House of Commons

Wednesday 10th November 2010 Commons Chamber

Wednesday 10 November 2010

The House met at half-past Eleven o’clock

Prayers

Wednesday 10th November 2010 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 10th November 2010 Commons Chamber

The Secretary of State was asked—

[David Morris (Morecambe and Lunesdale) (Con)]

1. What recent discussions he has had with ministerial colleagues on the contribution of Northern Ireland to the Government’s programmes to increase the level of exports for the purposes of international trade.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

My right hon. Friend the Secretary of State and I have had regular discussions with ministerial colleagues in Northern Ireland on economic development issues. We will continue to work with the Executive to rebalance the Northern Ireland economy and grow the private sector.

[David Morris]

Does the Minister agree that the inspirational visit to China by the Prime Minister shows that we should redouble our efforts on exporting?

[Mr Swire]

Yes, I certainly do. Invest Northern Ireland has recently led trade missions to Brazil, South Africa and Vietnam, and 35 Northern Ireland companies from across the sector went with it. What is going on in China should work as an incentive to others to export. Let me pay tribute to a company that I visited the other day in Ballymena—and I see that the hon. Member for North Antrim (Ian Paisley) is present. Wrightbus has just supplied 450 double-decker buses to Singapore and has won the design project for the replacement of the iconic Routemaster bus here in London. The answer to rebalancing part of the Northern Irish economy is to get—

[Mr Speaker]

Order. That answer is too long. The Minister will resume his seat, and he must not repeat that.

[Ms Margaret Ritchie (South Down) (SDLP)]

I thank the Minister for his answer. Given the need to provide growth in the Northern Ireland economy and ensure jobs and investment, can he provide assurances to the House that the Prime Minister, on his current trade mission to China, is aware not only of the need to rebalance the economy in Northern Ireland but of the products that could be exported as part of international trade—and also of the fact that the Government are about to publish a paper on the Northern Ireland economy and corporation tax?

[Mr Swire]

Of course the Prime Minister continues to take an interest in Northern Ireland. The food, drink and tobacco sectors account for 45% of total sales and 46% of external sales. These figures could and should increase, and the Secretary of State and I will work with the devolved Administration, in whatever way we are asked, to support any incentive of that kind.

[Ian Paisley (North Antrim) (DUP)]

Will the Secretary of State commit to making representations to the Treasury regarding alterations to how tobacco tax is lifted, so that the Treasury can receive a bigger taxation take while allowing the industry to invest in securing jobs in Northern Ireland?

[Mr Swire]

The hon. Gentleman has in his constituency the Gallaher Group, which my right hon. Friend the Secretary of State visited recently. The loss to the United Kingdom economy from contraband cigarettes and forfeited duty is in the region of £2 billion to £3 billion a year. We should consider that closely, and continue to make representations in that regard.

[Naomi Long (Belfast East) (Alliance)]

Is the Minister as concerned as those of us who come from Northern Ireland that recent reports show a third quarter fall in growth in the private sector in Northern Ireland, and will he therefore redouble his efforts to rebalance the Northern Ireland economy more effectively?

[Mr Swire]

Clearly, Northern Ireland is not immune to what is going on in the rest of the world—one has only to look over the border at what is going on in Ireland to see that. We work very closely with Northern Ireland on rebalancing the economy and we have the support of the Finance Minister, who, along with the Minister of Enterprise, Trade and Industry, is meeting the Select Committee on Northern Ireland Affairs this afternoon to discuss corporation tax. We must leave no stone unturned in our attempts to rebalance Northern Ireland’s economy and, critically, to provide well-paid and sustainable jobs.

[Mr Speaker]

Unless I am mistaken, the hon. Member for Morecambe and Lunesdale (David Morris) did not put a supplementary question to the substantive question. If he did he can nod his head, but if he did not, he should do so.

[David Morris]

indicated assent.

[Mr Speaker]

He did; he is happy. He is sanguine about it.

[Gavin Williamson (South Staffordshire) (Con)]

2. What recent progress has been made on locating the disappeared.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

In July, the Independent Commission for the Location of Victims’ Remains successfully recovered the remains of Charlie Armstrong, and it awaits DNA confirmation regarding remains it believes to be those of Gerard Evans and Peter Wilson. This would take the total number of disappeared who have been located to nine.

[Gavin Williamson]

Is it still the case that the ICLVR is to be wound up at the end of this year?

[Mr Swire]

May I pay tribute to the excellent work of the ICLVR, particularly Geoff Knupfer and Jon Hill, who do such good work, as I have seen for myself? I met the Wilson family just before the find was announced, and I can testify to the very serious effect that it has on families who have waited for many, many years to find their loved ones so that they can be placed in a grave and they can go to see them regularly. That achieves closure for many people. The commission is a joint initiative between the Irish and the British Governments. It is led entirely by intelligence, and we will continue to be led by intelligence—

[Mr Speaker]

Order. The Minister will have to practise. He is far too long-winded, and that has got to change.

[Eric Joyce (Falkirk) (Lab)]

The Minister refers to the recovery of remains, which is a painful reminder of the need to deal with the legacy of the past in Northern Ireland. If the Secretary of State decides to place any new obligations on the Historical Enquiries Team, will he ensure that it is fully and properly funded to undertake them?

[Mr Swire]

The two bodies are entirely different. We believe that the HET is a good organisation and should be properly resourced, as we believe that it represents the way forward.

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

The whole House will think fondly of that gallant soldier Captain Robert Nairac of the Grenadier Guards, who was so brutally killed by the IRA. Does the Minister have any up-to-date information about whether his remains may yet be discovered?

[Mr Swire]

My hon. Friend is right to draw attention to that. Alas, Captain Nairac is not alone. A considerable number of bodies have yet to be located, and that we hope that will happen in due course.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

The Minister has already referred to the winding up of the commission dealing with the disappeared. Does he think that is wise, and does he think it is wise also to wind up the Independent Monitoring Commission, given the ongoing paramilitary activity in Northern Ireland?

[Mr Swire]

The right hon. Gentleman may have misheard me. I have not said that we will wind up the former. With reference to the latter, we announced that there would be one more valedictory report. It was established in the first place to monitor the connections between elected representatives and paramilitaries. We believe that that is no longer appropriate or necessary.

[Lady Hermon (North Down) (Ind)]

Would the Minister kindly give me a commitment that fresh efforts will be made to retrieve my young constituent, Lisa Dorrian, who was murdered and disappeared by those with loyalist paramilitary connections five years ago? That is five long Christmases for the family, who deserve closure. What fresh efforts are being made to retrieve her body?

[Mr Swire]

The hon. Lady is entirely correct, but she must understand that the responsibility of the Northern Ireland Office in these matters is limited, and quite properly so. The ICLVR is an independent organisation and responds to intelligence provided to it—very often anonymous intelligence. I hope that it will listen to what the hon. Lady has said, but it will respond only when the intelligence comes. I hope that those who have any understanding or any knowledge will bring that forward.

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

3. What recent discussions he has had with private sector companies in Northern Ireland on the effects on them of changes in Barnett formula funding for Northern Ireland consequent upon the outcomes of the comprehensive spending review.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

My right hon. Friend the Secretary of State and I have regular discussions with people from the private sector in Northern Ireland. I have found a widespread recognition that the public sector can and should respond by delivering better value, and support for the objective that we and the Executive share of rebalancing the Northern Ireland economy.

[Tom Greatrex]

The Minister will be aware of the recent report from PricewaterhouseCoopers stating that 36,000 jobs will be lost in Northern Ireland as a result of the Government’s policies—20,000 in the public sector and a further 16,000 in the private sector. What estimate has he made of the cost to the taxpayer of those 36,000 people currently in work being made unemployed by the Government’s policies?

[Mr Swire]

The hon. Gentleman was not in the House at the time, but these are not the Conservative and Liberal Democrat parties’ cuts. These are Labour’s cuts—[Interruption.] Northern Ireland has done better out of the spending review than it was led to believe would have been the case under the previous Government. It is in the interests of everybody in the House to talk up Northern Ireland, to attract inward investment and to rebalance the economy so that it is not so dependent on the public sector. That is the way forward for Northern Ireland, and I hope the hon. Gentleman will support us on that.

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

Does the Minister agree that to reform the Barnett formula, all the devolved nations would need to agree to a process, and that if one nation, such as the Scottish Government, refused to participate in that process, that would be showing disrespect to all the others?

[Mr Swire]

Of course I am aware of the House of Lords Select Committee report on the Barnett formula, the Holtham Commission on Welsh funding and other commentators on the system of devolution funding. At present we are trying to get the public finances under control to get the economy moving again. Any change in the system of funding the devolved Administrations must wait for the stabilisation of the public finances.

[Sammy Wilson (East Antrim) (DUP)]

One of the impacts on the private sector will be the huge reduction of 40% in capital spending over the next four years, and there is disagreement about whether the settlement honours the St Andrews agreement settlement on capital spending. In the one area where there is dispute, does the capital settlement for Northern Ireland include capital spending on the police? Is that part of the Minister’s assessment of the total capital budget for Northern Ireland?

[Mr Swire]

The hon. Gentleman knows that under the previous Government the reduction was likely to be 50% of capital expenditure. Under us it is 37% over four years. In response to his comments on policing and justice, I can tell him that we stand by the commitments. As he knows, the Northern Ireland Executive’s capital allocation of £3.3 billion over the spending review period will permit those costs to be met, but there will be difficult decisions, and unfortunately it is up to the hon. Gentleman, as the Finance Minister at Stormont, to make those difficult decisions. It is up to him and the Executive, and I support his attempts to get them to form a budget.

[Robert Halfon (Harlow) (Con)]

Does my hon. Friend agree that the people of Northern Ireland will welcome the cut in business taxes, which will create real private sector jobs, and the coalition Government’s action to deal with the £120 million a day in interest and debt that we are paying?

[Mr Swire]

Yes, of course. Northern Ireland, like other parts of the United Kingdom, will benefit from those actions, which the incoming Government took very quickly. Beyond that, however, we are thinking about how, in the long term, we can stop the dependency on the public sector, which is disproportionate in Northern Ireland. In that context, one way forward will be to look at the whole issue of corporation tax.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

4. What assessment he has made of the likely effects on security in Northern Ireland of the outcomes of the comprehensive spending review; and if he will make a statement.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

Following the outcome of the 2010 spending review, it is for the Northern Ireland Executive to decide how funds are allocated to the Northern Ireland Departments. It will be for the Northern Ireland Justice Minister and the Chief Constable of the Police Service of Northern Ireland, in the first instance, to negotiate the PSNI budget with the Executive. My right hon. Friend the Prime Minister and I have made it clear that we will protect the people of our country from the terrorist threat with every means at our disposal.

[Gemma Doyle]

I thank the Secretary of State for his response. He will appreciate that people in Northern Ireland and throughout the UK will be concerned about the impact of spending cuts on peace and security in Northern Ireland. Can he assure the House that the comprehensive spending review will not impact on front-line community policing in Northern Ireland? That is something that the Minister stopped short of saying in response to an earlier question.

[Mr Paterson]

We have been absolutely clear that we will stand by Northern Ireland. We will do what is necessary to bear down on that threat, but the first port of call is for the Justice Minister and the Chief Constable to negotiate with the Executive on the very substantial allocation of public money that has been granted to them in the spending round.

[Mr Laurence Robertson (Tewkesbury) (Con)]

The Select Committee on Northern Ireland met the assistant commissioner of the Garda two days ago, and he assured us that in spite of the financial difficulties in Ireland they would continue to police the border, in particular, in the same way. He said that there would be absolutely no reduction in their efforts. Can the Secretary of State give us the same assurance today?

[Mr Paterson]

Emphatically yes. We have exceptional co-operation with the Garda, and I should like to congratulate them on their seizure of a significant amount of armaments at Dunleer woods in County Louth. Emphatically yes: we will work extremely closely with them and match their effort.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The Secretary of State will be aware of the deteriorating security situation in parts of Northern Ireland due to the dissident threat. Will he be open to an approach, should it be required, for additional resources to deal with that threat as it materialises over the winter months?

[Mr Paterson]

We have been clear, from the early negotiations that I had with the shadow Secretary of State, when he was Secretary of State, that we would endorse the very substantial policing settlement that the previous Government negotiated with the Northern Ireland Executive. That was quite clear. Should there be security pressure, and should the security position deteriorate, it would be right for the Justice Minister and the Chief Constable to come to us and ask for contributions from the national reserve.

[Andrew Stephenson (Pendle) (Con)]

5. What his most recent assessment is of the level of threat posed by terrorist groups in Northern Ireland.

[Ian Murray (Edinburgh South) (Lab)]

7. What his most recent assessment is of the security situation in Northern Ireland.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

The threat level in Northern Ireland remains at severe. We are not complacent, but I am pleased to tell the House that this year, following eight further arrests this morning, there have been 195 arrests and 71 persons have been charged with terrorist offences. That compares with 106 arrests and 17 charges in the whole of 2009. I commend the security forces for their continued successes in frustrating the efforts of residual terrorist groups. The coalition Government are committed to continuing to promote peace, stability and economic prosperity in Northern Ireland, and standing firmly behind the agreements negotiated and the institutions that they established.

[Andrew Stephenson]

I thank my right hon. Friend for that answer. The national security strategy has highlighted the fact that there have been 37 separate attacks this year, so the threat from residual terrorist groups remains high. What steps is he taking to combat that threat?

[Mr Paterson]

I am grateful for my hon. Friend’s question. We have taken this to the highest level of Government. We presented a paper to the National Security Council, and as a result of that, the threat from Northern Ireland has been put in tier 1 in the national security strategy.

[Ian Murray]

The latest Independent Monitoring Commission report highlights the continuing involvement of dissident republicans in very serious levels of criminal activity. Will the Minister assure the House that all resources will be made available to ensure that that threat does not continue?

[Mr Paterson]

I repeat that we are working extremely closely with the devolved Administration and the Dublin Government on bearing down on this threat, and we will do what is necessary.

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

Will the Secretary of State acknowledge the deep anger among all sections of the community in Northern Ireland at the growing level of attacks by paramilitaries—with, indeed, activity on both sides, but particularly among dissident republicans? People are looking for action to be taken, and for co-operation between the agencies for which he is responsible and the Northern Ireland Executive to deal with this problem urgently.

[Mr Paterson]

The right hon. Gentleman is right to make that comment. That is why we produced a substantial paper for the National Security Council, which was discussed at the highest level; and that is why we are working so closely with the devolved Administration and the Justice Minister, to whom I spoke this morning, and the Government in Dublin. We are determined to work at all levels to end this security problem.

[Mr Dodds]

I thank the Secretary of State for his answer, and acknowledge the work that he is doing in terms of the tier 1 level of threat assessment in Northern Ireland. However, the fact that the recent bomb find at East Midlands airport happened on the same day as a bomb find at Belfast City airport shows the level of threat against citizens right across the United Kingdom. Can we be assured that while the threat of al-Qaeda is a priority, the threat in Northern Ireland is also treated as a top priority?

[Mr Paterson]

The right hon. Gentleman is right to point out that these threats affect us all in the United Kingdom. That is why the threat from Northern Ireland has been placed in the No. 1 category—in tier 1.

[Mr Shaun Woodward (St Helens South and Whiston) (Lab)]

The Secretary of State and his right hon. Friend the Prime Minister gave an unambiguous undertaking before the Hillsborough Castle agreement that the previous Government’s financial arrangements for the devolution of policing and justice would be upheld. In relation to the security situation, this unequivocally included a commitment that the Northern Ireland Executive would have access to the reserve. Can the Secretary of State confirm that he continues to stand by that commitment, without any new conditions being imposed by the Treasury?

[Mr Paterson]

I am grateful to the right hon. Gentleman for his question. I have said this already, but I am happy to look him in the eye and repeat it. Should the security situation deteriorate, then—according to the agreement that the previous Government, in which he was Secretary of State, made with the then Executive—the Justice Minister and the Chief Constable have the right to approach the Government with a clear strategy on security grounds in order to call on the national reserve.

[Mr Woodward]

I am grateful for that reply. We all note the decision to raise the threat level here in Great Britain, and the Secretary of State can be assured that the Opposition fully support the decision to address the problems created by that threat. Given the level of recent attacks in Northern Ireland, including the recent use of a hand grenade, and given the need for the response to be measured, proportionate and joined up, would a request by the First Minister and Deputy First Minister to meet the Prime Minister as soon as possible be fully supported by the Secretary of State?

[Mr Paterson]

The Prime Minister made regular visits to Northern Ireland when he was Leader of the Opposition. He met the First Minister and Deputy First Minister then, to discuss a broad range of issues. He intends to go back to Northern Ireland, and at that time he will have the opportunity to discuss matters with them. If the right hon. Gentleman is referring specifically to the budget settlement, it is appropriate that the First Minister and Deputy First Minister first discuss that with me, having done their utmost to come to an agreement and consensus in the Executive on a budget for the substantial funds that have been allocated to them in this spending round.

[Mark Durkan (Foyle) (SDLP)]

6. What discussions he has had with ministerial colleagues on the implications for Northern Ireland of the provisions of part 2 of the Parliamentary Voting System and Constituencies Bill.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

My right hon. Friend the Secretary of State and I have had regular discussions with ministerial colleagues and with elected representatives in Northern Ireland on the provisions of the Parliamentary Voting System and Constituencies Bill, and will continue to do so as the Bill continues its progress through both Houses.

[Mark Durkan]

Does the Minister recognise that as it stands, part 2 of the Bill has serious implications for the Northern Ireland Assembly, whose constituencies are meant to be coterminous with parliamentary constituencies? Reviews every five years that could put those constituencies out of cycle, or change the total number of constituencies in Northern Ireland, will be hugely unsettling. Will he take steps to ensure that full consideration is undertaken with the authorities in the Northern Ireland Assembly, as well as with his ministerial colleagues?

[Mr Swire]

rose—[Interruption.]

[Mr Speaker]

Order. I want to hear the Minister’s reply.

[Mr Swire]

Thank you, Mr Speaker.

The hon. Gentleman raised this matter during the passage of the Bill. It is true that coterminosity between the parliamentary and Assembly seats has worked well, and the amended rules can continue to provide for the Electoral Commission to take that into account. I should say to him that as he knows, the size of the Assembly is up to the Assembly, not to Parliament or to this House through the Bill.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

8. When the Government plan to disburse their proposed financial assistance to savers with the Presbyterian Mutual Society.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

In the spending review announcement, my right hon. Friend the Chancellor of the Exchequer announced that the Government would meet in full a £175 million loan and £25 million in cash to fund the Northern Ireland Executive’s proposal to resolve the PMS crisis.

[Jonathan Reynolds]

I thank the Minister for that response, but given that the Government’s proposals are a carbon copy of what my right hon. Friend the former Prime Minister announced, why did the Secretary of State delay the announcement by six months, causing unnecessary suffering and misunderstanding for the people who had lost money in the PMS?

[Mr Swire]

There is a fundamental difference between what the previous Government did and what the current Government have done about the problems connected with the PMS: we have actually done something. We have responded to the request from the Executive in full. We stand by the Prime Minister’s commitment, and we are very pleased that we were able to act so swiftly—unlike some others.

[Patrick Mercer (Newark) (Con)]

9. What assessment he has made of the reasons for the recent increase in the level of dissident violence in Northern Ireland.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

This violence is a direct response to the continued political progress in Northern Ireland. Those people are outdated and backward-looking. All that they have to offer is to destabilise the peace process and disadvantage the people of Northern Ireland, but they will not succeed. The Government take the terrorist threat in Northern Ireland extremely seriously. There have been 39 attacks so far this year, compared with 22 throughout 2009.

[Patrick Mercer]

I heard what the Secretary of State had to say earlier about the operations of the police in the Republic. Can he also give me some assurance that there is intelligence sharing between the Northern Irish Government and that in Dublin?

[Mr Paterson]

I am most grateful to my hon. Friend for his question, and for his interest in Northern Ireland affairs. I do not think I can give a better example than the fact that the current Chief Constable always had good relations with his neighbour when he was chief constable of Leicestershire, but has said that his relations with Fachtna Murphy, the Garda commissioner, are even better. I should like publicly to pay tribute to Fachtna Murphy, who is, sadly, retiring at the end of the year. He has been a great friend of Northern Ireland. The collaboration between the Garda and the PSNI is at an exceptional level, and I look forward to helping it continue.

[David Simpson (Upper Bann) (DUP)]

The Secretary of State will be aware of the recent series of dissident republican operations in my constituency, including the bomb at a railway bridge and a previous bomb that almost killed three local children. Does he share the Chief Constable’s current assessment of the levels of resources and manpower available to the PSNI?

[Mr Paterson]

I am grateful for that question. I am also pleased to send on my sympathies to the hon. Gentleman’s constituents who have been subject to such intolerable attacks, which, thankfully, have not caused death or injury. Last week the Chief Constable said:

“We are absolutely putting huge resources back in, we are going to sustain that next year and the year after until those responsible are brought to justice or they can be persuaded to give up.”

[Jim Shannon (Strangford) (DUP)]

10. What assessment he has made of the effects on the Northern Ireland fishing fleet of the operation of EU legislation on working time; and if he will make a statement.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

Responsibilities here are divided: fisheries generally are a devolved matter, but the UK Government have led on aspects of the EU working time directive as it applies to fishing vessels.

[Jim Shannon]

EU legislation includes a fundamental right to work. What steps has the Minister taken with his European counterparts to ensure that the fishermen of Portavogie, Ardglass and Kilkeen, who have had their days at sea restricted, have a right to work?

