. Will the results published on 30 October be the final results that have been checked for fraud, or will they be provisional results which have to be checked again? It would be helpful to know what the status of those results will be when they are published.

On other governance issues, we have all read in the newspapers recently the alarming reports about cash going from Iran directly to President Karzai. The president himself has said that a number of countries provide funding for him in a number of different ways. However, part of the Kabul statement and the Kabul settlement stipulated that there should be proper accounting of all money received into Afghanistan. It is important that such a process is transparent—we would all agree on that—and that the money is used for proper capacity building rather than buying influence. As I understand it, all the money received from the United Kingdom is paid into the Afghanistan Reconstruction Trust Fund, which is administered by the World Bank. Are all international contributions made through the World Bank; and, if not, do we know the countries that are making contributions outside the World Bank in a way that perhaps needs to be questioned more closely?

I return to the issue of women in Afghanistan. We are all aware that President Karzai has signed the Shia Personal Status Law, which, as the noble Lord will be aware, severely curtails women’s rights in some truly abhorrent ways. This is not a matter we can just wave to one side; it fundamentally attacks the human rights of many women in Afghanistan. The Kabul conference communiqué included commitments on women’s rights, the mainstreaming of gender equality and ensuring human rights and the provision of civic education. What direct communication and contact have Her Majesty’s Government had with women’s groups working in Afghanistan? There is a fundamental weakness on this point on the Government’s part. Afghanistan is a country where there is gender segregation—not throughout but in many places. The 14 Ministers of the FCO, DfID and MoD include not a single female. These are countries where authority matters. It is important to have an authoritative figure who can talk about these issues directly to the Government and to women’s groups. I hope that the noble Lord will be able to tell us something about what measures will be put in place in order to deal with those issues.

On 21 July the Minister told us of the £200 million extra funding that the Government had pledged at the Kabul conference, and I think that he confirmed at that time that it was indeed new funding. I am sure that he will be able to assure us on this point but, for the sake of complete clarity, can he confirm that the £200 million is not affected by the spending cuts? That would be helpful.

Can the Minister also give details—perhaps not now, but maybe later when he has had a chance to think about it—of the financial commitments made by other EU countries? We know how much the UK is putting in, but how much are our European Union neighbours putting into these funds, and how much is coming from our colleagues in the NATO countries and, indeed, the 40 or so countries that are reported to have participated at the Kabul conference?

The quarterly statement is enormously welcome, and I applaud the detail in it. I look forward to information being regularly received in this way. It will allow Parliament to plot progress and it is, if I may say so, an admirable example to some of the Minister’s colleagues of ministerial accountability to Parliament.

16:25

[Lord Howell of Guildford]

My Lords, the noble Baroness has posed a series of extremely well informed and penetrating questions. The words that I seized on in her contribution were that I might have a chance to think about some of them, because instant replies might not be perfect. I will, though, attempt to answer in detail a number of the important points that she has made.

I shall not take those points in order; instead, I shall deal straight away with what I believe to be the central consideration in the devolution of Afghanistan society—the position of women in it. Indeed, this applies to many of the broader political issues and struggles that the world faces today, particularly in central Asia and the Middle East. I agree with her that the position of women is central. Our officials are working closely with the Afghan authorities all the time about this matter. I have some figures here. Some 100 women were involved in the earlier peace jirga. During the election, 402 women stood as candidates, which is quite a lot; 68 seats were guaranteed for women, and one seat was won by a woman despite not being guaranteed. So, things are happening, but we have a long way to go. We are miles from seeing the proper civilised position of men and women in a modern society. We are just not there yet; a huge amount of work lies ahead. I agree with the noble Baroness that it is, above all, by the measure of that that one can decide whether there is success in seeing Afghanistan, which is a noble country that must be able to play a part in the civilised comity of nations, go forward in the right way. That issue is central.

I return to corruption, the various issues about money flying around and recent comments about bags of gold and so on. The key requirement with that sort of issue is transparency and knowing, if money is to be transmitted in this rather primitive way, that it is at least going to good causes and not to evil and secret causes. Transparency should bring those things out.

On the overall corruption situation, though, I cannot be all that cheerful. Tremendous pledges were made at the Kabul conference, to which I referred, about the need for reducing and eliminating corruption, but on the Afghan side, frankly, not much progress has yet been made. The so-called “high office of oversight”, a sort of Afghan anticorruption commission, was set up, but in our view it needs to play a stronger co-ordinating role than it does. On our side, we helped to fund the major crimes task force, which was set up last November, a year ago, and that has had some success and has got some prosecutions and convictions. That is a sign of advance. Then there is the Monitoring and Evaluation Committee which has now been set up, but that, too, needs to get started and really get going. Until these things are operating really effectively, we cannot be at all complacent about the corruption situation.

More generally, perhaps I should have begun by saying that I very strongly welcome the support from not only the noble Baroness, who is deeply experienced in these matters, but her party, for the general trend of what we are trying to do in Afghanistan. This proves that we are in this as a nation and determined to see these matters through.

She asked whether I am confident about the timetable to ensure that there will be no combat troops by 2015. We are confident that things are going the right way, that progress is being made and that this is a realistic timetable. We think that that can be done. There may be training units left in Afghanistan after 2015, but we are absolutely convinced that it makes sense and is strategically correct that by 2015 there will be the withdrawal of all combat troops. We think that that schedule makes a great deal of sense and fits into the whole pattern of the gradual transfer of security and general administration to the Afghan people and the Afghan security and police forces.

As to costs, I can confirm that the £200 million announced by my right honourable friend the Secretary of State for International Development is completely insulated from the cuts. The noble Baroness wanted that assurance and she can have it. Regarding, the cost of the 320 additional support personnel for training and so on, I believe that that cost is separate from the £200 million and will not eat into it. I give her the assurance now and hope that I will not have to eat my words. She is quite right to say that if we start deducting those sorts of salaries and costs, it would rapidly erode the commitment. So I am giving her the assurance that the cost is separate.

She asked a number of questions about the election outcome and the results. I am not sure that I can be as helpful about those. We have been dealing with issues of fraud and we think that overall they do not invalidate the election—although I must confess that the figure of 1 million votes being fraudulent or irregular is formidable. However, we still think that the elections were held in challenging circumstances, although obviously, because of the invalidation of so many votes, the elections were not perfect. Despite all the logistical and security difficulties, it is right that the Afghans have exercised their right to have a say in the future of their country. Exactly how these results are going to come out, provisionally or finally, I cannot tell. So far as I know, no interpretation has been made by psephological wizards in the Foreign Office as to how it will all work out; therefore, I cannot be as helpful to her on that matter.

I hope that I have covered all the questions that she asked. Later on, I shall go over very carefully what she said and if there is any gap in my answers, I will certainly seek to fill it.

16:33

[Baroness D'Souza]

My Lords, I, too, thank the Minister for repeating the Statement and say how much I welcome these quarterly Statements, which are extraordinarily useful. I underline what has been said previously by the opposition Member and ask the noble Lord to confirm before the next quarterly Statement—even in writing—that the generous amount of aid allocated for development work in Afghanistan will go directly to relevant aid programmes run by the private and NGO sectors, not via the Armed Forces. The question I really want to ask is: is a serious peace process involving discussions with some elements of the Taliban now being considered?

16:34

[Lord Howell of Guildford]

On the second point, I beg the noble Baroness's indulgence. Did she ask whether there were serious discussions with the Taliban? I see that she is nodding. Whether discussions should open with the Taliban is a matter for the Afghan authorities. President Karzai has said very clearly that he would contemplate these discussions on certain conditions, which are pretty obvious. He wants to talk to people who are not determined to carry on killing and promoting violence, but who are anxious to see the creation and build-up of a stable and non-violent Afghanistan. If these sorts of conditions are met and sensible discussions can take place, they will. We definitely take the view that it is for the Afghan Government and people to decide how to conduct those sorts of talks. In short, this is an Afghan process. If we are asked to play a role in the process, we will consider it on its merits. I hope that that clarifies the matter.

The £200 million is a DfID programme for the development of a better Afghanistan. It is separate from the military commitments that we are determined to maintain in order to ensure that our troops have the best possible equipment at all times. These are separate matters. The DfID money is for the development and prosperity that we hope in due course to see in Afghanistan. I reiterate the point that the economy is beginning to grow at a very remarkable rate. This is a very encouraging sign amid the continuing difficulties.

16:35

[Lord Clinton-Davis]

Will the Minister take the opportunity to reject the idea that has been advanced by at least one prominent person—and perhaps by several—that British troops should be withdrawn from Afghanistan immediately? That is entirely unjustified at the moment.

[Lord Howell of Guildford]

I wholly agree with the noble Lord: that must be right. The squeeze is on al-Qaeda in Afghanistan. It has had to move elsewhere and is more dispersed. The process is continuing and to abandon it now by withdrawing would be a regrettable and deplorable act.

[Baroness Falkner of Margravine]

My Lords, I will pick up on the point made by the noble Baroness, Lady D’Souza, about negotiations with the Taliban. My noble friend's response was somewhat at variance with the Statement, which clearly says that the UK will support a settlement for Afghanistan that meets six qualifying objectives: whether it is representative, upholds human rights and so on. The emphasis is on the UK supporting a settlement. Can my noble friend reassure us that if we are expected to support a settlement, some of the preconditions, such as upholding human rights and giving no one disproportionate influence, will be part of our endorsement of a settlement? It concerns me that we may say that these things need to happen for us to support the settlement, but then allow the Taliban to disregard the High Peace Council and these statements entirely.

My other question concerns media reports that ISAF and NATO are turning to the Russians for logistical support and assistance in Afghanistan. Can my noble friend tell us more about the accuracy of the statements, because this could have a rather perverse outcome on the ground, given Russia's previous history there?

[Lord Howell of Guildford]

I will tell my noble friend a bit more about the Russians in a moment. First, I will deal with the other question. I do not think that anything that I said is inconsistent with the Statement. I made it clear and repeat, first, that we regard this as an Afghan process and, secondly, that President Karzai has said that he is willing to reach out to all his countrymen, which I suppose must include a moderate Taliban, provided that they meet certain conditions. That obviously means cutting ties with al-Qaeda, ending violence and pursuing their aims peacefully within Afghanistan’s constitutional framework. We will support the President in that. I do not think that there is anything inconsistent in that view. However, the process is in the hands of the Afghan people and one hopes that it will lead to positive results in that some, and perhaps all, of these conditions will be met. However, we shall have to see.

I turn to the Russian position and the rather interesting things that have been said recently about that. First, my noble friend will know that the Russians have already been helping quite substantially. There is nothing new about Russian involvement and assistance in this matter. Perhaps I may give her the details. Russia already provides considerable support to the ISAF mission in Afghanistan, including additional helicopters and basic material supplies for the ISAF forces. The NATO Secretary-General has said that NATO is now in discussions with Russia on increasing that support. A decision on how Russia wishes to do this is obviously a matter for it. I agree with my noble friend that, when one thinks about the historical baggage and the irony of past situations, this is an unfamiliar, new situation. However, when I read about it, it struck me that it confirms that what the world is trying to do in Afghanistan is to eliminate a tremendous danger of instability arising from the al-Qaeda operations, which would affect everyone. Instability and failure in Afghanistan would be just as much a threat to Russia—and, indeed, to China and the great rising powers of Asia—as to Europe and America. Therefore, I was heartened by this support. Provided that it is of the right kind, that we learn the best lessons from it and that we learn from the Russians what lessons they have discovered from their own failures in the past, I think that it is a positive development.

[Lord Rowlands]

My Lords—

[Lord Wright of Richmond]

My Lords—

[Lord Judd]

My Lords—

[Lord Wallace of Saltaire]

My Lords, the noble Lord, Lord Rowlands, has tried several times to ask a question.

[Lord Rowlands]

My Lords, can the Minister elaborate a bit further on the statement that the area under the control of the Government in Kabul is increasing? Can he tell us in how many provinces today it can really be said that the Kabul Government’s writ is running and that there is some kind of effective Kabul Government?

[Lord Howell of Guildford]

I believe that the answer is 14 provinces.

[Lord Wright of Richmond]

My Lords, is the Minister able to tell the House anything about progress or otherwise on controlling the poppy crop?

[Lord Howell of Guildford]

I cannot say very much, except that the earlier setbacks have to some extent been corrected and I believe that we are making progress. I should like to be able to give the noble Lord a far more detailed reply but I am not in a position to do so at the moment. I shall therefore do it in writing or at some other opportunity.

[Lord Hamilton of Epsom]

My Lords, can my noble friend confirm that the northern tribes in Afghanistan are getting extremely nervous about the talks with the Taliban? That of course means that the Pashtuns are being brought into the peace process and they are the people against whom, not very long ago, the northern people were involved in a very serious civil war, supported by the West.

[Lord Howell of Guildford]

It is a yes and no sort of answer. It is certainly true that Taliban extremists have relations with, in particular, the Pathan or Pashtun tribes, but my noble friend must remember that the Afghan security forces consist of 43 per cent Pashtun and 42 per Tajik, who have been at odds in the past but are now working together. Therefore, while inevitably the position of the Pashtun and their readiness to work with the rest of Afghanistan to see a stable state emerge will always be the problem—and has been for 100 or 150 years; there is nothing new about this—the fact is that at the moment many Pashtun are working very well with the Tajiks and the northerners. If it comes to discussions with any kind of Taliban adherents, they will obviously be the ones who are more ready to be integrated and to discuss a positive future and who are less extreme than the inevitable wild small percentage who will want to go on killing to the last.

[Lord Judd]

My Lords, on talks with the Taliban, there is a very delicate balance to be struck as regards preconditions. Although it is understandable that certain basic preconditions should be laid down, in talks of this kind it is essential to understand that the way to win commitment is in the process of the talks themselves. If you set too big an agenda of preconditions, that will become an obstacle to the process getting off the ground. It is a matter of how you generate the process to produce the commitment that you seek. On the Russian assistance that is now being provided, experience over recent years has, I am afraid, given a good deal of indication, if not evidence, that the Russian methods of operation in military matters are not always quite the same as ours in the commitment to win hearts and minds. Can the noble Lord provide firm reassurances that anything that the Russians do will not become counterproductive in this context?

[Lord Howell of Guildford]

My Lords, I can certainly assure the noble Lord on that. We would watch that very carefully indeed. It is difficult to separate the history from the view of post-Soviet Russia today. Russia is our friend, with whom we seek to have good relations, but the invasion of Afghanistan was a very brutal affair. Although some techniques used by the Russians were apparently rather good on the ground, there were brutalities as well. That is why many of the mothers of Russian soldiers demanded that their sons came home and got out of Afghanistan, which led to many other consequences.

On the negotiations and how they are handled, the noble Lord speaks with great experience of such situations. It is absolutely right that we have to achieve a balancing act in any negotiations of this kind as we come out of the violent phase and into the peace phase. My noble friend behind me has reminded us of the concerns of the northern peoples, particularly the Tajiks, and of the ancient jealousies between the different groups. All those things have to be balanced in any talks with the Taliban if they come about and if President Karzai is able to fulfil his willingness to reach out to all his countrymen, as he says.

[Lord Hannay of Chiswick]

My Lords, I thank the Minister for the Statement and for the regularity of Statements to come. Does he agree that the Statement said not one word about the regional dimension of the Afghan problem and that that dimension—the attitude of the neighbours of Afghanistan—will become increasingly important as we move towards 2015? The willingness of the neighbours to commit themselves in binding legal obligations not to interfere will be one part of securing a future Afghanistan that is not prey to its neighbours, whether Iran, Pakistan, Uzbekistan or the other neighbours. Could he say something on that aspect and whether he agrees that, in future reports on Afghanistan, it would be helpful if the Government could say something about the effort that they are putting in to building up a structure around Afghanistan in which a post-NATO Afghanistan could live in tranquillity?

[Lord Howell of Guildford]

My Lords, I must agree with the experienced noble Lord about the regional significance. On how you get that into a Statement on the regular reports on Afghanistan, I am not so sure. I can certainly say, here and now, that we recognise that the region has an important role to play in supporting Afghanistan and in facing all sorts of major challenges, including combating extremism, terrorism, illegal migration, narcotics and many other things. We welcome the fact that Afghanistan is actively seeking to support its bilateral relations in the region; indeed, regional co-operation was a major theme of the London and Kabul conferences. I cannot for a moment disagree with the noble Lord’s point that this is part of the jigsaw. We must have effective regional support. The problems that are encountered across the Durand line—the Pashtun do not even recognise some of the international boundaries—the problems that Pakistan, which we need to give all the help that we can, has faced and the continuing malign policies of Iran are all very much part of the situation and all need to be examined. I will suggest to my right honourable friends that they elaborate on that in future Statements, although it would make these Statements even longer than they are already.

[Lord King of Bridgwater]

My Lords, does my noble friend recognise that the Statement that he has made is very grave? The whole House has listened in a suitably sombre atmosphere to the account of the situation after—where are we now?—nine years, after 341 of our soldiers have died and a considerable number have been very seriously injured, and in which we have faced what in military terms might be described as a good deal of mission creep. We went to expel al-Qaeda and make sure that Afghanistan never again became a base for terrorism on a global scale. We have now picked up some enormously worthwhile objectives: the end of corruption in Afghanistan; full human rights for women in Afghanistan; the end of the drug trade, if possible; and proper electoral practices being fully observed. As one reads across that list, one realises the challenges that we now face. As the noble Lord, Lord Hannay, said, certain neighbours are not interested in ISAF and NATO succeeding in their current ventures—the activities of Iran come into question. Against that background, are not the Government, supported by the Opposition, absolutely right that, as time is not on our side, we must get maximum momentum now for Afghanisation of the programme to get properly established at the earliest possible date?

[Lord Howell of Guildford]

I am absolutely sure that that assessment is expert, well informed and right. It is our desire and intention to maintain momentum on a number of fronts. My noble friend talks about mission creep. In a sense, the narrow and single objective to start with after 9/11, which was that somehow al-Qaeda was to be crushed and Osama bin Laden captured from his hiding place, has widened into a much bigger issue. Of course, the context has widened as well. We have seen the growth of jihadist, extremist Islam; we have seen it spread into other countries. We have seen difficulties in neighbouring countries. We have seen the rise of obduracy in Iran. All those matters have unfolded while we are struggling. That merely confirms that in the 21st century, if we want a civilised, global and stable society, we will face many such struggles in future. They will not be over quickly; they will take a long time.

[Viscount Slim]

My Lords, I welcome what the Minister said and I was very heartened by what the noble Baroness said. The noble Lord, Lord Hannay, is quite right: there is a big tribal problem in this area. However, if the Minister cared to go to Quetta and had a cup of coffee in one of the many cafes there—as he well knows, it is a Taliban rest camp—he would find that the cafe talk of the Taliban and al-Qaeda is, “These chaps talk about a surge. These chaps then talk about leaving. We’ve won”. That is very dangerous when we are talking about discussions with the Taliban or al-Qaeda. Is it not wise to get them on two knees—or certainly one—before we have those talks? We have examples in the Lebanon and in Gaza of what happens: Hezbollah and Hamas have got closely, cunningly integrated in government, cabinet, parliament and the workings of the city and the surrounding countryside. Their influence is immense. This will be the aim of the Taliban and al-Qaeda if they get their hands in any way on the Afghan Government, weak and corrupt as they are. This happy talk about, “Let’s all get round the table”, is very dangerous for ISAF, NATO and Britain. I would like to see full confidence that ISAF, Britain, America and the other countries are going to sort these chaps out—that we are going to win and only then will we talk. With everyone opening their arms and saying “Come and talk”, we are walking straight into a great problem for five to 10 years in the future.

[Lord Howell of Guildford]

I cannot for a moment question the wisdom and experience behind that either, except to say that one talks about winning and then, as we learnt in Iraq, one needs to talk about how the win is secured. As the former President Bush found in his famous observations, to win in the short term is something that can apparently be done on the surface. However, a win in the long term means that as we are, we hope, a civilised 21st-century globe, the nations within it— including our own—cannot afford to have a poisoning influence at the centre of things. Whether we like it or not, while we must be as forceful as possible in the military suppression of the violence and extremism, there will, in the end, have to be a state created in which those who may have been involved with or even inclined to support the violence and rebellion of insurgents in the first place have to start playing their role as proper citizens. They will have to be included, so I half accept what the noble Viscount says, but the obvious strategy is to press ahead with what we are doing. We are confident that we are making progress. Beyond that progress lies the possibility of politics and of social, civic and economic development. Then we will have a world in which Afghanistan will no longer be the appalling headache that it is now.

Higher Education: Funding

Wednesday 27th October 2010 Lords Chamber

Motion to Take Note

16:57

Moved By

[Baroness Wilcox]

That this House takes note of the Independent Review of Higher Education Funding and Student Finance.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the late John Masefield, poet laureate, once wrote that:

“There are few earthly things more beautiful than a university: a place where those who hate ignorance may strive to know, where those who perceive truth may strive to make others see”.

I welcome this opportunity to debate the central role that higher education plays in our country so soon after publication of the outstanding report produced by the noble Lord, Lord Browne. Last week, my colleague the Minister for Universities and Science placed the noble Lord’s report on a par with those of two distinguished former members of this House: Lord Robbins and the much missed Lord Dearing. I very much echo that view. The noble Lord’s review has earned many plaudits, and rightly so. Of particular importance to me is the spirit in which he has conducted it. While the focus was clearly on funding and student finance, his abiding purpose has been to secure the long-term future of so many great institutions, that they may continue to be the beacons of wisdom and tolerance that Masefield praised.

I cannot emphasise enough that our universities are and must remain centres of free thought and discovery, and seats of learning in both the sciences and the arts. While the Government, who are currently formulating a detailed response to the noble Lord’s report, are clearly concerned with universities’ contribution to our economy and skills base, they will never lose sight of the wider purposes of higher education. There are many experienced figures on all sides of this House whose opinions I look forward to hearing today. Although my own experience is more modest, I am familiar with the HE sector from a number of perspectives: as a graduate and, latterly, a governor of what is now the University of Plymouth and as a governor of Imperial College. I also take a close interest in the UK’s outstanding research base through roles in several organisations, including the Foundation for Science and Technology and some work with the Royal Society.

Perhaps I may begin by reminding your Lordships of the context in which the noble Lord's report was published and by highlighting some of its central arguments. I defer to him, of course, on the detail.

We should not forget that it was the previous Government who invited the noble Lord to undertake this review, but on a cross-party basis. The coalition Government hope that consensus on the future of HE will continue. What cannot continue, however, as the noble Lord concludes, is the current unsustainable system of funding, and any reform must be reconciled with the parlous state of the nation's finances, which the Chancellor addressed in last week's comprehensive spending review. The Chancellor has announced that the overall resource budget for HE—excluding public funding for research, to which I will return—will fall from £7.1 billion to £4.2 billion by 2014-15. This is because we have accepted the main idea in Browne—that money for universities should flow through students rather than the funding council HEFCE. The noble Lord’s was, of course, a review on higher education in England, but it is of interest across the UK. My ministerial colleagues and I will work with the devolved Administrations on how the proposed reforms in England might affect Scotland, Northern Ireland and Wales, so that they can decide how to proceed.

The key point, though, is that money is not being withdrawn from the system but going into the hands of students by giving them loans to cover their tuition. With funding following students, whether they undertake degrees in Portuguese or particle physics, there will be stronger incentives for institutions to improve the quality of teaching and information that they provide. Indeed, it means that those universities which offer a better student experience from the lecture theatre to the careers service, from the library to the union’s bar, can expand to accommodate greater numbers of applicants. That process of universities responding to the expectations of more discerning students is a powerful means to drive innovation.

It is also by far the best option for maintaining quality in the sector, something which would have been impossible had we decided to cut the unit of resource per student or introduced a graduate tax. The noble Lord rejected both as unviable. Neither is compatible with his desire, and ours, to preserve UK universities among our greatest national assets. Higher education continues to deliver a significant lifetime earnings premium to its beneficiaries. The noble Lord has concluded that graduates should make a greater contribution to the cost of their education, but within a system that is both fair and progressive. It is to these fundamental principles that I now turn.

It bears repeating that the noble Lord, Lord Browne, was entirely right to insist that there must not be any up front tuition fee for students. The Government are committed to social mobility. We know that going to university is often a transformative experience, opening new vistas for students and great opportunities. Initial costs would deter people from less affluent backgrounds from applying to HE. For the same reason, we welcome his ground-breaking recommendation that part-time students be exempt from up front fees. This is not only fair in making HE more accessible to older students or people whose work or family commitments make full-time study impossible; it will also stimulate innovation in the sector as universities develop different modes of delivering different courses and degrees.

The goal of social mobility informs other features of the noble Lord's report, including his recommendation for a more generous maintenance grant available through a simplified system which the coalition is now considering. Then there are the graduate contributions linked more progressively than under the existing arrangements to an individual's ability to repay. Not all graduates, of course, go on to lucrative jobs. The noble Lord has proposed raising the income threshold below which no graduate would begin to make contributions. Above the threshold, higher-earning graduates would pay a real rate of interest, but repayments would cease should their salary decrease, say, or they choose to look after a young family. His modelling would mean that the top third of graduate earners would repay more than twice as much as the lowest third. We believe that is fair and progressive.

When it comes to setting higher tuition graduate contribution levels, the Government are keen, like the noble Lord, that institutions demonstrate how they will support the vital work of attracting applicants from less affluent or non-traditional backgrounds. Universities have undoubtedly made progress on widening participation. However, the Office for Fair Access has found that the participation rate among the least advantaged 40 per cent of young people at the top third of most selective universities “has remained almost flat” since the mid-1990s. The Government will support universities to raise their game on access by improving advice for young people at school and college, for example. Indeed, the Deputy Prime Minister has already pledged £150 million for a national scholarship scheme to improve access for students from families of modest means.