[Mr Swire]

I understand that Diane Dodds and other Northern Ireland MEPs are working hard to address some of the difficulties experienced by the fishing industry in Northern Ireland, particularly in relation to the matter that the hon. Gentleman raises. I must stress though that fishing matters are partly devolved. None the less, I undertake to look into the matter, write to the hon. Gentleman in due course and put a copy of the letter in the Library.

The Prime Minister was asked—

[Jason McCartney (Colne Valley) (Con)]

Q1. If he will list his official engagements for Wednesday 10 November.

[The Deputy Prime Minister (Mr Nick Clegg)]

I have been asked to reply. My right hon. Friend the Prime Minister has been leading a major Government and trade delegation to China, and is now travelling to Seoul for the G20 summit.

I am sure that the whole House will wish to join me in paying tribute to Senior Aircraftman Scott Hughes of 1 Squadron Royal Air Force Regiment, who died in Cyprus on Sunday while returning from operational service in Afghanistan. He was a professional and brave airman, and it is very sad that he died while returning home from a tour of duty. Our thoughts are with his family and loved ones.

This week, on the eve of Remembrance day, we especially remember all those who have given their lives in the service of our country, both in recent years and through previous generations. The sacrifices made by our servicemen and women for our peace and freedom must never be forgotten.

On a much happier note, let me, on behalf of the Government, extend our warmest congratulations and best wishes to the Leader of the Opposition and his partner, Justine, on the birth of their baby son. It is wonderful news and we really are thrilled for them.

[Jason McCartney]

A 12-year-old haemophiliac from Lindley in Huddersfield was injected with contaminated blood products, giving him HIV, hepatitis C and CJD. When will he and the 2,000 other survivors of this shocking scandal get fair compensation?

[The Deputy Prime Minister]

I know that my hon. Friend is a vigorous campaigner for all those whose lives have been so tragically affected by contaminated blood. It really is a dreadful catastrophe for all those affected. The Under-Secretary of State for Health, my hon. Friend the Member for Guildford (Anne Milton), intends to report by the end of the year on the outcome of the current review to see what more can be done for those affected by contaminated blood. Tomorrow, Health Ministers will hold an open meeting in Westminster Hall at which hon. Members from all parts of the House and peers from the other place can raise their concerns.

[Ms Harriet Harman (Camberwell and Peckham) (Lab)]

I join the Deputy Prime Minister in paying tribute to Senior Aircraftman Scott Hughes of 1 Squadron Royal Air Force Regiment. We honour his memory and send condolences to his family. We will remember all our servicemen and women on Remembrance day. I should like to echo, too, the right hon. Gentleman’s best wishes to the Leader of the Opposition and Justine on the birth of their new baby.

In April, the Deputy Prime Minister said that it was his aim to end university tuition fees. Will he update the House on how his plan is progressing?

[The Deputy Prime Minister]

Of course I acknowledge that this is an extraordinarily difficult issue, and I have been entirely open about the fact that we have not been able to deliver the policy that we held in opposition. Because of the financial situation and because of the compromises of the coalition Government, we have had to put forward a different policy—[Interruption.]

[Mr Speaker]

Order. I want to hear the Deputy Prime Minister’s update.

[The Deputy Prime Minister]

None the less, we have stuck to our wider ambition to make sure that going to university is done in a progressive way, so that people who are currently discouraged from going to university—bright people from poor backgrounds, who are discouraged by the system that we inherited from the right hon. and learned Lady’s Government—are able to do so. That is why our policy is more progressive than hers.

[Ms Harman]

Well, I am glad that the Deputy Prime Minister thinks it is so fair. I hope he will be going out and telling that to all the students and lecturers who are marching on Westminster today. In April he said that increasing tuition fees to £7,000 a year would be a “disaster”. What word would he use to describe fees of £9,000?

[The Deputy Prime Minister]

I think there is more consensus than the right hon. and learned Lady concedes on the simple principle that people who benefit from going to university should make a contribution to the cost of that university education. The question is: how do we do it? Do we do it fairly and in a progressive way? The proposals that we have put forward will mean that those who earn the least will pay much less than they do at the moment—while those who earn the most will pay over the odds to provide a subsidy to allow people from poor backgrounds to go to university—and will, for the first time, end the discrimination against the 40% of people in our universities who are part-time students, who were so shamefully treated by her Government.

[Ms Harman]

None of us agrees with tuition fees of £9,000 a year. This is not about the deficit: the Chancellor said that the deficit would be dealt with by 2014, when the new system will hardly have begun. No, this is not about the deficit; this is about the Deputy Prime Minister going along with a Tory plan to shove the cost of higher education on to students and their families. We all know what it is like, Mr Speaker. You are at Freshers’ week. You meet up with a dodgy bloke and you do things that you regret. Is not the truth of it that the Deputy Prime Minister has been led astray by the Tories?

[The Deputy Prime Minister]

I know that the right hon. and learned Lady now thinks that she can reposition the Labour party as the champion of students, but let us remember the Labour party’s record: against tuition fees in 1997, but introduced them a few months later; against top-up fees in the manifesto in 2001, then introduced top-up fees. Then Labour set up the Browne review, which it is now trashing, and now the Labour party has a policy to tax graduates that half the Front-Bench team does not even believe in. Maybe she will go out to the students who are protesting outside now and explain what on earth her policy is.

[Ms Harman]

As a result of the Deputy Prime Minister’s plans, English students will pay among the highest fees of any public university system in the industrialised world, and why? It is not to give universities more funds, but to replace the cuts that he is making to university teaching. Can he tell the House what the percentage cut to the university teaching grant is?

[The Deputy Prime Minister]

I can certainly confirm that the right hon. and learned Lady and her party also had plans to make massive cuts in the budget of the Department for Business, Innovation and Skills, which would have affected higher education. Here are a few facts. Every single graduate under our scheme will pay less per month than they do under the scheme that we inherited from Labour. The bottom 25% of earners will pay much less in their contributions to their university education than they do at the moment. Part-time students will pay no up-front fees, and not a single student will pay a penny of up-front fees whatsoever. It is a fair and progressive solution to a very difficult problem.

[Ms Harman]

It looks as though the right hon. Gentleman has been taking lessons from the Prime Minister on how not to answer the question. I asked him about the cut in the teaching grant. The truth is that it is a staggering 80%––80%. No wonder he is ducking the question. The real reason he is hiking up fees is that he is pulling the plug on public funding, and dumping the cost on to students. Is that not why he is betraying his promise on tuition fees?

[The Deputy Prime Minister]

The graduate tax that the right hon. and learned Lady advocates would be more unfair and would allow higher earners to opt out of the system altogether. We all agree—she agrees—across the House that graduates should make some contribution for the benefit of going to university. The question is, how? We have a progressive plan; she has no plan whatsoever.

[Ms Harman]

But during the election, the right hon. Gentleman hawked himself around university campuses pledging to vote against tuition fees. By the time Freshers’ week was over, he had broken his promise. Every single Liberal Democrat MP signed the pledge not to put up tuition fees; every single one of them is about to break that promise. He must honour his promise to students and their families throughout the country. Will he think again?

[The Deputy Prime Minister]

It is quite something to take lectures from the right hon. and learned Lady about party management after the mutiny in the parliamentary Labour party on Monday—[Interruption.] Labour Members are cheering her now, but they certainly were not at the mutiny on Monday night. The truth is that before the election we did not know the unholy mess that would be left to us by her party. On this issue, as on so many, the two parties on this side of the House have come together to create a solution for the future. The two parties on this side of the House have one policy; the Labour party has two policies.

[Duncan Hames (Chippenham) (LD)]

In the international dialogue about democracy that we are witnessing, what would my right hon. Friend say to those who welcomed the elections in Burma, which were nothing more than an utter sham?

[The Deputy Prime Minister]

I strongly agree that those elections were a complete and utter sham. Their conclusion was already decided well before they took place, with reserved seats for the military, and reserved seats for parties that were put up by the military. They are simply swapping their military uniforms for civilian clothing, but keeping their iron dictatorial grip on the people of Burma. Aung San Suu Kyi should be released when her house arrest comes up for review in the coming days, and real democracy should finally be introduced in Burma.

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

Q2. Given that we all know how important consistency is to the Deputy Prime Minister, will he explain to the House why his Chief Secretary to the Treasury is pictured on the Liberal Democrat website leading the campaign against selling off forestry in Scotland, at the same time as he is proposing that in England?

[The Deputy Prime Minister]

The poor Chief Secretary to the Treasury is picked on all the time—first for being ginger. Did the right hon. and learned Member for Camberwell and Peckham (Ms Harman) make an impact assessment of her outrageously discriminatory remarks?––[Interruption.]

[Mr Speaker]

Order. First, the Deputy Prime Minister must be heard. Secondly, the public thoroughly disapprove of this level of destructive barracking from wherever in the House it comes: note that, and learn from it.

[The Deputy Prime Minister]

I was simply making the point that any form of discrimination against rodents or ginger-headed folk is wrong.

As the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) knows, on forestry issues, as on many others, there is a devolved division of responsibility. He should know that better than anyone else.

[Charlie Elphicke (Dover) (Con)]

Q3. Will my right hon. Friend tell the House whether the Prime Minister received the “people’s port” community mutual’s bid for the port of Dover? Will he allow a community right to buy, or will it be another British icon sold overseas, as the previous Labour Government planned?

[The Deputy Prime Minister]

Of course I am pleased, as no doubt everyone is, that there is such a strong community interest in the future of the port of Dover. Campaigners have received stellar backing, and I wish their campaign all the very best of luck. As my hon. Friend knows, the port’s assets are owned by Dover harbour board, not by the Government. The Minister of State, Department for Transport, my right hon. Friend the Member for Chipping Barnet (Mrs Villiers) is considering proposals for a scheme that would allow the board to sell the port, so it would be inappropriate for me to comment further on that decision.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Q4. AgustaWestland is an excellent company providing skilled manufacturing jobs in Yeovil. Sheffield Forgemasters is also an excellent company, providing skilled manufacturing jobs in Yorkshire. Why did the Government decide to support one and not the other?

[The Deputy Prime Minister]

Of course I agree with the hon. Lady that both are outstanding companies. The difference is that the announcement of the decision to provide a loan to Sheffield Forgemasters was made 11 days before the general election, when there was no money in this year’s budget to make that promise. It was a promise made by the previous Labour Government knowing that the cheque would bounce. We have made a decision on Westland in the light of our difficult, controversial decisions to bring sense to the public finances. That is the difference.

[Andrew Stephenson (Pendle) (Con)]

Q5. The Deputy Prime Minister might be aware that, in response to the comprehensive spending review, the three most senior officers of Pendle borough council have announced a wage cut of 27%. In contrast, the chief constable of Lancashire police, Steve Finnigan, has started a 90-day consultation on making all Lancashire’s police community support officers redundant. Does my right hon. Friend agree that the chief constable should think again and that he should support our PCSOs—[Interruption.]

[Mr Speaker]

Order. I want to hear the Deputy Prime Minister’s reply.

[The Deputy Prime Minister]

Of course I welcome the decision by Pendle borough council and its executive directors to reduce the council’s wage bill. My right hon. Friend the Secretary of State for Communities and Local Government has called on all local authority chief executives earning £200,000 a year to take a 10% pay cut, and those on £150,000 to take a 5% cut. They need to make sacrifices, just as everyone else is. On policing, of course I understand everyone’s attachment to PCSOs, but it would be a flagrant breach of the traditions of policing in this country if we were to start second-guessing chief constables. I think we all want more visible policing; it cannot be right that the system we inherited from Labour means that only 11% of police officers are ever seen on our streets at any one time. That is wrong and it must change.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Q6. Tens of thousands of students have gathered outside this place today to oppose the right hon. Gentleman’s shameful policy of tripling student debt. He received a request to address the crowd, but as yet no response has been received. May I give him the opportunity to give that response now?

[The Deputy Prime Minister]

As the hon. Gentleman knows, I meet student leaders and representatives of the National Union of Students all the time. I hope that, when he joins the demonstrators, the first thing he will do is explain what on earth his party’s policy is. We have a policy; he has no policy and no plan, and is giving no hope to future generations of students.

[Brandon Lewis (Great Yarmouth) (Con)]

Q7. My right hon. Friend might be aware of the great work being done by the East of England Energy Group, and by the borough councils, the county council and local small companies in Norfolk to ensure that Great Yarmouth and East Anglia benefit from economic growth and regeneration through the energy markets. Will he and the Government support our work to ensure that East Anglia gets a fair and even chance to bid for the opportunities that these new markets can provide?

[The Deputy Prime Minister]

I strongly agree with my hon. Friend that renewable energy is one of the great industries of the future, and we are doing everything we can to support those areas that want to exploit the opportunities. We have committed £1.4 billion to a regional growth fund, and we are establishing a green investment bank with the explicit aim of creating further investment opportunities in green infrastructure in areas where private sector investment is currently constrained. I am delighted to hear about the way in which councils, businesses and the not-for-profit sector in Norfolk are working so effectively together.

[Sheila Gilmore (Edinburgh East) (Lab)]

In answer to a question that I asked last week, the Minister for Further Education, Skills and Lifelong Learning indicated that the major reason for his proposals on fees was to change the way in which higher education was funded, and to shift the burden from the state to the student. How does the Deputy Prime Minister square that with his party’s view that the proposals are a deficit reduction measure only, and that they could be changed in the future?

[The Deputy Prime Minister]

As I said earlier, I think every Member agrees that the funding for universities should be a mixture of direct support from the state and contributions made by—[Interruption.] As soon as we came into government, we looked exhaustively at the option of a graduate tax, which was proposed by some Labour Members and by the National Union of Students, but we discovered that that would be much more unfair and would allow particularly high earners to opt out of the system altogether, compared to the progressive system of graduate contributions that we are proposing now.

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

Q8. Her Majesty’s Revenue and Customs has a business payment support service, which has helped many businesses in my constituency that have met short-term problems to achieve a delayed payment of taxes—sometimes the taxman can help, apparently. Does my right hon. Friend agree that this is a valuable service and that HMRC, alongside every other part of Government, should provide as much flexibility and support as possible for business, if we are get out of the recession left to us by the previous Government?

[The Deputy Prime Minister]

I strongly agree with my hon. Friend. I think that HMRC’s business payment support service is indeed, as he says, a very valuable and important service, and it remains in place. By the end of September this year, 371,200 arrangements had been granted, worth £6.38 billion. That is extraordinarily valuable to small and medium-sized enterprises, which are indeed struggling and deserve all the support they require to power us out of this difficult economic environment.

[Paul Blomfield (Sheffield Central) (Lab)]

The Minister for Universities and Science has made it clear that all public funding will be withdrawn from non-STEM subjects in universities. Last Wednesday, the Minister for Further Education, Skills and Lifelong Learning told a Westminster Hall debate:

“We will continue to support the arts through the subsidy for teaching in universities.”—[Official Report, 3 November 2010; Vol. 517, c. 315WH.]

Who is right?

[The Deputy Prime Minister]

The statement we made was very clear. I hope the hon. Gentleman will accept that the model of mixed financing for our universities—partly from the Government and partly from graduates, who, as he knows, stand to benefit on average from tens of thousands in extra earnings because they have a university degree—is one that we are preserving and building on in a progressive manner.

[Caroline Dinenage (Gosport) (Con)]

Q9. In Gosport, our Sure Start centres provide valuable support to some of our most vulnerable people, which proves that even the Labour party can get something right. I welcome the Government’s continued support for Sure Start, but will the Deputy Prime Minister please reassure me that the programme will be refocused so that those in the greatest need get the greatest support?

[The Deputy Prime Minister]

I strongly agree. Sure Start children’s centres play a vital role in helping families and giving them the help when they need it through early intervention. That is why we announced in the spending review that Sure Start funding will be maintained in cash terms. As for how that funding is allocated to reflect deprivation, which was the hon. Lady’s question, the money is already weighted so that local authority areas with higher levels of disadvantage get more funding than others and, of course, local authorities have a high degree of flexibility and latitude themselves—and we do not propose to change that system at all.

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

May I bring the right hon. Gentleman back to higher education? He says that higher education should be paid partly by the individual and partly by the state, but the confusion that the people of Islington will have is that the right hon. Gentleman was not saying that in April, so when did he change his mind? In the best possible scenario, if we had a fantastic economy and no debt at all, would he still believe that higher education should be paid partly by the student and partly by the state?

[The Deputy Prime Minister]

I find it extraordinary that the hon. Lady can piously ask questions about changing one’s mind on this issue, when her party said no to fees in 1997, and introduced them; said no to top-up fees in the manifesto of 2001, and introduced them; said yes to the Browne review, but now says no to it; says yes to some graduate taxes, but no to others. Labour Members should make up their minds.

[Julian Sturdy (York Outer) (Con)]

Q10. As the coalition continues to stabilise our economy, will the Deputy Prime Minister assure my constituents that providing long-term relief and support for small and medium-sized businesses remains high on the Government’s priority list?

[The Deputy Prime Minister]

Yes, absolutely, as I said in answer to the earlier question. Over the past six months, we have taken a number of steps to help small and medium-sized enterprises: reducing the small profits rate of corporation tax from 21% to 20% from April next year; introducing new rules whereby for any new regulation, another one must be scrapped; the new enterprise capital fund of £37.5 million to provide additional equity finance; and of course the enterprise finance guarantee fund, which will be increased by £200 million. That is real support for the wealth creators of the future.

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

Q11. On 6 May, hundreds of the Deputy Prime Minister’s constituents and hundreds of mine in Sheffield were denied the right to vote because of current legislation. Why has the Deputy Prime Minister not taken the opportunity of legislation before Parliament to change the law, so that in future all those in the polling station at close of poll are allowed to vote?

[The Deputy Prime Minister]

I am acutely aware of the problem. I visited polling stations several times on that day, and saw the huge queues of people, many of whom were denied their democratic right to exercise a vote. The question is: what do we do about it? I happen to think that, in this instance, simply passing a law will not deal with the problem, which was a lack of resources and poor organisation by the returning officer, who acknowledged as much, as the hon. Lady knows, in Sheffield. That is what we need to address; we should not always simply reach for the statute book.

[Tim Farron (Westmorland and Lonsdale) (LD)]

The partnership between schools and universities in the provision of teacher education is absolutely critical, and at the moment it works terribly well. The university of Cumbria is Europe’s largest provider of newly qualified teachers. Will the Deputy Prime Minister assure me that universities such as mine, which provide teacher education, will continue to have a leading role in the training of our teachers of the future?

[The Deputy Prime Minister]

Of course we must support all those institutions that produce the great teachers of the future. We must have great teachers who can also lift the aspirations of children in this country and particularly of bright young people from poor backgrounds who at the moment feel completely intimidated from going to university. I hope such teachers will explain to those young people that under the new scheme that we have proposed, they have a real route to live out their hopes and dreams at our great universities in the future.

[Heidi Alexander (Lewisham East) (Lab)]

Q12. Yesterday, the National Housing Federation reported that a first-time buyer in London needs a salary of almost £100,000 to buy an average-priced property. In the light of that, will the Deputy Prime Minister tell me how many low-cost homes will not be built in the capital as a result of his Government’s decision to cut the affordable housing budget by 63%?

[The Deputy Prime Minister]

What I do know, of course, is that we inherited a situation in which fewer—[Interruption.] They do not like to hear it, but they have to—it is the truth. Fewer and fewer affordable homes were built, and more and more people and families ended up on the waiting list for affordable homes. We have a plan finally to put that right, and to increase the construction of new affordable homes at a rate that the Labour party never achieved.

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

Successful counter-insurgency operations in the past, such as in Malaya, suggest that not one of the preconditions for success—control of borders, good troop density levels, a credible Government, and support of the majority of the population—exists in Afghanistan. Does this not beg for a more realistic assessment of the situation?

[The Deputy Prime Minister]

We have sought to introduce a strong element of realism, not only in the extra resources and support that are required for our troops in Afghanistan, but in the recognition—I think this is the implication of the question—that there is not a military solution to the conflict in Afghanistan. There must be a marriage of a military strategy, which applies pressure on insurgents who want to disrupt the peaceful co-existence of communities and people in Afghanistan, with a political process of reintegration and reconciliation, so that we can leave Afghanistan—

[Mr Speaker]

Order. May I ask the Deputy Prime Minister to face the House? Otherwise, it is difficult for him to be fully heard. [Interruption.] Order. I want to hear the Deputy Prime Minister.

[The Deputy Prime Minister]

I was always taught to address the person who had asked me the question, Mr Speaker. So let me say, addressing my hon. Friend, that we need to marry a political strategy with a military strategy. Only by balancing the two will we be able to leave Afghanistan with our heads held high, knowing that we have done the difficult job that we were asked to do there.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Q13. Apart from the promise to give rapists, murderers and paedophiles the vote, what pre-election promises has the Deputy Prime Minister kept?

[The Deputy Prime Minister]

I am not sure whether that was a question or merely a line that the hon. Gentleman has rehearsed over and over again over the past few days. As for the issue of prisoner voting rights, in 2005, as he knows, there was a court judgment on which the last Labour Government consulted repeatedly. At some point, regrettably, we need to bring our law into line with the court judgments, and that is what we will now seek to do.

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

Is the Deputy Prime Minister aware that, according to a report on Radio 5 Live this morning, after the changes in tuition fees graduates earning £25,000 a year will have to pay back only £30 a month?

[The Deputy Prime Minister]

Opposition Members simply refuse to acknowledge that the 25% of lowest graduate earners will pay much less than they do now. That seems to me to be a strong indication of the progressive nature of our proposals.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Q14. Business to be dealt with later today includes the Equitable Life (Payments) Bill. Is the Deputy Prime Minister aware of the anger and frustration felt by many thousands of Equitable Life policyholders, will he address that, and will today’s business—with, hopefully, his support and that of Members in all parts of the House—reach a more satisfactory conclusion for those policyholders?

[The Deputy Prime Minister]

As the hon. Gentleman knows, under the last Government there was no prospect of any compensation for Equitable Life policyholders. He will also know that the compensation package that we announced in the comprehensive spending review is far in excess of the compensation levels recommended by the independent review. Of course the situation is difficult, and we would always like to provide more compensation, but the compensation that we are providing is much, much more than many people expected.

[Stephen Lloyd (Eastbourne) (LD)]

The Times Educational Supplement recently published a feature article stating how effective the pupil premium would be. Does the Deputy Prime Minister share my frustration at the fact that the Labour party appears to be more interested in scoring partisan points than in supporting the coalition Government’s serious attempts—

[Mr Speaker]

Order. We have got the gist of it, and we are grateful to the hon. Gentleman.

[The Deputy Prime Minister]

I think that the pupil premium is a significant policy. It puts an end to the system that we inherited from Labour, which meant that if you were a poor child at school in one part of the country a lot of extra money would be allocated to your education, whereas that would not happen if you were a poor child in another part of the country. The pupil premium is attached to children from poor backgrounds wherever they live, to lift their sense of aspiration and to improve the one-to-one tuition support that they need if they are to have the fair chance in life that all children deserve in our country.

[Phil Wilson (Sedgefield) (Lab)]

Q15. Up to 100,000 tenants are paying rent to more than 44,000 private landlords who are being investigated for non-payment of tax on rental income, and 53% of those tenants are receiving housing benefit. What are the Government doing to clamp down on private landlords who fiddle the tax and housing benefit system?

[The Deputy Prime Minister]

I strongly agree that we should come down very hard on those unscrupulous landlords, who are profiteering from the housing benefit system that was so poorly administered by the previous Government. As the hon. Gentleman will know, rents in the private sector have declined by about 5% over the last year, while rents that depend on housing allowance have increased by 3%. That is why we need to bring some sense and proportion to the way in which we administer housing benefit, which has more than doubled over the past few years.

Petition

Wednesday 10th November 2010 Commons Chamber

Mr Jim Cunningham (Coventry South) (Lab)

- Hansard - - Excerpts

The petition states:

The Petition of residents of the Coventry South constituency,

Declares that the Petitioners believe that animals in British factory farms are pumped full of protein to speed up their growth; notes that soy is a major source of protein; further notes that, in order to produce enough protein, precious habitats like rainforests are cleared in South America to make way for vast soy plantations; and further declares that this increases climate changing gases in the atmosphere, damages the Earth's free life-support systems, which provide us with clean water, healthy soil and air to breathe, forces small farmers off their land, making them unable to grow food for their families, and fails UK farmers, leaving them vulnerable to fluctuating commodity prices.

The Petitioners therefore request that the House of Commons urges the Government to take steps to shift subsidies away from factory farming, to support farmers to grow their own animal feed and to ensure supermarkets offer fair deals to everyone.

And the Petitioners remain, etc.

[P000866]

Point of Order

Wednesday 10th November 2010 Commons Chamber

12:34

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

On a point of order, Mr Speaker. On 1 November, the Home Secretary made a statement in the House on aviation security. The shadow Home Secretary asked her a number of questions that she was not able to answer. She said that she in due course would write to the shadow Home Secretary with the answers. Ten days later, we have not received those answers. I seek your advice, Mr Speaker, on how we can deal with the situation.

[Mr Speaker]

I am grateful to the hon. Gentleman for giving me notice of his point of order. His complaint will have been heard by Ministers. I hope, from his point of view, that it will also be heeded, and that he will receive the promised answers soon. It may also be helpful for the hon. Gentleman and the House to be reminded that business questions will take place tomorrow. I hope that that is useful.

Support and Protection for Elderly People and Adults at Risk of Abuse

Wednesday 10th November 2010 Commons Chamber

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

12:34

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

I beg to move,

That leave be given to bring in a Bill to promote awareness of abuse of elderly people and adults at risk, to promote training on how to recognise and respond to such abuse amongst those who are likely to encounter abuse in the course of their work, to promote greater awareness and understanding of the rights of victims of abuse amongst agencies with responsibilities for providing, arranging, commissioning, monitoring and inspecting care services, to promote the development of local strategies for preventing abuse of elderly people and adults at risk and for ensuring that victims are assisted in recovering from the effects of abuse.

I am delighted to have this opportunity to move this motion and introduce the Bill. The abuse of elderly people and adults at risk is a hidden problem, and I hope that by raising it in the House today I will help to focus attention on this matter which affects hundreds of thousands of people every year, and which a range of organisations, including Age UK and the Alzheimer’s Society, have already done much to highlight.

Issues of abuse are complex and much abuse goes unreported. The failure by abused elderly people and adults generally to report instances of abuse is down to a number of reasons: stigma, shame and even a feeling of guilt by the abused, wrongly but genuinely felt, for having provoked the abuse. Very often, the abused adult is dependent on the abuser. Isolation also plays a part, as does lack of contact with care providers or criminal justice agencies.

The complexity of the problem is illustrated by a piece of work recently carried out in Northern Ireland which showed that three quarters of incidents in which elderly adults were subjected to abuse involved a family member, including very close relatives. Often in such situations the abused person will want to maintain some kind of relationship with the abuser, and they might be threatened that if they report the abuse they will be denied access to other family members, such as grandchildren, thus reinforcing the feelings of loneliness and isolation. In such cases, the elderly person often decides to balance the abuse they are actually suffering against the fear of some future action that they believe would result in their being left in an even worse state.

As a country, we must do everything we can to protect people at risk, especially our senior citizens, from abuse that can take many different forms. Often these factors are combined, but generally abuse falls into the following categories: emotional, psychological, financial, physical, sexual and neglect. Although Members will be aware of extreme examples of abuse when they are reported in the press and other media, it is clear that much abuse happens almost unnoticed or is passed off and excused as “poor care”, or with the comment, “That’s just the way he or she”—the family member—“behaves.”

The issue of financial abuse is causing increasing concern. A 2008 Help the Aged report found that up to 2.5% of elderly people felt they had experienced some kind of financial abuse, exploitation or coercion, and in my constituency case load I have come across increasing numbers of specific issues involving the administration of the personal finances of vulnerable adults. That is now becoming a greater problem given the difficult economic times we are facing and pressures on family finances, yet public awareness of the issue is limited.

Many members of the public at large do not understand the nature of the different types of abuse. That was borne out by the work of a partnership project in Northern Ireland, Uniting Against Elder Abuse, which brought together Age Concern and Help the Aged—which are now united as Age NI—and the Alzheimer’s Society and Carers Northern Ireland. The project delivered a two-year strategic programme aimed at raising awareness of the problem generally, providing access to independent advocacy for frail older people and those with dementia, and developing a therapeutic response for those who experience abuse. I can say from the experience we had then in Northern Ireland that people were genuinely taken aback at the report’s findings and the extent of the problem.

The number of people affected is much greater than is sometimes realised. It is estimated that one in 25 of all older people living in the community is affected by some kind of abuse every single year. As the majority of cases occur in the older person’s home, agencies such as social services are not necessarily involved or aware. According to one survey, 62% reported that they had had no contact whatever with social services or any other support organisation, highlighting the fact that there is likely to be a considerable hidden minority of older people living in an abusive situation or subject to some kind of abuse without recourse to traditional forms of support or help.

There must therefore be greater commitment to educating and informing people about the support available to them. There are gaps in education, knowledge and training at the individual level and across the public and voluntary sectors. Those gaps must be plugged. It is vital that we have a single, common piece of legislation to reinforce existing policies designed to protect the elderly and adults at risk of abuse. Current safeguarding legislation is too complex and spread across many and various Acts and measures. It therefore offers only limited protection. No single professional, whether it be a social worker, a police officer or a nurse, could ever be expected to be aware of all the legislation that is out there. That is why overarching, comprehensive and consolidating legislation is needed.

There would be immense benefit in bringing existing provisions together, including principles, definitions, a duty to investigate, clarification of powers of entry, powers to remove a perpetrator or perpetrators of abuse, and a duty of co-operation. Legislation should not only be about responding to individual allegations of abuse, but should place a strong emphasis on prevention—and not just preventing an abusive situation arising for an individual. What is needed is a major shift towards understanding the circumstances and situations that contribute towards abuse or render people vulnerable to it, acknowledging the reality of its effect and how we as a society must move towards eradicating it.

Often, there appears to be little formal contact between agencies and services, and support can be unco-ordinated and fragmented. Let us compare that with the protection of children, which is a benchmark that we should seek to emulate. There is too much buck-passing over vulnerable adults and senior citizens, and only legislation will end that. Legislation would require suspected abuse to be investigated. Guidance is all well and good, but it applies differently to the various authorities and statutory agencies. The law should apply to all agencies involved in preventing and responding to abuse. Specific legislation would force better co-ordination of the various statutory agencies as they confront the silent offender of abuse. The same legislation could address the training and education deficit, which I have already mentioned, across the range of elderly support services, including the private, public and voluntary sectors.

Devolved Administrations are already taking steps, or have taken steps, to target elder abuse, with Scotland introducing the Adult Support and Protection (Scotland) Act 2007, Wales preparing to make recommendations by the end of this year, it is hoped, and Northern Ireland preparing a policy framework for consultation in early 2011.

The Department of Health opened up consultation on the “No secrets” guidance in 2009, but neither the previous Government nor this one—I acknowledge that they have been in office for only a short time—have responded to the findings of that consultation, including those on whether legislation is needed.

Legislation on the abuse of elderly people and adults at risk would facilitate a more comprehensive assessment, with a common benchmark standard across all support agencies. It would establish a more consistent and effective response by statutory providers, ensure better training and education, which would improve awareness, and consolidate local authority guidelines and offer enhanced guidance to the criminal justice system.

The day we set aside or neglect our responsibility to help and cater for the needs of our senior citizens and those who are open to and at risk of abuse within our society is the day that we lose our moral compass. I believe that this is an extremely important issue and hope that the presentation of the Bill leads to Government action. I commend the Bill to the House.

Question put and agreed to.

Ordered,

That Mr Nigel Dodds, Andrew Percy, Malcolm Wicks, Greg Mulholland, Dr William McCrea, Mr Jeffrey M Donaldson, Mr Gregory Campbell, Sammy Wilson, David Simpson, Ian Paisley and Jim Shannon present the Bill.

Mr Nigel Dodds 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 105).

Equitable Life (Payments) Bill

Wednesday 10th November 2010 Commons Chamber

Considered in Committee

[Mr Nigel Evans in the Chair]

Clause 1

Payments

12:46

[Mr Fabian Hamilton (Leeds North East) (Lab)]

I beg to move amendment 1, page 1, line 7, at end insert—

‘(2A) Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out.’.

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

With this it will be convenient to discuss the following:

Amendment 2, page 1, line 7, at end insert—

‘(2A) The Parliamentary Commissioner for Administration shall report to Parliament on the implications for payments to which this section applies of the findings of the Independent Commission on Equitable Life Payments, no later than one month after the publication of such findings.’.

Amendment 7, page 1, line 7, at end insert—

‘(2A) In determining the amount of the payments that it is appropriate for the Treasury to authorise under subsection (2), the Treasury must have regard to such matters relating to the adverse effects of that maladministration on those persons and the proper calculation of their resulting losses as have been determined by the Parliamentary Commissioner for Administration to be relevant to and appropriate for that calculation.’.

[Mr Hamilton]

I tabled my amendment because, although I am well aware that the Bill is an enabling measure, I feel strongly that a group of Equitable Life policyholders has been unfairly excluded from the compensation scheme that the Government have put in place. You will be pleased to know, Mr Evans, that I will not rehearse the entire history of the Equitable Life saga, because I do not think that we have the time this afternoon. However, to put my amendment into context, it might help right hon. and hon. Members if I remind them of some of the background to the case that I am about to put for the with-profits annuitants who took out their policies before 1992, for whom the Government’s proposed scheme will not offer any compensation at all—in stark contrast to the post-1992 with-profits annuitants for whom 100% compensation is now proposed.

Founded in 1762 as a mutual insurance company based on the ideas of James Dodson, a fellow of the Royal Society and a man well ahead of his time, Equitable Life started selling pensions as early as 1913, but it was not until 1957 that the society started to sell its infamous guaranteed annuity rate, or GAR, pensions, which gave a clear and unambiguous return on capital invested depending on the age at which the policyholder decided to start taking the annuity. That was to carry on until 1988, at which point the society realised that its rates were so good and so far ahead of the rest of the market that they were unsustainable.

In December 2000, Equitable Life was forced to close to new business. By that time, it had more than 1.5 million members. In the last Parliament, the Select Committee on Public Administration said in its introduction to its December 2008 report:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

In June 2009, following many complaints from constituents over the past few years I introduced an Adjournment debate in Westminster Hall on Equitable Life. In it, I was critical of the then Labour Government —my own party’s Government—and although I loyally and strongly supported almost all the previous Government’s policies, I felt that we were wrong on this issue and should have done far more to implement the parliamentary ombudsman’s full and damning report of July 2008 entitled “Equitable Life: a decade of regulatory failure”. Needless to say, that did not make me very popular with my colleagues on the Front Bench at the time. My right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne), the then Chief Secretary to the Treasury, tried his best at the end of the last Parliament to implement what I believe to have been a flawed exercise to bring in some sort of compensation scheme by employing Sir John Chadwick to design a system, but that took so long that it was overtaken by the general election in May.

The new coalition Government decided initially to continue the Chadwick process, to the disappointment of the Equitable Members Action Group. However, I must thank my right hon. Friend for his courtesy and the help that he tried to give me when he was Chief Secretary. He clearly understood the moral imperative that Parliament and the Government had to Equitable’s policyholders, but his hands were tied and no compensation scheme was forthcoming under the previous Government. That was a great shame.

When Sir John Chadwick finally published his long-awaited report on 22 July, his recommendation on the total compensation to Equitable policyholders was for just £400 million to £500 million, or about £400 to £500 per person, out of the estimated total losses of approximately £4.8 billion, as calculated by the actuaries Towers Watson almost two years ago. I am reluctant to give praise to the Government parties, but I was delighted when the Chancellor of the Exchequer, in his speech to the House on the comprehensive spending review on 20 October, scrapped the Chadwick report and proposed a compensation package amounting to £1.5 billion. That figure was a threefold increase on Sir John Chadwick’s initial proposal but was still insufficient to make up for the losses incurred by Equitable policyholders. More importantly, however, the Government accepted at long last the report of the Parliamentary and Health Service Ombudsman in full. Again, I must reluctantly give credit to the Government for having done something that I wish my Government had done long ago.

Any delight that surviving Equitable policyholders and I felt at the Chancellor’s announcement was soon clouded by the details of the proposed compensation package. All the 37,000 post-1992 with-profits annuitants will eventually receive 100% compensation for their losses since then, but none of the estimated 10,000 pre-1992 with-profits annuitants will receive any compensation. Let me explain how my amendment goes to the heart of this issue.

[Jonathan Evans (Cardiff North) (Con)]

I have no reluctance in paying tribute to the hon. Gentleman for his independence of thought and the campaign that he has waged on this issue. He has been not a lone voice, but one of very few Labour voices addressing the matter. On pre-992 annuitants, how on earth could one calculate what their losses might be as at that time, bearing in mind the fact that it is very likely that in the late 1980s and early 1990s bonus payments that were probably much larger than was warranted, given subsequent events, were added to their asset share? In other words, they might well already have been overcompensated.

[Mr Hamilton]

I thank the hon. Gentleman for his kind words. I hope that in continuing my comments I shall answer his question.

I have long believed that the Equitable saga is a moral issue for us in Parliament. We sought, through the Financial Services Authority, to regulate financial institutions such as Equitable so that those who invested their valuable savings to ensure their future income were protected against fraud and maladministration. Our own ombudsman, Ann Abraham—she works for us—called the failure to regulate Equitable “catastrophic” and pointed to examples of savers encouraged to invest with that company long after it clearly could no longer meet its obligations.

If we as a nation want to encourage people to save and to provide for their retirement and old age, in addition to what they will receive in state pension, it is essential that the companies offering those savings products can be trusted and relied on. With hindsight, we can see that Equitable clearly could not deliver to the hundreds of thousands of investors who trusted it and those people have been badly let down as a result. We had an obligation to ensure that that could not happen and we now have an obligation—indeed, a duty—to ensure that those who have lost out are fairly compensated for all their losses. This matter is above crude party politics; it is an obligation to which 380 sitting MPs signed up before the last election when they put their names to EMAG’s pledge. We must not let the policyholders down now.

Let me relate some heartbreaking cases that will illustrate better than I can just how people have suffered as a result of Equitable’s failure. One of my constituents, Mrs B of Leeds, has written:

“I signed for my With Profits Annuity in March 1991, investing £57,000. I am really suffering just now with my husband now being disabled and I am still trying to work four days a week to make ends meet. I receive only £141 a month from Equitable and it will continue to reduce. Surely all With Profits Annuitants should be included in the compensation! Have I been harbouring false hopes all these months? If so, there does not seem any point in my continuing to write to my MP or the Prime Minister.”

Another policyholder, Mr D, who is not a constituent of mine as far as I am aware but will be a constituent of somebody in the House, writes:

“In his letter of 20 October Mark Hoban refers to the government’s concern with the plight of the WPAs. However, he fails even to mention the Government’s decision that those who started to receive their annuities before September 1992 are to get nothing. This is in spite of the fact that they too have not been allowed to get out, are continuing to suffer, year by year, reductions in their annuities and are older than any of us.

Fortunately Paul Braithwaite [the Secretary of EMAG] perceived from the first what was going on and has placed the matter of the treatment of the pre-September 1992 WPAs at the top of the agenda for a judicial review. However”—

this is the crux of what Mr D says—

“I think our MPs are fair minded enough to perceive for themselves how unjust the proposed action of the Government is. I am writing to my MP straight away.”

Whoever that might be should look out for the letter.

Once an annuity has been purchased it cannot be sold or changed, so the with-profits annuitants who took out annuities before the September 1992 cut-off date are trapped.

[Stephen Lloyd (Eastbourne) (LD)]

I, too, pay tribute to the hon. Gentleman for his work. It has been a pleasure to work with him on this issue and I support his amendment. In a nutshell, on the moral case, the parliamentary ombudsman and Sir John Chadwick both said in writing in advance that all the annuitants should be treated equally and that these annuitants should not be excluded, not least because they are the oldest and most frail.

[Mr Hamilton]

I thank the hon. Gentleman for his kind remarks about the work I have done but, as the Committee will know, he is the secretary of the all-party group on justice for Equitable Life policyholders, and I thank him for his efforts in this regard. He is absolutely right: Sir John Chadwick did say that, as I shall mention later.

The with-profits annuitants who took out annuities before the September 1992 cut-off date are as trapped as those who purchased them after that date and their incomes diminish each year. Having taken out policies that they believed would allow them to make ends meet in old age, they now face increasing poverty because Parliament did not act soon enough to prevent the collapse of Equitable. That is why we owe them the compensation that they deserve as much as the post-1992 with-profits annuitants.

What is so important about September 1992? Let me give further reasons why this is an artificial and unfair cut-off date, which I seek to stop with my amendment. First, annuities could not be exchanged once bought, so every annuitant has suffered from the consequences of regulatory failure irrespective of when their annuity was taken out or what extra bonuses were added. The cut-off date ignores the views of the parliamentary ombudsman, Ann Abraham, and Lord Chadwick in their reports. Even Chadwick, who came up with a much smaller overall compensation package than the £1.5 billion now on the table, agreed that the pre-1992 with-profits annuitants should not be excluded, as the hon. Member for Cardiff North (Jonathan Evans) pointed out.

It is said that because of the changes to the computer system, Equitable’s records prior to late 1992 were not available, but the current chief executive of Equitable, Chris Wiscarson, who has been extremely helpful, has previously stated that this is a problem that could be surmounted. The parliamentary ombudsman has previously made it clear that nobody would sensibly have invested in Equitable after 1 July 1991 had the regulator acted effectively and transparently. If that situation had been made apparent to the media and the public at that time, nobody would have sensibly invested after that date.

It seems clear to me that anybody who took out a policy between July 1991 and September 1992 is being unfairly penalised simply because of a change in Equitable’s computer system. This is exacerbated by the fact that policies brought out in this period had the longest exposure to the adverse effects of maladministration. The coalition Government gave a commitment to

“implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.”

My amendment would ensure that this commitment could be carried out properly and at a relatively small additional cost.

Let me be clear. I am not recommending that we take some of the compensation from the 37,000 who have already been promised 100% compensation, which amounts to about 50% of the total offered by the Government. I am suggesting that we bring forward the £100 million of the total package that was proposed to be given in the next Parliament, and that we add to that a further £100 million from current, albeit limited, reserves.

As I said earlier, I believe that this is a moral obligation and that Equitable pensioners are looking to us, their recently elected representatives in this Parliament, for justice, which is why I intend to press the amendment to a vote so that there can be no discrimination between with-profit annuitants according to when they purchased those annuities.

13:00

[Andrea Leadsom (South Northamptonshire) (Con)]

Does the hon. Gentleman accept that there might be more support for the amendment if it did not incur further cost to the taxpayer, bearing in mind the current severe financial constraints?