It should be clear from this brief summary that the Government accept the overall thrust of the noble Lord’s report. We are currently looking closely at the detail. That is deliberate; it is crucial that we proceed on a sound and sensible basis. There are relatively tight deadlines to ensure that we can amend regulation around fee structures and student support in time for universities to include accurate information in their prospectuses. We will also need to make some changes to primary legislation to adopt the noble Lord’s proposal for a real rate of interest on repayments. At the same time, it is not only prospective students and their families who are dependent on our getting this right but universities themselves and a country urgently seeking to balance the books. We need to handle any transition with sensitivity.

There was another dimension to the spending review that was of huge significance to universities: the decision to protect the overall level of funding for science and research programmes in cash terms. This ring-fenced settlement, worth £4.6 billion in each of the next four years, is unquestionably good news. Across the country we have excellent university departments with the critical mass to compete globally and the expertise to collaborate with businesses and other organisations. The settlement should mean that we can continue to support them. I remind noble Lords that the Research Councils cover the arts and social sciences, in addition to the physical and life sciences. Moreover, Sir Bill Wakeham, at the behest of the Research Councils and Universities UK, has identified a range of efficiency measures, which universities can now pursue to mitigate the effects of inflation and preserve research funding in real terms.

From my association with Imperial College, I recognise the value of a stable investment climate. It allows teams of researchers to plan ahead and gives business, both domestic and international, reassurance that our excellent scientists will be able to complete projects. The same is true for medical charities and other investors. It is vital that we maximise returns on this investment, continuing to produce outstanding research more cost-effectively than any other country in the G8. The Government will continue to support capital investment in priority areas, hence the recent allocation of £69 million to the Diamond synchrotron in Oxfordshire, where scientists conduct ground-breaking research in the life, physical and environmental sciences. Elsewhere, my department and the Department of Health are co-funding the UK Centre for Medical Research and Innovation, alongside medical charities and University College, London. For similar reasons, we welcome the progress that HEFCE is making on developing an assessment framework that combines recognition of the highest levels of research excellence with reward for the impact it has on the economy and society. We will also work with HEFCE to reform the higher education innovation fund to increase the rewards for universities that are most effective in business engagement.

It would be foolish to deny that much work remains to keep the country’s universities on a secure footing, and equally foolish to suggest that the Government have all the answers. Nevertheless, in adopting the bulk of the noble Lord's recommendations—in spirit, if not always in detail—we will not lose sight of what a modern university is for. That is certainly the case in seeking to improve the experience of students so that they may embark upon the next stages in their lives with the skills and confidence to do rewarding jobs, and I mean “rewarding” in the broadest sense. It is certainly the case in making sure that one's financial circumstances are no obstacle to a higher education and at an institution where one's talent and ability can best be realised. It is certainly the case in terms of allowing outstanding researchers, home-grown and international, in English literature as well as engineering, to carry on producing world-class work.

However, I make no apologies for stating that the Government also want universities to help drive economic growth. As the noble Lord, Lord Browne, notes in his report:

“Higher education is a major part of the economy, larger in size than the advertising industry, and considerably larger than the aerospace and pharmaceutical industries”.

In fact, almost every industry, and certainly the trio I have just mentioned, is influenced by the teaching and research that goes on in HE. We want university/business links to go from strength to strength in terms of R&D and in tailoring courses around the needs of employers.

We must harness this valuable asset in a way that gives universities the best opportunity to thrive, and that is by respecting another defining feature of UK institutions besides their traditions and their capable staff. I refer to their long-standing autonomy. Our universities will make a greater contribution to society and the economy by pursuing their various missions with maximum independence from the state.

Better teaching and world-leading research, improved access and social mobility, closer links to business and public services, affordability and autonomy are the principles that will underpin any reforms, and the Government will manage them cautiously with a view to a stronger, more vibrant HE sector. I look forward to the debate and beg to move.

17:12

[Lord Giddens]

My Lords, the Browne report makes a significant contribution to the debate about the future of higher education in this country, and I congratulate the noble Lord, Lord Browne of Madingley, and the others who were involved in producing it. It is right to say that universities need further funding to sustain their pre-eminence and that students should make a significant contribution to their education. As the Minister said, that education confers distinct career advantages and monetary gains. It is right to reject a graduate tax for several reasons, one being that it would take some 20 years before there was any return.

These things having been said, I find myself in fundamental disagreement with the underlying philosophy of the report and, therefore, with some of its emphasis. It treats higher education as a market in which students are consumers, but higher education is not a market, at least in any orthodox sense. Universities are a public good and are recognised as such everywhere in the world, including in the United States. In other words, they provide benefits from which all citizens gain. These benefits go far beyond utilitarian benefits, which are pointed up in the report. They are far more than just the training of doctors, scientists, engineers and so forth. Universities educate for citizenship. They help create the cosmopolitan outlook that is so fundamental in a diverse, globalising world. This impact stretches well beyond those who receive a university education. It is vital to stress that the arts, humanities and social sciences play an essential role in fostering such a cosmopolitan outlook.

If the report is implemented as it stands, we risk ending up with the worst aspects of the American university system without its redeeming features. I would point out to noble Lords that these redeeming features are substantial. I will list four of them. First, top universities in the United States can operate a “needs-blind” admission system because of the large endowments that they have. British universities will never approach those endowments, certainly in anything like the near future, and will not be able to operate such a system, which is of direct and immediate help to students from poorer backgrounds.

Secondly, in the United States, students can work their way through university because of the credit system, which makes it easy for students to drop in and drop out of university and later resume their university courses. We have kind of analogues here, but we do not have the same system, especially as affects the top universities. This favours students from poorer backgrounds in the United States. I welcome the stress on part-time degrees, but it does not make up for this difference, which is quite fundamental in the nature of university courses in this country.

Thirdly, the state university system is very prominent in the United States. It plays an important part in the university system as a whole. The state university system is in some part, and in some states in large part, publicly funded. Home students pay relatively low fees. This also helps students from poorer backgrounds.

Finally, states such as California have a wonderful system of community colleges. Their FE colleges have some similarities to ours, but they are not a direct analogue. The community colleges allow students from poorer backgrounds to get in and to work their way through their degrees, but they also act as feeder institutions for the top universities. I used to teach at the University of California, which has such a system, at UCLA, Berkeley and Santa Barbara. It was terrific to see students who started right at the bottom of the system get into the elite universities. This included students from all sorts of ethnic backgrounds and underprivileged backgrounds.

These factors by and large do not apply in the United Kingdom. We therefore have to look for other safeguards. Lacking these mitigating factors, the reforms proposed in the report would unquestionably accentuate inequalities and deter poorer students. Richer parents will pay their children’s fees up front, consolidating a track of privilege that already links private schools and the elite universities.

Just as important—and this worries me a lot, given what I have said about the public nature of higher education—the arts and humanities could go into steep decline if we have simply a student finance driven system, with leading departments having to close. According to the QS rankings, we have the number one university in the world—Cambridge. We have four other universities in the top 10. We do not really need as radical a market-driven approach to support and expand the system that we already have. I look to the Liberal Democratic segment of the coalition to try to ensure that social justice remains as important as excellence in whatever emerges from the debate on this report.

It seems relatively easy to see what kind of system you could have which could reconcile these things. It would have three components. First, the massive cuts that universities are going to be asked to take could be reduced. They probably would have to be if there was going to be a net benefit to universities. Secondly, fees should be capped—at around £7,000. That will ensure that quite a lot of money goes into the system, but would also prevent some of the inegalitarian consequences which otherwise will ensue.

Thirdly, the Government should consider introducing specific support for the arts, humanities and social sciences, which are an elemental part of university education. We cannot allow those subjects simply to decline or diminish on the basis of a simple market-driven system. We need some way of reconciling that with support for these essential subjects which contribute so much to citizenship.

In conclusion, it is possible to preserve and enhance excellence in a system that also preserves the essential public benefits which universities offer and which protects the interests of those from deprived backgrounds.

17:19

[Baroness Sharp of Guildford]

I thank the Minister for the opportunity to discuss this important report from the noble Lord, Lord Browne, on proposals for student financing. I look forward to hearing other contributions to the debate because, as the Minister made clear, the proposals are still being discussed among Ministers and no final decisions on how the report will be implemented have been made.

Nevertheless, there has been some indication that Ministers will accept a cap on fees of somewhere in the region of £7,000, which would alter, in many senses, some of the proposals put forward by the noble Lord, Lord Browne. At that level, as the noble Lord, Lord Giddens, indicated, there would be no subsidy for the arts, the humanities or the social services: a graduate contribution would meet the whole cost of provision.

My right honourable friend in the other place, Vince Cable, Secretary of State, indicated that he had no alternative; he was confronted by the need to find savings of over £3 billion from his budget. A large proportion of his budget in BIS is made up of the science budget, the skills budget and the higher education budget. He judged—I think this is broadly welcomed in the House—that there was no room for cutting the science budget; that science, as the creator and nucleus of growth in this country, should be, and has been, left in cash terms at the level that it was. Similarly, the skills budget was vital to growth prospects. That left only the university budget and it was decided that there was a good case for asking students to pay a larger proportion of the cost of universities, and the report of the noble Lord, Lord Browne, gave an opportunity to do so.

There are a number of good features in the report. I particularly welcome the proposals for part-time students, a cause for which I have fought long and hard in this House for many a year. I am delighted to see that at long last there is to be pro rata provision in loans and grants for part-time students. It looks to be an important change in the structure of university provision in this country because it will provide an incentive, which to date has been lacking, for students to attend their local universities or further education colleges on a part-time basis. For some students, studying for the part-time two-year foundation degree—which, in effect, is the old HND—might be more appropriate to their capabilities and provide them with a stepping stone to further progression if needed. They are practical, vocationally based foundation degrees which, in many senses, meet our skills needs better than some of the wider degrees currently provided. It is a long-fought-for and important option.

I also welcome the proposition that, effectively, the students should carry the money with them; that universities should have to compete for students by offering good value for money in the courses that they provide.

Teaching has for a long time played second fiddle to research, and the long overdue recognition that teaching is important and should be valued in its own right in universities is implicit in the report of the noble Lord, Lord Browne. I like that very much. I should perhaps declare an interest as a former university teacher and I remain a visiting fellow at the University of Sussex. I can remember having like other academics to fill out diaries about how I used my time. It became clear from the output of those diaries that, far from research subsidising teaching, it was the other way round: the teaching budget in universities was subsidising research.

The proposals have also given vice-chancellors what they have long demanded: a stream of funding which comes directly into their coffers rather than, as at present, via HEFCE. That the Government are to keep a cap on it makes it clear that the flow of funding is still regulated by government. Since the Government are borrowing the money to pay the fees, the notion that the arrangement is independent of government is hardly correct.

I have some reservations about the merging of HEFCE, the QAA, OFFA and the Office of the Independent Adjudicator, all to create the superquango of the Higher Education Council. The issue about which I am particularly unhappy was voiced at length in last week’s Times Higher Education; that is, that places in universities are to be regulated by the Government setting the UCAS tariff for student access to universities. I do not see how that could possibly work; it means uncertainty both for students and the universities. It will not be known how many students will come in and in which areas.

What I find most difficult about the proposals is that, for many young people and the not-so-young, the debt will never be paid off. The IFS analysis of the proposals show clearly that, with fees of more than £6,000 a year, more than half of graduates would make repayments over 30 years and never pay off the loans. As the IFS points out clearly, the system amounts effectively to a graduate tax—a 9 per cent supplement on income tax for anyone earning more than £21,000 until they pay off the accumulated value of the debt. Approximately half the students will never pay it off.

The advantage of the proposals of the noble Lord, Lord Browne, over the present system is that it is more progressive: those whose parents’ income is low and whose earnings are low would benefit most because they would qualify for up-front grants and never have to pay the full interest rate or pay off the loan. The charging of the full rate of the interest on those earning more means that the higher earners would pay more. Since only the higher earners would pay off the debt, they would meet all the costs, whereas the low and middle earners, whose debt is never paid off, would benefit from the subsidy implicit in not having the debt paid off. As has been made clear by my noble friends, charging the real rate of interest with a high threshold for repayment is therefore a more progressive system than the present system with its lower threshold and the zero real rate of interest.

Most difficult is the situation that confronts the middle earner—let us suppose that they are a teacher or a social worker whose earnings start, at age 21 when they graduate, at about £21,000 a year and rise by their early 40s to something like £38,000 a year. Through their earning life, they will pay the 9 per cent supplement on income tax—a marginal rate of income tax on all earnings over £21,000 of 40 per cent, rising to 50 per cent when they hit the higher-rate threshold at about £37,000. We may argue about the disincentive effect of raising income tax by 1 per cent or 2 per cent, so a 9 per cent supplement must be a major disincentive. Is it fair that students whose parents have capital and will therefore pay off their loans when they graduate will not have to pay the 9 per cent supplement? It is this feature of the system that I find most difficult. Why should those who come from lower-income families and who earn reasonable but not very high salaries have to live with the incubus of an 9 per cent extra rate of tax for much of their working lives, especially at a time when they are struggling to get into the property market and provide a home for a family? I hope that the Government are thinking of a very generous system for a scholarship scheme. My noble friend mentioned that they would be introducing such a scheme, and I hope that it will be somewhat akin to the old state scholarship scheme that was around when I went to university. I hope, too, that in public service jobs that do not pay too highly there will be very generous golden hellos, paying off the debt for those students who fill those jobs where there are shortages, such as social work or science teaching.

The student loans are coming from the Government. My noble friend said very firmly that money was not being withdrawn from the students; they do not have to pay upfront. We have rather over 1 million students in this country at the moment. If the cap is set at £7,000, it suggests that the student loan book will rise by £7 billion a year, with the maintenance loans on top of that of something like £10 billion a year. The wonders of resource accounting mean that most of that cost will go off the books and not become part of the national debt. If the Government succeed in selling the student loan book, as they want—it is called securitising and is very much what Northern Rock did with its mortgages—the cost will be only the residual cost of the discount required to sell it off, which is probably something like 30 per cent. Nevertheless, that means that there is a net cost to the Government of some £3 billion a year. The original saving on the university budget amounts to £2.9 billion. What the whole exercise has done is to translate that £2.9 billion on current account into £3 billion on capital account. I sometimes wonder whether that is worth while.

17:31

[Lord Browne of Madingley]

The provision of education has long been the mark of an advanced and civilised society. It provides skills useful to individuals in fashioning a career or a vocation, inculcates a sense of shared heritage and broadens the minds of those who take part. It provides people not just with knowledge today but with the prospect of acquiring knowledge tomorrow by creating a lifelong habit for learning. At root, education is a path to enlightenment, social mobility and ultimately self-fulfilment. The goal of any nation must be to continue to improve and extend those benefits to every corner of society irrespective of birth or financial means. That is the context of this debate today. I am very grateful to the Minister for bringing this important subject to the House.

Over the past 11 months, I have chaired an independent panel tasked with reviewing the state of higher education in England. I should like to talk through the thinking behind our conclusions. Our report noted a number of positives. The UK has a world-renowned higher education sector, with three universities in the global top 10 and 15 in the top 100. The sector educates more than 2 million students every year across a diverse range of institutions, including universities, colleges and specialist institutions, and generates around £60 billion of output for the economy.

Besides those public benefits, higher education also delivers substantial private benefits to those taking part. Over the course of their working life, the average graduate earns around £100,000 more than if they had not gone to university after A-levels. That graduate premium is substantially higher than the OECD average. In considering the case for reform, better reflecting the balance between public and private benefit was a crucial first step. However, before designing a new system, we first had to understand where the current system was falling short of expectations. For us, that revolved around three principles.

First, there was quality. Institutions are now better funded than they were a decade ago, but they have limited means of accessing additional investment and income. That is because there is a cap on what they can charge and a cap on how many students they can admit. Students themselves have also failed to report a big improvement in their experience of higher education. There was a strong feeling that the extra student investment was buying little in return.

The second principle was participation. While more students than ever are attending and entering higher education, there remain insufficient places for everyone—perhaps as many as 30,000 qualified students were unable to gain a place at university this summer. We also found that, while access was improving, the social composition of those attending the most selective universities has barely changed since the mid-1990s. Compounding this problem was the inequity of government support being provided to full-time students and not to part-time students, many of whom may have missed out on what may be called the traditional university experience at 18.

The third principle was sustainability. Early on in our review, it became very clear that our higher education institutions lacked resilience to public spending cuts; most of their income still came in the form of block teaching grant provided by government. Although it was not our job to determine the level of spending cuts, we had to ensure that our system allowed institutions to replace public funding with alternative sources of income. We also had to ensure that whatever level of spending was decided on by government, it was affordable for taxpayers over the long term. It does not serve the public interest to keep tinkering with higher education funding.

Let me set out our recommendations to address the shortcomings that I have identified. I begin with quality. A good way to improve quality in any organisation is to make funding dependent on it. For this reason we have proposed a radical overhaul of the way institutions are funded. Instead of receiving most of their money through a block grant for teaching, we proposed that funding must instead, as the Minister said, follow the student through government loans. We put student choice at the heart of our system. So as to ensure that choices are as informed as possible, we have recommended that better information, advice and guidance be made available to every school pupil. School pupils today make choices but they do not make them on good information, advice and guidance.

To improve the student experience, we have proposed that there should be a new single regulator in higher education with powers to enforce and uphold new student charters—a document which for the first time will outline what each university will offer students in return for their investment. Although we have slightly tightened regulation in terms of quality and access, we have significantly loosened it in terms of student numbers and tuition charges. Institutions will face no restrictions on what they can charge for tuition, although in practice they will have to think very hard about whether they offer good value for money.

We have made further recommendations to ensure that higher charges do not impact on participation. For a start, we have recommended that money be made available to finance a 10 per cent increase in student numbers over the next three years. We should end the annual disappointment for tens of thousands of qualified students who may miss out on places each summer. To ensure that no one is prevented from entering higher education, we have maintained the principle that no student be asked to pay tuition costs up front. For the first time, we have also extended that principle to the 40 per cent of students studying part-time. To cover living costs, we have also maintained government loans for all students, with more generous non-repayable grants offered to those from households earning less than £60,000 a year. All that means that no student will pay for higher education; only graduates will pay, and only then according to the level of their success. We have recommended increases in the threshold at which graduates start to repay their loans from £15,000 to £21,000—importantly, indexed with wages. The Institute for Fiscal Studies has estimated that under that system the bottom 30 per cent of graduates will pay less than they do today. Only the top 30 per cent of the graduate output will pay back the full amount.

As the Secretary of State said on the day our report was launched, that is fair and progressive. Crucially, it is also sustainable. After reforming the system of funding twice in the past decade, we believe that the higher graduate contribution outlined in our report reflects a more sustainable balance between public and private funding. Institutions will no longer be paid just for being there. Public money will instead be used more efficiently to invest in priority courses and courses that might be at risk, and to support those on low incomes.

For Government, bigger loans will remain affordable through the addition of a low rate of interest and a levy on institutions charging more than £6,000 for tuition. The reason for the levy is that it is designed to avoid the perverse outcome that institutions charging the most would receive the biggest government subsidy. But most importantly of all, our recommendations ensure sustainability by creating a system that can respond dynamically to what students want.

Ours is a system that loosens controls on institutions and forces them to think more clearly about their mission and how they can best serve their students. It creates a pathway to a larger, better funded and more dynamic university sector that can retain its deserved reputation as one of the world’s best. Crucially, it is a fairer and more progressive system—a system in which people study according to their ability to learn, not their ability to pay.

17:41

[The Lord Bishop of Wakefield]

My Lords, I join others in thanking the noble Lord, Lord Browne, for his report and for his words today.

I would like to reflect particularly on the raison d’être of universities and the impact of this report upon it. Throughout Europe, the origins of university education in Christian culture are abundantly obvious. Salamanca, Florence, Krakow, St Andrew’s, Oxbridge and elsewhere: even the buildings tell of Benedictine or similar origins, rooted not only in the church but in a broader Christian humanism underpinned by a belief in a liberal education. Universities old and new have been founded upon a commitment to human well-being, holistic development and a pursuit of truth for the common good. That commitment is resonant with that earlier European humanistic tradition.

For the church, that understanding is rooted in Christian faith but not unique to it. The church has a continuing commitment to people in the lower socio-economic groups, the poor and the marginalised. It is concerned that, even in the days of austerity, steps are taken to maximise the opportunities for all people to fulfil their potential, whatever their background. In the context of this debate, that would mean ensuring that people traditionally underrepresented in higher education had the opportunity to study at this level. We have been much encouraged about progress in that direction in recent years, and believe that everything possible should be done to maintain that momentum.

In the light of that, there is much within the noble Lord’s report that we would welcome. Here we include, first, the fact that no student will need to pay for their university education up front, as we have heard, and the increase in the salary threshold at which graduates start repaying their loans. Secondly, we welcome the requirement on universities to develop access commitments indicating how they intend to widen participation. This dovetails with the commitment to raise aspiration among those from lower socio-economic groups, encouraging them to apply to the most selective universities. Thirdly, we welcome the increased government support for part-time students.

There are, however, issues that concern us. Student debt is a major concern, not only its size but its common acceptance as standard. At some point debt must discourage applications, especially from within materially poorer sectors of society. Of course, this report comes as a ray of light to some universities in the light of the proposed cuts outlined in the comprehensive spending review. Without the support of student fees, many, if not most, universities simply would not now be able to continue. However, this is a risky wager. Increasing fees will be the answer only if students decide that they are prepared to incur serious debt.

Implicit in the understanding of the European humanistic ideal of education was a continuing commitment to a liberal education. In the report, there seems to be a largely unexamined premise that the primary role of universities is to prepare people for work and to serve the economy. Worryingly, this feels part of a recent trend, seen for example in the previous Government’s framework document for higher education of 2009, Higher Ambitions: The Future of Universities in a Knowledge Economy. This trend goes back significantly further—more than three decades—to James Callaghan’s speech at Ruskin College, Oxford in 1978, which heralded the development of a core curriculum. This was seen to be the foundation for a more instrumental and utilitarian approach to education at all levels.

Of course, the desire for people to find employment and service the economy are clearly goods to be welcomed. Unemployment and poverty are a blight on the lives of individuals and whole communities. My experience over nearly eight years in west and South Yorkshire has made this abundantly obvious. We are nevertheless profoundly concerned that the economic function of universities is emphasised to the detriment of their wider educational role, as the noble Lord, Lord Giddens, suggested. Indeed, there is a danger that they are seen simply as one more set of businesses aimed at encouraging appropriate skills for commerce and industry. The present report appears to encourage such a view, seeing some disciplines—mainly science, technology, language skills and medically related courses—as strategically more important than others.

Universities should certainly continue to receive direct funding from the public purse to teach those disciplines. Our concern is that other disciplines such as the humanities in general—including the arts, social sciences, and most languages—should also receive such support, otherwise departments will inevitably close and the insights of such disciplines will no longer be a part of our public vocabulary. The humanities, far from being strategically less important, contribute an essential understanding of what it is to be human and how we can best live together in creative unity. Witness, for example, the continuing debates on how to create societies where people of different cultures and faiths live together in peace and justice. Such debates require us to engage with several of the humanities—including sociology, philosophy, theology, history and others—to underpin our understanding of our own culture and to work effectively for its future. I would go so far as to say that society needs a soul; I use that term in the way that it has been used concerning a developing Europe and not in a narrowly Christian idiom.

Indeed, Her Majesty's Government have drawn attention to our corporate responsibility in creating a big society. To do so, I would argue, we need tools to describe and analyse our society and culture. Moreover, these tools can be transformative of society. Laying hold of the treasures of human wisdom will stimulate the imagination of this and future generations and direct their passion for the common good. Indeed, the present report notes at one point:

“Higher education matters. It helps to create the knowledge, skills and values that underpin a civilized society”.

That quotation is reminiscent of the last major government-requested report, mentioned by the noble Baroness in her introduction to the debate—the 1997 report, chaired by Lord Dearing. The Dearing report, Higher Education in the Learning Society, argued that universities are,

“to play a major role in shaping a democratic, civilized, inclusive society”,

and to be,

“part of the conscience of a democratic society”.

Still earlier—in my early youth—the Robbins report, which gave birth to the new universities of the 1960s, talked of transmitting a common culture.

There is a noble educational tradition, rooted in the origins of western European culture, that has affirmed the central role of universities in shaping society. A good and broad university education will shape both individuals and the community of which they are part. Human beings are neither simply economic agents in a marketplace nor individuals isolated from one another. We are—body, mind and spirit—creatures of the soul as well as the physical, fed by music, art and worship as well as by science. All of these are important to the holistic development of culture and society.

A man who is a treasury of quotations, GK Chesterton, noted that:

“The virtues have gone mad because they have been isolated from each other and are wandering alone. Thus some scientists care for truth; and their truth is pitiless. Thus some humanitarians only care for pity; and their pity... is often untruthful”.

For the sake of the individual and the common good, our universities must remain places of free-ranging inquiry into what it is to be human and what it means to live together in a civilised way. To neglect those disciplines that enable us to do that would be a serious failure indeed. The novelist and scholar David Lodge wrote:

“Universities are the cathedrals of the modern age. They shouldn't have to justify their existence by utilitarian criteria”.

17:52

[Lord Norton of Louth]

My Lords, I, too, welcome the opportunity to debate—

[Lord St John of Fawsley]

What is the essential point of a university? The currency of the word has been successively devalued, but a university is a body that engages in research. It is not a glorified high school, technical school or polytechnic, but an institution of higher learning. Successive Governments have offered people at universities courses that are not university courses at all. That is what we should be looking at. I speak as a former Minister in charge of higher education.

[Lord Norton of Louth]

My Lords, I will resume where I left off. I very much welcome the opportunity to debate the Browne review. It is a great pleasure to follow the right reverend Prelate and I endorse every word that he said. I declare an interest as a university professor of politics. I am also co-chair of the Parliamentary University Group and chairman of the Conservative Academic Group. I am therefore not short of advice, although the advice that I miss on occasions such as this—as, I know, does the House—is that of the late Lord Dearing.

My starting point is to reiterate what the report notes about the quality of higher education in the United Kingdom and about its contribution to the wealth and—following the right reverend Prelate—development of society. We have one of the best—certainly one of the most cost-effective—systems of higher education in the world. We are second only to the US in research ranking, we continue to be to the fore in attracting overseas students and we outstrip many of our competitors despite spending less as a percentage of GDP on higher education. As has been said, spending on higher education should not be seen as a drain on public spending, but as a necessary investment for our future economic growth. There is a private gain for students in higher education, but a massive public gain in terms of the contribution to the wealth of this country. As the right reverend Prelate said, this is not just the economic but also the spiritual wealth of the nation.

The noble Lord, Lord Browne, and his team, have produced a seminal report. It derives from a fundamental question: can the state afford to pay for a massive expansion in the provision of higher education? When I went to university, I was in a minority of my age cohort. Once we move to a situation where more than 40 per cent of the age cohort is in tertiary education, cost becomes a critical issue. How are we to fund expansion? We have in effect conceded that the cost cannot be met solely from the public purse, and I do not see how, with continued expansion, we can turn the clock back.

Over the past decade, undergraduate enrolment in HE institutions has increased overall by 28 per cent. If we are to expect students to make a contribution, then I accept that the arguments favour loans, with no up-front payments by students, and a repayment system largely along the lines proposed by the Browne report. The case for a graduate tax appears superficially attractive—I have just been reading the arguments advanced by million+—but when one looks at the arguments, the case against it is more than persuasive, not only in terms of administration but in terms of principle. It skews the balance between the centre and universities in favour of the former. I am therefore persuaded by the arguments advanced by the Browne report.

Although I have seen a number of alternatives, I have not yet seen one that improves upon the case made in the report. For the student, the commitment should be seen as an investment package. I believe that it constitutes a worthwhile investment in terms of the difference that it makes not just to income—in effect, the material side of life—but to what may be deemed the spiritual side. It contributes to the growth of the person. The graduate premium is measured in money, but there is much more to it in terms of personal development. The student benefits from the investment but, as the noble Lord, Lord Giddens, stressed, we should not lose sight of the fact that so too does society. There is a correlation between the proportion of young people receiving university education and the economic growth of a society. Students benefit and society benefits.

The Browne report makes a cogent case and I congratulate the noble Lord, Lord Browne, and his colleagues on the work that they have done. Like others, I very much welcome the recommendations on part-time students. There are, though, three aspects of the report with which I take issue, and perhaps I may deal with those before coming to one or two questions for my noble friend.

First, I share the doubts expressed about the creation of a super-quango in the form of an HE council. My fear is that there would be too great a concentration of regulatory capacity in one body and I am not altogether sure that the functions would cohere well in such a body. One thing that I think the Browne report has not taken into account is that the QAA has a UK-wide function. The council will be responsible for ensuring the accountability of HE institutions but I am not clear to what extent the council itself will be accountable. The review mentions only an annual report to Parliament. I appreciate the need to reduce the number of quangos but I am not sure that simply merging four into one is appropriate.

Secondly, it has been mentioned that it appears that funding for the arts, humanities and social sciences will cease. It is not clear why these sectors should in effect be penalised for their success. The intention is to create a market, but if there is a cap then no market may develop in the way that is intended, and the proposals, for reasons I understand, in any event skew the market in terms of preferential treatment. Removing the funding for the arts, humanities and social sciences may undermine the diversity in the provision of courses that characterises higher education in this country, with the effects that the noble Lord, Lord Giddens, mentioned.

Thirdly, although I very much welcome what is recommended in terms of part-time students, I am not sure that the review has it right in respect of postgraduate teaching. That the socio-economic profile one finds at undergraduate level is replicated at postgraduate level is not necessarily a persuasive argument for leaving the situation as it stands.

I turn to the position of government. Clearly, as we have heard, we cannot discuss the review in a vacuum. As the Browne review recognises, we need to maintain investment in higher education, not least in order to maintain our international competitiveness. However, given the cuts in HE, what is being proposed for the foreseeable future is a means of reducing the gap between what is needed and the funding that is available. Crucially, cuts take effect before universities receive increased income from fees.

The cuts have to be seen in context. Funding at the end of the last century and the beginning of this one did not keep pace with the increase in student numbers. The unit of resource fell significantly in the 1990s and is still below the figure of the early 1990s. Universities will be expected to do more as a result of the increase in fees, not least because students will demand more, yet they will find that they receive no overall increase in income. They will have to prepare for the new system at the same time as having to cope with a surge in applications for places next year—a consequence of demography and applicants wanting to avoid the new fee level.

Universities thus need as much certainty as possible and as soon as possible, if they are to plan effectively. Given that, I have three questions for my noble friend. First, can she explain, more than she did in opening, the rationale for the scale of the cuts in higher education? Higher education institutions recognise that, along with others in the public sector, they face a reduction in funding over the next four years. However, over the period of the spending review, the higher education budget faces a cut of 40 per cent. It is perhaps important to stress that the cuts come on top of cuts. One can argue that the Browne proposals are the best way to help make up for much of the shortfall but, as we have heard, the danger is that the Government will impose a cap that will not only limit the scope for market forces to operate but leave institutions short of what is needed to invest and to maintain their international competitiveness. How does my noble friend see universities being able to compete with competitor countries that are investing heavily in universities?

Secondly, can my noble friend say more about the Government's thinking on imposing a cap on fees? The Government appear unwilling to embrace what the Browne review proposes, preferring instead a higher cap. This not only militates against creating the market recommended in the review but, if set at the wrong level, may leave universities notably short of the funds necessary to contribute to future economic growth.

Thirdly, could my noble friend say more about the timescale? This is a fundamental point. Universities have to move quickly to plan for 2012. Prospective students need to know not only what fees will be levied but also what support will be available to them. The danger is that they may know the first but have to wait to know the second. As she said, an increase in the fee level can be achieved quickly by secondary legislation, but everything else requires primary legislation. A White Paper is promised by the end of the year to be followed by a higher education Bill. That obviously will need to be achieved within the present long Session. Time is of the essence.

Implementing Browne and managing a reduction in income, at the same time as having to cope with an upsurge in student applications, places an enormous burden on HE institutions. It is vital that the Government are prepared to act quickly in terms of legislation. There needs, of course, to be thorough parliamentary examination. That means, therefore, not a rushed passage through Parliament but an early introduction, not least to ensure proper consultation. Perhaps my noble friend can enlighten us a little further as to the Government's thinking and, if not, can she at least tell us when we can expect to have the Government’s response?

18:02

[Baroness Blackstone]

My Lords, I declare an interest as the vice-chancellor of the University of Greenwich. I should add that I have also spent 10 years in a Russell Group university, 10 years in a 1994 Group university and five years in a specialist institution. I am not saying that I have seen it all, but I have a relatively wide experience of many different types of institution.

I deeply regret, for similar reasons to those of my noble friend Lord Giddens, that I cannot welcome this report. I believe that it is profoundly wrong in the ideological position that it takes and that most, although not quite all, of its recommendations are misconceived. I believe that the quality of its analysis is poor and that many of its claims will not be substantiated when a more rigorous analysis is undertaken of the data on which it draws to make its recommendations. However, I can assure the House that this is not a personal attack on the noble Lord, Lord Browne. I recognise that he took on an immensely difficult task and I am only sad that he and his committee were unable to draw on the resources needed to produce a more convincing report.

It is ironic that this independent review was promised in another place when variable fees were introduced so that after five years the fairness or otherwise of the new system could be examined. At the time, no one could have predicted that such a review would double the fees then proposed and assume that the public funding of 80 per cent of undergraduate tuition would be abandoned. Nor would anyone have predicted that this review would be based on a commitment to the free market that is so extreme that it abandons, to quote Sir Peter Scott, a much respected vice-chancellor and former member of the HEFCE board,

“the very idea of a public system of higher education, built with such care and effort since Robbins”.

For many years, I have believed that students and/or their families should make some contribution to the cost of their university education. However, as my noble friend Lord Giddens has said, it is also the case that higher education brings social and economic benefits to the nation. For that reason it is right that the taxpayer should also contribute. We are all the richer for having highly educated people. The Browne report fails to address this fundamental truth and assumes that the replacement of public grants by fees is a desirable outcome. Many of us beg to differ. When I had some responsibility for the introduction of fees in 1998, they were an addition to public funding, as was the introduction of variable fees in 2004.

There is insufficient time to make all the criticisms that this flawed report deserves, so I will be selective. Although I would like to associate myself with the points made by the right reverend Prelate on the overutilitarian approach of this report, I want to begin with widening participation. The report assumes little or no effect on potential students from low-income backgrounds in doubling the fee debt that they will incur. Because the 1998 and the 2004 legislation did not deter students from poor families from going to university, that does not mean that a fee increase of close to 100 per cent will not do so. The committee is overconfident in asserting that, just because fees are deferred, participation can be protected. Given the much higher costs to be imposed on the individual student, it would be more realistic and in line with elementary economics to assume that a very large increase in prices will lead to a decline in demand.

As the Liberal Democrats went into the election with a pledge not just to hold fees down but to abolish them, I would like to ask those on the Liberal Democrat Benches who are participating in this debate, and the rest of them, how they could possibly support the committee’s proposals on fees. Anyone who wishes to see social justice should be concerned. Perhaps the Minister, too, will tell the House what the Government’s position is, given the potential impact of very high headline fees on young people, as well as on older people without a degree, who are considering going to university. As others have said, the disincentive effect could be very great. That will damage the commitment just made by the Minister to social mobility.

The second issue about which the report is depressingly cavalier is the variable effect of its recommendations on different kinds of university. It appears to be more concerned to increase differentiation between universities and to create a market than to protect the system as a whole and to maintain all our universities. Let me quote from the excellent report by John Thompson and Bahram Bekhradnia, published by HEPI. They said:

“The Committee appears strangely unconcerned with the effects of its proposals on universities whose market position may not be strong and which may not be in a position to sustain even a ‘lower resource’ fee of £6,000. The country needs these universities to thrive and succeed. The reason they may not be strong in the marketplace may have nothing to do with their quality or their standards”.

They went on to say:

“Universities are part of the national infrastructure, and it is in the interests of the country and the responsibility of the government of the day to ensure that universities at all levels of excellence thrive”.

Speaking as a former Minister, I think that this is one of the most regrettable things about the report. Our international reputation is based on strength in depth, variety in research output and a well run system with good teaching in many different kinds of institution. This is one of the reasons why we have been so successful in recruiting international students right across the board. I take issue, as do many vice-chancellors, with the suggestion that universities that are less popular will “raise their game”, to quote from the report, if their student numbers fall, from the threat of going under. As I have suggested, there may be many reasons why they are less popular which have little or nothing to do with the job that they are doing. Again, as the HEPI paper states:

“The national interest would be ill served if they were to fail”.

Moreover, assuming that they survive, why should those universities, with many widening-participation students, end up with fewer resources to teach them, because they cannot charge such a high fee without jeopardising demand? Would we accept that inner-city schools should have less money to teach their students than others? Of course not. Why should we accept that for universities that take those very students from those inner-city schools? I ask the Government—I beg the Government—to ensure that all universities are equally well resourced in their teaching.

Mention should also be made of how the implementation of the Browne report will affect the United Kingdom’s higher education compared with that in other countries. No system in the world has abandoned public investment in undergraduate tuition. No public system charges anything like £6,000 to £7,000 per student. I know many experts in other countries, including the United States—I agree with what my noble friend Lord Giddens said about the US system—who are incredulous that these recommendations can be taken seriously. Moreover, the report’s proposal to have no government-imposed cap is extraordinary. How can any Government abrogate their responsibility to regulate the maximum fee, given the effect that it would have on both access and participation?

We are talking not about washing machines but about a matter of public interest that affects the life chances of many individuals and the nature of our society and economy. Will the Minister make it clear today that the Government will reject the recommendation, as has been signalled once or twice during the past few days? Can she tell the House what the maximum fee will be? Can she also give us a cast-iron assurance that the research-intensive universities will not be allowed to charge a higher fee to undergraduates than other universities? Those fees should be spent on teaching, not on research.

The report is also naive in what it implies about competition and student choice. There is already extensive competition between universities in the existing system: competition for home students, international students, research funding, charitable donations and joint ventures with industry and commerce. The notion that the market will increase competition and allow greater student choice is highly debatable. Choice may in fact become more constrained, because more students than at present will feel that they need to go to their local university to save incurring even larger debts by living away from home. The report accepts that better information will be needed for the market to work, but my experience suggests that, in practice, this will be immensely difficult to achieve and that many potential students will find it difficult either to access or to absorb huge amounts of complex information about what universities are offering.

There are many imponderables in the proposals for repaying the fee and maintenance loans. For example, the Browne report says nothing about the impact on mature students and part-time students. I associate myself with the positive remarks made by other noble Lords about what the committee says on funding for part-time students. The increase in the trigger point for repayments from £15,000 to £21,000 is also welcome. However, the suggestion that some have made—not, I may say, the report’s authors—that that means that many graduates will be relieved from repaying it is surely misplaced. The starting salary of a graduate nurse is £21,500; that of a newly qualified teacher outside London is also £21,500. Even relatively low-paid graduates, such as those in those occupations in the public sector, will have to pay 9 per cent of their salaries immediately on graduating. Some will be paying back over many years while they are struggling with mortgages and bringing up a family.

It would be helpful to hear more from the Government about rates of interest and how they intend to make the system more progressive than the current proposals. Information about when legislation will be introduced is also needed, as the noble Lord, Lord Norton of Louth, said. Can the Minister tell us the likely timetable, as well as indicating whether she agrees that higher fees cannot be announced and introduced until the legislation has cleared the parliamentary hurdles and been enacted? Students cannot apply for places not knowing what the range of interest payments will be when they start repaying. Why are the Government apparently considering a piecemeal approach rather than a carefully considered new higher education Bill that encompasses all the issues that the report raises?

No allowance appears to have been made in the calculations in the report for default. Those figures must be clarified. Will the Government do that? Does the Minister accept that default is likely to be higher when the debt is so much greater? Can she also tell the House how the Government intend to recover the debts of European Union students? A much larger default by those graduates will hardly be fair to British students and graduates and is certainly likely to excite the interest of those parts of the media that are already extremely hostile to the European Union.

The committee’s calculations of the likely cost to the taxpayer of the new fee and loan structures that it proposes are not transparent, because the assumptions made are totally unclear. The experts suspect that they underestimate the costs and that the benefit to the taxpayer from higher fees will be quite a lot less than the £1.8 billion annually that the committee claims. Because the earliest that graduates will start paying back is 2015, the proposed package is likely to lead to higher public expenditure for many years. Can the Minister arrange for some work to be published on the net effects, including details of the Browne committee’s analysis?

I agree with the remarks of the noble Lord, Lord Norton of Louth, on the report’s proposals on reorganising the regulatory system and creating a new higher education council. Those recommendations are not based on thought-through consideration of the issues. It almost seems as if the committee was trying to plug the gap in HEFCE’s work following the drastic reduction in its grant-giving activities. While there is a case for OFFA being absorbed into HEFCE, there is little case for that to happen to the OIA, and a much more careful examination of the pros and cons of having a separate QAA—we must remember that that separation was a recommendation by the Dearing committee—is needed.

Whatever the pressures of the deficit, I ask the Government not to destroy our much admired publicly funded system of higher education by making the changes recommended by the Browne committee, which would do immense damage and be hard to reverse when our economy recovers, as it inevitably will.

18:18

[Lord Smith of Clifton]

My Lords, I thank the noble Baroness, Lady Wilcox, for introducing this debate. The Browne report on financing higher education reinforces and accelerates the trend begun with the Dearing report of 1997. As the noble Baroness, Lady Blackstone, said, it is a trend which essentially and eventually leads to the privatisation of tertiary education in the UK. Only today, press reports have said that the LSE, founded by that great bunch of Fabians, is considering going private. That is perhaps a portent. We have moved a long way from the old so-called mixed economy, the partnership between the state and the universities that existed during the four decades after World War II.

The terms of reference of both the Dearing and Browne reports meant that proposals were framed very narrowly. It is unfortunate that we have to debate Browne before the White Paper dealing with HE, which is due out in the next few weeks. Neither report could take a wider view about the structure and purpose of third-tier education. That constraint inhibits a full debate on the subject—a debate which has never really been conducted since the Robbins report and which is long overdue. If the Browne proposals are fully implemented, privatisation will become a more overt policy. Of course, a totally free market in higher education can be seen as a coherent model to follow—not that I would follow it—but I urge some caution in leaving the university system to market forces, for there are likely to be many consequences both intended and unintended that flow from that.

In the first place, the top-tier institutions will have to further rationalise and restrict the number of research and teaching areas they provide. This has already happened with the closure, for example, of a number of chemistry, language and philosophy departments. Market forces have dictated such closures. The fundamental question is: are universities to be allowed to determine such rationalisation on an individual basis or should some national criteria be applied? To take some specific examples: how many universities should offer subjects like architecture, palaeontology, archaeology, oceanology or nuclear engineering—one, two or half a dozen? We know the answer in the case of nuclear engineering: none. It has long since disappeared. A more systematic approach is needed along the lines of the inquiry conducted in the 1980s by the noble Lord, Lord Oxburgh, which rationalised the number of geology university departments in the country. This is not an exercise which should be left to the three funding councils, as the needs of the UK university system as a whole should be the focus. That includes a consideration of possible institutional mergers.

That last point leads on to my second set of consequences. Second-tier higher education institutions will be decimated. Three have already been mentioned in the press as being near bankrupt, and I believe that many more will become unviable in the not too distant future. Too much attrition at this level of tertiary education risks impeding one of the Government’s proposals for introducing two-year, fast-track degrees. Similar to initiating a series of Oxburgh-type reports to secure an optimal range of academic disciplines, we need a parallel set of inquiries into the optimal mix of higher education institutions along the lines of that conducted by Clark Kerr in California nearly half a century ago.

As the noble Lord, Lord Giddens, has said, that inquiry provided for California universities at the level of Berkeley, UCLA, Santa Barbara et cetera which could provide the full range of degrees: bachelor, master and doctoral. Then there was the spread of high-quality state colleges that offered bachelor and master degrees in places such as San Jose, San Diego, Los Angeles and Bakersfield. As the noble Lord, Lord Giddens, mentioned, there were also numerous community colleges that provided diplomas and the first two years of an undergraduate degree. I, too, have taught in California. I have suggested before to the House that such a scheme should be applied on a regional basis in the UK. I also suggest that, in much the same way as the newly created academies are seeking to restore what was good about the old grammar schools, such regional schemes should seek to restore what was good about the former CATs and polytechnics: namely, the provision of more vocational training.

Finally, I repeat to the House: if this generation of legislators, who benefited from no fees and had maintenance grants during their university careers, seeks to impose swingeing costs on future generations of students it must recognise the intergenerational inequality involved. Two steps should be undertaken. First, there should be a retrospective, hypothecated tax on those who graduated between 1948 and 1998 and, secondly, a graduate tax; that is what I want, rather than loans at high interest as the Browne report advocates. I do not believe it is beyond human ingenuity to devise such a tax. I fear that will not happen and that we will continue to muddle along.

In winding I therefore ask, as many previous speakers have done: when are we going to have the coherent debate that is long overdue on the whole future of tertiary education in this country? I ask the Minister to give me the assurance that when those discussions take place, particularly following the White Paper, both vice-chancellors and students’ unions will be fully and frankly involved in discussions about the Browne report and the White Paper.

18:25

[Lord Boswell of Aynho]

My Lords, as the pattern of introductions to this House and subsequent maiden speeches has unfolded since the summer, two things have emerged that I have identified and very much welcomed. First, there is our genuine gratitude for the welcome we have received here from all parts of the House. If I may say so, for those coming from another place there is a strong personal preference for its lack of tribalism. There is also the very strong support and advice we have had from all members of the staff at all levels. Secondly, there is a theme which is perhaps appropriate for the difficult times for our economy and our country: a sense of obligation arising from the honour we now enjoy to those of our citizens in need of help or encouragement in difficult times.

Looking further ahead, I now feel that it is not just the passing of the years in my own case which makes me want to look forward beyond my own children’s generation to that of our grandchildren as well. This is highly relevant to tonight’s debate on the excellent report of the independent review led by the noble Lord, Lord Browne, because I firmly believe that our universities—not just the household names which have established themselves over the years, generations and centuries—remain one of this country’s glories. We know that their reputation is high in international terms; that has been done on relatively limited resources. At the same time, over the two generations which have now passed since the Robbins report, we have effected a rather British kind of painless but radical change from elite student involvement to popular involvement, and exposed many young people and adults, too—they are often forgotten—to the social and educational benefits of higher education, as well as its income and instrumental benefits, without destroying the quality of the system. More did not mean worse, though it did mean different and more diversified.

At this point, I should properly declare an interest as vice-chair of the governors of the University of Wales Institute, Cardiff, which of course gives me an exposure to a different funding council. Perhaps I might mention in passing on the report that there are some rough edges in the proposed changes in connection with institutions in the devolved Administrations; I leave that now. I also declare an interest as a recently co-opted governor of the University of Northampton, although on that we greatly look forward to my noble friend Lady Falkner’s contribution because she is chancellor of that university. Both of those are post-1992 universities. I have another good reason for remembering that particular year, as in its dying days—after the Act had already passed through into law—I was privileged to be asked to serve as higher education Minister.

My later experiences as a governor convinced me that the complexity of the sector makes it wholly unsuited for centralised control. Fortunately, the self-restraint of successive Ministers of differing parties has at least broadly maintained the concept of autonomy, on which indeed the success of the sector has been founded. However, it strikes me that the constraints and developing policy problems of that time, almost 20 years ago, are still very much alive. I used to call that some kind of bizarre, sequential slow-bicycle operation, punctuated by occasional official reports led by Members of this noble House—the winner being the Minister who stayed upright the longest, without falling off and occasionally changing policy.

We still need, as we did then, to balance student numbers and aspirations against Exchequer cost both for tuition and for maintenance; to reconcile quality and unit cost; to secure access and social justice; to balance the vocational with the quite non-vocational; to tune research and teaching activities; and, of course, to lever in external funding wherever practicable. The Browne review exposes that, in our present arrangements, something has to give, and if it is not to be—and I do not wish it to be—either quality or student numbers, then those students who are participating must be prepared to contribute in due course out of their future earnings streams, and they will increasingly feature as consumers of the system. I therefore welcome and endorse the strategic approach of the review. It will, however, need very close attention to the detailed impact on all the multiple types of students, and, of course, on institutional stability itself.

I am particularly glad that we are beginning indirectly to unpick the traditional and increasingly costly straitjacket of the full-time student award which has applied all the way back to my own undergraduate days and has led to a kind of two-tier system, regulated and unregulated, with part-timers, until now, excluded from support. However, we need to ensure—I am sure the Minister will have regard to this—that all students of ability and their families need not feel deterred by the weight or threat of future debts. I believe that we can secure this on the broad basis of the review's proposals.

On wider university funding issues, the current spending review is, of course, even more directly relevant. At this stage I simply put down a marker for the broad area of humanities and the social sciences as well as the physical sciences, as by definition universities need to have at least a spread of competence and excellence.

We have generally, so far, done well by students and their universities. We have expanded the system without compromising it. We recognise, as the review does, the compelling constraints of today's economic situation, but we need not despair, and it is our duty to find a way through them.

18:31

[Lord Broers]

My Lords, I warmly congratulate the noble Lord, Lord Boswell, on his outstanding maiden speech. I know him well through his active and effective membership of the Science and Technology Committee in the other place. The Science and Technology Committee in this place works closely with the committee in the Commons—hence our relationship—and so I had expected a clear and eloquent speech. However, I think that he has excelled himself.

The noble Lord’s interests and experience in Parliament are exceptionally broad. By profession he is a farmer and an economist, but down the Corridor he has been government Whip; Parliamentary Under-Secretary of State for Education and Parliamentary Secretary for Agriculture, Fisheries and Food; and an opposition spokesman for what seems almost everything over the years. I know that we all welcome him enthusiastically to his place in the House and are confident that he will make very valuable contributions to our activities.

I congratulate the noble Baroness, Lady Wilcox, and the noble Lord, Lord Browne, on his review. I just hope the fact that the noble Baroness has in effect called this debate on behalf of the Government is symptomatic of a new era when the Government want genuinely to listen to others before making the final decisions themselves.

Academics are famous for their dislike of change, and yet most of our universities have continuously adapted to changing circumstances and some are among the longest lived of our social institutions. Universities are slow to act because scholars’ timescales are long and their interests diverse. They are complex societies, but wise. They recognise the inherent complexity of their organisations and have the intellect to cope with that complexity. The Government should be reminded of this before they start imposing change upon them.

I have started in this way because it is not possible, especially in dealing with our leading universities—and I declare my interest as a past vice-chancellor of the University of Cambridge—to tamper with some of the funding streams without looking at the totality of their funding. All of their income streams, whether addressing teaching or research, or meeting ongoing costs, capital enhancements or student support, are closely intertwined and interdependent. In my experience it is almost impossible when allocating resources to distinguish between the various activities of academics, to decide what is scholarship, what is research or teaching, or even what is administration.

As an engineer, I ran from my laboratory to the lecture theatre where I found that the best way to capture the interest of the students was to talk about my research and what others were doing that was new, and after the lecture I met my colleagues to decide how we could finance the redevelopment of our teaching laboratory before spending the hour before lunch reviewing a new textbook for a publisher. I remember during my time we were asked by the funding council to tell them how much time we spent on teaching and how much on research. We complied, because it does not pay to bite the hand that feeds you, but there was no accurate way to do this. At the time—and I think it is probably still the case in most of our leading universities—to the best of our ability to estimate it, the money received for teaching was insufficient and we were in effect subsidising teaching with research money, and yet at others universities I was told by their vice-chancellors that they had to use teaching money to seed research. Government and councils of higher education should leave these matters to universities themselves and not try to be prescriptive. There are large differences between our universities, but in the vast majority of cases they will make the best decisions.