[Mr Hamilton]

Yes, of course the amendment would attract far more support if there was a net zero cost. However, this is an important moral issue. Many of my hon. Friends and other Members know my views, for example, on the Trident replacement, which I know has now been shelved for a while, and on various schemes that take a huge amount of capital expenditure. The sum that we are discussing now is relatively small. I believe there are other savings that may be made, particularly in defence spending, which could pay for this.

That is a decision that the Government and the two parties that make up the coalition will have to grapple with, but I believe that the policyholders look to us to ensure that the justice they have been promised is delivered. It is a moral obligation, and it overrides many of the other areas of expenditure to which any Government are committed.

[Frank Dobson (Holborn and St Pancras) (Lab)]

Does my hon. Friend agree that if there is a moral case to compensate anybody, there must be a moral case to compensate everybody, and not leave some people out because of some mess-up over a computer system?

[Mr Hamilton]

I thank my right hon. Friend for that. He is right. It is galling when the very vulnerable and frail pensioners who are the ones suffering most because they are the pre-1992 with-profits annuitants look, for example, to the quite correct compensation given to Icesave investors of up to £50,000 per investor, and to some of the other compensation schemes in which the Government have been involved over the years, and find that they, who might not have much longer to live, are going to be without compensation at all.

[Jonathan Evans]

I am grateful to the hon. Gentleman, who is being extremely generous in giving way. I fully accept the moral argument that he is putting forward. That is why I was a signatory to the pledge as well. In response to the question I asked earlier, he certainly has a point about taking back the date to 1991. His amendment, though, would go back well before that, but he has not made the argument for going beyond 1991. My second question was how he would compute the compensation. That must be a central question, and in his argument so far I have not heard an answer to that.

[Mr Hamilton]

I thank the hon. Gentleman for his intervention. First, there would be relatively few annuitants from further back in time. Clearly, a person who retired in 1981 or 1985 would be getting on a bit in years now, so only a small number of people would be involved. Secondly, Equitable must have records showing what bonuses were paid at different times.

The further back the scheme goes before 1991, the fewer annuitants there will be who demand or need that compensation, but the need will be greater because of the frailty and the loss in the value of those annuities since then. Since 1991, those annuitants, even though they may have had bonuses before that, continue to see a decline because of the maladministration, which affects them as much as it affects post-1992 annuitants. I hope I have at least partly answered the hon. Gentleman’s point.

[Jim McGovern (Dundee West) (Lab)]

Actuaries are sometimes disdainfully referred to as people who found accountancy too exciting, but surely a good actuary would be able to calculate the sums in question, whether for pre-1991 or post-1991 annuitants.

[Mr Hamilton]

I thank my hon. Friend for making that very good point. We are talking about many hundreds of thousands of policyholders throughout the United Kingdom, but we know that there are about 37,000 or so post-1992 with-profits annuitants. We think there are about 10,000 pre-1992 such annuitants, but the further back we go the fewer there will be, so if it was a difficult, time-consuming exercise to work out relative losses for all policyholders, which it certainly was, which is why Sir John Chadwick was engaged, it will surely be a much easier exercise for the far fewer people who are with-profits annuitants prior to 1991. My hon. Friend’s point goes some way to answering the question.

[Richard Fuller (Bedford) (Con)]

I thank the hon. Gentleman for giving way again. This has been a long-standing issue, and perhaps he can help some of us who are new to the House. He mentioned a total of £100 million from subsequent years’ Budgets, plus £100 million from reserves to be allocated to pre-1992 annuitants who are not covered in the proposals. Is he making an estimate, or is that sum firm is in his mind? That is a key issue. The concerns expressed about computer records do not stand up against a point of principle, but it is important that we have a sense of how firm and solid the hon. Gentleman’s understanding is of the sums that might need to be paid.

[Mr Hamilton]

The hon. Gentleman makes a very good point, and I cannot give him a precise answer. The figures that I have quoted are estimates I obtained from the Equitable Members Action Group, which has quite a lot of good people working for it—people who have been in the financial services industry. I go on their expertise. This is the best estimate that we can gain.

The reality is that many of the annuitants are quite elderly. It is unlikely that in five years we will have the same number we have now. We already know, for example, that every single day since the disaster happened 15 policyholders throughout the entire spectrum of Equitable policyholders have died. We can therefore assume, unfortunately, that more will no longer be with us in the years to come, so the amount of money will be a diminishing sum. The best estimate that we can gain is £200 million, and that estimate comes from EMAG.

[Jim Shannon (Strangford) (DUP)]

Can the hon. Gentleman clarify that last point? Obviously, since our last debate on the subject in the Chamber way back in July, some people have passed away. Is there any provision in the amendment for the next of kin to take advantage, in the absence of those who have passed on?

[Mr Hamilton]

That is a good point, and it was made during the previous Parliament, in February, at a packed meeting with the former Chief Secretary to the Treasury, my right hon. Friend the Member for Birmingham, Hodge Hill, and Sir John Chadwick. My right hon. Friend made a commitment, which I am not sure the Financial Secretary has made, so perhaps he will clarify the situation in his contribution, that the estates of those who had passed away would receive some compensation. The point that I have just made may be contradicted, but it depends on what the Financial Secretary and the Treasury want to do.

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

Before the hon. Gentleman continues, let me just make it clear that long ago we established the fact that, under any compensation scheme designed, we would make payments to relatives of those who were deceased, and that there would be no means-testing.

[Mr Hamilton]

I thank the Financial Secretary for clarifying that point, which somewhat contradicts what I said earlier about the diminishing amount of money.

The best estimate that EMAG can give us is £200 million for the 10,000 existing pre-1992 annuitants. I confirm that I wish to press my amendment to a vote, and simply conclude that we owe some of our most frail and vulnerable pensioners no less. I urge all Members to support my amendment.

[Jonathan Evans]

I am very pleased to have the opportunity to participate in this debate, but may I begin by declaring an interest? I am the chairman of a life insurance company, but I have no connection whatever with Equitable Life, financial or otherwise.

The hon. Member for Leeds North East (Mr Hamilton), alongside many Conservative and Liberal Democrat Members prior to the election, fought hard to put forward the cause of Equitable Life policyholders, and I am pleased and proud of the position that my colleagues and the Minister adopted. Many of us, in the lead-up to the election campaign, signed a pledge to seek to put into operation a number of factors. The first was the recognition of all the individual provisions that the parliamentary ombudsman put forward. The hon. Gentleman will know that the previous Government only partially accepted the ombudsman’s report, and I am very pleased and proud of the fact that the Minister fully accepted all its points. I rather wish that EMAG had been a little more generous in its praise of him for having done so.

Secondly, the compensation that has been put forward will come as a disappointment to some, but the ombudsman made it clear that we had to take account of pressures on the public purse at the time. When we heard Sir John Chadwick’s proposals, there was virtual unanimity among those newly elected Government Members that £400 million was completely and utterly inadequate. I thought that the Government might put the figure up to about £1 billion and hope for the best, but we ended up with £1.5 billion.

[James Morris (Halesowen and Rowley Regis) (Con)]

Does my hon. Friend agree that we would not be in this situation, or have to have this conversation, if it had not been for the delay imposed by the previous Government?

[Jonathan Evans]

That is true, and the record of the outgoing Labour Government in that regard is inglorious, but I do not want to be partisan. In essence, Equitable Life policyholders do not want us endlessly to bash the Opposition; they want to know which way we can go forward. So I shall turn my remarks to the specific points made by the hon. Member for Leeds North East. He made a good moral case for not excluding people who ought properly to be included in the category to whom compensation could be paid, but, as I suggested in my intervention on him, some factors cause me some concern.

13:15

First, the hon. Gentleman referred to the elderly pensioner who had put in £57,000 and now receives a very low monthly figure. I certainly share his concern about that, but, if we were to unpick financial arrangements going back to the 1980s, we would have to consider the difficulty that arose from the fact that Equitable Life gave guaranteed annuity rates to some of its policyholders and, at the same time, record bonus rates to those people who did not have those guarantees. In reality, Equitable Life was building its business on the basis of becoming a market leader in the bonuses that it granted—even to the point where the parliamentary authorities recommended that all hon. Members making additional voluntary contributions should make use of Equitable Life because of its market-leading rates.

We know now that those rates were deceptive, but during the 1980s those rates were paid and those bonuses added to the asset pool being put together. Therefore, it cannot be gainsaid that, certainly by 1990, most people with an asset share in an Equitable Life policy probably had an amount that was well beyond what was appropriate for the investment that they had made. In other words, they were over-supplied with bonuses during that period.

[Stephen Hammond (Wimbledon) (Con)]

I have taken part in a number of these debates during my short period as a Member, and, unlike some hon. Members, I am not reluctant to praise the Minister. However, in my constituency surgery last Friday I saw an 80-year-old gentleman who accepts the points that my hon. Friend now makes, but makes the point himself that the pre-1992 group are still trapped and unable to take any action. Had they been able to take some action to mitigate or ameliorate their circumstances, they would have done so. My hon. Friend the Minister has done a great job in moving the issue forward so quickly, but I hope that he will at least listen to the concerns of the pre-1992 annuitants.

[Jonathan Evans]

I am grateful to my hon. Friend for that contribution. He approaches the issue with significant expertise, so he will know that, if we are to achieve justice, it is not just a question of treating all those pre-1992 policyholders in the same way as everybody after 1992. One would go back and assess the pre-1992 annuitants’ asset share to see whether they were paid 105%, 110%, 120% or 140% of asset share; and one would correct that, so that the pre-1992 and post-1992 annuitants were dealt with in a balanced way. The danger with the proposed approach is that there will not be that balance. It is already clear, from the question asked by my hon. Friend the Member for Bedford (Richard Fuller), that we do not have a basis for the figure of £200 million; it is a wet finger in the air in order to assess the situation.

The second factor that causes me significant concern is the lack of available actuarial information. I share all the concerns about the Chadwick process, and, although Sir John might have made an observation about the pre-1992 annuitants, he did not compute their liabilities. The danger, therefore, of being seduced by the strong arguments of the hon. Member for Leeds North East, is that we would enter into an open-ended commitment and have great difficulty realising its objective. During the debate, however, he has made a good case on behalf of those annuitants who go back to 1991. We should remember the judgment made by the ombudsman and her terms of reference. Most of the inquiries started looking at the period from 1999 onwards, but most of the condemnation about regulatory failure goes back to events prior to 1991. It is important that the Committee should take that factor into account when invited to say whether compensation should be granted going back very many years before that.

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

I should like to speak to amendment 2, which is grouped with amendment 1, tabled by my hon. Friend the Member for Leeds North East (Mr Hamilton) and amendment 7, tabled by my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson).

In wishing you a happy birthday, Mr Evans, let me say that I do not have any registrable financial interests in the matter under debate. However, I want to place on record that 18 months ago, some while before I was returned to the House, I was occasionally commissioned to give advice and training on parliamentary and public policy matters, and on one occasion, I undertook a day’s work for a company whose clients included the former chief executive of Equitable Life; by then, of course, its fund had been closed for many years. I thought it important to disclose that encounter for the avoidance of any doubt. Although I had a day’s work indirectly related to Equitable Life some time before coming into Parliament, I have not had any financial or policy discussions on the matter subsequently.

I have held this brief for a couple of weeks, and it has been an extremely steep learning curve of reviewing history and policy that dates back well over 25 years, as my hon. Friend the Member for Leeds North East said. I was struck by the opening words of the House of Commons Library background note to the Bill:

“Describing the Equitable Life (Payments) Bill as the tip of an iceberg would be harsh on icebergs: at least they have 10% or so of their bulk above the water line. The Bill is but a tiny atoll below which lies the immense bulk of the Equitable Life tragedy.”

In general, I intend to be as supportive as I can of the Bill, as it is a positive step forward in the attempts to rectify a long and sorry saga. The amendment simply seeks to encourage the parliamentary ombudsman to

“report to Parliament on the implications for payments…of the findings of the Independent Commission on Equitable Life Payments, no later than one month after the publication of such findings.”

I do not want to go through the entire background that has brought us to this Committee stage today. By my count, eight separate inquiries, and possibly more, have done that, and there are conflicting and sometimes contradictory findings and accounts of what happened in the past and who should be responsible for rectifying the situation for policyholders. However, we know that in the spending review the Government accepted the ombudsman’s approach to maladministration and, more relevantly to this debate, to the framework for a compensation package. The Government say that they want to honour the interpretation of the ombudsman’s second report in full. That is their choice. There are clearly arguments in favour of that approach, as well as against it.

The Minister now places great emphasis—although it could be argued that he did so to a lesser degree before the general election, when there were a lot of loud campaigns on signing up to the EMAG pledge—on it being appropriate to consider the potential impact on the public purse of any payments of compensation in this case, as the ombudsman has said. The Treasury has concluded that it will initially focus on total relative loss as the basis for its payments and will cover those losses in full for post-1992 with-profits annuitants, to the tune of some £620 million. Some 37,000 individuals will be involved in that. That means that that group of with-profits annuitants will receive compensation equivalent to that which they would have gained had they invested in companies other than Equitable Life. However, because of the cap of about £1.5 billion that the Treasury is placing on the total payouts, the other 1 million or so policyholders, including annuitants with older policies—I presume, although I may be wrong about that—will have to have their compensation for relative loss adjusted to fit within the envelope available.

The Independent Commission on Equitable Life Payments, which is chaired by Brian Pomeroy, has been set up by the Minister to advise on the allocation of compensation to policyholders other than those with-profits annuitants, who will be getting 100% compensation. I am conscious of the words of Sir John Chadwick when I think through the technical challenge of administering a compensation payment scheme; it is important that its design and delivery are clear and efficient. I hope that we are not on the brink of a further failure that compounds the problems of the majority of policyholders by opting for a compensation scheme that could be so complex and opaque that it might risk grinding to a halt. We need a scheme that works in practice.

If the Minister is opting for the ombudsman’s approach—as I say, that is the Government’s choice—there are questions that need to be answered, and I would be grateful if he could reflect on those when he makes his comments. First, exactly how will the apportionment of the relative loss figures for other policyholders not receiving 100% compensation be calculated under the ombudsman’s approach, if we will not be following the Chadwick methodology given the Government’s acceptance of all 10 findings by the ombudsman?

Secondly, will the other policyholders—the vast majority—be classified into broad categories or subject to individual assessment of their cases? Will there be any burden of proof requirement on the other policyholders in the assessment of their relative loss, or is it likely that the compensation scheme will have some assumed automaticity in all cases? I ask that only because the ombudsman’s findings of loss are very specifically linked to a policyholder’s reliance on the regulatory return data. She said:

“I find that injustice was sustained by any policyholder who relied on information contained in the society’s returns between 1990 and 1996.”

I am trying to get a sense of precisely how that process will work.

Thirdly, how will the payment scheme take into account all the other maladministration factors for other policyholders that Sir John Chadwick’s methodology would not have covered, if we are following a classification scheme?

Whatever compensation scheme the independent commission eventually alights upon, it is an important starting point to establish that it is consistent with the Minister's intentions—in other words, that it encompasses all the parliamentary ombudsman’s conclusions. I gather that there are moves afoot by the Public Administration Committee to interpret whether the ombudsman’s model aligns with the payment scheme that eventually emerges. That might be a good idea, but perhaps it is a little circuitous. It would be far better, in my view, to give the ombudsman directly the right and the opportunity to say publicly whether the payment scheme is indeed in keeping with the spirit of her own findings. She could then say whether the total relative loss figures are accurate and whether the compensation scheme is fair, particularly given the controversy over the dates and whether some people will or will not be included in the 100% compensation for with-profits annuitants. The purpose of our amendment is simply to give voice to the ombudsman so that she can confirm her view.

It is worth noting at this stage that, far from granting the wishes of the Equitable Life policyholders regarding everything they wanted, the main pressure group formed to speak for their interests, EMAG, is angry and perplexed at the nature of the compensation scheme envisaged by Ministers and the constraints placed on the independent payments commission. EMAG says on its website:

“The independent Commission’s recently torn up terms of reference have not at this date”—

this was a week after the announcement in the spending review—

“yet been replaced.”

It says that the Minister’s letter of 20 October to the commission’s chairman

“makes clear that retrospectively the remit will now totally exclude”

the full class of with-profits annuitants. My hon. Friend the Member for Leeds North East alluded to that point. EMAG continues:

“So its remit now is to divvy up £775m between 600,000 and to suggest the prioritisation. This surely cannot be what the Parliamentary Ombudsman had in mind as the role for the independent Commission?”

Given this question mark over the parliamentary ombudsman’s intentions, we felt it important to table the amendment to try to give voice to that.

There is doubt about whether the compensation arrangements are as much in alignment with the ombudsman’s approach as the Financial Secretary would like to argue, and I hope that our amendment will give the ombudsman a chance swiftly to comment on the calibre of the scheme and clarify once and for all whether it fits with her approach. We believe that that can be done quickly, and there seems to us to be no reason why it could not happen within one month of the publication of the scheme’s proposals. There would not be any reason to delay payments, and it would aid transparency and confirm whether the Government’s arrangements via the commission’s payment scheme were the same as those envisaged by the ombudsman. Although amendment 2 may be a belt-and-braces approach, at this stage of the saga we need some cast-iron assurances all round.

13:30

[Mr Mike Weir (Angus) (SNP)]

If the hon. Member for Leeds North East (Mr Hamilton) presses his amendment, we will certainly support him.

I have been debating Equitable Life in the House ever since I was first elected, and I well remember endless debates in the two previous Parliaments in which I was joined by Conservative Members in trying to get the Labour Government to take action. I recognise that some Labour Members also pushed their own Government for action. It was a long battle, and frankly we did not get very far.

When the new Government were formed, I cannot say I had any great enthusiasm for the thought of the coalition, but I did at least think that perhaps we could get an end to this saga, which had brought so much unfairness to so many people throughout the country, many of them elderly.

One difficulty has always been what the final compensation bill should be. It is easy to get lost in figures, as they range from Chadwick’s £500 million up to EMAG’s latest figure of more than £6 billion, but the generally accepted figure seems to be in the region of £4.6 billion. The Government have set a figure of £1.5 billion, which is about a third of that generally accepted figure. I understand their reasoning that that is all that can be afforded, but sorting out Equitable Life could have been one of their great early achievements. It is being undermined by arbitrary decisions, the worst of which is the overall cap on the amount. Rather than an independent commission considering the matter and recommending a figure, a figure has been put in place and all the independent commission can do is decide how it is divided among policyholders.

[Mr Fabian Hamilton]

As I mentioned in my contribution, about half the overall £1.5 billion package will be consumed by the 100% compensation for the 37,000 post-1992 with-profits annuitants. Does the hon. Gentleman agree that the remaining balance will provide a considerably smaller sum in the pound to the rest of the policyholders?

[Mr Weir]

The hon. Gentleman is quite right. I understand that the figure quoted by EMAG is about 15% of their loss, which is a very small amount for people who have suffered.

What could have been a very good outcome seems to have been undermined by arbitrary decisions. I hope that the Financial Secretary will explain the rationale behind excluding the 10,000 pre-1992 annuitants from compensation altogether. I do not understand the logic of that. I do not see any suggestion that it should be done in the ombudsman’s recommendations.

I have said in previous debates that it is important that this Parliament supports its independent ombudsman, and there seems to have been a major deviation from what the ombudsman recommended. The hon. Member for Cardiff North (Jonathan Evans) made some interesting and relevant points about how compensation for pre-1992 annuitants should be calculated, which is undoubtedly a difficulty. I am not an actuary and cannot give him the answer to that, but I do not think it is beyond the wit of man—or even an actuary—to work out a figure.

Ultimately, this is a matter of principle. I raised that point on Second Reading. We are dealing with a situation in which many thousands of our fellow citizens have lost out through maladministration. The Government are ultimately responsible for that maladministration—the previous Government, not the present one, but they are the heirs to that. We should not accept the principle that the Government can say, “Okay, there has been maladministration. We are responsible, but we will set a cap on how much compensation we give and then arbitrarily decide which of the group who have suffered will be compensated.” That is a very bad principle. In no other case in which there has been loss and there is liability would anyone be entitled to say, “I’m only paying a proportion of that. That’s all I can afford.” The Government should not go down that route.

I believe that we will debate an amendment later to set up a totally independent organisation to consider the matter. We need that to be done independently, not with a cap and not with some people arbitrarily excluded. We will support amendment 1 if it is pressed, because it is only reasonable. We have to right what has been a terrible injustice going back well over a decade.

[Frank Dobson (Holborn and St Pancras) (Lab)]

I shall speak very briefly in support of all three amendments in this group—those tabled by my hon. Friends the Members for Leeds North East (Mr Hamilton) and for Nottingham East (Chris Leslie), and even the one that I have tabled.

As drafted, the Bill leaves practically everything to the discretion of the Treasury, which I find objectionable. I remind the Committee of what Winston Churchill said about people at the Treasury—that they were

“like inverted Micawbers, waiting for something to turn down”.

The chance of their coming to any generous conclusion for people who suffered in the Equitable Life scandal is very small. The courts have held that bodies given discretion are not allowed to fetter their own discretion. It is therefore necessary for the House to fetter the discretion of the Treasury.

I strongly support the view that we should not allow a situation in which the most elderly people will be excluded from compensation. In view of the fact that everyone places so much weight on the ombudsman’s contribution, I strongly support the amendment tabled by my hon. Friend the Member for Nottingham East, which suggests that we should give her a further look at what is being proposed. It will be preposterous if, in trying to do what the ombudsman wants, we end up doing something that she thinks is unsatisfactory and inadequate. The reasoning behind the amendment in my name is the same.