So how does this relate to the review of higher education funding and student finance? I hope it illustrates why the coalition must not make decisions about teaching and student finance without also deciding what is to happen to all the other sources of funding. The first is research funding, especially QR—the stream that used to flow according to the research assessment exercise and now depends on the research excellence framework and which in our leading research universities is much larger than the amount they receive for teaching. The coalition must also decide about CIF—the Capital Investment Fund—which is capital for learning and teaching, research and infrastructure. Universities have come to rely on this money to maintain their equipment and infrastructure, and it has been essential in maintaining their capabilities in research at a level that encouraged investment from the private sector, from industry, which incidentally seems, depressingly, to be declining. This stream from the private sector is of crucial importance and has to be carefully monitored. Then, closely connected with industrial involvement, there is the third stream of funding aimed at encouraging enterprise. Finally, of great importance to universities, there are the research councils. Fortunately, as the Minister said, there is good news here. As an aside, I must express my appreciation, as the chairman of the board of the Diamond Light Source, that the money has been provided for the very exciting final phase of that project.

If the Government or the funding council—or councils—intend to change any of these streams, they should be aware that the changes may conflict with what is planned for teaching and student finance. If the other streams are to be stable, it is possible to assess the adequacy of the proposals set out in the broad-ranging Browne review, which, with the exception of the levy that is proposed if universities decide to charge fees above £6,000, I strongly support. The levy is regressive and will, in effect, put the universities in the role of tax collectors, which is not appropriate. The money provided by universities for bursaries at fee levels above £6,000 would also presumably be, in effect, taxed, which is even more inappropriate. I would like to see flexibility in the cap if it is to be imposed, but I regret that this may not be politically acceptable.

If the reduction in the funding of BIS is to feed through to the teaching money passed on to the universities, then—to the extent that estimates can be made—the student fee will have to increase to £7,000 to maintain present levels of overall funding; that is, to keep the situation much as it is today. According to the estimates I have recently been given, this still leaves expenditure exceeding income. To balance these would require a fee of £8,000.

As a final comment, I observe only that as the money provided by the funding council declines, so do the reasons for our leading universities to go on accepting government regulation. We might reach a level where independence becomes feasible and too attractive to resist. The noble Lord, Lord Giddens, has mentioned the US universities. I think it is well known that the top US private universities, through their success as research institutions, receive up to a third of their funding from government—in their case from federal and state sources. There is no reason why our leading universities should not gain similar support for their research. I conclude by asking the Minister to reassure us that the Government will take the totality of university funding into account before making their final decisions about teaching funding.

18:41

[Lord Hunt of Chesterton]

My Lords, I, too, welcome this report for addressing the key issues of the teaching component of higher education and student finance. It is a great pleasure to follow the noble Lord, Lord Broers, who was an excellent vice-chancellor at the University of Cambridge. I declare an interest. Like other noble Peers, I have been a professor at universities, including Cambridge and UCL, in various countries. From this experience, I can well understand that excellent students do not necessarily want to go to excellent universities. All universities are very peculiar places, as was slightly implied by the noble Baroness, Lady Wilcox, and each one is peculiar in its own way. We should not assume that everybody wants to go to the particular peculiar one that is supposed to be the best. This should be welcomed, not deplored.

This report takes forward the 2006 Act. The report responds, in a sense, to the questionable assumption, which has been addressed by others, that there are not enough funds for a largely state-funded university system. This position is not held by most other European countries. I am sure we can all agree with the positive remarks in the report’s introduction about the research leadership of UK universities. However, the report also criticises quite strongly some teaching and other aspects of our universities. These are partly structural and relate to the proposals for university funding. I shall return to that in a moment.

The fundamental point that we need to discuss is how to ensure that a large proportion of UK school-leavers and all suitable mature students have excellent higher education. I approve of the egalitarian thrust of the report, given its essential assumptions. However, to have this wide involvement without the fear of debt, government funding must have a high priority. As the noble Lord, Lord Broers, said, this funding must also match and be integral to the maintenance of universities’ other roles. As the noble Lord, Lord St John of Fawsley, said in his rather unorthodox intervention, universities are for more than research; they are also places of knowledge. If you have been in industry—or, as I was, head of the Met Office—you know that one of the most valuable things about universities is that they are centres of knowledge. It is not something that universities often recall, but their knowledge is usually more valuable than their current research, although sometimes the research is important as well.

All parties have contributed to the tremendous progress in higher education in the UK since the 1960s. At that time, many able school-leavers certainly did not go to university, as I saw when I worked in industry. Now we have figures of 40 or 50 per cent. Furthermore, in the UK, we have a very high level of course completion. Many of the courses in the United States have a completion level of around 30 per cent. That is a very strong feature of the UK system.

The report emphasises how higher education policies are vital for the interests of the UK. One aspect is our competitive position, relative to other EU countries. If we cease to subsidise courses, many of them, as is reported in the Sunday newspapers, will go to the Netherlands and Sweden. I am a visiting professor in the Netherlands, which has very good universities.

However, the report also sees it as being in the UK’s interests to maintain certain specialised subjects, such as engineering, science and languages. I welcome the prominence of engineering. The noble Lord, Lord Browne, is a distinguished engineer and Professor Julia Higgins was also involved with his report. Engineering does not always get such prominence in government reports. I congratulate the noble Lord, Lord Browne, on that point. As a student, I benefited from a scholarship from the Institution of Civil Engineers.

Observers from other countries and UK employers are not particularly impressed by the structure of courses in English and, I believe, Welsh universities. I am surprised that this point has not been made. It is interesting that around the world almost no new universities are set up on the English or Welsh model. Some are based on the Scottish model, which is excellent. We should be cautious about that. The reason is that our courses are exceptionally narrow. As the right reverend Prelate the Bishop of Wakefield pointed out, it is the narrowness of British higher education courses that many countries find extraordinary. Employers also find it extraordinary. It means that people entering technical employment have absolutely no idea of the history, politics or culture of the country that they are working in. We need specialist and generalist education. This is not, I am afraid, a point that I find most academics agree with. As the noble Lord, Lord Smith of Clifton, said, we certainly need a more fundamental discussion about higher education.

One might imagine that financial incentives to universities and students could provide a basis for more general higher education courses. This is even more necessary now that AS-levels are to be de-emphasised. I was very impressed as a schoolboy when I heard CP Snow speak to us at Westminster School, around the corner, about his visit to Russia in the 1950s. There, physicists and mathematicians also had to take literature papers. He reminded us that the kind of question a top physicist or mathematician could answer in Russia in the 1950s was: “Discuss the character of Natasha in War and Peace”. Would you find that in any other country?

At the other end of the political divide, in the United States first and second-year students of literature have to take courses in astronomy and geology. In Arizona State University, which I have been to recently, dance majors have to take mathematics. This really causes trouble to my mathematical colleagues. Nevertheless, it happens. We are miles away from that but we discussed it in England. In the 1950s and 1960s, Cambridge University thought scientists needed to know a bit of culture and vice versa, so there were lectures at 5 pm, which of course did not last very long.

In the 1960s, we also had a whole batch of new universities. I was at Warwick, where we studied Enquiry and Criticism to enable people to learn more generally. Keele had Plato to NATO, as the Times called it. These all petered out; they all said that there was not enough time, which is ridiculous. That is why people are not using the British model of university. I noticed an absence of this perspective in the speech by my noble friend Lord Giddens, who quite rightly commented that it is very important to maintain humanities and social sciences as well as technology, but in the United States, it is the fact that humanities professors have to teach people in other faculties that gives them a funding stream that enables those pure knowledge departments to survive. You have a philosophy department because the philosophers are teaching scientists. It is not rocket science in terms of economics, but we are a long way off it.

Another welcome feature of recent developments in the university world is the increasing number of students studying and researching for second degrees. Funding is called for on page 41 of the report. Will the Minister assure us that the withdrawal of government funding for teaching will not reduce taught graduate courses in universities? They are nothing like as extensive in the UK as they should be. People have been moaning about this since the 1960s. There is a much smaller number of specialist graduates leaving universities, as our former Prime Minister, Mr Brown, emphasised on many occasions.

While commending the report, there are some big issues about the health of the higher education system in England and Wales which needs to listen to more radical ideas than those one currently hears in university common rooms, Whitehall and Parliament.

18:50

[Lord Bilimoria]

My Lords, two years ago, I shared a platform in India with one of India's brightest young best-selling authors, Chetan Bhagat, and he said that what young Indians wanted above everything else—what they really craved, what they were hungry for—was education. India has some of the brightest people in the world and many are now leading education institutions such as the Harvard Business School, where the dean is Indian, and some of the largest companies in the world, such as PepsiCo, where the chief executive is Indian. Yet, in the latest Times Higher Education world university rankings, India, a country of 1.2 billion people, did not have one institution in the top 200. Fifteen years ago, China did not have one university in the top 200; today, as the noble Lord, Lord Parekh, told me yesterday, it has five in the top 100. What is the bet that 15 years from now India will have several?

In this country, we have been fortunate enough to have had a head start of 900 years. Education in this country rests on an esteemed and ancient foundation. Oxford and Cambridge were among the first universities established in Europe during medieval times, and over the centuries that followed we never stopped innovating, developing and enhancing higher education. Students and the importance of study have rightly been held in the highest regard, and today we can look around this country at several world-class higher education institutions and justifiably feel very proud.

Earlier this month, on 1 October, at Cambridge University, where I am privileged to have studied and where I currently hold four positions, our new vice-chancellor Sir Leszek Borysiewicz—known as Boris—in his opening address as the university's 345th vice-chancellor, quoted the university's mission statement, which is,

“to contribute to society through the pursuit of education, learning, and research at the highest international levels of excellence”.

That is what Cambridge and so many other universities in this country do. Britain constantly punches above its weight. We have under 1 per cent of the world's population and are five times smaller than the United States, yet we regularly have four or five universities featured in the top 10 worldwide. We have produced the second highest number of Nobel laureates and are bettered only by the United States. We have the highest number of publications within the top 1 per cent of citations in Europe, above Germany and France.

It is incredible that we can say any of this. It is incredible that higher education in this country is such a success story because, despite having top-class higher education institutions, our annual spend on education as a percentage of GDP has been very average over the past decade. In 2006, 10 EU countries spent more on higher education as a percentage of GDP than us. With spending as a percentage of GDP at 1.1 per cent in this country, the United States soars ahead of us at 2.9 per cent—nearly three times higher—and a staggering 1.7 per cent of that is generated through private giving. Therefore, even the American Government’s spending on higher education of 1.2 per cent of GDP is higher than our entire spending on higher education. It is incredible that we have been able to do so much in Britain with so little and that we have been able to compete with universities in the United States, where tuition fees are often tenfold what students pay in this country. Compare the two countries' top universities: Harvard's endowment is $25 billion, while Cambridge's endowment is $6 billion.

Taking all this into consideration, can we truly justify a fall in the higher education budget—excluding research, which I am glad to hear—from £7.1 billion to £4.2 billion by 2014-15 as proposed by the CSR? That is a 40 per cent reduction. This is sheer lunacy. I know that this phrase is overused, but it seems to be falling on deaf ears: an investment in education is an investment in our future. We talk about ring-fencing certain areas of spending, and education should have the strongest and highest of fences. I am all for increasing universities' power to make their own decisions and, as the Minister said, the great level of autonomy in our universities is partly responsible for their success and a major reason why we have been able to maintain a competitive edge against our European competition, such as France, where state control is at a much higher level. However, there is a big difference between state control and state funding. There is a big difference between regulation and support.

We are all well aware that this country’s public sector spending was out of control under the previous Government, that we have lost our sense of balance and that cuts need to be made. Where are our priorities when we spend £190 billion on welfare and pensions when we know that tens of billions of pounds of that is being abused and taken advantage of? Fortunately, the coalition Government are beginning to address the welfare issue, and I am delighted about that, yet we are trying to cut the higher education budget by 40 per cent over the spending review period. This is being penny-wise and pound-foolish. We are not the only country in hard times right now, we are not the only country that has to face the harsh reality of cuts, we are not the only country with several dark years ahead of us, but we are in the minority when it comes to slashing away at higher education spending. Our competition is investing at this time, not cutting. How much lower than 1.1 per cent of GDP spending are we going to go before we realise it was far too low in the first place?

Benefaction created the great colleges of the great universities of Oxford and Cambridge; it was benefaction that built the great universities of Harvard and Stanford in the United States; and what better example of benefaction can I give than Cambridge celebrating its 800th anniversary in 2009 by launching a campaign to raise £l billion by 2012? I am delighted to say that we reached that target in June this year, two years ahead of schedule.

Over the past 50 years, as the percentage of the population going into higher education has gone from 6 per cent to 45 per cent, we have developed a mindset where we have relied on government for university funding. It is amazing that only now have we woken up to the importance of benefaction and universities raising their own funds alongside the government support. The Browne review enables universities to do so through charging their own fees, in the way that we already charge our foreign students—and what a contribution they make. In 2005, the UK made £1.39 billion in tuition fees and an additional £2.35 billion in living costs. Foreign students are one of our best export earners, but unlike other exports where our goods are shipped out of this country, we bring our foreign students into the country and build lifelong bridges with them, the generations after them and their countries. I am proud to have been one of those students years ago. Ten per cent of academics in our universities were born outside the United Kingdom. Five of the past six Nobel laureates based in the United Kingdom are foreigners, and we were on course to continue in this profitable and successful vein with levels of non-EU international student enrolments increasing by 25 per cent between 1998 and 2008 until the Government introduced their cap on immigration—what a mad cap idea!

It is quite obvious that public spending has to come down and I applaud the Government for aiming for a target of 40 per cent of GDP in public expenditure. But let us consider what we are gaining from an investment in education: it is way above the £60 billion of output about which the noble Lord, Lord Browne, spoke. Just look at the brilliant Eureka UK report, published by Universities UK, on 100 discoveries and developments in UK universities that have changed the world. The contraceptive pill, the MRI machine, stem cells, fibre optics, combating modern slavery, plate tectonics, keyhole surgery, black holes and pulsars are all from British universities, and the list goes on.

Over and above that, we have the breadth of universities in this country. I was privileged to be chancellor of Thames Valley University for five years. It is now called the University of West London. This modern university had centres of world excellence, including the London School of Hospitality and Tourism, which is one of the best institutes of its kind in the world. Its alumni include the head chef at Buckingham Palace and the secretary of the Oxford and Cambridge Club. In our banqueting department, there is our deputy manager, Stefane Portes, as well as Pawel Pietraszewicz. Our nursing college is the number one in England. The university also has the famous London College of Music, where the father of the noble Lord, Lord Lloyd-Webber, was principal.

We need to review the future of higher education in this country, but we need to do it in tandem with higher government investment. That is what our competitors are doing. I congratulate my noble friend Lord Browne on his excellent review. Its presentation, thoroughness and rigour, intentions and content are all superb. I agree with the rejection of a graduate tax programme. I appreciate the review’s opinion that higher education institutions,

“safeguard knowledge, catalyse innovation … strengthen civil society. They bridge the past and future; the local and the global”.

However, charitable giving accounts for only 0.2 per cent of higher education’s income streams in this country, compared to 8 per cent in the United States. In other words, it is 40 times higher in the US. Where relevant, we also need to look at corporate sponsorship and overseas income. The more funding that is available, the more that there will be to allow access for students from disadvantaged backgrounds.

The noble Baroness, Lady Wilcox, mentioned the context of the report. In the Browne review, the Government let the cat out of the bag in the last sentence, which states:

“These measures create the potential to allow the numbers of student places to increase by 10% and enhance support for living costs while still allowing public spending reductions to be made”.

There you are: the timing and circumstances surrounding this review speak for themselves. This, I believe, is the issue most of us have with the review. All its brilliant qualities are overshadowed as it opens itself up for interpretation as a tool to justify cuts, as opposed to a tool of positive reform.

The report could also have addressed the global reach of our universities. We need to be enterprising and to take advantage of opportunities to collaborate with universities abroad in countries like China and India. We have to wake up to these possibilities, as the additional income stream that this could provide is vast, as well as enabling us to continue to be competitive. This is the future and it is not too late for us to get on board. By cutting our higher education spending we are being foolish. Instead of enhancing and bolstering our competitive advantage, we are handicapping ourselves, which is sheer madness.

In business, when building a brand or a company, you talk about your unique selling proposition, your core competence and what gives you the competitive edge. In our tiny country, our higher education institutions form, as the Treasury's spending review 2010 quite rightly puts it, the jewel in our crown. Nothing must be done to jeopardise this because the returns we get on this investment will ensure the future security and competitiveness of our country. What is more, you can calculate percentages of GDP—you can crunch numbers—but you cannot put a price on, quantify or compare the value of education. The returns that we receive from every penny we place into higher education are unequivocally, unquestionably, truly priceless.

19:04

[Baroness Morris of Yardley]

My Lords, before making my contribution, I would draw attention to the Register of Members’ Interests. I am employed by the University of York and I am a council member at Goldsmiths College. These are not easy issues. They are good issues to discuss and debate over many months and years, but it is not easy to come to a conclusion. I do not think that anyone has made a speech in which they have pretended to have the answer. These are tough issues and this is a chance to get it right, which is why this debate is so important. In that respect, I welcome the report by the noble Lord, Lord Browne, and his committee. A lot of work and consideration has gone into it, and it has presented us with an opportunity to have a long-needed debate. I shall return to this important point later, but the report goes somewhat beyond the remit that the noble Lord was given.

I welcome some of the report. The emphasis on funding for part-time students has to be welcomed. We wanted to do that when we were the Government, but we did not find the money. It will be interesting to see how the coalition Government respond. The report’s wish for the training of lecturers in terms of teaching skills and a qualification has not been mentioned. That has to be welcomed. It would bring lecturers up to date with teachers in further education and in schools.

I also welcome a simpler administration of financial support. The thought of applying for financial support at the same time as applying for a university place makes sense. Another point that has not been mentioned in the debate is that the report welcomes the continued expansion of higher education. My party set the target and expanded places in higher education year after year. There has been comment from other parties and outside Parliament that it is wrong to expand higher education to include more students. I very much welcome the part of the report that goes almost further than that and says that everyone with the aptitude to do well and to succeed ought to be able to go into higher education. I like that aspiration which supports the view that we took. The financial arrangements addressed by the report illustrate a shift. It is not just a recommendation about a higher cap. This shift opens up a new debate and it makes this report particularly important.

I shall address four points, two of which have been mentioned and a further two have not. First, this review comes at a time when students will be asked to pay more for courses, but when public investment is being lessened. That is an important difference from when we discussed this issue on previous occasions. Secondly, this is a climate in which there will be less investment in public services and in higher education.

My third and fourth points are the most important. What is proposed is likely to introduce differential fees. Although that term was often used of the 2005 Act, it did not happen. Almost without exception, everyone raised their fees to the £3,000 limit. In my view, that did not put people off applying to higher education. If you want to go to university, you and your family will do your utmost to enable you to get there. If all fees are £3,000, you will find a way of getting the £3,000. There was significant help from the Government, which was a consequence of getting the Bill through the House of Commons.

One university perhaps charging more could change the pattern of applications. Thankfully, there is no evidence that students chose not to apply for university when the fee increased to £3,000. However, a differential fee will influence the university to which students will apply. The evidence is in what happened. More university students decided to stay at home because it was cheaper. It was not because they necessarily wanted to study at the university down the road, but because it was cheaper. Students will now be offered an opportunity to secure a degree at differential costs and many from lower-income backgrounds will choose the cheapest route. In that sense, this is a different report and invites a different debate.

I have often thought—but this is more instinct than evidence-based—that the problem for students from less affluent backgrounds is not the fee, which is not paid up front, but the maintenance money; the cash to keep you going while you are on the course. This is the great divide between students from wealthy backgrounds and students from less affluent backgrounds, who find it tough because they do not get a hand out from their parents. I worry a great deal about the number of students from less affluent backgrounds who work an incredible number of hours to pay their way through university. Is the Minister concerned about the maintenance grant envisaged? Will it put an end to that discrimination in the system?

More fundamentally, as other people have said, the report makes a shift in that it adopts a market approach to finance and will allow student choice to drive the system. That means that student choice will determine the funding in the teaching grant and course provision; there will be more courses in subjects that students choose to do. By its very nature it will determine the size, and maybe even the survival, of institutions. It is easy to make an argument in favour of student choice and students driving the system; it is slightly more difficult to ring warning bells about it. However, I shall try to do so because it is an imperfect lever for driving the system.

I say this for two reasons, one of which has been explained far more eloquently by my noble friend Lady Blackstone and I am backing up what she said. First, students are not the only stakeholders in our higher education system: the economic needs of the country, the economy of every citizen, regional economics, regional economies, regional employment, regional survival and regional prosperity are all stakeholders. How can investing in skills down the road, which we do not know exist but which industries that are about to be born may need, be driven by current student choice? Cultural heritage, literature, the arts, social sciences and history were all referred to by my noble friend Lord Giddens and all are important. I am not convinced that student choice will protect all those stakeholders.

My second reason for being worried about student choice being the driver in the system is that students will consider things other than course quality. When the Minister opened the debate she said—it was no more than poetic licence but it was a nice sentence—that one of the matters students would consider was the quality of the bars. I know she is right, but I doubt whether we should have a system whereby the quality of the bar drives student choice and student choice drives the survival of our institutions in higher education. Students will choose a university for many different reasons—because it is where their friends go, where their brothers have gone, where their parents have been or where they live; whatever seems right for them. I worry about that.

The report acknowledges that there will be market failure. That is why more money has been put into STEM subjects, but it is not clear how long that funding will last. I am not sure whether the Browne report is saying that there may be market failure in the STEM subjects now but in future years we might be able to accommodate market failure anywhere else. I made a list of where market failure might appear in the near future. We could not tolerate, could we, any region of this country not having a university? One of the good things we have done over the past decade is to make sure that every region does have a university. Cornwall and Cumbria used not to have universities. Surely we could not tolerate a system where the market meant that one of our regions did not have a university. Surely we could not tolerate a system where higher education did not offer a broad range of subjects. If that is the type of civilisation we want to be, surely we could not tolerate a system where some subjects were squeezed out. Surely we would want to protect university teaching expertise that the student driver might not be delivering on. What provision is there, other than the STEM subjects, to counter market failure elsewhere in the system? If the market is driving the system, there will be failure other than in STEM subjects.

The last point I wish to make has been addressed by my noble friend Lady Blackstone and is absolutely crucial. We have a richly diverse higher education system but for the past 15 or 20 years the funding and accountability mechanisms have not always reflected that. It has meant that all universities have had to compete for the same funding streams—where the money comes from—and so every university wants to be research intensive because that is where the money is. The subjects that they are good at have not bought them recognition and they have not bought them money. I have asked myself whether the report solves that problem or makes it worse. I fear it makes it worse. It highlights that there will be money from research grants, the possibility of charging higher fees and encouragement for philanthropic giving, all of which play to the strengths of our research intensive universities. I do not mind that—I do not have a problem with it—but I value and cherish the rest of the sector as well.

We do two things: we praise the fact that over the past few years we have more young people from non-traditional backgrounds going to university; and we bemoan the fact that they have not gone to the Russell Group universities. Where have they gone? They have gone to the old polytechnics and places like that. They deserve recognition for that, both in an accountability framework and in money.

The real problem with the report is that it has almost gone further than we expected. Its roots were to solve the problem of the previous Government having to put in a cheque before they were allowed to raise the fees above £3,000, or whatever inflation has made it. However, it has opened up a debate about the nature and shape of higher education. I welcome that, but I wonder whether, as a Government, a nation and a Parliament, we have taken on board and clearly understood that what we are about to decide is not only the level to which fees should be allowed to rise but what the shape of further education might be over the next 10 or 20 years.

For me, the higher education agenda is about world-class research, widening access, knowledge transfer, regional strength and development, and social mobility. It is also about links with further education and schools. Further education, which is responsible for the education of more than 30 per cent of our people, has not had a mention today. All these sectors need to be incentivised and rewarded if they are to survive. My worry is that the report does not do that. As we consider this issue and go forward on it, I would welcome the coalition Government seeking to widen the debate to ensure that we get all these issues right.

19:18

[Lord Hannay of Chiswick]

My Lords, even if the Government had not imposed a massive 40 per cent cut in the allocation of funds to universities for teaching costs, as they have now done, there would still have been a need for a report of the kind that my noble friend Lord Browne of Madingley was commissioned to produce. Given the success of the 2006 reforms in university financing—in my view they have been a remarkable success, resulting in greater investment in and greater autonomy for the universities without any falling off of demand for places or in the quality of applicants; rather the contrary—I would argue that they need to be built on, not dismantled.

However, those reforms were not sustainable in the long term within the parameters laid down in 2006, for reasons largely of parliamentary arithmetic and not objective consideration. The universities were being prevented, and still are, by law from recovering the full costs of the teaching that they provide. They were also being prevented from responding to the demand for places, while the provisions for subsidising student loans were running out of control. Now, with the cuts, the review and action to follow it up have become matters of life and death for our universities. I should declare a non-pecuniary interest as someone who has been involved for the past 12 years in university governance, first at Birmingham and now at Kent, but the views that I am expressing are not those of either institution.

I offer my sincere congratulations to my noble friend and his colleagues on producing such a crisp, clear and compelling report. He has explained a complex subject in manageable terms. His prescriptions seem for the most part to be what is needed, even if they are not what many of us, in an ideal world, would have wished for. I am grateful particularly for his dismissal of the false trail of a graduate tax, which would be neither implementable nor equitable.

However, I have doubts about some aspects of the report’s prescriptions. First, I am not entirely convinced by the rather tortuous provisions for removing the cap on tuition fees in its entirety, with a rising government levy on fees above £6,000. Does this not risk getting the worst of both worlds, widening the gap between the small number of top universities and the others while not really satisfying the elite group, which could well end up taking fewer UK students? Would not a substantially higher cap than the present one, with a further review after a fixed time, be a simpler and more acceptable way to proceed, so long as it fills the gap created by the Government’s cuts?

Secondly, I suggest that we should be a bit careful about how far we go in applauding and encouraging competition in the university sector. Well run universities have nothing to fear from a bit more competition, which variable fees could bring about. However, unlike with businesses, competition for profit is not universities’ raison d’être. Competition for academic excellence is what they are about, which is not the same thing.

Thirdly, the approach to cutting back the government grant for teaching, which it is clear cannot be avoided in one form or another, is a bit too crudely utilitarian. Do we really believe that science, engineering and medicine, along with the rather oddly named “strategic languages”, are the only subjects worthy of government support? Are the creative arts, social sciences and humanities of no value or benefit to our society? If so, I fear that most members of the Cabinet devoted their formative years to the wrong subjects.

Fourthly, while I see the logic of rolling up three of the present four quangos in the higher education sector into a single higher education council, I question the wisdom of including within its scope the Office of the Independent Adjudicator. This office performs a quasi-judicial function and needs total independence. Joining it with a body that performs regulatory and financial allocation functions could end up damaging the legitimacy of the adjudicator’s rulings with no serious benefit in efficiency or cost.

So much for my comments on my noble friend’s admirable report; what needs to be known now is the Government’s reaction to it and their intentions over implementation. I was most grateful to the Minister for her opening statement, which began to do that, although I think that she has a fairly long way to go. So far, the Government’s comments have been pretty vague and general. There is talk about a White Paper; there is talk about action being taken before the end of this year. The universities need clarity and certainty and they need it in the early months of 2011 if they are to be ready to work within the scope of the new arrangements by September 2012. I hope that the Minister will say more about the timetable and the procedures. Will primary legislation be required—I think that she suggested that that would be so—and, if so, for what elements? I also hope that the Government will give an absolute undertaking not to allow a gap in time to arise between imposing the cuts and empowering universities to have access to new funding. They should ensure that capital spending under way is not starved; otherwise, irremediable damage could be done.

The Browne report does not cover the whole field of higher education finance, as it says nothing about research funding or postgraduates. How soon will the Government be in a position to clarify the situation on research now that the science budget seems to have been spared the worst of the cuts? Nor does the report cover an issue that will crucially affect one of the universities’ most buoyant sources of non-governmental finance: access to visas for non-EU students, postgraduates and faculty. I echo what my noble friend Lord Bilimoria said on this. Can we be assured that the review of immigration will not result in barriers to these categories of student? Surely there is a better way of dealing with abuses to the visa system than the imposition of arbitrary caps and imposing more complex and more costly procedures on bona fide applicants, who now make up one of this country’s primary invisible exports.

A lot is at stake in the present review of university financing. If Britain is to be a successful competitor in a knowledge-based global economy, our universities need to emerge strengthened and not weakened. If the big society is to deliver the benefits sought of it, the universities must be available to all who want to go to them and are academically qualified to do so.

19:26

[Lord Maples]

My Lords, that was one of many very interesting speeches in this debate. I share the noble Lord’s concern about a levy and the capping of fees because, if there is a benefit in a competitive model, it is in allowing people to do what they want, which an artificial cap would stifle. I do not share the noble Lord’s concern about competition. I shall return to that, because that concern has been expressed by a great many noble Lords today.

I bring no particular expertise to the debate except as a long-ago consumer of higher education and currently a vicarious consumer through my children. However, I see just a hint of complacency in the status quo. We keep going on about the wonderful universities that we have. An international reputation surrounds about three or four, maybe five or six, of our institutions, but the other 125 do not compete on that international scale.

I am surprised that the higher education industry is so well represented in this House. They used to say in the House of Commons that the third largest party was lawyers; I am beginning to think that the third largest party here is people who work in one way or another in the higher education sector. They have to face up to the fact that the student experience—here I speak with some knowledge, for my son is at a Russell Group university—has deteriorated and is, frankly, awful. I shall come back to why that is so and how these proposals might improve it.

There has been some discussion about whether the benefits of higher education are public or private, material or spiritual. They are all those things, which are all important ingredients in the input and the output. The sector should be expanded so that all those who are capable of benefiting from higher education can do so and are not discouraged by whatever the fee and financial arrangements are. I am glad that the coalition has found in implementing cuts in the department a way of protecting the budgets of science and further education and replacing the income that will be lost to universities through student fees. The happy coincidence of that and the excellent report of the noble Lord, Lord Browne, produces a viable solution.

A noble Lord pointed out that most of us here went to university on a full grant and asked that we speak objectively about it, without hypocrisy. I suppose that the answer is that I went to university on a full grant, which was of huge benefit to me; I do not know whether I would have gone otherwise. However, I think that only one in 12 of the population went to university at that time—they were all male, so it was one in 12 of the men. With a third of the population going to university now, I simply do not think that that model is viable. If we had advance fees, it would be manifestly unfair and discouraging of people from poorer backgrounds. The fees are such that even somebody on an income of £30,000 or £35,000 a year would struggle with them. I, too, do not like the idea of a graduate tax. It would be a way of nationalising universities, because there would be no guarantee that they would receive the money. They would still be knocking on the Treasury’s door every year asking for their budget and it would not create the consumer relationship between student and university that I want to see—I am talking here particularly about undergraduate education. I thought that the figure for what the average graduate earns in excess of non-graduates during their working life was far higher than the £100,000 a year quoted by the noble Lord, Lord Browne. I thought that it was something like £500,000. Whatever it is, they pay a great deal more tax already, anyway, as a result of that—probably more than their education costs. The important thing is that the fee provides a direct relationship between the customer and provider or the client and the institution, however one wants to describe the relationship.

The Government did the right thing in 2004 when they introduced fees, but what they did not do was to allow the logical extension of that; they did not allow a market in higher education to develop. Having a market does not necessarily mean having competition for profit. It can mean doing things in different ways, with a variety of things that might appeal to different kinds of students. The result of a cap on fees and on the number of places was that all universities charged the same and competition and choice were stifled. What I like about the review from the noble Lord, Lord Browne, is that it recognises that letting the market develop and the sector expand will create variety and choice and improve quality. Consumers will, I hope, start to behave more like consumers, which I thought that they would do when the fees were introduced—in 2006, I think. However, because all the fees are the same, I do not think that they do. We need universities to compete for students, which might happen if there were a slight excess of capacity rather than a slight shortage. I urge the Government not to place a cap on fees or to introduce the levy recommended by the noble Lord, Lord Browne. If nothing else, the higher the general level of fees, the more it will encourage new entrants into the sector, which I would like to see. That is why I wanted to spend a couple of minutes talking about choice and variety.

Why are almost all undergraduate courses in this country three years long, with six months a year spent at university? That is based on the Oxford and Cambridge model, when people needed to go home to help with the harvest. It assists people who want to do research, because the burden of undergraduate teaching is imposed on them for only half a year, but there may well be people who would say that they could do their degree in two years. If someone is at university only for 75 weeks, it could easily be done in two years and it would cost that person less. It might cost the same in tuition fees, but the cost of maintenance and living away from home would be less. Why might that variant not be introduced? It will not be introduced with the present system, but it might if we had a liberalisation of the funding of this sector.

Why in this country do we not have liberal arts colleges as we do in the United States, which only teach undergraduates? They do not attempt to do research and there is very little postgraduate education. Many of them do not do expensive science subjects. Why does that type of institution not exist in this country, except for the University of Buckingham, which offers a two-year course?

The research assessment exercise has had a pernicious effect on undergraduate education. I am sure that it is right that a large amount of the funding to our great universities goes on the quality of their research. That is where the Nobel prizes are won and where the international reputation is acquired and maintained. For the undergraduate teaching function, however, we all know that the best teacher may not be the cleverest person. That is true in schools and universities. In my old college at Cambridge, I heard the master say about someone who taught me, “I couldn’t afford to keep him now, because his research output was not enough to get through the research assessment exercise”. But he was a wonderful teacher of lawyers. Several High Court judges and one justice at the Supreme Court were his pupils. That sort of person is very valuable and is not being facilitated by the effects of the research assessment exercise.

Something has been made of local universities, where people can live at home and go to what were polytechnics. We need to see more of that. All this—two-year courses, liberal arts colleges, places that only teach undergraduates, perhaps not doing very expensive subjects such as science and local universities where people could live at home—has to do with choice. This variety will, I hope, be provoked, promoted and encouraged by the mechanisms suggested in the Browne review, which I think that the Government welcome.

I turn to the subject of quality. The system will lead to greater variety and choice. I speak as a vicarious consumer of education. Several of my friends’ children are either at university or have just left it and their experience is so far removed from mine or from that of most Members of this House as to be almost unrecognisable. My son does not have a tutor, as far as I can tell; if he does, he does not meet him or her very often. He has no tutorials, while I had three hours a week of tuition with two or three other people and a don, which was the most important part of my education. He gets one seminar every three weeks with about 30 people in it. When he suggested to the head of faculty that his dad would pay a bit more to find a PhD student who might spend an hour a week with him explaining some of the bits of economics that he did not understand, not only did he get no assistance but he was made to feel that that was seeking an unfair advantage.

There has been a serious deterioration in the quality of undergraduate education. That is partly, of course, a result of the deterioration in the money involved and therefore the staff to student ratio, but it is also a result of the emphasis on research and the attitude in universities that undergraduate education is not really their primary function. If liberal arts colleges and two-year courses were introduced as a result of freeing up the market mechanism, that would give universities a kick and make them think a bit more about the undergraduate education that they provide. If students are paying more and have a choice about how much they spend—it might be £4,000 in one place and £5,000 or £6,000 in another, maybe even more if they want to go somewhere such as Imperial, which provides a more expensive education—they will pay far more attention to what they are going to get. That can only be good in provoking improved quality in universities.

I congratulate the noble Lord, Lord Browne, on his report and the Government on their reception of it. I urge them to take it to its logical conclusion and allow the market to develop. That will lead to improved quality and improved choice. If I ran a university, as a great many speakers in this debate have done, one thing that I would like to be free of is government interference. This seems to be a route to that end.

19:35

[Lord Sawyer]

My Lords, I, too, thank the noble Lord, Lord Browne, for his report. Having left school at 15 and never having run a university or worked in any form of university, I am honoured to be the chancellor of Teesside University, and declare an interest. I am very proud of the achievements of Teesside University, which is the current holder of the Times Higher Education’s University of the Year and the Outstanding Employer Engagement Initiative awards. I am also very pleased to see my university shortlisted in the category of the most entrepreneurial university in the country. All this success takes place in the year that my university celebrates its 80th birthday and I look forward to the continued success of my institution in the coming years. It is from that background of success that I look at the recommendations of the independent review of higher education funding and I am grateful to the noble Baroness, Lady Wilcox, for initiating this important debate.

My starting point is that the last 20 years have seen us make outstanding strides in providing individuals and employers within the UK with the higher level skills and knowledge necessary to allow us to compete effectively with the increasingly knowledge-led global economy. Any revised system of student funding and financial support must recognise the importance of continuing to provide opportunities for people from all parts of society to fulfil their potential in order that they can make the maximum possible contribution to our future economic, social, environmental and cultural success. The progress that we have made in recent years has been significantly enhanced by the way in which we have evolved a university sector, in which institutions of different types have been encouraged to pursue diverse missions, playing to their unique strengths, and making complementary contributions to the overall success of the system. For example, in the case of my own university, that contribution has included supporting new business start up and knowledge transfer, activity underpinned by an outstanding working partnership with employers across all business sectors; facilitating over 18,000 students per year to undertake higher education on a part-time basis, predominantly alongside work; and achieving a record, virtually second to none, in facilitating the progression of students from socially disadvantaged backgrounds who are, in many cases, the first generation of their family to participate in higher education. In addition, we have developed an outstanding working partnership with local further education colleges that is widely recognised as one of the strongest in the country, and has included the development of effective progression routes for both academic and vocational learners, supported by the development of Teesside University-funded higher education centres on each college campus in the Tees Valley. Most importantly, we have underpinned all this with the pursuit of improved levels of quality, retention and student attainment.

So I speak from a perspective based on success, inclusion, partnership and excellence. It is on that basis that I particularly welcome the recognition of the noble Lord, Lord Browne, of the importance of maintaining and, indeed, expanding the provision of higher education opportunities, and the crucial recognition of the importance of it being both free at the point of entry and subject to a progressive system of loan repayment. This will, I believe, enable individuals from all parts of society to take full advantage of the opportunities that higher education can offer.

I also welcome the proposals for a simplified system of student financial support, which would enable students from the most disadvantaged backgrounds to receive a combination of loans and grant income to meet their living costs during their period as a student. That is very important. However, I am against creating a completely unregulated market for university fees because this would have a damaging impact on our ability to deliver on the Government’s commitment to enable the brightest people from all parts of society to attend the most selective universities as it is unlikely that students from the most disadvantaged backgrounds would be willing to contemplate the levels of fees and living-costs debt that would be incurred by attending a university charging at the top of the price range. Although it is good to see that the noble Lord, Lord Browne, proposes to raise the threshold for loan repayment to £21,000 a year, and to restrict the interest payable on the amount owing until graduates are in receipt of an income at that level, it is very important to note that the overall level of debt owed by a graduate is likely to continue to rise on a year-by-year basis until such time as their annual earnings reach £40,000 a year—a fact that will be a cause of great concern to many potential students and their families. That is the area to which the Government need to give greatest consideration. They need to look at imaginative solutions for tackling this debt issue. They particularly need to ensure that they talk to students, student unions and young people as they will be faced with these problems, not the people involved in this debate tonight.

Further, it is important to recognise that in some parts of the United Kingdom, such as the north-east of England, there is still a lot of work to do in correcting the major higher skills deficit arising from a historical lack of higher education opportunities in that region. This results in a number of talented individuals with little record of prior educational attainment returning to higher education at a later stage in their career. Therefore, it is important to recognise that the proportion of students without the traditional qualifications to meet such a threshold varies dramatically throughout the country. We will need to reflect that fact in any allocation system that is introduced to cater for these non-standard entrants into our universities.

I also warmly welcome the proposal to begin levelling the playing field between part-time and full-time study by allowing part-time students to access fee loans on the same basis as full-time students. However, I stress that for many students, particularly those studying in professional areas, the part-time student experience is fundamentally different from that of the full-time student. I ask Ministers to think carefully about making any assumption, implicit or explicit, that part-time students are simply following by a different mode the same course as full-time undergraduates. The reality of the diversity of our higher education provision is much more complex than that, as institutions with extensive experience of part-time vocational and professional higher education seek increasingly to utilise the workplace; as the needs of the economy emerge; and as the current and previous experience of students become fundamental elements in their part-time learning experience. I urge Ministers to develop a very flexible approach to support part-time students which recognises the uniqueness of their circumstances.

I am pleased to note that the review of the noble Lord, Lord Browne, recognises the importance of widening participation funding for those students for whom higher education is not part of their heritage, and who are drawn from the disadvantaged communities which can most benefit from the transformational power of higher education. I encourage Ministers to ensure that that crucial funding reaches the universities that do the most to transform such individuals and their communities. In recognising the broader social, cultural and community benefits of higher education, it is important to ensure that the proposal within the noble Lord’s review to utilise the additional revenue generated from student fees to substitute for government funding does not lead to a position where universities are unable to afford to offer humanities, social sciences and arts-based programmes that underpin so much of what is good about our universities and our society, as has been said many times in tonight’s debate.

In conclusion, I hope that I can persuade the Minister to share some of my views and perhaps to visit Teesside University, which has won the University of the Year award, to see what a great place it is, because it truly is a great place. I perhaps sound the wrong note in the House of Lords in saying that in many ways universities are the workplaces of today. People no longer work in the steelworks or in ICI; they work in the university, which is very important to the town. Indeed, the whole town revolves round the university. Everybody appreciates the contribution that it makes to the economy. I urge the Minister to come and see what the University of the Year does and what can be achieved in an area of very high unemployment with poor educational opportunities, where people are striving to make the university successful to benefit the community and its students. I welcome the Browne review as something that we need to debate going forward. I hope that it will bring long-term, sustainable benefit to our excellent higher education system.

19:45

[Baroness Falkner of Margravine]

My Lords, I declare an interest as chancellor of the University of Northampton. I also benefit from the remunerative employment of my spouse at the London School of Economics. I congratulate the noble Lord, Lord Boswell of Aynho, who, as MP for Daventry, was a steadfast friend of the University of Northampton. His maiden speech demonstrated that he is as trenchant as ever. We look forward very much to hearing his future contributions.

We find ourselves at a critical juncture in the future of higher education in England. The excellent debate that we have had tonight nevertheless feels somewhat unreal in the sense that one imagines that all has been well with the funding of higher education until this point. We know that this has not been the case for at least a generation. When a fully state-funded system moves from catering for the needs of 10 per cent of the population to those of nearly 50 per cent of the population over some 30 years, it is inevitable that questions will need to be asked about who pays for this. It is also evident to me that it could not possibly be defensible that those whose children will not avail of this opportunity should still be asked to pay for the mainly middle-class students who benefit from a university degree. It is both inequitable and regressive for general taxation to be used to benefit a particular section of society; to paraphrase the Prime Minister, those who have sharper elbows than others.

This is not to deny the overall benefits to societies from universities, but simply to point out that it is taken as given—hence the continued financial support from the public purse, albeit reduced, that the review recommends. There is little doubt in the current economic climate that the current system of capped income-contingent loans is inadequate to meet the funding requirements of universities and their students in order to maintain excellence. There is no doubt that the current economic climate has led to a more radical set of options being suggested in the Browne review. This has also been helped by the emerging consensus among most of those involved in higher education that tinkering at the edges is no longer feasible and that smaller cuts to HEFCE funding, combined with another increase in the income-contingent loan scheme, would neither meet course costs nor somehow put off the requirement for universities to have increased funding. So the options left on the table were to have a graduate tax or to follow through with the proposals of the noble Lord, Lord Browne, for a graduate earnings contribution. Several noble Lords have spoken about the challenges posed by a graduate tax as well as its inherent inequalities, so I will not repeat those views.

I turn to the proposals of the Browne review. I start by congratulating his panel on having achieved a balance between equity, quality and sustainable funding. Like most reviews, in answering questions it also raises a number of fresh ones, which I hope my noble friend the Minister will be able to answer in her response tonight. While society is undoubtedly strengthened by the expansion of higher education, I accept the principle that those who benefit financially from an optional life choice, which is what a university degree is, should bear the bulk of the costs of that choice.

I shall speak about the concerns expressed about the utilitarian nature of these proposals. As someone from an ethnic minority who speaks to numerous disadvantaged students from ethnic minorities, as well as to those who are not, I want to share with the House the idea that many young people have aspirations to be financially independent through employment. They look to their degrees to get them a job that will enhance their positive freedoms—the “freedoms from”. The idea of the longer-term benefits of sagacity and intellectualism are not foremost in their minds when they are 18 and contemplating the rest of their lives. Utilitarianism has its role as well, alongside the ivory towers.

I also welcome the expansion of places and of the funds following the student. In the past few years we have seen a situation where able students have been prevented from fulfilling their aspiration for a university degree because HEFCE’s control of the number of funded places has prevented them from going. The review estimates that there were some 20,000 to 30,000 qualified applicants who were unable to obtain a place over the past five years. It cannot be right to have a random lottery that tells you that you have met the criteria for entry but you cannot go this year, and perhaps not even next year, as there is a cap on numbers driven by budgetary constraints.

I turn to the other welcome development: the availability of funding for part-time students. I went to university later in life and obtained degrees through both full-time and part-time courses. Nevertheless, I worked throughout my undergraduate and postgraduate degrees. The most difficult aspect of this was finding the funding up front when doing my master’s. Most part-time students who are not on employer-funded courses need to build up a nest egg to see them through the two-year or three-year commitment that they make, just to cover their living costs. The additional burden of having to take out a commercial loan to pay for up-front fees provides an incentive to chuck it all in and go full-time to take advantage of the option that full-time courses currently offer of deferring payment till later.

The sustainability of university finances has been an on-going theme for my generation. We in Britain take great pride as a nation in featuring well in international league tables and in counting the number of Nobel laureates that our research institutions produce, yet at the same time we cultivate a culture whereby students, academics and indeed the governance of our institutions can somehow be delivered by muddling through. I am glad that the noble Lord, Lord Browne, has dispelled the notion that our university budgets can continue to be trimmed without any impact on teaching standards or research excellence.

In plain English, the review attempts to provide the best possible education at the lowest possible price, hence the lifting of the cap on fees to allow individual institutions to charge what their students will bear. I would therefore be dismayed if the backbone of the review—removing the cap and allowing a market to develop—were to be abandoned for the lowest-common-denominator position of a fixed, yet higher, fee; it would meet the demands neither of students nor of universities. I also say to my noble friend Lord Smith of Clifton, who I see is back in his place, that a cap would ensure that those elite institutions that he was worrying about, such as the LSE and Cambridge, would indeed go private.

Alongside this uncapping is an essential corollary: that those charging over £6,000 will have to return a proportion of the additional income to the Treasury on a sliding scale. These levies are to be used to offset the costs of education for those who will be earning under the threshold and hence will require a subsidy. This is a progressive response to a significant challenge, as it will also put an onus on those charging higher fees to improve access. I hope that the Government will resist calls for a cap, which to date has plainly been seen to be unworkable.

My final point concerns the improvement of access. I welcome the proposals in the review for improved guidance for pupils on the benefits of higher education and for informed support to ensure that they are able to make the best choices of courses in line with their aspirations. The review proposes that the UCAS portal will allow pupils to compare courses and their relationship to employment options after one year of graduating. I wonder if this is not too short a timeframe for assessing the success or otherwise of your future degree. Will the Minister consider a longer timeframe, monitoring the progress of a graduate in employment for perhaps three years to give a better picture of the future? This would help school-leavers making difficult decisions.

While the review has detailed how the service in schools may be professionalised, will the Minister explain how older part-time students might also be similarly assisted? The UCAS portal will not be directed at them but their investment is as deep, if not more so.

On widening participation, I also urge the Government to go further than the review and consider making the first year free for all those pupils who have been recipients of the pupil premium. There is also the on-going question of how students from disadvantaged backgrounds might be encouraged to enter the elite institutions. The Sutton Trust research shows that around 3,000 pupils with results at GCSE and A-level that would enable them to attend elite institutions do not apply; the noble Lord, Lord Browne, mentioned that himself in his speech. The review also points out that these institutions spent some £400 million in 2009-10 in trying to improve access yet, perversely, the review leaves it to institutions to determine how they might improve access in the future when OFFA is subsumed into the superquango, the Higher Education Council. It is curious that the Higher Education Council will also be the adjudicator of appeals. The importance of independence for both an access regulator and an appeals adjudicator is significant, and I hope that the Government will consider that carefully.

The proposals are far-reaching and radical. As one who has sat through numerous debates in this House over the years, listening to noble Lords despairing about the quality of education as well as the reductions in funding for universities, I am convinced that the time has come for a radical, progressive and lasting solution. If the Government consider the proposals carefully, blunt their rougher edges and come back with the fundamentals nevertheless intact, we will have gone a long way towards an equitable solution for funding high education.

19:56

[Lord Butler of Brockwell]

My Lords, I find myself in agreement with a great deal of what the noble Baroness, Lady Falkner, has said. I warmly welcome the proposals in the Browne report, and I congratulate the noble Lord and his team on them.

It must have been tempting, and the noble Lord referred to this, to tinker with the details of the tuition fees scheme in the hope of not offending anyone too much. If that had been done, a great opportunity would have been lost. By approaching the issue from first principles and basing its recommendations on those principles, the Browne review opens up the possibility of freeing universities to meet the needs both of students and of the national economy and—if the Government hold their nerve; I will return to this—of extricating the Government from their present invidious position.

Of the six principles on which the Browne report is based, I think many of us would agree that the most important is the third:

“Everyone who has the potential should be able to benefit from higher education”.

That was the principle of the Robbins report nearly 50 years ago. Sadly, however, as the noble Lord, Lord Norton, pointed out, the Robbins principle that higher education should be provided at taxpayers’ expense to all those capable of it was a practical proposition when fewer than 10 per cent of young people went into higher education, but is totally impractical when over 40 per cent do.

I differ from the noble Baroness, Lady Blackstone, and the noble Lord, Lord Giddens, not on their principles but on what experience shows us. Successive Governments, unable to ask the taxpayer to provide the necessary resources to fund a free higher education system but unwilling to grasp the political nettle of asking students to make a contribution, have been slowly strangling our higher education system, as the noble Baroness, Lady Falkner, said. The cap on tuition fees has produced some absurd anomalies. Universities suffer a loss on almost every UK and EU undergraduate they admit, which the universities have to meet by diverting funds from research or by being forced to subsidise students from wealthy families with funds which they could use to support students from less wealthy families. Universities also have a strong, almost overwhelming, incentive to recruit foreign students, to whom they can charge realistic fees, rather than our own UK and EU students, to whom they cannot. This has been bad for our universities, but it has also been bad for successive Governments caught between the rock of asking the taxpayer to provide more and more funds and the hard place of turning to the only other source—the students themselves.

The Browne report provides an opportunity for the Government to get their fingers out of this mangle. By providing for a direct relationship between the student and the university, as the noble Lord, Lord Maples, pointed out, it will produce an energising stimulus to both—to the student to demand the best and to the university to provide it. The recommendations ensure that no student is prevented from attending university by having to meet the costs up front.

Of course, we would all prefer that no student had to accumulate liabilities to be met from their future incomes, but, as the noble Lord pointed out, and as history tells us, that is no longer a practicable possibility. Graduates have to meet those liabilities only if, consequent upon their degrees, their income is sufficient to enable them to do so. When we talk about a progressive system we should remember that, if the beneficiaries of higher education did not meet the cost, the taxpayer would have to do so. As the noble Baroness, Lady Falkner, pointed out, there is nothing progressive about the half of the population who do not have the benefit of higher education having to pay for the advantages of those who do.