I do not wish to say any more, but the House should do its proper job of telling the Treasury what the rules should be when it considers the matter. I am not getting at Ministers; I am getting at the Treasury as an organisation. It does not have a good record, and ethics and decency are not major considerations for it. They never have been, and perhaps they should not be its major considerations, but we should bear them in mind, so that we can bear down upon the Treasury.

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

The hon. Member for Leeds North East (Mr Hamilton) made an impassioned and moral argument for amendment 1, to which I shall return later.

I have taken a very keen interest in this issue. It has affected a significant number of people in Stratford-on-Avon, to the extent that I have had hundreds of letters and e-mails about it. Like many other Members, I signed the EMAG pledge before the election, and I believe that backing the Government to get the Bill through is delivering on that pledge.

It is probably worth our spending just a few moments thinking about the economic landscape in which we are operating. We are borrowing about £500 million a day. Every time we go to sleep and wake up in the morning, we notch up another £500 million. To service the debt costs about £120 million a day—that is not to pay it down, but just to stand still. It is against that background that we must try to resolve the tragedy of Equitable Life.

Let me spend a couple of minutes on the timelines of the events. In 1988, Equitable Life stopped selling its guaranteed annuity rate policies and, in 1990, those policies became too expensive to honour because of the falls in interest rates and in inflation. In 1999, after the 1997 election, Equitable cut its bonus paid to 90,000 GAR policyholders. In July 2000, the House of Lords ruled that Equitable Life must meet its obligations to its GAR policyholders, thus leaving it with a £1.5 billion liability.

In February 2001, the Halifax agreed to pay £1 billion for the assets. In July, with-profits policyholders saw the value of their savings slashed by 16%—by almost one fifth. In August, Lord Penrose announced his investigation. In October, the then Economic Secretary to the Treasury told the Treasury Committee that the previous Labour Government might consider compensation for some victims if a grave injustice had occurred.

In January 2002, policyholders backed a compromise package. In March 2004, the Penrose report blamed Equitable Life’s management for the whole affair. Following the report’s publication, the Government ruled out compensation and were accused in this House of abandoning policyholders. In April, the parliamentary ombudsman announced that she would reopen her investigation.

In 2007, the European Parliament called on the UK Government to compensate policyholders. In January 2008, Equitable agreed to pay an undisclosed sum to 407 with-profits annuitants who launched proceedings in 2004. The ombudsman’s report was published in 2008. The previous Government said that they would respond by the autumn. When the deadline was missed, the then Prime Minister said that they would respond before Christmas. However, they did not respond until the new year.

In August 2009, Sir John Chadwick published his first interim report, and in March 2010—more than a year after his appointment—he published his third and final interim report with a promise of a final report in May 2010. That date was subsequently extended to July.

I go through these events in chronological order to demonstrate the pain that the victims of Equitable Life have had to go through. This is a true human tragedy. The hon. Member for Leeds North East talked about the e-mails and letters that he has received from his constituents, and the same is happening in all our constituencies.

The Government’s offer is a very good one. My hon. Friend the Member for Cardiff North (Jonathan Evans) said that, at best, he expected them to offer up to £1 billion. Many colleagues and I voiced our concerns the last time we debated this matter in the Chamber. When one makes a pledge, one must try to honour it.

[Richard Fuller]

Like many of us, my hon. Friend is wrestling with this question of fairness and with the political obligation to find a fair payment scheme that was mentioned in the Public Administration Committee and that many of us have signed up to. Hon. Members from both sides of the Committee are caught between wanting to praise the Minister for the swiftness of his recommendations—we praise him for that—and finding, in these difficult times, £1.5 billion. We often talk about that figure in comparison with the Chadwick number. However, does my hon. Friend not accept that we should view the figure with respect to what the Government themselves have said about policyholders’ relative loss, which Towers Watson estimated at, I think, £4.3 billion? Does £1.5 billion represent meeting our obligation of fairness if it is set against the relative figure of £4.3 billion that the Government themselves have accepted?

13:44

[Nadhim Zahawi]

My hon. Friend is quite right: the figure is £4.3 billion. I, too, have wrestled with the problem. In the current economic climate, offering £1.5 billion to the victims is fair and it delivers on the promise that many of us have signed up to. I hope that many colleagues will support the Government to expedite the process and finally get money flowing to the victims, something that we hope will happen by the middle of next year. The figure of £1.5 billion is about four times higher than the £340 million that victims would have received if the coalition Government had accepted the Chadwick report, which is what we feared would happen. I am very comfortable with the sum being offered.

[Stephen Lloyd]

I accept my hon. Friend’s premise that the amount is considerably higher than the previous Government proposed. I also accept that we are in a desperate situation in which we are paying £120 million a day to service a debt. That is outrageous and clearly we must focus on that. However, a way around the challenge is the one that I have presented to the Economic Secretary to the Treasury, which is to urge the Treasury to revisit the matter in five years’ time for the second tranche of the £500 million. By then, the economy will be transformed and we will be in a stronger position. Does my hon. Friend not agree that while the £1.5 billion seems a very generous sum at the minute, a little flexibility from the Treasury means that the further £500 million could be revisited in five years’ time?

[Nadhim Zahawi]

rose—

[The First Deputy Chairman]

Order. Before the hon. Gentleman responds to that intervention, may I remind Members that interventions should be short and that this is not a Second or Third Reading debate? We are speaking to the amendments that are before us and if we focus on them, we will make quicker progress.

[Nadhim Zahawi]

My hon. Friend makes a good point. However, having listed that extraordinary chronology of debacles, it is clear that there could be a problem if we left things open and said, “We might be able to revisit them at some other stage.” We would be opening up other doors, and that may cause further delay. I come from a world of business rather than of politics and I believe that, if we try to put a line under a terrible situation and compensate people, we should do it quickly and completely.

Mr Evans, I take on board your remarks. All I will say is that the Minister should be applauded. There will be no means-testing and the dependants of the deceased policyholders should be included in any compensation. I have had a number of heartrending letters in which relatives have written, saying, “It is too late for us because our loved ones have passed away.”

I understand the passion that the hon. Member for Leeds North East has shown through amendment 1. The problem with the amendment was outlined by my hon. Friend the Member for Cardiff North (Jonathan Evans), who said that it was very difficult to put a quantum on what that number should be. In the current economic climate, I would find it hard to support it if we said, “Oh well, maybe it is £100 million extra from reserves; maybe it’s £100 million that we can bring in from future years.” None the less, the hon. Gentleman made a strong point about the annuitants from 1991 going forward, and I hope that the Minister was listening carefully.

[Mr Fabian Hamilton]

Does the hon. Gentleman not agree that creating an arbitrary date—which is what the cut-off point would be—would lead to a great deal of anger and distress among some of the oldest and most vulnerable policyholders?

[Nadhim Zahawi]

The hon. Gentleman would be right if the date were purely arbitrary. However, the ombudsman stated that the malpractice occurred in 1991, so the date is not quite as the hon. Gentleman puts it. It has not been plucked out of the air.

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

Leaving aside the economic difficulties that we face, is not the central problem that when we put a cap on something, we have to make it work? Therefore, we have to arrive at a certain formula to make the cap work, because we are largely in the hands of the Treasury, as my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) said earlier. Unless we get a grip on the Treasury, we will find ourselves in similar situations, and it is my guess that the Treasury has imposed the cap.

[Nadhim Zahawi]

The hon. Gentleman makes an interesting point. What I would say is that, in contrast to the quotation from Winston Churchill earlier, my observation as a new boy to this House over the past six months is that the Treasury has behaved positively. We must remember that we will be administering public money. The Government have no money of their own; rather, we collect money on behalf of the people and then we administer it. It would be foolhardy and perhaps even foolish for us to say, “Let’s have somebody else administer public money.” At the end of the day, people have to have someone who is accountable, and we are accountable, as is the Treasury.

Amendment 7 seeks to ensure that the Treasury takes into account a proper evaluation of the total relative losses when determining payments—that is, the figure should not be £4.3 billion, but could be much higher. I strongly disagree with that. Many EMAG members have written to me, lobbying me to see the matter differently, but I have to say that I disagree. Given the current economic hardship, we all face an incredibly difficult situation, in which we are all having to tighten our belts. To deliver compensation of £1.5 billion at this time is entirely fair.

Amendment 2 is in the name of the hon. Member for Leeds North East and all I would say to him is that I understand the thrust of his argument that we should consider what the ombudsman says about the behaviour and actions of the coalition Government in dealing with the issue. However, I would rather get things done and dusted, and have something delivered to the victims than procrastinate further and wait for longer.

[Mark Durkan (Foyle) (SDLP)]

I can fully appreciate what the hon. Member for Stratford-on-Avon (Nadhim Zahawi) said about the Government’s proposals being clearly better than what was offered by the previous Government. Frankly, that is not a very hard test to pass. The real test for us in this Committee is surely not whether what we have from this Government is better than what we had from the previous Government. It clearly is better. Rather, we as a Committee have to see whether it is as good as what is set out in the parliamentary ombudsman’s findings and recommendations.

[Nadhim Zahawi]

Just to offer some explanation, what the Government have delivered is not just better than what the previous Government were thinking about—or dithering about—trying to deliver. I also believe that there was a point in this Parliament when the coalition Government were seriously considering implementing only what Chadwick had recommended, but we have moved away from that. We have buried that, and we are now in a much better place for the victims of Equitable Life.

[Mark Durkan]

My point still stands: the test is a fairly easy one. The Chadwick report was so grossly inadequate as not to be a credible starting point for any Government. Many of us said that to the previous Government, including the hon. Member for Leeds North East (Mr Hamilton)—very bravely, loudly and consistently—and many of us have said it to this Government as well.

For us as Members of the Houses of Parliament, the test that many people will apply is: what regard do we have to the findings and recommendations of the parliamentary ombudsman? As the hon. Member for Angus (Mr Weir) stressed earlier, the public understand the parliamentary ombudsman to be a creature of Parliament and to have some weight and merit in Parliament’s considerations. However, the previous Government acted pretty dismissively towards the ombudsman. What we have in some of the amendments before us is an attempt to show clearly that this House will give proper weight to what the parliamentary ombudsman is saying.

We all received a letter from the parliamentary ombudsman about some of the Government’s proposals. Given that, is it wrong that we should reference the judgment of the parliamentary ombudsman—as the hon. Member for Nottingham East (Chris Leslie) is suggesting we do with amendment 2—perhaps as a way of moving on from the scandal and confusion that many feel surrounds the fact that the ombudsman was largely ignored by the Government and, in effect, by Parliament for so long?

[Jonathan Evans]

I am anxious to ensure that the hon. Gentleman does not undersell what the Minister has done. The hon. Gentleman will recall that every aspect of the parliamentary ombudsman’s report has been accepted by the Government and that, furthermore, the report said that whatever the overall compensation package should be, it had to take account of the impact on the public purse. Many of us on the Government Benches think that those are the two crucial tests.

[Mark Durkan]

That is what the hon. Gentleman is arguing. However, given that the money that we are talking about has been capped according to the Treasury’s judgment of what it believes is available—that means that the overall sum to be offered by way of remedy and redress will be a long way short of what all the other assessments say—I believe that it would useful for the Committee to accept an amendment that would allow us to ensure that the parliamentary ombudsman has some say in overseeing the measures. Under the circumstances, that is fair and reasonable, but if the hon. Gentleman is so content that the scheme as it stands meets everything that the ombudsman has said, he should see such an amendment as adding no particular stress or difficulty for the scheme. Such an amendment would be a way of offering public assurance after all the doubts that have been raised about how Government and Parliament have dealt with the issue.

[Mr Weir]

Does the hon. Gentleman not also agree that at no time did the ombudsman suggest that any group of annuitants should be debarred from receiving compensation, as is now being proposed?

[Mark Durkan]

I thank the hon. Gentleman for that point, which quite properly brings me to amendment 1.

[Jonathan Evans]

I do not want to delay the hon. Gentleman, who is being very generous in giving way, but if he waits until Third Reading, he will hear what I have to say about the totality of the package.

[Mark Durkan]

What a trailer for Third Reading! We will all be waiting.

On amendment 1, the hon. Member for Leeds North East set out a compelling case for why it is not just the cap, but the cut-off that we need to be seen to address. We have seen in the past how dates set for various reasons have ended up creating unfair and unforeseen consequences that Parliament did not truly intend. That certainly happened with dates for schemes in previous pension Bills, for reasons that seemed reasonable and understandable to the House at the time. We are now struggling with the consequences that were never intended. We must be wary about such cut-offs.

14:00

The arguments from the hon. Member for Cardiff North about amendment 1 had some validity. I suggest that some of the answers may be found in amendment 7, which was tabled by the right hon. Member for Holborn and St Pancras (Frank Dobson). The hon. Member for Cardiff North said that it might be harder for some pre-1991 annuitants to make the case that some of their losses were directly due to maladministration and that the nature, degree and pattern of maladministration was more obvious and accentuated after that. If so, amendment 7 would allow account to be taken of that, because it states:

“In determining the amount of the payments that it is appropriate for the Treasury to authorise under subsection (2), the Treasury must have regard to such matters relating to the adverse effects of that maladministration on those persons and the proper calculation of their resulting losses as have been determined by the Parliamentary Commissioner for Administration to be relevant to and appropriate for that calculation.”

Amendment 7 would cut both ways. It would be an assurance that the loss suffered because of maladministration is duly reflected, and it could be used the other way because if it can be shown that some of the people who would be brought into the scheme by virtue of amendment 1 had not suffered because of maladministration, due weight could be given to that. Equally, the pre-1991 undue profits issue—some people went for market glister rather than reliable long-term worth—would not be precluded from being properly addressed and balanced. We all want to achieve an adequate compensation scheme.

I shall support amendment 1 if it is pressed to a vote, and I commend amendments 2 and 7. Together, they would go some way to improving the Bill. They would also go some way to improving Parliament’s reputation at a time when people have been so disappointed and frustrated by how long this problem has been allowed to run on. I welcome the Minister’s assurances, which he made in an intervention, that the interests of the dependants of those who have died will also be properly addressed.

It is not enough to say, “Well, this is great; we now have something that is better than Chadwick. We now have something that is better than the previous Government’s proposals.” People were deeply distressed by the previous Government’s long inertia and indifference, but they are not hugely impressed by urgent inadequacy. The purpose of the amendments is to ensure that we do not make errors through urgent inadequacy.

[Bob Blackman (Harrow East) (Con)]

I pay tribute to the hon. Members who have spoken to the amendments. I praise our Treasury team, who have done a magnificent job of righting the wrong that was done to Equitable Life policyholders over many years. Opposition Members—there are some exceptions—should hang their heads in shame because of what they did when in government to Equitable Life policyholders. I came to the issue of the damage to policyholders rather late in the process—shortly before the general election. Like others, I was encouraged by my former employer to invest in Equitable Life, but it was a good job that I did not do so, or my view now might be different.

I remind hon. Members about the pledge that we made before the election: 380 MPs agreed to press for proper compensation for victims by swift, simple, transparent and fair payment schemes, as recommended by the ombudsman; and we agreed that we would all join the all-party group on justice for Equitable Life policyholders. I agree with the pledge, which I signed, and I have honoured every element of it. A large number of colleagues have not joined the all-party group that I have the privilege of co-chairing, and I encourage them to do so even if latterly.

I want to concentrate on three aspects of the amendments. The first is the moral duty that we owe to people who relied on advice and on the system of the regulator, the Government and Equitable Life. There was a major scandal, because those three bodies connived to swindle people out of their money. That is a sad indictment of what happened, and that is what set Equitable Life aside from all other aspects of the pension industry. We must demonstrate to people, especially young people, that it is worth investing in their future. If young people do not do so, there will be a sad and sorry state of affairs in this country. There is a clear moral duty.

The second issue is the amount of money that is due in compensation. I am delighted that the Treasury accepted that the ombudsman’s recommendation of £4.26 billion was the right amount to which policyholders were entitled. The debate today is not about money, but the Treasury team has come to a view that because of the economic circumstances only £1.5 billion is affordable. It has also had regard to the ombudsman’s report, which said clearly that relative loss must be taken into account. The Treasury team must have done some calculations to reach the figure of £1.5 billion, and I trust that the Minister will tell us in his reply today how that figure was arrived at. The reduction from £4.26 billion to £1.5 billion is dramatic, and he must respond to our points.

[Claire Perry (Devizes) (Con)]

My hon. Friend eloquently sets out the outrage that many of us feel, having signed the pledge. Does he agree that our Government, unlike the previous Government, have reached a speedy conclusion, as a result of which more people in the claimant group will receive compensation before there are further deaths? I agree with my hon. Friend about transparency and I, too, would support a motion to set out exactly how the calculations were made, in the spirit of our Government’s commitment to greater transparency in all financial matters.

[Bob Blackman]

I thank my hon. Friend for her intervention. The issues are complex, and the more one reads about and understands the scandal, the more difficult it becomes to resolve it. The Government in their wisdom have set out a compensation scheme that will continue for many years. The £1.5 billion is not a one-off payment that will go into a fund this year and end the matter. It will be spread over many years, and it will extend into the next Parliament.

[Mr Hoban]

May I clarify the fact that those who receive compensation and are not with-profits policyholders will receive a one-off payment during this Parliament? Only with-profits annuitants will have their payments spread over the rest of their lives.

[Bob Blackman]

I thank the Minister for his intervention. I was going to refer to that while I was responding to the intervention from my hon. Friend the Member for Devizes (Claire Perry). The clear issue now is justice for the people in the worst possible position—the trapped annuitants. I applaud the Government for honouring the pledge that 37,000 people who have been trapped as a result of the scandal will receive 100% compensation. I strongly support and endorse that.

We have a problem, however, and amendment 1 attempts to address it. The amendment has cross-party support; we must be seen to be acting not just as a party but as parliamentarians overseeing the Executive. The problem is that if someone took out a policy on a particular day, they would receive no compensation at all, even though the maladministration was taking place at the time; whereas someone who took out a policy on the following day would get 100% compensation. There are always difficulties when arbitrary dates are set, but that is neither fair nor reasonable.

I believe that we should set aside the date and review all the trapped annuitants to ensure that they get fair and proper compensation. The Chadwick report has been rubbished by EMAG, and by Members on both sides of the House, but even Chadwick proposed a scheme that would have compensated those trapped annuitants whose policies were taken out before the cut-off date.

[Mr Marcus Jones (Nuneaton) (Con)]

When my hon. Friend signed the EMAG pledge, as many hon. Members across the House have done, did he believe that we would end up leaving out about 10,000 pre-1992 annuitants from the compensation scheme?

[Bob Blackman]

I and all the others who are new to the House signed the pledge in the belief that, if we were elected, we would compensate everyone who had suffered as a result of the maladministration, rather than taking an arbitrary position to compensate some and not others. I have heard heart-rending stories from my constituents and from people all over the country who are now living on desperately low pensions, having expected much larger ones, and we have a very strong moral duty to all those people. We throw that away at our peril.

[Dr Sarah Wollaston (Totnes) (Con)]

This is not just a question of fairness. Many of those individuals are older and very vulnerable indeed. The letters that I have received make the point that those people are living on very low incomes at a very vulnerable time of their lives, and they have already suffered from the effects of inflation. I agree with my hon. Friend that we should talk about this as parliamentarians, not on a party political basis.

[Bob Blackman]

My hon. Friend clearly demonstrates that we are talking about the oldest and most vulnerable people, and that they have been dealt with in a most disgraceful way following this scandal. We have a moral duty to compensate them.

Going back to the points made by my hon. Friend the Member for Cardiff North (Jonathan Evans), it is clear that when the bonuses that were attached early in the process are taken into account, some policyholders might not receive a penny piece in compensation. We need to recognise that, but there is an 18-month gap between the cut-off dates. A large number of the retired people who had taken out annuities could not adjust them once they had purchased them, and they are now trapped in that position. That is why we have a moral duty to compensate them.

[Nadhim Zahawi]

What action would my hon. Friend recommend? My hon. Friend the Member for Cardiff North mentioned the possibility of people being judged to have received too much. Should we take that money away from them? The malpractice took place in 1991, and we should be talking about 1991, not about 1992 or about an open-ended process.

[Bob Blackman]

Clearly, if exorbitant bonuses were attached to certain policies, the policyholders would not be due compensation and they would not receive a penny piece. Remember, we are talking about compensation. We cannot take money off policyholders who have been receiving pensions. Parliament just cannot do that; it would be a retrograde tax and therefore unacceptable. Those who are due compensation should receive it, but those who are not due any would not receive any, and if they have benefited in the meantime, well, that is fine and dandy for them.

[Jonathan Evans]

In regard to the morality of the issue, I agree with many of my hon. Friend’s arguments. My concern, however, relates to the practicalities involved when people are policyholders with other companies. Many of them had large bonuses from the 1980s onwards, but get hardly any at all nowadays. We have to take account of this when we look at their asset share, compared with everyone else in the pool in a with-profits system. That is why many people believe that there is no future for with-profits business nowadays.

14:15

[Bob Blackman]

The independent commission will need to look at the relative loss that individual policyholders have experienced as a result of the maladministration. If annuitants took out policies well before the maladministration took place, there would be no relative loss, and they would receive no compensation. The nub of the issue is that we want the review to be independent, so that we can all look the policyholders in the eye and say that we have honoured our pledge to ensure that they were treated properly, and properly compensated. Under the Bill as it is drafted, we cannot do that because of the arbitrary cut-off date.

[Harriett Baldwin (West Worcestershire) (Con)]

My hon. Friend is obviously extremely knowledgeable on this subject. Does he agree that this is perhaps not so much a question of a specific date as of whether or not a policyholder was trapped? If they are trapped, there is absolutely nothing they can do about it.