There is one other point that I want to make about progressivity. Some have criticised the proposals of the noble Lord, Lord Browne, on the grounds that an interest rate is to be charged to graduates who pay back over a period and, in consequence, they will pay more than those who pay back immediately. However, the interest rate proposed is the rate at which the Government borrow—2 per cent over inflation. You could not get a rate like that from any other lender. Those who could pay back immediately would be well advised not to do so, and to maintain the loan.

Just as I have been delighted by the thrust of the Browne recommendations, I have been dismayed by subsequent hints that the Government will keep their fingers in the mangle by imposing some sort of ceiling on fees. I beg the Minister to advise her colleagues not to do so. If they do, they will regret it. All too soon, they will be faced again with the need for the cap to be raised and they will incur the political odium of having to do so. This really is a situation where, with one bound, our hero could be free.

If the Government want to make the system more progressive, I would urge them to do it by looking at the interest rate on outstanding debt for high earners. I also urge the Government, in introducing this new scheme, not to offset every pound reaching the universities from higher fees by corresponding reductions in the teaching grant—especially the teaching grant to arts subjects. It is wrong in principle for the Government to discriminate in that way—many speakers have made that point—and it is also likely to be ineffective. Universities will simply recycle money from the science subjects to the arts, which they are already being forced to do by this year’s HEFCE grant. It would be better to freeze the teaching grant or make a smaller reduction in it, which would in turn reduce the hike universities may feel they have to make in tuition fees, and consequently reduce the political odium for the Government. Given that, in the short term, teaching grants and tuition fees come from the same pot—notably the Exchequer—the short-term effect on the national finances would be neutral.

20:05

[Baroness Kennedy of The Shaws]

My Lords, I am grateful to the doughty noble Baroness, Lady Wilcox, for initiating this debate and I congratulate the noble Lord, Lord Boswell, on his thoughtful maiden speech. My interest in these issues is longstanding. I am currently the president of the School of Oriental and African Studies in London, and was recently elected to serve as the principal of Mansfield College, Oxford—a post that I will take up next year.

In the mid-1990s, I chaired an inquiry—a commission—into widening participation in further education. As a result, a foundation in my name, of which I am president, was established by that sector. It supports further education students from some of the most disadvantaged backgrounds going into higher education. We do that through bursaries, mentoring and work placements. It is those students who face the most serious disadvantage and who triumph against the odds, as well as the many more who have the potential to succeed in higher education but who have never been afforded the opportunity, who are at the forefront of my mind.

The recommendation to remove the cap on tuition fees concerns me greatly. It is said that higher fees and student debt do not deter those from poorer backgrounds from applying to university. I listened with interest to those Members of this House who suggested that. That assertion is supported apparently by the increasing application rates to UK universities, but they are increasing to the point where this summer huge numbers of students were denied a place at university because the outgoing and incoming Governments were unwilling to provide the funding for the number of places necessary to meet that record demand.

However, we must not be too complacent about the issues of equity and access to higher education. I know that first hand from the many students who come through the Kennedy bursary scheme. These include young women who became pregnant at the age of 15 or 16, but who return to education in their 20s, or young men who get into trouble and cannot survive at secondary school, but see the light again in their 20s or later. Many of them are people who are overcoming huge disadvantages and hurdles. They are very easily disincentivised if they think that they will face long-term debt once they go into the workplace.

Taken separately, fees, grants and loans each have an effect on participation in higher education. The Institute for Fiscal Studies—not popular with the current Government, but a substantial body—gave evidence to the Browne review and stated that higher fees in fact have a deterrent effect on participation. My noble friend Lady Morris explained that there was clearly a cut-off point at which it was felt by less well off families that they just could not meet the challenge. When the fees were increased in 2006, the negative impact was outweighed by the positive impact of increasing student support. The Government must be mindful of that evidence as they plan their response to the recommendations of the Browne review and not tip the balance in the wrong direction, giving the disadvantaged the sense that higher education is beyond their reach.

Like other noble Lords, I welcome some of the proposals. The disparities between the treatment of full-time and part-time students have also been one of my longstanding concerns. They have been totally unjustifiable. Part-time study often provides a second chance to those who missed out earlier in their lives, and it is therefore right that they should receive access and the same support as full-time students in the form of loans to cover their tuition fees. It is particularly good that they will not have to pay those fees up-front. I also welcome the rebalancing of levels of grants and loans to those students. However, one thing that I will raise is that there was no mention of London weighting to reflect the higher costs associated with living and studying in our capital city.

I return to the issue of higher fees. I remain to be convinced that allowing universities to charge higher fees, thereby introducing a market in the price of courses, will not leave students, particularly those from poorer backgrounds, choosing courses based on cost rather than suitability. All the evidence is that students from disadvantaged backgrounds choose the university closest to home and choose courses in subjects where they have shown the most talent at school. Often, they are much more anxious about taking on courses of a different kind, such as law and medicine. When so many selective universities continue to struggle to guarantee fair access to those from underrepresented backgrounds in spite of their many efforts to do so, it seems bizarre that the Government should consider adding higher course costs to the catalogue of factors that prevent some of our brightest students from accessing our most academically elite universities. The vista of a fee debt being carried into the future is the stuff of nightmares for many working-class people.

This is all the more concerning given the proposed changes to the arrangements for monitoring the performance of institutions in widening participation and in providing financial support. We have heard about the creation of a new superquango, the higher education council. It is understood that universities will have to agree an access commitment, with what the report describes as tougher scrutiny taking place. This is all remarkably vague and noncommittal. I notice that the requirement that institutions charging the maximum fee must offer a minimum bursary to students from disadvantaged backgrounds—one of the main concessions that Back-Benchers obtained in 2004—has been abandoned by the Browne review. I should like to see an absolute requirement to provide bursaries, particularly for those universities that will charge more. There can be no doubt that the current system of institutional bursaries is far too complex, and I welcome any simplification. Clearly it is true that people receive poor advice and guidance, and any improvement on that front is a benefit. However, what we in the Kennedy Foundation have discovered is that there is a real need for mentoring as well as money if we are going to provide any package of support to those who are disadvantaged.

One impressive element of Mansfield College, Oxford, is that it was the first college to embrace the ideas of widening participation and of students coming from further education to Oxbridge. I should like to see that extended. Grants for students must be the quid pro quo for any lifting of the limit on the charges that universities can make. I am concerned that we will see the arrival of Tina. Noble Lords may wonder who she is. Tina is the mantra that we hear too often nowadays: there is no alternative. The noble Lord, Lord Butler, said it was no longer practicable to leave students without debt. I say to the House that this will have a very damaging effect on the legal profession, in which I have had a very satisfying career. That will not be possible for young people from the kind of background that I came from, because of mounting debt.

I will mention one other area that deeply concerns me. The plan to remove all public subsidy for degree courses in the arts, social sciences and humanities makes no sense, economically or culturally. The Browne proposals would remove nearly all of core funding in some universities. Certainly, this is true for SOAS. This is in effect the privatising of our teaching function. The implication is that there is no benefit to society in students taking degrees in Arabic, history or development studies, which is quite evidently untrue. The other day the Deputy Prime Minister said that the Government had looked carefully at the case for a graduate tax, but had dismissed it as unworkable and unfair. I am disappointed that the report of the noble Lord, Lord Browne, did not consider the alternative put forward by the National Union of Students. It submitted its own fully costed and economically tested proposal, not for a lifetime graduate tax but for a progressive graduate contribution model that would have seen payments linked to earnings for a fixed period of 15 years only—so there would have been an end in view. This would have had the advantage of eliminating the concept of tuition fees—and debt linked to fees—altogether. However, it seems that those proposals have not been examined and I ask the Government to look at them.

I will say finally that education changed my life—something that is true for a number of Members of this House. My parents left school at 14, my older sisters at 15. Having the opportunity to study law in London turned my life around in immeasurable ways—not just in the utilitarian sense of allowing me to become a lawyer and improve my earning capacity. I had a fulfilling and stimulating career, but it also enriched me in many other ways; for example, in the friendships that I had with people from totally different backgrounds from those I would otherwise have known. I learnt about worlds far beyond the one that I grew up in. I learnt about politics, music, literature and art, which I knew nothing about in my own home. I learnt about other cultures and traditions, and I acquired habits of learning and disciplines of mind. That is what education does for people. However, it is not just of value to those who receive it. Education has been a source of social vitality, and the more people we include in the community of learning, the greater the benefit to us all. Education strengthens the ties that bind people. It takes fear out of difference and encourages tolerance. It is the means by which our values and our wisdom as a society are shared and transmitted across generations, and it helps people to see how the world ticks. It turns them into better citizens.

That is why I think that the review of the noble Lord, Lord Browne, is wrong in essence. Universities must not be treated as purveyors of a commodity, with students as consumers. Like the noble Lord, Lord Giddens, I see our universities as part of our nation's common wealth. As such, they deserve investment, and our students deserve support as a government priority. It is the primary responsibility of a civilised state to enable bright young people to surmount dark and difficult beginnings. For the university to remain what our poet Masefield described as a thing of beauty, as the noble Baroness, Lady Wilcox, said, it has to be available to the talented, whatever their background. I hope that the Government will think carefully before endorsing this review in full.

20:16

[Lord Judd]

My Lords, I, too, thank the Minister for having introduced today's debate in such a civilised manner. I also congratulate the noble Lord, Lord Boswell, on his maiden speech. I have had the opportunity over the years to work with the noble Lord on the issues of education in the Commonwealth. It is good to see him among our number, bringing his experience to bear.

I am privileged to be a member of the courts of Newcastle and Lancaster universities, and a governor of the LSE. I also do a certain amount of professional advisory work with De Montfort University. They are all exciting universities with very different roles to play. However, I am a resident of Cumbria and it would be quite wrong to participate in this debate without bringing to the attention of the House the anxiety that exists among the academic and student community in the new university there about its future and survival, and what the funding issues mean for them. These issues must be resolved without delay.

Our first objective—this has been a repeated theme in the debate today—should be to establish the purpose of higher education, and indeed of education as a whole. There is of course a functional, utilitarian role of enabling society and the economy to operate. However, there is also the visionary, creative role, which ensures that we have questioning, inquiry that is critical in the best sense, and self-fulfilled and confident citizens—not just sophisticated consumers, but citizens playing a positive role in open democracy, able to ask questions, not just to tick boxes. It ensures a society where originality is valued—a society marked by its qualitative characteristics, not merely its quantitative dimensions. Hence the vital significance of the arts: of classics, literature, music, sculpture, design and, not least, architecture.

The challenge, I believe, is that still literally hundreds of thousands go to their graves without realising their potential or what they could have been. In a society capable of so much scientific and technological achievement, it seems an absolute disgrace that we still tolerate this situation. However, we must not confuse vocational training and education. Of course, we must have the advanced skills to produce sustainable growth and wealth but this cannot be an end in itself. History, I suggest, will judge us by what we do with the wealth that we generate and not just by the quantity of that wealth.

That brings us to the issue of debt. At the moment, our society is totally preoccupied with it, and the Government constantly remind us about the dreadful nature of debt. I find it an amazing contradiction that we can merrily embark on a system which says that it is absolutely natural for students and large numbers of people to start their lives with a huge debt and that this is a culturally inescapable part of our society, when at the same time our society says that debt is wrong on a national level and the Government tell us every day that they cannot do anything because of debt. It is difficult to overestimate the fear of debt which exists in many of our less affluent, well endowed communities.

Before we take a look at the proposals, perhaps I may add one other word. Why do we always accept—we have heard it said in the debate this evening—that it is not practical to think of free higher education when we do not question free primary and secondary education? The truth is that, as in so much of the qualitative side of life, ours is a society which puts a higher premium on private affluence than on public wealth. Until we get that balance right, we will always struggle to find imperfect solutions. Basically, we have sold out on the principle of saying that we can have a decent society only if we give priority to public wealth and public well-being.

With regard to the other proposals, perceptions matter. In the universities in which I am involved, I have worked quite hard on issues of access and I am fairly certain that, with apprehension about still-larger debts, there will be a psychological effect on access. I have only one slight difference with my noble friend Lady Morris of Yardley in what I thought was a brilliant speech. She said that if people want to get to university, they will find the funds to pay for it. I know of communities where there is no aspiration whatever because people have not been exposed to the opportunities. Really deprived communities in which what my noble friend said is just not true can be found on the west coast of Cumbria. People do not think about universities as relevant to them, and there is all sorts of potential trapped in that reality.

I believe that, whether it is intentional or not, there is a danger that the proposals could produce two tiers within our higher education system, both within individual universities and between universities. I fear that there will be an increasing tendency for students to study what they think they can afford and what will produce a quick income rather than what they really want to study and have the capability of studying. I also suggest—there has been allusion to this, but we know it—that in the real world wealthy universities will attract big endowments and big financial support, and those that are less wealthy will continue to struggle, so the differences will grow. There is also the question of international comparisons. This has not been mentioned but is it not possible that some potentially good students will say, “Hang on a moment. I can get a rather good university education at a much smaller cost in France or Germany. Why do I have to have all this struggle with debt in my own society?”? It was even put to me the other day that someone might decide that they can get a rather good university education at Cape Town, with all the stimulus of studying in a completely different environment. Why accumulate all this debt to study in this country? Of course, that underlines the greater emphasis that other societies give to public wealth and well-being.

Above all, I join my noble friend Lord Giddens in stressing the qualitative future of our society and the fact that this depends as much on the arts and social sciences as on physical quantitative dimensions. Philosophy, ethics, psychology, anthropology and sociology are all crucial to making a success of our society, and it is just stupid not to understand that. At places such as the LSE we are always grappling with the challenges that confront humanity at the moment. Perhaps I may spell out some of them: climate change, global economic functioning, social exclusion, health and well-being, international trading systems, unemployment, security, international development, race relations, conflict resolution, peacebuilding, human rights, financial risk and regulation, bioscience and societies, and public policy in general. These are the real issues facing humanity and this is where the social sciences will become absolutely indispensable if we are to find a successful solution.

Then of course, in a wider cross-section of universities, an important and growing contribution is being made to what I call professional calibre. I think of the courses being provided for the police, probation officers, social workers, youth workers, community workers and teachers. What is being recognised here—and there have been some extremely enlightened chief constables who have seen it very clearly—is that you need professionally well trained police but that you also need well educated police to make a success of policing in an increasingly complicated society. I am afraid—this is not in any way a criticism of the noble Lord, Lord Browne, and his report but a comment on the dangers inherent in the Government’s approach on funding—that we are going to see this qualitative work in the professions undermined because the universities will suffer from less funding; and because the bodies that have helped to finance, or in a sense commission, those courses will be forced to cut back on the higher education and university elements within the courses because of their reduced budgets. If the Minister can give me some attention for a moment, it seems to me that this is a crucial issue that deserves priority attention.

There is also the whole reality of the cuts and unimaginative targeting which will affect the entire approach to cross-subsidising studies. In much of the work to which I have referred, the matrix of studies is terribly important. From that standpoint, departments which are more expensive and more difficult to sustain have a crucial contribution to make. With this more targeted approach, what is going to happen to the cross-subsidising of courses? I suggest, as others have done, that universities are not places for market experiments. I think of the late Harold Macmillan talking about selling the family silver; and I think of the characteristics of a society that knows the price of everything and the value of nothing. All too easily, I can see cutthroat competition arising among universities, driving down quality and trying to attract students at rates which students will more easily be able to afford.

The Government repeatedly tell us that we are all in this together. If we are all in this together we need a strategy for higher education as a whole and we need a comprehensive approach which makes sense; we do not want to see one institution against another. Unashamedly, I hold to the old philosophy that what dignifies the term “university”, and any institution worthy of the name “university”, is the concept of a community of scholars—not an institution in the marketplace fighting to survive and fighting to attract students over other universities. In an ideal civilisation, universities as a whole should be a community of scholars and should not be at each other's throats, trying to ensure that they survive in the marketplace.

We all know that this country has been through a terrible economic crisis. When we think about it, we all know that the origins of that crisis lay very much in the realm of values and ethics. That is why, in our higher education system, we must be certain that we are not producing high-powered technologists, high-powered economists and the rest in a vacuum of ethics and philosophy. Surely, the more advanced and the more complex the challenges become, the more important those issues are for us all. Therefore, I hope, before the Government rush in to any solution, that they become very clear about what it is we are really trying to do.

20:32

[Lord Luce]

My Lords, at this stage in the debate I cannot help feeling pretty mesmerised by the extraordinary range of knowledge and expertise that we have heard from a large number of the contributions today. In particular, I identify the noble Lord, Lord Boswell, who is a very welcome newcomer to the House and who has a great knowledge of higher education. I enjoyed his speech and I have noticed that he has been sitting here throughout, listening to everyone.

Like others, I ought to declare an interest as a former vice-chancellor of the independent University of Buckingham and as an honorary fellow of Christ’s College, Cambridge. Those are two very different universities but they are part of the 130 or more extremely diverse universities. To my mind, every institution ought to be judged by comparing it not with its neighbours but with its own mission and objectives. Every university is different.

I welcome the thrust of the report by my noble friend Lord Browne—namely, that if there is, in the face of an economic crisis, a diminution in the amount of taxpayers’ money available, the student must come to the fore. I regard myself as having been very privileged to have been to university at a time when I did not have to pay fees. I am very conscious of that. Students, not the state, have to become the real customers of universities where they pay more but, at the same time, do not pay fees up front; where they have a progressive repayment system that gives greater help to the less well off or to those who earn less later in life; where the threshold is increased to £21,000 over a 30-year period; where we work towards a level playing field of access for all; where part-timers are now treated the same as full-timers, which I welcome; where there are fewer controls imposed on universities; and, therefore, where there is more autonomy for universities. All that must be welcomed, although I have reservations in a number of areas.

I would like to draw on two experiences, which are relevant to the debate, concerning the University of Buckingham. First, I preface my remarks by saying that I am not in favour of no taxpayer support whatever for the university world, but I am in favour of diversity and having a range of universities, some of which should be wholly independent. By paying the true cost, what is the effect? The student comes first; the student is highly motivated, works extremely hard and gets a lot of personal attention. What is the outcome? For the past five years, the University of Buckingham has come top of the national student survey for student satisfaction. That tells you quite a lot. At the same time, the record on employability of those students is immensely good.

The second point about the University of Buckingham is that I want to stress that my noble friend has recommended in his report that the fast-track, two-year bachelor’s degree should be taken seriously and has a contribution to make in the whole pattern of ranges of degrees that we have in our system. The late Lord Beloff pioneered the two-year degree at Buckingham, beginning in the 1970s. We are talking about 40 weeks in the academic year, instead of roughly 30 weeks—the same number of weeks in two years as, for example, students at Cambridge or Oxford would do in three years, with the same quality and standard of degree achieved in two years. Staffordshire University and other universities have been doing pilot projects and evaluations on that. Of course a two-year degree does not suit every student, but it suits some students. It may particularly suit the mature students, while it may not suit others who could do better and flourish better on a three-year or four-year degree. Nevertheless, it plays an important role in the whole system. It requires sustained hard work and four terms in the year but it also saves one year of fees. Therefore, the student is released one year earlier, either to go to work or to assume postgraduate studies or whatever. We need to recognise that the financial viability of such short courses would be strengthened or enhanced if it were possible to charge tuition fees that are 25 per cent or 50 per cent higher per annum, say, than those for the three-year courses, in order to treat the two-year and the three-year degree with parity. I hope that that will be seriously considered by the Government if there is to be a cap at all.

Many of my noble friends and others have mentioned Cambridge, with which I am also identified—a centre of excellence, without any shadow of doubt—where the combination of tuition and maintenance fees is £18,000 a year and where the university fills the deficit of £9,000 from its own resources. I repeat the point made by my noble friend Lord Butler and others: it would be much better to start by having no cap at all but, if we must have a cap, it must be flexible. There must be differential fees recognising the different roles of universities. Some universities are already considering adopting their own student loan schemes. If we are to retain a common approach, it needs to be highly flexible.

We should be concerned, and I am sure that every noble Lord is, that there is real growth in the resources of our universities—not simply replacement funding, but real growth, notwithstanding the toughness of the present climate—recognising that we pay a far lower sum as a proportion of GDP than a large number of other countries, not just the United States. To my mind, as taxpayer support diminishes, so the private sector has to be encouraged in every way that one can conceive to fill that gap to increase resources for universities—in addition, of course, to tuition fees.

The precondition for the success of this new policy is to create a climate where there is a wide range or battery of incentives for raising more resources privately, much more than we see today, from challenge funding, matching funding, which I know that the previous Government introduced, to better charitable giving. We have to give credit here to the Labour Government for the introduction of gift aid, but we need to go far further than that now. We should provide incentives to increase endowment funds for universities. I do not favour the view that it is impossible to do that in this country. I agree that we are not like the United States and that the culture of giving is not so strong here as in the United States, but we should not be negative about this; we should be positive. In the United States, there are lifetime legacies and planned giving schemes. There are all sorts of ideas from other countries that we ought to be picking up.

As has been mentioned, Cambridge has the largest endowment fund of any European university—I think that it is now £7 billion, thanks to its having raised £1 billion recently in its appeal. Cambridge provides support on a sliding scale for all students with parental income below £50,000. It is giving support on a needs-blind basis. Harvard, we know about: it has much bigger endowment funds. Princeton has far bigger endowment funds. That is what we must fight for. It will be a very big challenge for the Chancellor to meet that point. Otherwise, we have a negative atmosphere of simply talking about replacement funding. We want growth and we look to the Chancellor to fuel that and help it along—in addition to collaboration in resources raised for research in universities and business in the local community. That is my main message and the main point that I ask the Government to take seriously. If we are to meet the challenge to maintain our place as a country with a reputation for really high-quality universities that are centres of excellence, that is the way we must go.

20:42

[Lord Desai]

As the 25th speaker, I had better say something different from what anyone else has said. First, I very much welcome Lord Browne’s report. I have waited 23 years for something like this to happen. It has at last happened. In 1987, when I was on a summer holiday, my colleague Nicholas Barr sent me a paper in which he argued that all higher education undergraduate funding in the UK should be on an income-contingent loan basis. We all fell on it with amazing pleasure that at last someone had got something right.

As someone who had no education in this country—I was educated in India and the United States—I could not understand the inequity of British higher education funding, which allowed people from class groups A and B to swan around for three years, to get a degree and to move into the top two deciles of income, all at the taxpayer’s expense. Normally, of course, the taxpayer did not have the benefit of higher education. The middle classes, of course, beat their breast about low access levels, but they did nothing about the quality of secondary school education and therefore the situation continued.

The inequity of British higher education funding has been justified by the idea of externalities. Of course, if someone gave me a lot of money I would praise it as doing a lot of social good—of course I would. Why wouldn’t I? However, it is a fallacy to say that, because education has externalities, it should be funded in the way that we fund it. Perhaps that is partly true, but a part of education is being funded as long as we fund university research and capital expenditure that the undergraduates benefit from. Even after Browne, undergraduates will not be paying the true cost of their higher education.

Another inequity in the British higher education system that has been happening for the past 30 years is that non-EU students are the only category who pay the real cost of higher education. They pay £10,000. Even after Browne, we are talking about only £6,000—and everybody is saying, “My god, the sky is about to fall”. If the true cost is £10,000, why do we not charge £10,000 and get on with it? The nature of an income-contingent loan system is such that not only are there no upfront costs, but it is not like a mortgage. I am sorry to say that we have spent a lot of time devising this; I have put intellectual effort into it. It should not be like a mortgage, because the cohort pays for it, not the individual. Very importantly, it exploits the inequality of income outcomes among the graduates. By having a threshold and a proportionate share, eventually some people will pay more than they have borrowed while others will pay less. It is one of the most equitable systems that I can think of.

I hope that we go ahead with Browne, although, as I said, I have reservations about £6,000 being too little—and I am not making this up. In 1998, when the then Labour Government said that the level should be set at £1,000, I am on record in this House as saying that it should be at least £4,000. When they said that it should be £3,000, I said that that was nothing; it should be £7,000. I have been ahead of the curve—or behind it, however you want to look at it.

This is a good opportunity not to get stuck with £6,000. We really should find out the cost of educating an undergraduate. Come on, it is not rocket science. Then, let students have a transparent choice of how much they will pay through an income-contingent loan and let us see how much the poor taxpayer will pay for the whole thing. Let us also ask the taxpayers if that is what they want to do.

My noble friend Lord Giddens talked about the American system. I have always thought—since I was in America—that the American system was much more egalitarian than the British one. In the American system, you more or less have to fend for and educate yourself—banks give loans and people save or work while studying. The American system also has flexibility whereby you can take some credits now and some later. As my noble friend Lord Hunt pointed out, that is what gives the American system its strength.

British universities are silos. You enter and you make a contract for three years. You cannot escape and, if you do not finish the course, you do not get a piece of paper for it. You do not get any credit—you fail. They have taken your money and they have failed you, thank you very much. The education is also very narrow; there are no liberal arts colleges. That is why not a single Commonwealth country has followed the British model of higher education. Nor have they followed our way of financing it, but that is another matter.

If we get to the position of adopting the Browne system of higher education, profound changes may happen to the British university system. I cannot wait for it. I know people who say, “Competition is horrible. It is terrible”. We endure competition everywhere else. When it comes to Murdoch owning BSkyB and other television stations, we say, “No, we must have competition. We cannot let Murdoch have a monopoly”. I think that, similar to what the noble Lord, Lord Luce, said about Buckingham, competition might force some universities to specialise, to offer different packages and accelerated degrees and to give people a different kind of education. Universities should be different. One thing that I hold against the Conservative Government is that the great Education Reform Bill, as it was called, reduced diversity in the system by making all the polytechnics and CATs universities. Everyone started wearing gowns and flouncing around. There was diversity but it was reduced. We need more diversity. We need universities that offer only a few courses—maybe only humanities or social sciences. Why not? The LSE offers only social sciences and it is a perfectly good university. It may be that financial change will lead to much healthier changes in the British university system than there have been so far. I know that it always shocks the British mind that anything could be better than what we already have, but it is possible that we could have a better university system.