[Bob Blackman]

That is clearly where our moral duty arises. If policyholders are trapped and cannot adjust their position, they are unable to rectify the damage that has been done.

I want to speak briefly to amendment 7. The Government have accepted that £4.26 billion should be the full amount available to policyholders, 37,000 of whom will receive 100% compensation. That clearly involves a huge amount of money, which will come out of the £1.5 billion. The policyholders who are not trapped annuitants would therefore get something like 15% of the compensation due to them, which seems pretty unfair and unreasonable. We should set up a commission to devise a payment scheme, then look at the results. Instead, £1.5 billion has now been set aside, and an independent commission will set up the mechanism for distributing that money. That could have very serious consequences indeed.

Parliament has a problem in this regard. I applaud the Government for moving swiftly to settle this matter once and for all, but we are setting up a method for distributing the money and creating expectations out there. About 1.4 million policyholders have been affected by the scandal, and 37,000 will receive full compensation while 10,000 will not get a penny. That leaves rather a lot of policyholders among whom to divide a relatively small amount of money. When the Minister responds to the debate, I trust that he will be able to set out how the calculations were made, so that we can be clear about them.

Amendment 7 would allow us to review the position in five years’ time, when the economy has recovered and the benefits of this Government are clear for all to see, and to top up the compensation further for those people who will be retiring in five, 10, 15 or 25 years’ time. We also have a moral duty to honour our pledge to those people. This is one of those cases in which we have set out to do something in the proper way, and I applaud those on the Treasury Bench for moving swiftly to bring the matter to a conclusion so that payments can be made as soon as possible, but we must ensure that we fulfil our moral duty to those policyholders.

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

I start by putting firmly on the record my belief that the Government have implemented the parliamentary ombudsman’s report and have honoured the pledges made before the election. It was always part of the parliamentary ombudsman’s report that this would be a political decision for the Government to make, taking the public finances into account when they set the cap. The Government have set the cap at £1.5 billion. I wish it could have been more, and I hope that it will be possible to revisit this in future when the public finances are in a better state.

I have sympathy for amendment 1, but let me state my understanding of how it would work in practice. It does not alter the cap that has already been set, so if the pre-September 1992 with-profits annuitants were to be compensated to the same level as the post-September 1992 with-profits annuitants, there would be less for the latter group of people. If the cap remains the same, and the amendment does not alter the cap, giving more to some people would mean giving less to others. I ask the Financial Secretary and the hon. Member for Leeds North East (Mr Hamilton) who moved the amendment to comment on that when they respond.

I want to press the Government on why they have chosen the date of September 1992. As other hon. Members have said, the maladministration started in June 1991. Penrose found that when the Equitable Life Assurance Society’s board papers were sent to the Government Actuary’s Department on 11 June 1991, there was information in those papers showing that the society was not in a good position. Had the Government Actuary’s Department publicised that information at that time, investors would have been deterred from investing in the society. There is a strong argument for saying that the date should be not September 1992 but June 1991.

On 30 July 1992, in an internal briefing, the Government Actuary’s Department described the society as being one of the

“companies on whom we have been keeping a close watch for a number of years”

and said that Equitable Life remained a company “which caused serious concern”. There was evidence in July 1992—in fact, before July 1992—that the Government Actuary’s Department was aware that Equitable Life had problems. Surely that should have been made public and investors should have been deterred. In his response, will the Minister clarify why the date of September 1992 was chosen, because it certainly seems to me that an earlier date—say June 1991 or possibly even earlier—would have been more appropriate?

[Mr Marcus Jones (Nuneaton) (Con)]

I would like to speak mainly about the position of with-profits annuitants and the pledge that I and other Members of all parties made before the general election—that the Government should make fair and transparent payments to those who had suffered as a consequence of the debacle of Equitable Life. I am talking about 350 local people in my constituency who are part of the Equitable Members Action Group. Those 350 include people associated with many companies that were in the Equitable Life scheme. Many hundreds of other people are affected. For some, Equitable Life provided their only private pension to supplement their state pension provision.

I welcome the fact that for a number of my constituents, that pledge has been made good, and I understand that the trapped annuitants in the post-1992 cohort will receive 100% of their compensation. I am delighted about that. Needless to say, I am also very concerned for the pre-1992 Equitable Life investors for whom, it seems, there will be no compensation at all. That seems contrary to the recommendations of the parliamentary ombudsman, contrary to EMAG’s suggestions and contrary to the views of Sir John Chadwick, for whom not many Members have a great deal of time.

I understand that it is difficult to quantify the losses, but, if the Government have the will, the losses of the pre-1992 annuitants should be explored. The people to whom we made a pledge before the general election in May were not necessarily concerned whether they were pre-1992 annuitants or post-1992 annuitants. Their concern was as Equitable Life policyholders looking for justice.

If the Government and the Treasury have the will to deal with this situation, they should do so; if not, they should explain how I justify the position to constituents who have been wronged.

If the Government and the Treasury are prepared to look at compensating the pre-1992 annuitants, there has to be a health warning, because there is a law of unintended consequences, should we be stuck at the compensation figure of £1.5 billion. Many of my constituents who are post-1992 annuitants might be unaffected by any decision to include the pre-1992 annuitants.

Amendment 7 deals with that position and the relative losses. The Treasury should consider it, although I am concerned about whether it could be taken into account within the current comprehensive spending review or would need to be considered after the current CSR period expires.

I would like to ask the Minister several questions. First, will he look again at how to compensate the pre-1992 annuitants, and at how that might be quantified? Will he commit to working with his Treasury colleagues to take into account payments beyond the CSR period to enable the pre-1992 annuitants to be compensated without prejudicing the position of the post-1992 annuitants and that of Equitable Life policyholders generally?

I implore the Minister again—I did so in the last debate on this subject—to recognise that the Government’s decision over Equitable Life raises questions not only about the integrity of the current Government, but about the integrity of savings and investments for one’s retirement. I am well aware that many of my constituents do not have their own retirement provision. The Government should encourage people to provide for their retirement, but if we do not ensure that there is a safety net for people who have invested and done the right thing for their retirement, they will think that it is not worth putting themselves out by investing money for their retirements during their early years of work.

I ask the Minister to consider those points extremely carefully before any decisions are taken this afternoon.

[Mr Hoban]

I start by referring to the closing question from my hon. Friend the Member for Nuneaton (Mr Jones). He will be aware that in July we published proposals to strengthen the regulation of retail financial services, including pensions, which I hope will go some way towards reassuring people that we have learned the lessons from the past and put in place a much more stable and robust framework for the regulation of long-term savings.

I am grateful for the opportunity to discuss, first, the role of the parliamentary ombudsman in developing our policy on the payment scheme. Her work has been central to our approach. I also want to focus on with-profits annuitants and those who took out their policies prior to September 1992. These issues have been raised particularly since our announcements in the spending review. I hope that I can bring some clarity to the treatment of different groups of with-profits annuitants.

14:30

At the spending review, my right hon. Friend the Chancellor announced that about £1.5 billion of funding will be provided for the Equitable Life payment scheme. As hon. Members have said, that is more than four times the figure produced by the Chadwick process, which was set in motion by the Opposition. The funding includes the full cost of losses to policyholders with with-profits annuity policies—approximately £620 million—which will be paid through regular payments. That amount is to cover those with with-profits annuity policies, whose policies started between 1 September 1992 and 31 December 2000. As hon. Members have indicated, those who took out with-profits annuity policies prior to 1992—in fact, not just with-profits annuitants but anyone who took out a policy prior to 1 September 1992—are excluded from the scheme. The Government are committed to implementing the ombudsman’s recommendation to introduce a fair and transparent payment scheme to Equitable Life policyholders for their relative loss as a result of regulatory failure. That is what the ombudsman asked us to do, and that is what we are implementing. The Bill authorises us to make payment under the scheme.

[Nadhim Zahawi]

Is it not precisely the point that, rather than being an open-ended compensation scheme, the scheme relates to malpractice?

[Mr Hoban]

My hon. Friend is absolutely right. Our obligation is to compensate people for regulatory failure by the Government when they were the regulator of Equitable Life. The scheme is not an open-ended compensation scheme. It is very focused, and that was the ombudsman’s recommendation. Her locus in this matter is a consequence of the Government having acted as the regulator for Equitable Life during the period in question.

Let me explain to the Committee and to the hon. Member for Leeds North East (Mr Hamilton), who raised the question, why 1 September 1992 is a logical, not arbitrary, date. The ombudsman indicated in her report that there were problems with the regulatory returns for 1991, and that those could influence policyholder behaviour. However, they could not have come to the attention of policyholders, and prospective policyholders, before they were submitted at the end of June 1992. No policyholder would have been aware of that regulatory failure until the returns had been published. It is unlikely that those returns would have come to anyone’s attention prior to 1 September 1992. I stress that the date is not arbitrary, but a consequence of the ombudsman’s findings and how they impact on what policyholders would have been aware of. Policyholders would not have been aware of the regulatory failure until the autumn of 1992.

[Mr Fabian Hamilton]

I accept the Minister’s point about the date not being arbitrary, but does he not accept that the regulatory failure affected those annuitants who could not change their annuities, even if they were purchased before September 1992? Along with those annuitants who purchased policies after September 1992, they continue to see a decline. Therefore, they were affected by regulatory failure.

[Mr Hoban]

The hon. Gentleman makes an assumption that the scheme is open-ended, but it is designed to compensate policyholders who invested in Equitable Life from 1 September 1992. With regard to the implications of that, I shall respond to the intervention by my hon. Friend the Member for Cardiff North (Jonathan Evans).

[Mr Weir]

Will the Minister explain further, as I do not quite understand? He seems to be saying that only those who became aware of a regulatory failure in 1992 are affected. However, am I not right in thinking that that suggests that the regulatory failure goes back prior to 1992, and would have affected people then, although they would not have been aware of it? Are those people not entitled to compensation?

[Mr Hoban]

The ombudsman is concerned about people who invested in Equitable Life who might not have done so had they been aware of that regulatory failure. That regulatory failure would not have been known to them until September 1992, so there is a clear, rational argument for 1 September 1992 being the right date to start the calculation of losses.

[Several hon. Members]

rose—

[Mr Hoban]

Let me continue.

We are excluding that group of people because they took out policies before any maladministration could have affected their investment decision. Therefore, to echo my hon. Friend the Member for Cardiff North, they suffered no relative loss.

[Bob Blackman]

But will the Minister answer the moral issue? At the time when people were making investment decisions, and taking out these policies, the regulatory failure was going on. As they became victims of that regulatory failure, surely we have a moral duty to compensate them.

[Mr Hoban]

When people made the decision on the information available to them, the relevant information was not in the public domain, and would not have affected their investment decision until September 1992. That is a clear, logical, sensible starting point, based on principles and on the ombudsman’s findings, for the maladministration, and that is the point from which we should calculate relative loss for policyholders.

[Mark Durkan]

The Minister is in danger of asking the Committee to accept the notion that customer ignorance can be a legislator’s excuse. That cannot be so. If the Minister is trying to say that what they did not know did them no harm, that is preposterous. They did not know, and they have suffered harm.

[Mr Hoban]

I do not agree with that point. There is a clear principle: the basis on which people were investing in Equitable Life. At that point, no one knew about the maladministration.

We should also bear in mind the issue of practicality and the lack of information available to Equitable Life’s policyholders. Hon. Members should reflect on the fact that no one would have made investment decisions based on anything that happened prior to 1992 until that information was in the public domain. That is why the group has been excluded from the calculation of relative loss.

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

My hon. Friend is being generous in giving way. No one suggests that the situation is not difficult, but whether or not one was aware of maladministration, and whether or not it existed pre ’92, surely the central point is that annuitants who took out a policy pre ’92 suffered relative loss post ’92, courtesy of maladministration. To return to an earlier point, perhaps there is a moral duty to include such people in the compensation, as I believe that the parliamentary ombudsman suggested.

[Mr Hoban]

The parliamentary ombudsman’s findings were clear: she said that the maladministration started in 1991, but that it would not have been obvious to policyholders until September 1992.

Let me deal with two issues that hon. Members should have take into account in assessing the point. First, as has been mentioned, there are challenges around getting information for the pre ’92 period. Secondly, there is the point made by my hon. Friend the Member for Cardiff North about the timing of losses. We recognise that pre ’92 with-profits annuitants were affected by how Equitable Life was run. Sir John Chadwick and Towers Watson looked into what those WPAs would have received from Equitable Life had there been no maladministration. They concluded that they received more from Equitable Life as a result of maladministration than they would have done had it been properly regulated. That was because Equitable Life paid out more to them in the early years than it would have done had there been no maladministration. Let me give an example to prove that.

If a with-profits annuitant had purchased their policy in 1989 and gained through that purchase an income of £7,200, by 1993 the policyholder would have been receiving an annuity of approximately £10,000 per annum. Part of that sum was a result of the bonuses that had been declared on the policy since commencement. It is recognised that Equitable Life was paying higher bonuses than it could afford during the late 1980s and early 1990s. If Equitable Life had not been over-bonusing during that period, Towers Watson has calculated that the policyholder would have received only £9,500 per year. It is a consequence of the maladministration that the policyholder is receiving £500 more than he or she should have during that period.

Equitable Life continued to overpay bonuses throughout most of the 1990s. As a result, by 2002 that policyholder was receiving £17,000 per annum. If the over-bonusing had not taken place, the policyholder would have received only £15,800, so he or she was still receiving more as a consequence of maladministration.

In 2003, Equitable Life cut the rate of annuity payments to its with-profits policyholders by about 20%. In the absence of maladministration, the value of payments to with-profits policyholders would also have been cut, although, owing to market performance, by only 18%. After the cuts in 2003, our example policyholder was receiving £12,900 per year from Equitable Life. Had there been no maladministration, he or she would have been receiving only £12,300. I hope that that example has helped to clarify the consequences of maladministration, namely that even after the cuts in 2003 policyholders are still receiving more than they would have if Equitable Life had been properly regulated. For a range of reasons, their plight is not as it has been represented.

The first question to be asked, then, is “When did maladministration affect policyholders and the decisions that were made?” The second relates to the practicality of extracting data pre-1992, which is well established and has been well aired in the Chadwick report and elsewhere; and the third concerns the consequence of maladministration in Equitable Life, which is that with-profits annuitants are receiving more over the lifetime of their policy than they would have received if that maladministration had not taken place.

[Jonathan Evans]

I was interested in the way in which my hon. Friend dealt with my point about over-bonusing, but I feel that he has undermined another point that I made: I suggested that it was not possible to make such calculations, but my hon. Friend has suggested that Towers Watson has done so. In a sense that also undermines the thrust of why the pre-1992 policyholders should be excluded. I had assumed that they might not have been disadvantaged and that it was too difficult to work out the numbers, but if Towers Watson has worked out those numbers and there is no relative loss, it seems a bit odd not to include them, at least for the purpose of calculating the position and telling them that there is no loss.

[Mr Hoban]

I was trying to make two points. First, those policyholders were excluded from the calculation of relative loss as a consequence of the ombudsman’s findings and her view on when maladministration had taken place. According to the example that I have given, they would not have suffered loss in any event. I am merely saying that, in my opinion, there is a strong case in principle for the exclusion of those policyholders, and in practical terms they have not suffered loss.

[Mark Durkan]

Will the Minister give way?

[Mr Hoban]

I want to make some more progress.

The fact that with-profits annuitants who bought their annuities before 1 September 1992 have seen a reduction in the level of payments that they currently receive from their annuities is a result of poor investment market performance and the fact that their earlier annuity payments were artificially high. That was because of the structure of the policies that they bought, or because they received too much in the earlier years, as Equitable Life paid out more on a discretionary basis than it should have. Unlike the value of conventional annuities, the value of a with-profits annuity varies according to investment return. Although the reductions are regrettable, they are not instances of Government maladministration, and therefore Government should not be providing compensation for that group of policyholders.

14:45

A number of Members mentioned Sir John Chadwick. My hon. Friend the Member for Harrow East (Bob Blackman) said that Sir John’s report had been rubbished by some people. The report included a mechanism for the calculation of internal relative loss that would have dealt with the pre-1992 annuitants, but, as my hon. Friend said, there was widespread criticism of it, not just in the House but by all the commentators, by EMAG and by others. No one came forward with an alternative scheme to compensate the pre-1992 annuitants, because no one had really thought about them. It needs to be recognised that they fall outside the parameters of the ombudsman’s report, because she did not envisage a need to compensate them.

Let me now deal with the future role of the ombudsman in this process. When we came to office, we pledged to

“implement the Parliamentary Ombudsman's recommendation to make fair and transparent payments to Equitable Life policyholders”.

My right hon. Friend the Chancellor of the Exchequer confirmed that pledge at the time of the comprehensive spending review, when he announced our plans that we have for the scheme.

As we all know, the ombudsman has worked tirelessly to help to ensure that justice is delivered to the policyholders who have waited so long for a resolution of this issue. Her continued interest in the matter has been of great help, and has brought some clarity to what is clearly a very complex issue. The ombudsman has been generous with her time, and has continued to contribute to the debate. She has, for instance, appeared before the Public Administration Committee. I discussed the Chadwick report with her in the run-up to the spending review, and her views helped the Government to reach a view on the losses suffered by policyholders.

I should welcome any continued contribution that the ombudsman might wish to make to the debate on Equitable Life, and if she wished to advise Parliament of her views on the work of the independent commission, that would assist both the House and the Government; however, I think it would be inappropriate to require her to play such a role. Her role and remit are clearly set out in the Parliamentary Commissioner Act 1967, which does not give the ombudsman a standing obligation to continue to advise this House as to the response to her reports. There is good reason for that, not least the need to make appropriate use of the ombudsman's resources. It must be for the ombudsman herself to decide what role she wishes to play once she has finished her investigation.

The hon. Member for Nottingham East (Chris Leslie) asked how we would implement the ombudsman’s approach. We have said that the Government accept the calculation of relative loss as £4.3 billion. The ombudsman wrote to Members on 26 July this year saying that she recognised that the relative-loss approach adopted by Towers Watson

“provides a firm foundation on which to build.”

That is the basis on which we introduced the scheme and accepted the losses.

The independent commission will advise on the allocation of remaining funds to not-with-profits annuitants, apart from the post-1992 WPAs. The Equitable Life database allows us to apply relative-loss methodology to each policyholder’s data, so there will be no individual requirement to claim or provide evidence of claim, or indeed to reveal the instances of maladministration that are relied on. That will benefit all policyholders who suffered relative loss. The ombudsman spoke of reliance on regulatory returns, but Sir John’s alternative approach does not require us to ascertain what reliance was involved. Effectively, that gives people the benefit of the doubt, and in my view it means a simpler, fairer and more transparent scheme.

Sir John also talked about the distribution of losses, which was mentioned by my hon. Friend the Member for Harrow East. Thirty per cent. of policyholders suffered no loss at all, about 405 suffered a loss of between £1 and £1,000, and 60% suffered a loss of between £1 and £5,000. Therefore, as Members will recognise, the distribution of losses is quite varied. A large number of policyholders either have no loss or suffered a relatively small loss. That gives the payments commission some flexibility in respect of the design of the scheme and how to use the pot. I should, however, stress to Members that the amount that is available is fixed, so while we may want to be more generous to one group, that would mean that another group suffers. We need to bear that in mind in considering eligibility.

I encourage my hon. Friends to reject any amendments in this group that are put to a vote. We have come up with a fair scheme that is based on the ombudsman’s findings; the loss reflects her calculation. I therefore think this is a good scheme, representing a balance of fairness between policyholders and taxpayers.

[Mr Fabian Hamilton]

I am grateful to the Minister for his clear explanation of his rationale for the compensation scheme. I am afraid, however, that I still do not accept the argument that the cut-off should be absolute and rigid and that those who took out annuities before 1 September 1992 should not receive any compensation or be eligible in any way. As I do not fully accept his argument, I will press amendment 1 to a vote.

Question put, That the amendment be made.

14:51

Division 114

Ayes: 76

---

Labour: 49
Conservative: 9
Democratic Unionist Party: 7
Scottish National Party: 5
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Independent: 1
Alliance: 1
Green Party: 1

Noes: 301

---

Conservative: 254
Liberal Democrat: 46

[Chris Leslie]

I beg to move amendment 3, page 1, line 7, at end insert—

‘(2B) The design and administration of any scheme of payments to which this section applies shall be independent of government.’.

[The First Deputy Chairman]

With this it will be convenient to discuss the following:

Amendment 4, page 1, line 7, at end insert—

‘(2C) The Treasury shall publish details of the independent appeals procedure for policyholders as defined in subsection (2) above to use in the event of dispute over the compensation payment decision in their case, no later than three months after commencement of this Act.’.

Government amendment 6.

New clause 1—Distribution of payments—

‘(1) An independent payments commission shall be established comprising three members appointed by the Secretary of State.

(2) The independent payments commission shall design a distribution scheme for payments made arising from this Act.

(3) In designing a distribution scheme under subsection (2) the independent payments commission shall consult with interested parties, including the Equitable Life Assurance Society and representatives of policyholders.

(4) The Treasury may make provision by order made by statutory instrument for payments to be made in line with the distribution scheme designed by the independent payments commission.

(5) A statutory instrument containing an order under subsection (4) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.’.

[Chris Leslie]

I shall speak to amendments 3 and 4, which stand in my name and the names of my hon. Friends. Amendment 3 would enshrine in the Bill the fact that the design and administration of any payments scheme should be independent of Government. It is pretty straightforward and simple—in fact, it would be difficult for it to be more straightforward and simple—but we think it important to try to encourage the Government to enshrine in the Bill the Minister’s pronouncements so far that the design of the compensation scheme should be independent of Government. That is an extremely important point, especially as it was part of the conclusions drawn by the parliamentary ombudsman herself.