Another fallacy is that uniformity is equality. Uniformity is not equality. Even if there has to be a certain level of fees, there is no reason why every university should be forced to charge the same fee. In a debate some years ago, when we were discussing the 2006 rules, the noble Lord, Lord Quirk, said that perhaps universities should be allowed to charge an average, across all their courses. They could then discriminate, between courses, what they charged.

The crucial point is what the Government are willing to pay up front to the student by way of subsidy of the front-end costs. Let us say that the university can charge whatever it wants but the Government will subsidise only a £6,000 or £7,000 per year education. If Oxford, Cambridge or the LSE want to charge £20,000, they must find loans for the other £13,000, which will have nothing to do with the Government. That will leave a perfectly good system in which we do not have to tax universities for charging. There is no need for clawback. We could say that £7,000 is what the taxpayer will pay up front while we are financing the loan. If universities fancy themselves as Harvards, they must make arrangements for a particular loan package, which they will offer to their students. Those students will go to Cambridge, Oxford or the LSE because they believe that doing so will enhance their future income. That is why people go to university. They also go there for culture and so on, but actually they go for income. We could easily have a sort of cap on what the Government would pay, with universities then being free to charge whatever they wanted. That would simplify matters. It would force universities, as the noble Lord, Lord Luce, said, to seek endowments and funding of a different kind to help to subsidise the loans that students take out.

I wanted this to be done before there was any prospect of a cut in government spending. This change in the way of financing higher education has nothing whatever to do with the general budget of the Government. The Labour Government should have done it 10 years ago when we had the money. Had we done it when we were prosperous, there would have been fewer complaints. We did not; we lost our nerve. In 1997 I hoped that the incoming Government would adopt as policy our recommendation of an income-contingent loan system. They did not and the rest is history.

We have to make it quite clear that the grounds for doing this is equity—equity for the population, most of whom pay indirect as well as direct tax and most of whom will be on income levels that are well below what a graduating student would earn in his or her first job. An income of £21,000 may seem like peanuts to us but it is about the mean income and way above the median income. Therefore, a graduating student will end up in the top two or three deciles. We are not talking about poor people and certainly not about poor deserving people. The rich may be deserving, but I doubt it.

We have to allow lots of flexibility and allow universities to do different things. We have to make such packages that the only commitment that the Government have is the extent to which they will fund the income-contingent loan system. For the rest, we can allow the dreaded market to take care of it. If you think that the market is not a good thing, look at the United States. The chart on page 16 of the Browne report shows the proportion of graduates aged 25 to 34 against those aged 55 to 64. In most European countries, there has been a spread in the percentage, but not in America. Why is that? It is because historically Americans have been able to go into higher education in large proportions because they have a flexible, non-bureaucratic, non-government-funded system. That is the secret of achieving equitable higher education, which may be counterintuitive to most of us.

20:55

[Lord Willis of Knaresborough]

My Lords, the first time I spoke in this House was in the debate on the Defamation Bill introduced by the noble Lord, Lord Lester, and 12 QCs and two High Court judges spoke before me. In this debate, it seems that everybody is either a leading academic, a former vice-chancellor or the master of a Cambridge or Oxford college, apart from the noble Lord, Lord Browne, but I am sure he fits into that pattern somewhere.

We are indeed indebted to the noble Lord, Lord Browne, for his report on higher education funding. He has sought to resolve an issue that has been growing in difficulty ever since the nation embarked on a policy of industrial-style expansion of higher education in the 1990s. I suspect that if we do not grasp this opportunity, we will return to it in the not-too-distant future. The noble Baroness, Lady Blackstone, is not in her place, but I make no apology for having opposed the introduction of up-front tuition fees in 1998 and the imposition of variable tuition fees in 2005. I maintain my belief that education should be free to those who qualify on merit to access our universities, and like the Secretary of State I am proud to have fought to offer a generation of students an education that was free to me and has given me such fantastic opportunities all my life. However, I am equally convinced that without continued investment in the high-level skills and research talent of the nation, we will never be able to compete in a world where increasingly knowledge and innovation are key to global success.

In a perfect world, these two ideals could be satisfied through the public purse, but ours is far from a perfect world. The inevitability of a shift from the state to the student for the funding of teaching began in 1998, but was made inevitable when in 2008 the current economic crisis engulfed the nation. The recommendations of the noble Lord, Lord Browne, were inevitable, but they suggest quite alarmingly that the final destination is uncapped fees, a fully fledged market in higher education and a private higher education system. I share the fears of the noble Lord, Lord Judd, over that, although the noble Lord, Lord Desai, seems to be quite excited by the prospect. We are not quite there yet, but make no mistake, that is the journey we appear to be on, and I suggest we think very hard before taking it.

Does it matter? Is that not where the most productive economy—the United States—already is? Are we not merely playing follow my leader in some elaborate game of intellectual musical chairs? Well, yes, it matters. The Secretary of State states that it matters, which is why I applaud his desire for consultation and his willingness to produce a White Paper. The noble Lord, Lord Browne, has set the scene. He has made some shrewd suggestions, and his core proposals for raising the cap on fees, making repayment more progressive and simplifying yet improving the most generous student support system in the world are to be commended. In particular, the move to extend student finance to part-time undergraduates is, as many noble Lords have said, one of the most progressive and enlightened initiatives in decades.

However the belief of the noble Lord, Lord Browne, that the market will raise standards, offer students a better deal and improve teaching and research outcomes needs to be challenged. He must know that without US-style variability, it will be impossible to create a market based simply on price and quality. He also knows that without some restraint in terms of numbers of students and courses offered, we could get further distortions in the workforce, particularly a decline in STEM graduates, as institutions chase low-cost, high-return students. The belief too that a competitive higher education market will improve access to leading research institutions is hugely misguided, although the report rightly recognises that access is more to do with the failure of our schools system rather than the fault of our leading universities.

I do not want to repeat or rehearse the many superb comments and concerns raised by other noble Lords. Instead, I want to point to a serious weakness in the report by the noble Lord, Lord Browne, which I trust the Secretary of State will address when producing his White Paper. The noble Lord, Lord Browne, failed to say that his expertly crafted solution to higher education funding was predicated on an existing model of higher education in the UK that is arguably—I repeat, arguably—not fit for purpose.

The noble Lord, Lord Bilimoria, was right: much of what our universities offer is globally superb, but far too much of the system basks in the excellence of our research output and there are serious concerns, as the noble Lord, Lord Browne, points out. It is time to stop trying to make the post-Robbins higher education system fit the 21st century and to take a long, hard look at the whole of our post-19 education and skills offer. In the past 20 years, we have moved to a mass higher education system with 45 per cent of our 18 to 24 year-olds attending university. I applaud that, as I do the enormous efforts that the previous Government made to increase participation for under-represented groups. But, faced with the dual challenges of budget deficits and increased competitiveness from a rapidly changing global higher education market, surely the starting point for any review should have been the function and then the form of higher education, rather than simply the funding.

Providing universities with a replacement income stream without the sector having to accept serious reform is a lost opportunity. Surely, if local government, the health service and our Armed Forces have radically to re-engineer their services to meet 21st century needs, so should our universities. It is simply not enough to ask for reform within universities. We need to reform the whole sector.

The Minister talks about greater efficiencies following the Wakeham review and of possible amalgamations or joint use of back office facilities, but if these are solutions, why have not cash strapped university chiefs already done them? It is because they and we are locked into a mind set that says fundamental institutional reform is somehow an admission of failure. It is not: it is an admission of reality and of clarity of mission based on what is best for students, the regions and our nation, and not simply the institution.

Our higher education system is there primarily to do two things. It is to provide intellectual and practical skills to our students, and to provide a research base to fuel the knowledge economy in the widest sense, both societal and commercial. To provide the latter we must have world-class research departments and we must foster world-class indigenous talent. It is remarkable that we have four universities in the top 10 in the world, and that with 1 per cent of the population we produce 9 per cent of world scientific literature and 14 per cent of citations. Our aim should be to build on that and not to be satisfied with it. To do that we need greater research and teaching focus. Already 90 per cent of research funding goes to some 30 universities—perhaps 30 is too many.

We must also question the current institutional freedom to develop postgraduate schools. Currently, all 165 HEIs can offer master and PhD courses, even if they have a relatively small faculty. Does this produce the research talent that the nation seeks or does it simply serve to give some institutions status at the expense of that talent? In the US, with 14.3 million students, 2,297 HEIs have degree-awarding powers, 1,094 of which award post-bachelor qualifications, but only 654 award research doctorates. Yet in the United Kingdom, with 1.9 million students, every one of our 165 universities and higher education institutes has the power to offer PhDs, and 149 currently do so. Will the Minister at least confirm that the forthcoming White Paper is prepared to examine the need for a smaller, more focused, research-intensive university sector? A more focused research sector could then be charged with recruiting the very best talent our nation can offer and provide students with sufficient scholarships, bursaries and loans based on one simple criterion—ability.

The premise that such a system is operable across all institutions, as now, is simply not tenable. The pursuit by many higher education institutes of the “research dollar” has changed not only behaviour but has distorted mission to a point where the teaching of graduate skills to meet the needs of our societal and commercial economy has been devalued. Just as we need to review our research and postgraduate offer, we need to seriously look at how we can deliver the higher level skilled graduates our economy needs at a price both our taxpayers and students can afford.

It was interesting that in his analysis the noble Lord, Lord Browne, studiously avoided what the late Lord Dearing called in his 1997 report the third funding stream for higher education—the employers’ contribution. I am disappointed that employers, who, after all, are beneficiaries of a robust higher education system, have not found their way into the funding mix. Yet the need to provide business facing level 4 skills is as vital to the UK as is our research base.

To this end, I hope the forthcoming White Paper will look at encouraging a merging of the missions of our post-19 FE sector with those universities that are predominantly concerned with teaching high level vocational skills—a new sector that matches in teaching vocational skills the aspirations already present in research excellence; a sector that allows our best further education colleges to compete in the skills sector without having to go cap in hand to either the HEFCE or individual universities for the right to accredit their courses.

Such organisations operate elsewhere in both Europe and, particularly, the US, where the community college or liberal arts system is respected and effective. We have the basis for such a system in many parts of the existing FE and HE sectors, and it is here where the new engine room of the 21st century higher education system can emerge—a sector that recognises the close links between social and business enterprise locally and regionally; a sector where students can earn and learn; a sector where exorbitant “hotel” costs and resultant debt can be avoided; a sector where skills can be developed through a myriad of pathways that are directly relevant to local and regional economies.

The Browne report is not a take-it-or-leave-it solution but a catalyst for real change. Now is the time not to be timid; now is the time to be radical—even if it means less vintage port in some of the hallowed corners of the HE empire.

21:06

[Lord Liddle]

My Lords, I, too, congratulate the noble Lord, Lord Boswell, on his maiden speech, and I thank the noble Baroness, Lady Wilcox, for initiating what, for me, has been as much a tutorial as a debate.

I agree with many noble Lords who have spoken that we should never forget that the pursuit of learning is a crucial hallmark of the good society. I agree with my noble friend Lord Giddens that university education makes a huge contribution to the spread of cosmopolitan values, which is important for the future of our civilisation. The public benefits of higher education extend far beyond the purely economic.

Having said that, the universities play a crucial economic rule. They are crucial to our success in the knowledge economy, which is particularly true in Britain at the moment when we need a new wave of entrepreneurial, science-based innovation to rebalance our economy away from its overdependence on the City and financial services. In the present circumstances the Government are right to prioritise research over teaching. I think it is what a Labour Government would have done as well, although I do not think they would have gone so far as to scrap the teaching grant for all humanities subjects, which seems extreme.

We have to recognise also that university education, in addition to its public benefits, brings huge private benefits to the individual. That is why the principle of student loans that are free up front but repayable on an income-contingent basis is sound. It was a reform made by the previous Government of which I was proud, and the public finance situation today makes its extension inevitable; a graduate tax is not a practical fiscal alternative.

The noble Lord, Lord Browne, is to be congratulated on the clarity and frankness with which he has set out the options for us. The test of the Browne report will be its impact on wider participation. I think that we are all agreed in this House that higher education cannot be an opportunity that is simply confined to an elite. A genuine opportunity to participate regardless of income, background and circumstance has to be on offer to every individual capable of benefiting from it.

I speak from this perspective with some passion. I must declare an interest as a director of the several-times-mentioned University of Cumbria, which was founded in 2007 to widen participation in an area where it has been historically low. I also had the privilege of getting into Oxford from what was then Carlisle Grammar School, on a full grant, from a railway clerk's family where no one had gone to university before. As with the noble Baroness, Lady Kennedy, that whole experience has transformed my life.

The University of Cumbria has been weak financially. Although we have turned things round in the past nine months, it is heavily dependent on teaching income—as many of the post-1992 universities are—with a core curriculum concentrated on the arts, education and health. For an institution such as this, which does not have significant research grants and receives very few overseas student fees and very little commercial income, the withdrawal of all HEFCE teaching grant except for STEM subjects is a devastating shock. The university will have to set a fee of more than £7,000 simply to survive.

No one can be sure what the long-term impact of such a change will be. How many working-class students will be deterred from applying by the prospect of running up more than £30,000 of debt at a minimum for a standard three-year degree? And, frankly, the debt will be more than £40,000 if their family income falls just outside eligibility for a living-costs grant. With these levels of debt, will such students feel confident that the job that they hope to get at the end of their course will justify the risks? Let us be clear: these are not kids who imagine they are going to be masters of the universe in high-rolling City jobs at the end of their university life.

I know that the answer of the noble Lord, Lord Browne, is that if their income is below £21,000 a year, they will be obliged to pay nothing. I accept the argument that his proposals are more progressive than the present arrangement. That is good, but it is not good enough. Will prospective students see university as a worthwhile investment if it raises their salary from the median income before tax, which a noble Lord mentioned is around the £21,000 a year threshold? If the consequence is that their salary is upped to the 75th percentile, which is £30,000 a year, will they think that it is worth taking on all that debt for that?

My fear is that the likely long-term consequence will be a narrowing of the higher education sector and tougher competition for students between institutions, one in which new institutions such as Cumbria University will be at the sharp end of change, both because of our geographical isolation and because we lack the long-established institutional reputation of other places. Is this sort of shake-out what the Government want? If we are to avoid this, there is a responsibility on both government and higher education institutions.

A more free-market system of higher education can work only, as it does in the United States, with a much more generous system than we have of grants and scholarships. Frankly, I regard the Government’s proposal to establish a national scholarship fund of £150 million as tokenism and deeply inadequate. Someone mentioned that Harvard has an endowment of more than $25 billion. Even in the financial bad times of the past five years, Harvard has had an annual income of 4.7 per cent on that endowment—well over $1 billion for a single institution. Of course, getting equivalent endowments for British universities may never be realistic, but we can make a start. I suggest a couple of things to the Government. In all seriousness, could we not hypothecate some of the revenues from the Government's new tax on banks, designed to curb bankers’ excessive bonuses, towards a university scholarships fund? That would be immensely popular in the country and would do a lot, if the banks accepted it, to restore their reputation in society.

The Browne review proposes a difference between those who earn less than £21,000 and those who earn more, in what they pay. I would add a further progressive twist. Why not charge all high earners a higher interest rate on their student loans than the one that the Browne report proposes? I was delighted that the noble Lord, Lord Butler of Brockwell, seemed to think that that might be a sensible idea. We could use that money to provide scholarships and grants for low-income families. I recognise the logic of the recommendation from the noble Lord, Lord Browne, to continue teaching grants for expensive medical courses, but three-quarters of the public servants who earn more than the Prime Minister are doctors and consultants who have benefited from those subsidised medical schools. Could they not pay just a little bit more on their interest rate on their loans to plough that back into their institutions?

Institutions will have to adjust as well. We will have to look at how we cater for part-time students—and I welcome the proposals from the noble Lord, Lord Browne, in that regard. We will have to restructure our curricula, expand overseas and be more commercial. But that kind of reconfiguration from a university involves time, and we need phasing and certainty about the path of future government support. At the same time, some very quick decisions have to be made, because universities must publish their prospectuses soon for 2012-13. We need to get on with making these decisions in the knowledge of what the financial position will be.

I add a final word as a Carlisle lad who went to Oxford on a full grant. I hope that the Government will be cautious about lifting the fees cap. It could be possible if we got to a situation whereby a much wider generosity was shown in scholarships and grants. But financial support is not enough; essential for me was the support and encouragement of my school. I am glad that Sir Martin Harris, who has studied this issue with great care as the director of fair access at the Office for Fair Access, believes that school support is the crucial factor in encouraging wider participation at all levels of academic ability. We need much closer engagement between Oxbridge colleges and state schools in certain areas, between the provincial redbricks and the estates which surround them and between institutions such as Cumbria University and their local communities. However, to do that requires dedicated funding for wider participation which must be preserved, not cut as 16 to 19 funding will be. This dimension of widening participation and sustaining the progress that we have made is lacking in the Government’s approach. It will be crucial to the long-term acceptability and political viability of the recommendations of the noble Lord, Lord Browne.

21:19

[Lord Sutherland of Houndwood]

My Lords, I begin by congratulating my noble friend Lord Boswell on an excellent maiden speech. It brought to mind years past when he was the gamekeeper as the Minister for Higher Education and I was the poacher as one of those wretched vice-chancellors who tried to wheedle money out of him. I suspect that we spent a large amount of time arguing over the terminological point of when an efficiency saving becomes a cut. I think we agreed that when it had gone on at 2 per cent per year for 10 years, it no longer constituted a series of efficiency savings. We are again discussing a financial gap. I congratulate the noble Lord, Lord Browne, and his colleagues on bringing this conversation to a sharp point—we need to make decisions. The report has been produced speedily and efficiently. I hope that the Minister will reassure us that the Government will make up their mind about what they are going to do with equal speed and efficiency. Given the sword of Damocles that is hanging over us—of a 40 per cent cut for a large number of universities—we need to know what the Government’s intentions are, and we need to know that quickly. That point has been well and often made in the debate.

The report is good in most parts and in a sufficient number of parts for it no longer to be the curate’s egg, but at least, perhaps, the bishop’s egg. It is a significant report which has much in it to commend it. What is good about it? First, it sets the right direction of travel. This is a route on which we are embarked. This is not a moment when we can turn back for all the reasons that have been well laid out in this evening’s discussion. The noble Lord and his colleagues recognised that this is not a start-from-first-principles moment but is a moment when the great tanker is sailing forward and has to be kept afloat. The future of millions of young people and, indeed, of our country, depends on the continuing viability of the university system. This is not a time to reopen the design of the boat. However, I take the point made by the noble Lord, Lord Willis, that a much broader discussion is needed. I shall come back to that in a moment.

The second good thing about the report is that it is pragmatic in its approach. It realises its place in contemporary social history. We have heard the figures—just after the war, 2.5 per cent of the population went to university; now the figure is 45 per cent. We are in a different world. For many of us, it is a much better world, but there are consequences and real costs. We have a university system that is mature, complex and, in places, very sophisticated. Parts of it have been 800 years in the making, other parts are of more recent manufacture.

The report also recognises the practical constraints of a funding system that is not able to sustain what we are doing. If my colleagues on the opposition Benches have better suggestions in this regard, I should like to know what they are, and why the previous Government allowed a gap to open up in the funding of universities. That is the reality. That is where we are. We must proceed from that point. Any better suggestions are clearly welcome. The report accepts that there are two financial constraints. The first is that we cannot afford to continue to fund universities in a way that was devised for a much smaller system. That is the reality. The second is that the financial die was cast four or five years ago when this House and the other place passed legislation to allow for the charging of fees. That is the context within which we are operating. It was inconceivable that we would turn back on that.

The great quality of this report is that is essentially a pragmatic response to that situation. Would that it were otherwise; I agree with all the visionary statements that have been made about providing free higher education at source for those who have the ability to benefit from it, but the reality is that we now have a mass system that we are not able to afford—even more so over the next four years than perhaps we had first guessed. Those who wish to reject its conclusions should come up with better proposals about where the money is to come from.

As I have suggested, however, and this was a wise decision, the report does not raise some of the big and continuing questions that drove the Robbins report and, to some extent, the Dearing report. It assumes, as I have said, that the ship has set sail and must be kept going. Priority number one is that the system has to be kept healthy, with no institutions going to the wall because of inadequate and inefficient government action, or the lack of it, over the next year or so.

None the less, the big questions remain. I appreciate the passionate speech of the noble Lord, Lord Willis, on this; I am not sure that we would end up going in the same direction but he is right to say that we need to discuss these questions. We are long past the discussion raised by Newman, which some of my academics colleagues would like: what is the idea of a university? That presupposes a small, one-size-fits-all operation. It is a 19th-century model, but we in Britain entered the 20th century and, eventually, the 21st century. However, there are fundamental questions that have to be asked. I put two of them to your Lordships now.

The first question is an obvious one: what are universities for? There is no single thing that they are for. I shall show off my humanities background because I am going to be controversial: as Wittgenstein would say, the word and the uses of the word “university” are attached not to a single meaning but to a whole family of meanings that have connections and resemblances to each other. That is the philosophy seminar over. That point is fundamental to how we conduct the discussion. We have diversity, although not enough, and not as much as we should have for the size of our operation. If we are going to cash in—sorry, I should not use expressions like that; I stand corrected—if we are going to make the most of that diversity and indeed enhance it in all the ways that have been laid out before us, we must look for variety in what is compatible with education at a higher level, and indeed at an excellent standard.

In some ways, the second question is more difficult and has raised questions in the minds of many of my colleagues here: what should society reasonably expect of universities that it funds or part-funds? That is a perfectly fair question. By “society” I do not just mean the Government, although they are included; I mean those who pay taxes and those who have never been to university. They are paying for this system. What might they reasonably expect, and what is the case that we put to them for that funding continuing in some form or another? If we had asked in 1992—although that was not the moment to ask this—what society expected of our university then, we would have a rather different system from the one that we have now. There would have been some clarification about the directions in which society thought it reasonable for universities, en masse and individually, to go with the funding that backed them.

That is the high-flown stuff. I shall make one or two specific comments and suggestions about the report in a moment, but I make the point that there is no better time than a recession to get on with the discussion about what society expects from universities and what they are for. Do it now; do not let it wait until we have the next funding crisis. The settlement proposed by the noble Lord, Lord Browne, and his colleagues is an interim one—have no doubt that we will return to this question.

I have one specific suggestion to make as a result of what I read in the report, and I would be interested to know whether the Government are contemplating such a possibility. If I were still in the business of helping to manage, direct and lead universities, I would look very carefully at the possibility of privatising parts of them—not least in the arts faculties, some of the social science faculties, certainly the law faculties and probably some of the business studies areas. I say privatising in the sense that if the proposal goes ahead, and some version of it will, the funds that were originally available for those areas will not be coming in through government grant, but through fees paid by whatever system we agree to. If you are bringing in £7,000, £8,000 or whatever, why not take the extra step and say, “We will free ourselves from direct government interference and use that money to plan and develop in these areas which we think are important”? I do not think those subjects are not important—quite the reverse. In that way we may be able to civilise the relationship between humanities, for example, and government departments, and never again have a Secretary of State who implied that he thought the study of medieval history was pointless—a crass error that happily will not be repeated, I hope. That was a year or two ago—not this year.

The universities should be planning such an option and the smart ones will be. What would it be? Let’s have a business plan and let’s see how cost-effective it would be and how we can protect the quality of those subjects that have been so well expounded by my colleagues along these Benches. Such an option is possible. If you think that it is not, what about the USA? Harvard, Yale, Stamford, Princeton and New York universities all have excellent humanities faculties. They have used their resources to employ some of the best people as teachers. Chicago still provides the basic course that every student must take covering western civilisation. I have seen that happening. I have been there in classes, watching it. It is fascinating. These private institutions have not trashed the humanities and they have not trashed those areas of social science that can contribute so much to our country and the quality of life here. I go with all the stuff about civil society and what you need from the humanities area. I make a serious suggestion. Government cannot compel this, they cannot drive it, but they can make sure that there are no obstacles in the way, because there will be civil servants who suck their teeth at such a radical suggestion. If that suggestion is worth pursuing, please give encouragement to those universities which can pursue it—and a number of them could very well do that.

I have two or three points of quick reflection on the report. There has been a lot of discussion about the market and whether this is an appropriate way to talk about universities. Look at what we are doing with overseas students. It is a market in which universities have developed a presence, capacity and ability, while some have developed bad habits. Go out to Hong Kong or Singapore. Some have developed bad habits—markets are like that; but so are centrally planned states, as we have noticed. But it can be done and it has been done. There have been some losses. Look for the undergraduates coming from sub-Saharan Africa, for example. They are not coming here, and that is what the market has done. There have to be other ways of dealing with that. There are other ways, and there are good people trying to do something about it. However, I accept that there are costs to a market, but it can work—and it is working in the area of overseas students.

On a point of irony, we have come almost full circle. Keith Joseph must be twitching with delight in his grave. He was the one who suggested that we might have student vouchers whereby the money follows the student and goes to the university, and the stimulus that that would produce would be beneficial. He was ridiculed and reviled for that by the university system. However, by a miracle—this is the genius of the Browne report—instead of having student vouchers when you turn up at university to demand your pound of education or whatever, you will have a student IOU. Not only will we have the drive of the independence of the student input, the state is not paying for it—the student is. Keith Joseph will be giving three cheers from the nether regions.

I will make one point about the graduate premium. We overplay the graduate premium of £100,000 on average. It is there, but not for a large number of graduates whom I taught, because of the kind of jobs they do in schoolteaching, social work, nursing and so on; and if it is there, it is £100,000 on average over 40 years. We can all do the sums. That means £2,500 a year on average, or about £50 a week before tax and national insurance. That means, if you are lucky, you would get a moderate West End theatre ticket but would not be able to afford an ice cream in the interval. It is not a huge sum of money when you lay it out in those terms—if that is the average figure. I know that there are many more who earn much more as a result of a university education, and they, too, should help to pay for it.