The Minister has asked the independent commission, chaired by Brian Pomeroy, to report by the end of January, but there is too much wiggle room for the Minister then to take those recommendations and bring the design and the administration of the subsequent payments scheme in-house within the Treasury. I see no clear reason why the Bill does not contain clarity on the next steps forward, particularly in relation to the daunting task of creating a payments scheme to cover upwards of 1 million policyholders not falling into the 100% compensated with-profit annuitant category.

Many other policyholders are still sceptical of the Government’s intentions and EMAG, which is the body representing many of those policyholders, is voicing its discontent with those who, before the election, signed up to their pledge to create “fair and transparent” payment schemes, which they now attack as akin to asking 1 million people—to quote the words of EMAG’s Paul Braithwaite—to

“share a pack of Smarties”.

Obviously, EMAG is making its point in its own particular way, but clearly there is some doubt and some cynicism about the approach that the Minister is taking. I am sure, having heard what he has had to say before, that he indeed wants a level of independence in the payments scheme as far as possible, but I do not understand why that commitment has not been included in the legislation. That would seem to me to be the best way forward.

Amendment 4 seeks to tackle the issue of any appeals procedure that might be necessary for policyholders in the compensation scheme. We suggest that no later than three months after the commencement of the Bill the Treasury be required to spell out quite how that appeals procedure would operate for the policyholders who are not content with the judgments made in the compensation scheme that eventually ensues. Several hon. Members argued for an appeals procedure on Second Reading on 14 September—my hon. Friend the Member for Ynys Môn (Albert Owen) among them—and it was also raised by my right hon. Friend the Member for East Ham (Stephen Timms).

In that debate, the Minister stated that he had raised the issue with his officials but that there were clear problems. He said he would pursue it, so the purpose of the amendment is to find out whether he has had the opportunity to do so and what the appeals process will look like. I certainly expect that there will be complexity, not just in the payment scheme but in any subsequent individual appeals adjudication, and that could be quite difficult to imagine at this stage. However, it needs clarification given the route that the Minister has chosen, moving away from the ex gratia model in the Chadwick methodology and instead accepting the ombudsman’s approach to compensation.

I was glad that the Minister said there were components of the Chadwick methodology that he favoured bringing into any compensation scheme—specifically that there would be no burden of proof on individual policyholders to show that they had been misled by the regulatory returns. That would certainly make the scheme simpler. Will the Minister take this opportunity to tell us whether the independent payments commission will eventually metamorphose into an authority for administering the payments? If so, will it be asked to design an appeals system, or is it the Treasury’s intention to undertake that part of the design?

Perhaps the Minister could say whether he sees any parallels with the appeals system set up when the former Department of Trade and Industry introduced an appeals mechanism in respect of the ill-health complaints about what was then known as vibration white finger. He will remember that a series of complex compensation payments were made in those cases, but an appeals system was set up that had a route into a judicial process and eventually to the High Court. If some policyholders might become involved in a judicial process, it would be useful to have clarity about whether the same will happen.

Will the Minister also confirm not only, as I think he said, that the administrative costs of operating the compensation programme will be separate from the compensation fund, but that any appeals costs will also be separate from the compensation fund? I am sure that the Committee will welcome any clarification of the Government’s intentions, and in the meantime we felt that the amendment was a reasonable device to ensure that those answers are forthcoming.

[Bob Blackman]

I shall speak to new clause 1, which I tabled, but I made a long speech on the earlier group of amendments and I do not want to repeat all the points I made then.

We need to make the whole process clear, transparent and independent of Government so that the money that has been set aside to compensate the victims of this scandal is seen to be distributed so that they receive their due compensation in a manner that is independent of the Treasury. The dead hand of Treasury officials should not mean that the scheme is designed in a particular way. I do not necessarily need to press the new clause, but I seek assurances from the Minister that we have a full, independent, transparent way to compensate the victims, who have been so badly treated over the past 10 years.

15:14

[Mark Durkan]

Obviously we are waiting to hear what the Government will say about their amendment, but the other amendments—including the new clause proposed by the hon. Member for Harrow East (Bob Blackman)—are in essence an attempt to ensure that there is a sense of competent independence in how the scheme is administered and payments made. In terms of making appeals available and ensuring that the design and administration of the scheme are independent of Government, the new clause offers a reasonable construct of what a clearly independent scheme would be.

In the debate on the previous group of amendments, there were plenty of references to pledges that many of us signed and how far the Government’s measures will mean that we have discharged those pledges, but I do not think that any of us signed pledges that said we would do the whole thing just according to Treasury lights and nothing else. The amendments are an attempt to ensure that it will be not only Treasury lights that govern the terms of the scheme and its performance.

[Mr Weir]

Does the hon. Gentleman not feel, however, that the problem remains that the whole thing will be governed by the ultimate cap? That is the difficulty that faces all Equitable Life policyholders.

[Mark Durkan]

Yes, I do. There is no escaping the constraints that the cap will create. In the last group of amendments, we considered the questions that arise when the cap comes together with the cut-off. That conspires to create a pretty selective injustice for a group of people who are then left with very marginal compensation.

Even a very independent process, such as that proposed in the amendments, will be constrained by the cap. However, people would trust a credible independent process applying that cap with due consideration for all the concerns, rights and needs of policyholders more than they would trust the Treasury. In the last debate some Government Members said confidently how impressed they had been with the Treasury since they came into the House. That might well be—we are in the early stages of this Parliament and this Government and the first few pages of the exercise book are lovely, neat, impressive and perfect—but degeneration creeps in later on and even the Treasury will revert to its traditional roots and habits.

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

I have confidence in the Treasury trying to sort this out—I am sure that the hon. Gentleman will not be surprised to hear that. However, I am concerned about anything that pushes this matter into the long grass. We do not need any more delays caused by trying to set up other bodies. That is why I would like to say, “Get on with it and get the Treasury doing it.”

[Mark Durkan]

I do not believe that the hon. Member for Harrow East, for example, is trying to sow or fertilise long grass. This is about getting something that is credible, competent and reliable and the Committee should try to help in that regard. That is the spirit of these amendments.

There has been much criticism of the underperformance, to put it mildly, of the previous Government on this issue over more than one Parliament. Let us remember that those Ministers were not deliberately ignoring the plight of their own constituents who were coming to them or the problems highlighted by many of us from constituencies across the United Kingdom. They were constrained by the advice that they were getting from the same Treasury that people are now so happy with. The Treasury was advising that serious precedents and problems would be created.

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

I understand what the hon. Gentleman is saying, but Ministers are there to take decisions. They listen to advice but it is up to them to make things happen. He and I, as former Ministers, know that only too well, so why is he making an excuse for the inaction of the previous Government and their failure to respond to the needs of Equitable Life policyholders?

[Mark Durkan]

If the right hon. Gentleman had been here for the debates on earlier amendments, he would know that I made no such excuses then. Indeed, in all previous debates, I have been very critical of the performance of previous Governments. We have both been the Finance Minister in Northern Ireland, as he says. When I held that position, I used the line, “I’m the Minister of Finance; I don’t suffer from depression but I am a carrier.” That is the effect: Treasury Ministers are put in that sort of position. They become aware of constraints and difficulties that they then have to put before everyone else and impose on them as well.

My point is not that Ministers were right or wrong to listen to the advice but that we, as a Committee, must choose whether to go along with the Bill and say that the scheme will proceed only according to Treasury lights or whether to say instead that it should go according to wider lights and be informed by the sort of considerations reflected in the various amendments that hon. Members have tabled and by the many good observations made by Members on both sides of the Committee. Either we want to trust the Treasury and leave the scheme entirely in its hands, with its considerations and constraints alone, or we want to honour the spirit of what we have all pledged to those who have lost out with Equitable Life and to act in the light of the sad experiences that we have heard about.

I commend the amendments to the Committee. I shall wait to hear what the Government say about their amendment, but it seems to reinforce the Treasury’s whip hand over the whole scheme.

[Mr Hoban]

I take the same view as the right hon. Member for Belfast North (Mr Dodds) on the responsibility of Ministers. Civil servants provide advice but Ministers decide and act and we cannot ignore that responsibility. We have taken this matter very seriously and have sought, over the past six months, to drive through a speedy resolution to the problem. I echo the remarks of my hon. Friend the Member for St Albans (Mrs Main) on tackling this matter.

On the amendments before us, the purpose of amendment 3 is to make the design and operational mechanism of the scheme “independent of government”. I understand the need for independence in the design of the payment scheme, which is why I established the Independent Commission on Equitable Life Payments. The commission’s advice will necessarily form the basis of the scheme’s design. It will advise on how best fairly to allocate payments among policyholders, with the exception of with-profits annuitants, and it will consider which groups, if any, should be prioritised. It is right that that process should be independent, so the scheme will be independently designed.

The Government have considered whether the scheme should also be operated independently of the Government, as amendment 3 proposes, and have concluded that that would not be appropriate for three key reasons. First, it would delay the commencement of payments. Our ambition is to start making payments in the middle of next year using our preferred delivery partner National Savings and Investment. I shall say more about that on amendment 6. If amendment 3 were accepted, NS&I, which is an Executive agency of the Treasury, could not be used as the delivery partner as it would not be operating independently of the Treasury, which would therefore have to establish a new, independent body or identify an existing such body that could operate the scheme. It is also likely that legislation would be required to task the independent body with the design and operation of the scheme, which would delay significantly the making of payments to policyholders.

Secondly, the Government have established an independent commission to advise on the allocation of payments. This function is independent of the Government and is key in determining a fair allocation of payments. Making the operational delivery provider, whose job is largely about sending out the payments and making sure that cheques get to the people who are entitled to receive them, independent of the Treasury would not add significant value to that task.

Finally, it is important to ensure that value for money is considered when deciding on a delivery partner. The Treasury has satisfied itself that NS&I has the capacity and the capability to deliver the scheme, while at the same time providing value for money. The Government consider that by establishing the Independent Commission on Equitable Life Payments on 22 July, we achieved the aim that is at the heart of the amendment.

I turn to amendment 4 and what policyholders should do if they consider that they are not being treated fairly under the scheme. The Government are committed to treating policyholders fairly. In line with that, there will certainly be a means by which policyholders can raise concerns about the incorrect application of scheme rules to individual cases. We have given much thought to how best to deal with complaints and have made a great deal of progress in putting together a process that is fair and thorough. Full details of this process will be included in the document that sets out the scheme design in full.

[Angie Bray (Ealing Central and Acton) (Con)]

I spoke about this last time we discussed the matter. Given that the message to savers from the previous Government was non-existent or at least negative, does my hon. Friend think the message that the present Government are sending to savers is adequate? Are we saying clearly, “We understand that you have been badly let down by Government and we want to put things right as much as we can, given the circumstances in which we find ourselves”?

[Mr Hoban]

My hon. Friend makes an important point. There are two aspects to it. First, in respect of Equitable Life, the speed with which we have acted demonstrates our commitment to a resolution of the problem. The second is a forward-looking and prospective issue, which is why we have brought forward proposals to improve the regulation of retail financial services through the establishment of the new Consumer Protection and Markets Authority. That will be a boost to regulation and give confidence to savers that the market will be better regulated. It is important, and we have introduced measures recently, to ensure that if anything goes wrong, there is a proper process in place to tackle that.

I was commenting on the scheme appeals mechanism, which will be published before the scheme begins making payments and will be made available for parliamentary scrutiny. If a policyholder believes that the rules of the scheme have been incorrectly applied to their data, they will be able to raise a query with the delivery body, stating the nature of their concern. The query will be pursued by the delivery body.

If there is merit in the challenge and it is upheld, a recalculation will take place. If the challenge is not agreed by the delivery body, the policyholder will have the option of taking their case to the review panel. The review panel will consider the case in full and be able to make a fresh decision based on the facts of the case. It will be independent of the original decision-making process. If a complainant’s case is upheld, the review panel will ensure that a recalculation is carried out. If the complainant remains unhappy with the review panel’s decision, they will be able to challenge that decision in court by way of judicial review.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

My hon. Friend referred to cases in which the rules of the scheme might not have been correctly applied, but such are the complexities of Equitable Life policyholders—for example, a constituent of mine whose policies were additional voluntary contributions in a pension scheme which has been wound up—that someone might wish to argue that their particular type of case had not been envisaged in the way the rules were formulated, and that a specific decision needed to be made in that case. Will the scheme be wide enough to make that possible?

[Mr Hoban]

My right hon. Friend makes an important point. I would expect the payments commission to design a payments scheme that would be sufficiently comprehensive to ensure that all groups of policyholders were covered by it, so any appeal would be on the basis only of any data used to calculate the losses, rather than an appeal in principle against the design of the scheme. I will bear in mind the point that my right hon. Friend makes and encourage the commission, when it takes representations from people, to think as widely as possible about the different groups of policyholders that need to be taken into account.

[Chris Leslie]

The Minister is being extremely helpful and at least setting out a sense of what the architecture of that appeals system will be. He said that it would be subject to parliamentary scrutiny. Can he say for the record that the relevant statutory instrument will be subject to the affirmative procedure?

15:30

[Mr Hoban]

There is no requirement in the Bill to lay the scheme as a statutory instrument, but I shall ensure that when the scheme design is produced, it is laid before the House and there is an opportunity to scrutinise it.

The hon. Gentleman asked a question about the cost of administration and the cost of the appeals mechanism, and he was right to recollect that I said previously that the cost of administration would be separate from the compensation pot. That is still the case, and it goes without saying that the cost of the appeals mechanism will also be separate from the compensation pot. We want the money that is set aside for compensation to be used for compensation.

[Bob Blackman]

I am grateful to the Minister for outlining the appeals process, which, in this complex and complicated arrangement, will be important. Will he elucidate further on the effect of the time frame of the appeals process? What would happen if, for example, an individual policyholder or set of policyholders, who felt that they had been wronged and not received the compensation that they were due, went through the process and that led to a breach of the cap? If they were suddenly compensated with a lot more money than had already been allocated, how would that be dealt with?

[Mr Hoban]

In that situation, there would be two aspects: first, the design that the payment scheme had applied; and secondly, the data that were available to the policyholder. The scheme will be designed in such a way that it does not breach the cap, so it would be possible to appeal only if the data were incorrect. The data that will be used to calculate the compensation will come from a database supplied by Equitable Life, and I hope that its data are of a high standard, so that those situations do not occur.

From the details given today, the Government have been considering very carefully the design of the appeals procedure, and we will publish details of the procedure, along with other aspects of the scheme, ahead of the time that amendment 4 proposes. So in light of that we believe that the amendment is not necessary.

Let me turn to amendment 6, which is in my name. The delivery of the Equitable Life payments scheme is an important matter, and since we took office we have made huge strides towards finding a resolution to the Equitable Life issue. However, we are aware that, for many policyholders, the issue will continue until they finally receive the money. As such, it is important that we find the right delivery partner to help us do that. Having given the matter careful consideration and looked at a range of options, our preferred option is to use NS&I, to deliver the scheme.

Officials have held many meetings with NS&I to find out not only whether it is capable of carrying out that important task, but the processes by which delivery could be carried out. There are many factors that make NS&I an appropriate delivery partner for the scheme. One of the most obvious and important is capability. As part of its everyday functions, NS&I makes millions of payments to customers every month. It has processes and infrastructure in place and experience of carrying out the functions that the scheme will require.

The need for value for money in the delivery of the scheme is also important. We are all aware that, in a climate where we have had to make difficult decisions about where to make cuts, the Government must look for ways of making the cost of delivering the scheme reasonable. Using NS&I will allow us to draw upon existing Government relationships and contracts, and I am satisfied that NS&I can provide a good delivery mechanism by which we can start making payments in line with our stated ambition of the middle of next year.

[Chris Leslie]

I am grateful to the Minister for the information about National Savings & Investment being the preferred vehicle. In theory, there is a separation between policy, in terms of the scheme design, and operations, in terms of the administration but blurred edges can sometimes appear between the two. Will the independent commission hold the ring in any disputes about the mechanism, timing and administration of the scheme? Who will be the final arbiter of any disputes that arise from the process? Presumably, it will be the independent commission.

[Mr Hoban]

The hon. Gentleman makes an important point, and it is vital that we are able to operationalise, as it were, the scheme design. That is why I have encouraged the payments commission to engage with NS&I to ensure that the scheme that the commission designs can be delivered. That is an important part of the process, and I expect the commission to do that during the course of its work. I think that addresses the hon. Gentleman’s point.

Let me turn finally to new clause 1 and the status of the independent commission. I have already spoken about the importance of the work of the commission, and I am not sure that the new clause, which would give it statutory footing, would add value to its work.

[Mark Durkan]

Returning to amendment 6, can the Minister assure us that it is there only to provide proper statutory cover to the director of savings and NS&I in relation to the scheme, and not to extend Treasury control or constraints in relation to it?

[Mr Hoban]

I can give the hon. Gentleman that assurance. We could not use NS&I if we did not include this power in the Bill. Its purpose is to enable NS&I to act as a delivery partner, not to give the Treasury some way of reaching back into the payments scheme. I reassure him, and others, that the power is there merely to deliver the outcome of the scheme.

The role of the payments commission will be key. It will advise on the distribution of payments to those other than WPAs, and I will take its advice extremely seriously. The new clause would introduce a requirement for the commission to consult key bodies in the development of its advice, but let me tell my hon. Friend the Member for Harrow East (Bob Blackman) that it would need no statutory encouragement to do so. The commission has already met Equitable Life and EMAG, and it has published a discussion paper asking for more views on the guiding principles for determining fairness in allocating and prioritising the funding. I do not believe that an amendment to the Bill would make it any more consultative and thorough in its task. My hon. Friend is aware that I have made the commitment to go along to the all-party group with the chairman of the commission to engage with parliamentarians on this matter. That is a very clear sign of the way in which we want to engage, or the commission wants to engage, with stakeholders to come up with the best design for the scheme. I encourage people to read and engage with the commission’s discussion paper, too.

The new clause would also introduce a statutory duty for the Government to lay the design of the scheme before Parliament in the form of a statutory instrument in order to allow full scrutiny. I entirely understand the thinking behind this, and transparency has been at the heart of our approach to developing the payments scheme. However, as I have said, I will publish and lay before Parliament a document setting out the scheme design in detail, which may then be debated as Parliament chooses. Again, I do not think that a statutory requirement will make my commitment to full transparency any stronger. The Government therefore resist the new clause.

Furthermore, including provision in the Bill as to the status and operation of the independent commission would pose a very serious risk to the timetable of the commission. The commission is already in operation and has been since July, and it is due to report at the end of January. Notwithstanding the speed with which the House is dealing with the Bill, it will still take several weeks for it to finish its passage through this House and the other place. If the commission had to be reformed after the Bill received Royal Assent, to restart its deliberations so as to comply with the provisions of the new clause, there would be a real risk of delay to its advice. This would, in turn, delay the making of payments to policyholders—something that I am sure none of us would want to happen. In the light of this, and given the comfort that I hope I have provided on the operation of the commission, I invite the hon. Member to withdraw his amendment.

[Chris Leslie]

I am grateful to the Minister for setting out the information about the preferred vehicle for the payment scheme. Although we would have preferred to see some of the issues regarding the design of the scheme independently set out and enshrined in the Bill for the avoidance of doubt, I accept his commitment in making these points on the record. Similarly, in respect of the appeals mechanism, this debate has given us the opportunity to shed a little light on to how he envisages that arrangement playing out.

I hope that the Minister’s commitment to allowing further parliamentary scrutiny will not involve merely tabling a negative resolution on the Order Paper so that Members have to beg the indulgence of those on the Treasury Bench to find time to debate it. Given the amount of interest in these matters across the House, the affirmative procedure would be preferable, as that would allow us to consider them in detail. With that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Chris Leslie]

I beg to move amendment 5, page 1, line 7, at end insert—

‘(2D) The Treasury shall lay before Parliament details of the timings and planned dates for payments of compensation to which this section applies, no later than three months after commencement of this Act.’.

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

With this it will be convenient to discuss amendment 8, in page 1, line 7, at end insert—

‘(2A) After determining the total amount of the payments that the Treasury is to authorise under subsection (2) and the persons to whom those payments are to be made, the Treasury must secure—

(a) that each of those persons is paid the full amount due to that person in a single payment, and

(b) that the single payment is made as soon as practicable.’.

[Chris Leslie]

The amendment is intended to draw out more information specifically about the timing of the compensation payment scheme that the Financial Secretary envisages. In particular, we wish to ensure that the Treasury will lay before Parliament details of the timing and planned dates for payments no later than three months after the commencement of the Act.

We know that this long saga has involved many raised hopes, which have often been dashed. Although there were very good reasons for the last Government’s detailed consideration of complex issues, I accept in hindsight that decisions could and should have been taken more quickly and handled better. There were sound reasons why Ministers took a different approach to that of the Government today, but we are where we are, as the saying goes, and I wish to the ask the Financial Secretary a few questions about how the matter will progress from here onwards.

I am aware that table 3 in the spending review document, on page 12, sets out the phasing of the total finance set aside as being £520 million in 2011-12, £315 million in 2012-13, £210 million in 2013-14 and finally £100 million in 2014-15. As the explanatory notes to the Bill state, that comes to a total of £1.1 billion that has been set aside for this spending review period. Clearly there is a discrepancy with the £1.5 billion figure that we have been talking about, which presumably goes beyond the spending review period. I have a number of questions for the Financial Secretary, and I hope that he will expand upon the details.