My last point is that the market being proposed wants to move students toward certain areas of national importance—STEM subjects and languages. Universities cannot do this on their own. Government policies have created a situation in schools where student choice has been leading students in droves away from those subjects. The consequence will be that you may create a market, but unless something is done about what is happening in schools, and the quality and volume of teaching in science and languages, you will not have a market in which to operate. Are the Government tying up, in the way that joined-up government should, this element of potential policy with the way in which schools are being organised? I look forward to the Minister's response.

21:35

[Lord Triesman]

My Lords, I start by declaring my non-pecuniary interests. I have visiting fellowships at Cambridge and Warwick universities. I also express—rapidly, as time is moving on—my appreciation for this early opportunity that the Government and Minister have provided to debate the report of the noble Lord, Lord Browne. I thank all noble Lords who have engaged so effectively and powerfully in the debate—and not least I thank the noble Lord, Lord Browne, himself. I congratulate the noble Lord, Lord Boswell, on a fine maiden speech. I used to negotiate with him and promise to carry on arguing with him. I now find that I share that experience with the noble Lord, Lord Sutherland of Houndwood, and I have no doubt that we will all enjoy it. I say to the noble Lord, Lord Sutherland, that Sir Keith was indeed reviled, not least by the noble Baroness, Lady Thatcher, who told the world that on that matter he had not briefed her.

When the Minister repeated Vince Cable's statement on 12 October, I said that the entire history of the debate on the scale of the United Kingdom's—and latterly, the English—system of higher education, and on how it and its students should be funded, had been going on for so long that it was essentially free-standing from the current controversy about the nation's financial circumstances. So it should be, if we are to have what the noble Lord, Lord Smith, described as a coherent debate on these matters. However, having read and discussed the comprehensive spending review, as we all have, I know that it will be necessary to deal with the interplay of the Browne review and the CSR. It is necessary because of the threat to our universities. Having had the chance to study the report in more detail, and having heard what was said today, I now feel also that the report signals nothing less than a true, but in our view little considered, paradigm shift. Many speakers have expressed the same conclusion in other words.

Before considering the monumental shift that is proposed, and to which I understand the Government have pretty much committed themselves, it would be churlish not to welcome some conclusions of the noble Lord, Lord Browne. For a start, he confirms an aspiration for higher education that I believe has been shared on all sides: that,

“teaching at our HEIs is sustainably financed, that the quality of that teaching is world class and that our HEIs remain accessible to anyone who has the talent to succeed … The quality of teaching and of the awarded degrees is the foundation upon which the reputation and value of our higher education system rests”.

I am wholly with him and I take that to be the guiding principle of all that follows. The report concludes that all those who benefit from higher education should contribute to the cost—holders of degrees and the nation as a whole. Again, I endorse the principle, as did Sir Ron Dearing, as he was when he published his report. Incidentally, Lord Dearing was never a university student but he understood this sector very well, and at the heart of his understanding lay his grasp of the value of universities at the core of our national infrastructure. I say to the noble Lord, Lord Butler—

[Lord Smith of Clifton]

Lord Dearing was a mature student at the University of Hull and did a BSc (Econ).

[Lord Triesman]

I am grateful for that information. I obviously read the autobiography that he wrote before he got to that point in his life.

I was going to say to the noble Lord, Lord Butler, that as a taxpayer I have paid for many things that I do not consume and probably never will, but I would rather live in a society that helps people who have not enjoyed the benefits that I happen to have enjoyed.

It is right that student contributions should be repaid when they are affordable to the graduate and collected through the tax system. It is right, as my noble friend Lady Morris stressed, to endorse expansion in a world where qualification is increasingly sought by individuals and society, and where, as my noble friend Lord Sawyer said, the opportunity has been developed by so wide a variety of higher education institutions, such as the one of which he spoke so highly. It is right that the growing numbers of part-time students should enjoy the same benefits in a broad sense, and that makes sense, particularly as people choose to study in different ways and at different stages of their lives. I know that the precise arrangements recommended in the report are thought by some vice-chancellors to be somewhat defective. I do not make a big point of that. If the principle is right, a modest redesign by those running the institutions could probably overcome any problems.

By raising the fees under the student finance plan—and it is essential today to interrogate some of the detail—it is easy to understand the argument that HE finances could have been restored to levels closer to those that obtained before John Major drove down the teaching unit of resource by a terrifying 40 per cent. I do not believe that we will see this report as the restoration that the Government intend to make. Rather, I should like to think that it was the mission of the noble Lord, Lord Browne, in part at least, to attempt that restoration. Therefore, the noble Lord’s proposals might have been grasped, in this discussion as elsewhere, as a mechanism to adjust the balance struck for the fee contribution in 2004 for students starting in 2006—a mechanism denounced by the Liberal Democrats not only as wrong but as the start down a slippery slope, and, my gosh, it is slippery. In short, it has been portrayed by the Government, and perhaps even by the noble Lord, Lord Browne, as being simply a financial adjustment. The noble Lord acknowledges his explicit aim at page 19 of the report: it is to enhance the income of institutions. He could be thought simply to be taking further the enhancement from the levels of 2006—not that that has fully restored the unit of teaching resource.

I said that I think it is a paradigm shift and I shall say why. For decades—certainly since Robbins in 1963—and in a variety of evolving ways, the state has allocated student numbers, has even threatened universities with hefty fines for exceeding their quotas, and has effectively set the price for courses wherever and however they have been delivered. This level of control, for which on occasions there were at least very good reasons, enabled Higher Education Ministers to go further in their control of universities than probably some people would have desired. They wrote each year to the funding council letters containing ever more detailed instructions. I remember reading some that the noble Lord, Lord Boswell, wrote. They were letters sometimes half the length of a short novel with instructions passed on by the funding council to institutions as advice, of course, which had to be followed.

The noble Lord, Lord Browne, changes the basics, and it may well be that we have seen the last of those central directions. Students carry with them the major sums to finance teaching and, to coin a phrase from commerce, to make the market. It is for those reasons that I agree so strongly with my noble friends Lord Giddens and Lady Blackstone. Students will decide where to take their money, will take their decisions on the basis of what is on offer—I understand the principles behind all that—and will be restrained only by the entrance requirements of the institution. The report recommends both a 10 per cent increase in numbers almost immediately and at the same time the removal of barriers to access. Like the noble Baroness, Lady Sharp, I can see how numbers will be very difficult to predict in any effective way. I can also see, as my noble friend Lord Liddle said, the need for certainty in the long run for universities and how hard it would be to achieve in this environment.

Given the excess of demand over supply, these new customers—that is what they will be—may well decide that even more places are needed. If I have understood the arguments about financial support for students from the poorest quartile correctly, it may encourage more applications; we may make ground on the United States, where about three times as many students from that background enter higher education, but I am candidly doubtful that will happen. I do not really believe it but it will be a great change if it does happen. Like my noble friends Lady Kennedy and Lord Judd, I think there is a misunderstanding about debt aversion and the way in which it affects families in that quartile. Perhaps too few of us have come from a background that has lived through that process.

On the other hand, numbers may not increase, which is my fear. Whatever the number is, I make this general point: increase or no increase, quality is sustained in large measure by having an adequate unit of teaching resource. That is what we do not have. None the less, this is a new paradigm created by a huge shift in student contribution and more or less unrestricted places. We had all better draw a deep breath and grasp the ramifications. Although we have held the view, in the past, that the state is a significant beneficiary, it will make a far less significant contribution. The report of the noble Lord, Lord Browne, is not an adjustment to finance; it is a fundamental policy shift and at the moment we have considered very little argument about the character of that shift. The noble Lord, Lord Willis, was appealing for a wider debate on those very issues. I do not mean to put words in his mouth but I think that was the burden of what he said. That has not been discussed. It is a massive policy shift, which takes little account of the complex issues which were set out in a very powerful speech by the noble Lord, Lord Broers.

I ought to add, before anyone claims that this is merely a replication of the successful American model, that it is not, on the evidence. Of course, American universities achieve higher levels of private income than English universities do, but they also, as has been noted in the debate, receive significantly higher proportions of state and federal public money as well. The noble Lord, Lord Bilimoria, was absolutely right about that. Their scope for scholarships and bursaries is richly endowed and there is a culture of giving which puts us to shame. From my time on the Front Bench on the other side of the House, I can tell the House that we have neither the culture nor, apparently, the appetite to change the culture to that extent here. I regret that. I was told that it would all change, but it did not. Although Cambridge has unquestionably been successful recently, I gave up making any financial plans on the basis of helpful interventions from the tooth fairy.

The changes in the Browne report are most likely to lead to what one eminent civil servant recently described to me as universities weaning themselves off the state. In the newly proposed circumstances, can the Minister tell us whether the Government will encourage vice-chancellors, as I think the noble Lord, Lord Sutherland, just invited her to do, to say that they would prefer to go private and that that is the route now being taken? That is why it is a paradigm shift. Are the proposals to that end now before us? Is it true that a new Statement will be made in the early days of next week? Here is a fundamental problem in the report: is it to be addressed that fast? I accept that universities are a public good and they will be eroded in that role, as my noble friend Lord Giddens so eloquently said, if we take a simplistic view of the character of the market which they are being asked to enter.

I know that there were a number of questions raised on 12 October and I ask them again because the CSR was not then published and I was told that they could not be answered before it was published. London Economics has provided a well researched analysis showing that there may be—may be—advantages for the poorest quartile. That would be an advance, but it also shows that it may discourage that group. Even more, it shows that people on middle incomes—those whose parents cannot pay upfront—will pay back far more for far longer than those on higher incomes as a result of the report. The richest are likely to pay back their loans by their late 30s. It will take middle-income earners at least 14 years longer. Some will not pay back their debts. As the right reverend Prelate the Bishop of Wakefield, said, it is a risky wager. I think that it is more than that; I think that the race has been fixed. Women graduates, given their career patterns, will be in a still worse position—they will be subject, in my view, to a form of discrimination. I repeat my question of 12 October. Will the Minister confirm whether that analysis is correct or whether there is specific information which refutes it?

Finally, on debt, there is a vital question about unintended debt falling on HEIs. I understand that the CSR cuts will be made in institutions a considerable time before increased fees arrive, creating negative cash flow and operating deficit. I go further than the noble Lord, Lord Hannay: will the Minister confirm today that no HEI will suffer financial loss because of that sequencing and that HEIs will have the interest and other charges on any finance and related transaction costs met by the Government? Many in the universities will look for an urgent answer to that question.

There remains the final theme that has run through the debate and is of the greatest importance. I started by applauding the restatement by the noble Lord, Lord Browne, of the value of our universities to our country. They are at the leading edge of science, innovation, culture, arts and competitiveness. They speak eloquently to our civilisation. The report makes that point briefly but very effectively in its first chapter, although I fear that it may have unintentionally increased the risk to all of those objectives.

Universities are at the strategic centre of our future prospects, as the noble Lord, Lord Liddle, said. Harvard economics professor Robert Reich argued that any nation's primary assets are its citizens’ skills and insights. Businesses in the leading-edge economies migrate to wherever the best and most consistent renewal of those skills occurs, where that inventiveness takes place. Without that, no advanced economy survives; no deeply civilised culture endures. As I believe one noble Lord said, that is the competitive edge. It is our future. There is no other. It is intrinsically interwoven into the development of the arts, humanities and social sciences. Many speakers, not least the noble Lord, Lord Hannay, have emphasised that point, and I share that concern because of the removal of funding from such a wide spectrum of study.

If we are asked in all seriousness to look ahead to full recovery and growth, it is inevitable—it is not any special pleading which tells us—that universities are the surest strategic weapon at our disposal. That is a proposition that has been tested and proved time and again. I thought, mistakenly, that it was the burden of what the Prime Minister said in his speech at the CBI. The noble Lord, Lord Sutherland, asks where alternative sources of money will come from. In most countries, even those facing difficult financial circumstances, that has been an investment which the state has still thought valuable, for the reasons that I have given.

I understood that the task of the noble Lord, Lord Browne, was to grow that indispensable resource. I believe that it must have been his intention. It was to bake in the principles that I cited from him about international reputation in teaching. It was once again to boost the teaching unit of resource. It was to accomplish what Lord Dearing and the Government tried in 2004. However, the outcome, taken together with the CSR, is that there is to be about a 75 per cent cut in the teaching unit of resource, to be made good by students contributing a matching sum from their own resources for a long period of their lives.

If the cap is set at £7,000, it may just about even up the books, although many people think that it will not. It will create not a penny more. The Government's solution is not investment growth but to stagger on. Real growth, as the noble Lord, Lord Luce, described it, will not occur, and this is despite the evidence of all the advantages. In a Written Answer on 7 October, I learnt that the commercial spin-off value of university flotations between 2003 and 2010 was more than £2.6 billion and growing.

Is this truly how we imagine that we will secure our world-class higher education system? We will not only be uncompetitive, which has been the great fear, but I suspect that many international institutions will question whether we are really worth co-operating with, let alone competing against. I cannot believe it is possible that as a result of the CSR we have so radically undermined—and will undermine—so great an asset and so set back the most certain path to growth.

So I return to the question that I asked on 12 October and which was not answered. Was the noble Lord, Lord Browne, made aware that the Government were going to inflict a cut of the same order on the higher education teaching budget? That is a question about the strategy that he was asked to follow. It is a question for the Government, because it is the Government who set the terms of this discussion.

We will keep returning to higher education. I know that this House will certainly debate it time and again. We will certainly debate any deterioration in the state of university finance. But if we are to do what we really want then there has to be a very much wider debate, as many noble Lords have said, about the character of higher education and what we want it to achieve.

Many people in the system have told me in the last days that Browne is the only game in town. They have tended to tell me this in a fairly dispirited way. They, and we, understand the downside of it being the only game in town—precisely that it is, apparently, the only game in town.

21:56

[Baroness Wilcox]

My Lords, I thank noble Lords on all sides of the House for an excellent debate. The noble Lord, Lord Liddle, said that it was a tutorial and that is what it was for me. I thank the noble Lord, Lord Browne, for the work that he did, which enabled us to have this debate today. I also congratulate my noble friend Lord Boswell on a lucid and eloquent maiden speech. He is distinguished as a former Education Minister and has great experience in another place. He will be a great asset to your Lordships’ House. We look forward to hearing his views voiced often in this Chamber.

I should like to respond to as many questions and comments as I can but with one necessary and obvious caveat: there are two major pieces of work that set the context for reform of our higher education system—the report by the noble Lord, Lord Browne, and the comprehensive spending review. The Chancellor has already stated that we will build on the recommendations in the former to put universities on a sustainable financial footing so that we can maintain the quality and competitiveness of the sector. We will also provide financial support and solid advice to individuals to make sure that a decent university education is not beyond any person either because of pecuniary need or because of inadequate information. The Government will shortly produce a detailed set of plans covering both areas and I cannot pre-empt that this evening.

The thoughtful contributions from the noble Lords, Lord Maples and Lord Sawyer, the noble Baroness, Lady Morris, and others, illustrate the challenge facing the Government in responding to the Browne recommendations. The noble Lord, Lord Maples, strongly advocated the benefits of competition and unrestricted fees. The noble Baroness, Lady Morris, and the noble Lord, Lord Sawyer, are very concerned by that prospect. Both views are inspired by genuine concern for the welfare of students and the success of universities. The Government will truly find it challenging to please everyone, but we will do our best.

My noble friend Lady Falkner made some most interesting suggestions about improvements to access. She suggested that pupils receiving the pupil premium who have the desire and aptitude to go to university might get a first year free. We will carefully consider whether this could be achieved, building on the excellent work that many universities are already doing to support the neediest students.

Social mobility is non-negotiable for the coalition. We will improve the advice and guidance available to young people so that they are aware, for example, of the qualifications required for different courses and careers—and well in advance of applying. We will establish clearer, alternative routes into HE besides school or sixth-form college and we will communicate more effectively the considerable financial support available to applicants from poorer backgrounds. We note carefully what the noble Baroness, Lady Kennedy of The Shaws, had to say about the importance of fair access and of mentoring and raising the ambitions of all our young people. It might well be that lower expenditure on bursaries but higher expenditure on mentoring and links between universities and schools would prove more effective in improving fair access.

Just as we are determined to put the challenges, pleasures and rewards of a university experience within reach of people young and old, part-timers and those looking to develop new expertise, we also expect that experience to equip graduates with the knowledge and skills required to make their way in the world. The financial reforms conceived by the previous Government did not always lead to a qualitatively or quantifiably better student experience. We will expect universities to do better this time around, whether through better teaching, improved contact time with faculty or relevant preparation for life in the workplace and beyond. As my noble friend Lord Maples argued, allowing greater competition—such as new providers and alternative modes of learning—will help, boosting what is already a diverse sector.

The noble Lords, Lord Smith and Lord Hunt, asked whether departments will be allowed to close. It is not for the Government to tell universities which subjects they should teach or in which departments those subjects should be taught. That is for autonomous universities to manage for themselves. However, they will need to become more responsive to demands from students and employers.

I will deal with student support and university funding separately. For the former, I reiterate the recommendations made by the noble Lord, Lord Browne, which, in the Government’s view, set the right strategic direction and to which we are currently preparing a detailed response.

The noble Baroness, Lady Blackstone, asked about the default rate on higher fees, default by EU students and modelling. The repayment regime will be more progressive, which means that low-earning graduates will repay less than they do now. This is a welcome feature of the proposal of the noble Lord, Lord Browne, so it is not a question of greater default but an assurance to students who end up as low-earning graduates that their repayments will be fair. The European Union graduates will be required to pay their graduate contribution. There is no evidence so far that they are less willing to do so than home students. However, if they are, they will be pursued and their repayments enforced by the courts if necessary. To answer the final question asked by the noble Baroness, I can confirm that the Government plan to release data that underpin the financial modelling.

No students, part-time or full-time, will be required or expected to contribute to the cost of their tuition until they graduate. As graduates, they will begin to make contributions only once they earn a specified income, which will be higher than it is now. Should their earnings fall beneath that threshold, contributions would cease until earnings recovered. Full-time students from disadvantaged backgrounds can, in future, expect a more generous maintenance package, linked to their family’s income.

My noble friend Lady Sharp asked how we will help middle earners, especially those in valuable but low-paid professions. At 9 per cent of earnings over £21,000, these graduates will contribute at an affordable rate. Remember that this is not like a credit card debt. It does not affect one’s ability to obtain a mortgage or to get on the housing ladder, because it is income-contingent. Here I welcome the helpful, well informed comments of the noble Lord, Lord Desai. On bursaries and golden hellos for teachers and social workers, I must defer to the Secretaries of State for Education and Health, who oversee these schemes.

I have skipped away from the question asked by the noble Baroness, Lady Morris of Yardley, about protection for non-STEM subjects. The noble Baroness is right to remind us of the importance of universities teaching a wide range of subjects as part of our civilised society. I can reassure her that the coalition Government will keep this goal in mind when we consider our response to the report by the noble Lord, Lord Browne, and when we come to implement our decisions. I can also reassure her that we take very seriously the need to ensure that the poorest students get adequate financial support for living costs while at university.

The noble Baroness, Lady Blackstone, my noble friend Lord Smith and the noble Lord, Lord Hannay, asked about the timing of the government response, the HE Bill and the future of HEFCE, OFFA, QAA and OIA. The noble Baroness, Lady Blackstone, and my noble friend Lord Smith asked whether there would be a full government response about the shape of the higher education sector as a whole. We have committed to a higher education White Paper this winter followed, subject to parliamentary time, by an HE Bill later in this extended Session. This will invite views on a wider framework for higher education, including on the roles of HEFCE, OFFA, QAA and OIA. We are open to suggestions but, as my colleague the Minister of State for Universities and Science has already made known, we do not find the idea of a superquango inherently attractive. However, we accept the point made by the noble Lord, Lord Hannay, that universities and students urgently need to know the financial position and rules for the year 2012-13, and we will ensure that this is not delayed by lengthy discussions about quangos. We hope to make an announcement shortly.

I remind noble Lords that the previous Government had already reduced the spending on higher education institutions for 2010-11 and planned to go further. Tuition funding will in future be channelled much more through students themselves instead of through a block grant. Universities will decide what they charge for their courses but, as the Deputy Prime Minister has signalled, we expect to set a cap beyond which these charges cannot rise. We do not envisage unlimited university fees for UK and EU undergraduates, and if students are being asked to accept that they will, as graduates, face higher contributions than currently, we will expect a stronger performance from universities on fair access, transparency of information for students and parents and the overall quality of the student experience.

The noble Lord, Lord Norton, suggested that the Government should remove completely the cap on tuition fees. As the Secretary of State and the Minister of State for Universities and Science have stated, the Government recognise the concerns that uncapped fees would put off some applicants, particularly those from low-income families, and the need to balance these against the needs of our research-intensive universities to compete with their global competitors. We therefore have reservations about removing the fee cap completely, and the Deputy Prime Minister has made that known. The Government will put forward proposals on fee levels very shortly. I hope that also answers the question asked by the noble Baroness, Lady Blackstone.

Several noble Lords, including the noble Lord, Lord Giddens, and the right reverend Prelate the Bishop of Wakefield, raised concerns that these proposals on the arts and humanities would be to the detriment of the arts, humanities and social sciences. Many noble Lords spoke eloquently about the social, cultural and spiritual value of these subjects. On this, I wholeheartedly agree. These necessary reforms would not abandon the arts and the humanities and we will, through billions of pounds of investment in student support for tuition costs and in generous funding for research, continue to enable these disciplines to thrive. I make no apology for investing money in subsidising the teaching of STEM subjects because it is important to limit the proportion of costs that are passed on to graduates of these more expensive courses.

The noble Lord, Lord Bilimoria, and my noble friend Lord Norton spoke about the Government reducing public spending on higher education by so much. It is certainly true that in the spending review we have accepted that we need to reduce the public spending that we pay to universities via HEFCE, but that does not mean a straightforward reduction in the money that universities can secure from the public purse. If more funding flows to universities from those who study there and the Government lend students the money to pay that contribution on favourable terms, our overall GDP expenditure on higher education need not fall.

The spending review also contained several assumptions about efficiency savings within universities. They were focused around pay, pensions, procurement and shared services. It will be for each autonomous institution to decide how it will respond. More information about HE funding will, as usual, be contained in the annual grant letter to HEFCE, which the Government will send at around the turn of the year.

My noble friend Lord Norton of Louth suggested that we will not be able to compete internationally, as other countries invest in higher education. Let me be clear: the current level of investment in higher education is significant. However, the country is committed to delivering a tough deficit reduction programme. Only by rebalancing the contributions to higher education between the state and the beneficiary can we avoid a damaging impact on the quality of higher education.

I return to the related matter of research funding. The Government have recognised the substantial contribution that universities around the country make through research to economic growth and to the overall health and cohesion of our society. The decision to protect public investment in our highly productive science and research base represents a major investment in future growth. University reputations are built not just on teaching but on the quality of their research. The excellence of university research is also a critical factor in investment decisions by international companies. UKTI has used the strength of the United Kingdom research base to attract hundreds of R&D projects into the country.

I might now be taking the next points out of the flow of my response, but at least the noble Lord, Lord Willis of Knaresborough, the noble Baroness, Lady Blackstone, and others will get an answer. When I referred to the proposed HE White Paper and the HE Bill, I should have added that I welcome the suggestions that various noble Lords have made on the issues that we should consider in that White Paper, including the remarks made by the noble Lord, Lord Willis, about the spread of degree-awarding powers and research funding. We will consult widely with the sector, students and experts, such as the noble Lord, when formulating this White Paper.

The noble Baroness, Lady Kennedy of The Shaws, referred to NUS proposals on graduate contributions. The progressive repayment system proposed by the noble Lord, Lord Browne, shares many of the attractive features of a graduate tax and of the NUS proposals. I welcome the questions from the noble Lord, Lord Triesman, but I am sure that he will understand that I cannot pre-empt the Government’s full response, which will be announced shortly.

In conclusion, I remind noble Lords of the stakes involved in university reform. The Times Higher Education world rankings, which were issued a couple of months ago, highlighted the jewel that is our HE sector. The United Kingdom is home, once again, to 29 institutions in the top 200, second only to the United States of America.

League tables of this kind never tell the whole story, of course, but they at least provide a part of the narrative where higher education has become a global endeavour, where academics and students are mobile internationally and where universities in emerging nations are rising in stature. At present, the UK punches well above its weight. The quality of our higher education is one of the best adverts for our country and this must continue.

The challenge is to make sure that UK institutions dominate league tables in a decade’s time and in decades to come. We can meet one part of this challenge by building research partnerships with universities overseas, and that is happening already. My colleague, the Minister for Universities and Science, will be making a second visit to India next month, where he will discuss our role in this. However, much of the challenge will come down to introducing effective changes at home, for a renewed focus on higher education as a driver of social mobility, business growth, innovation and skills development is critical to our shared future.

The notion of a shared future brings me back to my starting point in this debate: the idea of autonomous institutions stimulating the curiosity and creativity of our people, reminding us of our common heritage and inspiring us in regard to human potential. The Government are duty bound to protect this invaluable national resource, and we will.

[Lord Hannay of Chiswick]

Can the Minister make a little more coherent the eloquent remarks she made about this being an international matter and that Britain’s place in the international market is strong and needs to become even stronger? Given the incoherence between that and the issue of immigration, I do not see how the two can be fitted together in the timetable she has given. Universities are being hampered now by the immigration system that is temporarily in place, and they do not know whether they will be hampered even more by the one that will be put in place. Can she not say anything about bringing some coherence into these issues?

[Baroness Anelay of St Johns]

My Lords, I am afraid that the noble Lord, Lord Hannay, has taken us to the point where guidance in the Companion says that we should consider finishing the debate. I have heard the debate throughout, both in the Chamber and out, and the noble Lord has raised an important point. I am sure that my noble friend will take the opportunity, through other measures in the House, to respond to him. I know she would wish to do so but, as Chief Whip, I invite her not to do so tonight.

Motion agreed.

House adjourned at 10.18 pm.