First, on what basis have those figures been arrived at? Do they represent the expected phasing of payments, or are administrative costs included, for example, distorting the apparently higher first-year figure set out in the spending review document? I presume that the administration costs have to be set out somewhere in the budgetary figures. If so, will the Financial Secretary clarify his intentions? I do not want policyholders to labour under the misapprehension that they will necessarily receive the bulk of their compensation up front, as those figures might suggest.

At what stage will the timing and phasing of payments become clear? Does the Financial Secretary expect that the independent commission will set out those details early on, and will there be any opportunity to enshrine the timing of those arrangements in law, perhaps through regulations, even though they will be designed independently of Ministers? In other words, will the commission come back to Parliament and say, “This is how we are going proceed”?

There have been reports that three tranches of payments are expected over a four-year period. Can the Financial Secretary clarify whether that expectation is broadly reasonable for the policyholders involved? The Government are clearly about to hand over many of the arrangements to the independent commission and to National Savings & Investment, but it is still important that we know the broad parameters that they will use. That is the purpose of the amendment—we are seeking a public commitment and transparency about the timing of the payments.

[Bob Blackman]

I rise to support amendment 8. I do not want to go over all the ground that we covered in debating the previous amendments, but the purpose of the amendment is precisely what we talked about earlier. Hon. Members intervened to say, “Let’s get this done. Let’s get it over with and ensure that policyholders are properly compensated as quickly as possible.”

It is clear that trapped annuitants will receive their compensation in staged payments over the life of their pensions. However, we get into complex territory again when discussing the other policyholders and the difference between with-profits and other annuities. As I understand it—I hope that the Financial Secretary will clarify this—tranches will be paid out over the life of the comprehensive spending review period. The third tranche will be paid only in 2013, which still leaves some £500 million to be paid out in the next comprehensive spending review period. As we understand it, this will be a long-drawn out affair, so perhaps we can have further clarification on the issue.

15:45

We have set aside £1.5 billion to compensate the victims of this scandal and we have set up an independent commission to design the scheme and decide how that money should be dispensed. The purpose of the amendment is to say that we should now get on with it and compensate those people while they are still alive. We should not hang on to the money and drag these payments out over an extended period.

We want to put in place a rapid approach. Once again, I congratulate the Treasury team on its rapid approach to resolving the scandal. None the less, if we are to have long and extended periods of payment, many policyholders who have been affected by this scandal will sadly have died before they can receive their money. Therefore, I trust that we can implement this clause and ensure that we demonstrate to all the policyholders who have been so badly affected by the scandal that they will receive their due compensation very quickly.

[Mr Hoban]

Let me deal with amendments 5 and 8. We have stated that our ambition is to commence payments in the middle of next year. As the Committee is aware, we have made great progress on this issue. Within six months of coming to office, we have published Sir John’s report and the supporting material; we have provided the first bottom-up estimate of losses suffered by policyholders; we have set aside £1.5 billion for the payment schemes; we have announced that we will cover the full losses of eligible with-profits annuitants; and we have established the Independent Commission on Equitable Life Payments to advise us on the fair allocation of payments among policyholders. Such progress shows how seriously we take this matter and how quickly we want to find a resolution. Our ambition is to commence payments in the middle of next year, and our track record of getting things done quickly on Equitable Life shows that we are capable of doing so.

Let me set out the process that we are following to ensure that payments are made as quickly as possible. In line with our commitment to independence, we have set up the independent commission to advise us on how we can fairly allocate the funds among policyholders, with the exception of the with-profits annuitants and their estates, and on any priority groups or classes of person who should be paid earlier.

Such an approach will help to inform the sequencing of payments. To ensure that the payments can begin as soon as practicable, we have set a challenging timetable for the commission and it will report at the end of January 2011. Between the end of January and the dates that payments commence, we will be laying the advice of the independent commission over the operational technicalities of the scheme to ensure that the end-to-end process operates well. We will then publish a scheme design document that sets out the end-to-end process of the scheme in the spring. We will also finalise the arrangements with the delivery agent. That will help to ensure that when the scheme goes live, we can get payments to policyholders efficiently.

I hope that I have reassured hon. Members that this Government are committed to making payments to policyholders as soon as it is practicable and that we are taking all possible steps to achieve that. As a result, amendment 5 is unnecessary. I have addressed the points raised by the hon. Member for Nottingham East (Chris Leslie) about the sequencing of payments. We are seeking advice from the new payments commission on how that sequencing will take place and how it will fit within the envelope of public spending that is set out in the comprehensive spending review.

Let me turn to amendment 8, standing in the name of the right hon. Member for Holborn and St Pancras (Frank Dobson), to which my hon. Friend the Member for Harrow East (Bob Blackman) spoke. The amendment deals with the issue of how payments should be made. I recognise the fact that policyholders have waited far too long for a resolution to the matter. That is why at the spending review we set out how we envisage the scheme working. I want to set out that vision again. Those policyholders who do not have a with-profits annuitants policy will receive their payments in one lump sum to give them the closure that they need quickly. As it happens, amendment 8, tabled by the right hon. Gentleman and my hon. Friend, would mean that with-profits annuitants would not receive their payments in the way that we envisage. One of the reasons why we have been able to increase the amount available to policyholders is so that we can spread the amounts going to with-profits annuitants over the remainder of their lives. If my hon. Friend’s amendment were accepted, it would stop that process and mean that their payments would come out of the £1 billion set aside at the time of the CSR. I therefore suggest that the amendment would not help policyholders to receive quite as much money as we believe they should.

Owing to logistical constraints associated with such a large and complex scheme and to affordability constraints, we cannot make all lump sum payments immediately. They will be paid out over the first three years of the spending review period. That is why I have asked the commission on payments to advise me on whether there are any classes of policyholders whose payments should be prioritised, to ensure that those in most urgent need of redress are paid first.

[Chris Leslie]

This may be a naive question, but box 2.7 in the spending review says:

“The Government expects the total amount of funding for the scheme to be in the region of £1.5 billion.”

That is the envelope that we have been debating, and that figure matters quite a lot, especially for those other policyholders. However, the same box says that

“£1 billion will be allocated to the Payments Scheme in this Spending Review period, which will cover…the initial costs of the first three years of WPA”—

with-profits annuitants—

“regular payments, and all payments to other policyholders.”

Can the Minister explain the difference between the £1 billion and the £1.5 billion, and say how the timings will be affected? Presumably the other £500 million will arrive after the spending review period, but I am a bit confused on that point.

[Mr Hoban]

The hon. Gentleman makes an important point, which gives me the opportunity to clarify the make-up of the £1.5 billion. The figure includes the full cost of the losses to with-profits annuitants—approximately £620 million—which will be made through regular payments. However, taking into account the pressures on the public purse, the Treasury could allocate only £1 billion over the first three years of the spending review. That will cover two things: the first three years of payments to with-profits annuitants, and lump-sum payments to all other policyholders and to the estates of deceased with-profits annuitants.

It is important to start to pay off with-profits annuitants’ losses quickly, alongside the lump-sum payments to other policyholders. About £225 million of the £1 billion is for with-profits annuitants and their estates, leaving approximately £775 million for lump-sum payments to non-with-profits annuitants. The Towers Watson estimate of £620 million for with-profits annuity losses leaves approximately £395 million for the rest of the WPA losses from 2014-15 onwards. Those who are quicker at mental arithmetic than me will have worked out that the total comes to about £1.4 billion. The balance is a contingency, because the payments to with-profits annuitants are based on their longevity. We hope that they live long and healthy lives, and that buffer is set aside to cover this need. That is how the maths works out.

[Mr John Redwood (Wokingham) (Con)]

Could my hon. Friend provide further clarification on the tax status of those receiving such payments?

[Mr Hoban]

My right hon. Friend pre-empts a point that I was going to refer to in the clause stand part debate. He gives me an opportunity to say now that the payments will be free of tax.

[The Second Deputy Chairman]

Order. There has been a very expansive debate so far, so there will not be a clause stand part debate. If the Minister wants to say anything, I would encourage him to say it now.

[Mr Hoban]

You are right, Ms Primarolo, we have had an extensive debate, so I will ensure that I now have my notes to hand for the clause stand part debate. I should clarify the treatment of the payments under the tax and benefits system. They will not be treated as income for tax purposes, and will not be taken into account in the calculation of tax credits, which is a benefit for policyholders. In terms of benefits, they will be treated as capital rather than income, and given the beneficial nature of the treatment of capital in the benefits system, that helps policyholders. We have sought in the design of the scheme, through measures such as the tax and benefits treatment, to maximise the value so that policyholders will receive the full amount.

[Nadhim Zahawi]

I will test the Financial Secretary’s arithmetic a little further. Has he worked out what that advantage is over and above the £1.5 billion?

[Mr Hoban]

My hon. Friend makes an interesting point. It is difficult to calculate that because, as he will recognise, the tax status of Equitable Life policyholders varies. Some pay no tax, some pay tax at the 20p rate, some pay tax at the 40p rate, and some may even pay tax at the 50p rate. The value will depend on their tax status, and we do not have sufficient access to taxpayers’ records to be able to match Equitable Life policyholders with their tax records, so we cannot calculate the benefit. However, he will appreciate that it could provide a significant benefit to some policyholders, and I hope that they will recognise that when they receive their payments. We have sought to be as generous as possible in the tax and benefits treatment for that purpose.

[Mr Redwood]

I thank the Minister for an important improvement to the scheme, which I am sure is welcomed.

[Mr Hoban]

I thank my right hon. Friend. When designing the scheme, we considered seriously how to ensure that policyholders would benefit as much as possible from the payments. If we had been less generous, we would have been accused of clawing back money through the back door, and that is an impression that we want to dispel.

[Sir Alan Beith]

I welcome that announcement, but there is a group of people who are affected in multiple ways: those who have funds in Equitable Life that are not yet in payment and who have been given transfer values substantially below what they believe the fund to be worth, even now. If they are waiting up to three years, and take the money out, accepting the transfer penalty, will they invalidate their entitlement under the scheme?

[Mr Hoban]

That is an important point. I am sure that a range of issues will emerge as we move through the scheme’s design to payment. People who have had Equitable Life policies throughout the period and bought them post-September 1992 will receive compensation even if they have exited from Equitable Life’s current arrangements. I hope that that provides clarification.

[Jonathan Evans]

Will my hon. Friend take the opportunity, perhaps later, to issue a fuller statement on his very important announcement in response to my right hon. Friend the Member for Wokingham (Mr Redwood)? I intended to raise the matter on Third Reading. There is no doubt that many policyholders will be delighted to hear the news, and it should be made more widely available to all policyholders so that they are aware of it.

[Mr Hoban]

My hon. Friend is right. The old saying is that the best way of keeping a secret is to make a speech in the House of Commons. I am sure that those of my hon. Friends who are in contact with Equitable Life policyholders will take the opportunity to write to them, and I hope that the Equitable Members Action Group, which is the main lobbying organisation on behalf of policyholders, will also take the opportunity to pass the information on to its members. It is important information for them, and we will continue to make policyholders aware of it as we communicate further details of the scheme.

Before that series of interventions, I was reflecting on amendment 8, and I want to say a little about why we are treating the with-profits annuitants differently from others in regard to payments. We need to recognise that the nature of the policies of that particular group of people is very different from that of other Equitable Life policyholders. Their losses relate not just to what has happened in the past, but to what will happen in the future. They will continue to receive a stream of income over a number of years from their with-profits annuity policy. We are now able to match that stream of income with their historic losses and their future losses. It makes sense for them to receive their payments in a way that reflects the income stream that they have lost, which is why they will receive their losses in regular payments over their lifetime.

In the light of that, I hope that the right hon. Member for Holborn and St Pancras will decide not to press amendment 8 to a vote, because the approach that he suggests is not appropriate for with-profits annuitants. We are determined to make swift progress on making payments to other policyholders, however, and they will get lump sum payments that will be free of tax.

16:00

[Chris Leslie]

The Minister has put on record some helpful information about the timing of the payment arrangements, and I do not think that it would add a great deal if we were to press the amendment to the vote. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 7, page 1, line 7, at end insert—

“In determining the amount of the payments that it is appropriate for the Treasury to authorise under subsection (2), the Treasury must have regard to such matters relating to the adverse effects of that maladministration on those persons and the proper calculation of their resulting losses as have been determined by the Parliamentary Commissioner for Administration to be relevant to and appropriate for that calculation.”.—(Frank Dobson.)

Question put, That the amendment be made.

Question negatived.

Amendment made: 6, page 1, line 20, at end insert—

“( ) The functions of the Director of Savings include anything the Director is appointed by the Treasury to do in connection with payments to which this section applies.”.—(Mr Hoban.)

Question put forthwith (Standing Order No. 68), That the clause, as amended, stand part of the Bill.

Question agreed to.

Clause 1, as amended, accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill, as amended, reported.

Bill, as amended in the Committee, considered.

Third Reading

16:03

[Mr Hoban]

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

The Government want to see justice for Equitable Life’s policyholders, and this is clearly reflected in the actions that we have taken since coming to office. In six short months, the coalition Government have made real progress towards implementing their pledge to make

“fair and transparent payments to Equitable Life policyholders…for their relative loss as a result of regulatory failure.”—[Official Report, 26 May 2010; Vol. 554, c. 1WS.]

Since coming to power, we have published the first ever estimates of losses suffered by policyholders, considered representations on them, and endorsed a relative loss figure of £4.3 billion—in line with the parliamentary ombudsman’s findings. We have set aside £1.5 billion to make payments, which is more than four times the amount that Sir John Chadwick’s methodology produced. This strikes the right balance between fairness to policyholders and fairness to the taxpayer.

We have announced that we will cover the full losses of those policyholders who have or have had with-profits annuities. We have established an independent commission to assess how best to allocate payments to policyholders. While giving the commission wide discretion, we have made it clear that we do not expect payments to policyholders to be means-tested and that we expect payments to be made to the estates of deceased policyholders. Our goal is to make the first payments to policyholders towards the middle of next year. This is a huge achievement, of which we can be rightly proud.

The Bill is a vital part of this work. It gives the Treasury the authority to incur expenditure to make payments to policyholders. Without this Bill, redress for those who have suffered so long would be impossible. That is why we have moved so quickly. To delay further action would be unfair to those who have already waited over a decade for a resolution. The sooner the legislation is in place, the sooner we can bring their suffering to an end. I know that right hon. and hon. Members of all parties fully support us on that.

We announced as part of the spending review that it was our intention to make these payments tax free. Today’s Bill gives the Treasury the power to make an order allowing these payments to be disregarded for tax. The payments will also be disregarded for the purposes of tax credits.

Finally, the Bill enables the Government to consider what effect, if any, these payments will have on people’s eligibility for certain means-tested, state-funded support. I outlined in the debate on the final group of amendments how this treatment will apply to welfare benefits. We are still considering how the payments will affect support such as social care.

We have concluded that lump-sum payments made as part of this scheme will be disregarded as income for the purposes of assessing eligibility for means-tested benefits. Instead, they will be classed as capital. Capital limits do not immediately cut off eligibility for benefits; they work on a sliding scale, gradually reducing support for individuals with larger assets. It is unlikely that many recipients who would otherwise have been eligible for means-tested benefits will receive payments that dramatically affect this eligibility. For with-profits annuitants, regular payments will be treated as income in a similar way to the lost income stream that these payments represent.

Earlier today, hon. Members debated in detail a Government amendment that gives National Savings & Investments the power to deliver payments. That being a large and potentially complex task, it is essential that the delivery partner has the experience and expertise to do the job properly and cost-effectively. When judged against these criteria and the imperative for payments to begin as soon as possible, National Savings & Investments was the strongest candidate, which was the motivation for including this amendment in the Bill.

I am aware of the concerns that hon. Members have voiced about the Bill’s brevity. It is, indeed, a two-clause Bill and it does not include detail about the payments scheme that would allow Parliament to scrutinise and debate the issue. I would like to point out that there is no requirement for the Bill to do so; it is simply an enabling Bill to give the Treasury the power to make these payments to policyholders—and nothing more. The scheme design does not require statutory footing and, of course, before the scheme design is finalised, we first need to make progress on this Bill. If we had waited for the scheme design to be finalised before proceeding with the Bill, it would have taken far longer before we could start to make payments. What the Treasury has sought to do is to work on as many streams as possible in parallel, within the constraints of our legal powers.

Let me reassure all hon. Members that I am fully committed to transparency at every stage of this process. I understand and sympathise with Members’ concerns, and for this reason I will publish a document setting out the scheme design in detail and lay it before Parliament for full scrutiny. Following the independent commission’s publication of its final advice, I will make a statement setting out the Government’s response.

I also know that Members are keen to discover whether a robust appeals process will be in place, one that will allow policyholders who believe their payment has been wrongly calculated to challenge this judgment. I am therefore pleased to confirm that we will be appointing a review panel, independent of NS&I, with full powers to consider any such challenges and to overturn any decision that it finds incorrect. As I said to the hon. Member for Nottingham East (Chris Leslie) in an earlier debate, the costs of that appeal mechanism will not be borne by the compensation pot. We want to ensure that policyholders get the full value of the money that we set aside for compensation payments.

In the interests of transparency, I should like to set out the next steps in the process of resolving this long and complex issue. As a starting point, I hope that today’s Bill will receive Royal Assent by the end of the year. That will allow the delivery partner to start preparations early in the new year, and to be well placed to make the first payments by the middle of the year, as is our ambition. It is important for the delivery partner to start work early, in order to accelerate the timetable to make those payments. The independent commission is due to report to me in late January and, following that, we will incorporate its recommendations in the design of the scheme, which will then be scrutinised by Parliament.

As I said earlier, I would encourage hon. Members on both sides of the House, whether they are new to the issue or have run with it for many years, as so many of us have, to engage with the commission in its work. It is independent of the Treasury, and the three commissioners are very experienced. I believe that they have the expertise and skills to design a proper payments scheme for policyholders. However, they would welcome contributions from everybody who has participated in the debate, not just in the House but across the country over the past decade, to enable them to produce the best possible scheme design, which meets as far as possible the aspirations of people who have had policies with Equitable Life.

Since the Government took office in May, we have come a long way. We have achieved far more in recent months than was achieved in recent years. We have quantified relative loss suffered because of maladministration. We have identified the losses that policyholders have suffered on a bottom-up basis, by groups of policies and by age. For the first time, a proper understanding has been established of the losses suffered. That is a tribute to the hard work conducted by Towers Watson and others to develop that estimate. As a consequence of the spending review, we have been able to assess the quantum of losses, to decide the loss figure that we accept. We have accepted the ombudsman’s view that relative loss is the best guide. We set aside £1.5 billion of funding to cover the cost of the payments scheme. We have announced that the losses of post 1992 with-profits annuitants will be covered entirely by the Government. We have also established an independent commission to advise on the allocation of funding to not-with-profits annuitants policyholders.

As a Government, we want to see a swift resolution to this matter. We want the many policyholders who have waited in financial purgatory for so many years, and who have campaigned so hard for justice, to receive the payments that are rightfully theirs. No one could disagree that policyholders have waited too long for justice. Although the debate has been relatively brief, it is not just the tip of the iceberg—to which the hon. Member for Nottingham East referred—as anyone who has participated in the debate will recognise. Passing this important Bill is essential to achieving justice, and I commend it to the House.

16:14

[Chris Leslie]

The short debate that we have had has covered a set of specific issues, largely arising from the Government’s conclusions in the spending review about how to compensate those suffering injustice following maladministration by insurance and financial regulators in the case of Equitable Life. I am glad that we have had the opportunity to talk about the independence of the payment scheme. We have been able to hold the Government’s feet to the fire on whether it will match the ombudsman’s model. I am glad that the Minister said that he would welcome further comments from her on the design of the compensation scheme. It will be interesting to see whether she endorses it as being the fair and transparent scheme that many Members have pledged to deliver.

We have also discussed the appeals procedure and the timing of payments. In response to the second ombudsman’s report, the former Chief Secretary to the Treasury, my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), offered an apology for the past failings of the regulators. That is an important point, which is separate from the question of whether the regulators can be held fully or only partly responsible for the losses incurred by the maverick actions of Equitable Life’s management during the 1980s and early 1990s. I am sorry that, at least during this debate, Ministers have not also expressed regret, clearly and on the record, for the part that their party played during the 1980s in failing adequately to establish a regulatory system to prevent the vast bulk of the Equitable Life problems from arising in the first place. I know that it was a long time ago and that none of the current Ministers were in any way responsible, but I think it would have been a helpful gesture to draw a line under the failings that had occurred in the past. After all, Lord Penrose concluded in his inquiry report that Ministers in the late 1980s

“did not regard the subject”

of updating life insurance regulation

“as a high priority for legislation.”

He noted that

“the Government's objective was to deregulate, to reduce regulatory burdens on business, to avoid interference in private companies, and to let market forces prevail.”

[Mr Hoban]

I appreciate that the hon. Gentleman is new to this topic, but we have already clearly expressed our apologies. Unlike the last Government, we immediately accepted all the ombudsman’s findings of failure. The hon. Gentleman’s party did not even have the courage to do that.

[Chris Leslie]

I am glad that the Minister has been able to reiterate points that he did not make in his Third Reading speech. I do not necessarily want to reopen the box entirely, but it is important for both parties to recognise that mistakes have been made, and that things should and could have been done better by those on both sides. In particular, however, I think it is important not to gain the impression that failings did not occur on the watch of the Minister’s party. Lord Penrose found that Conservative Ministers

“argued against reform in the… 1990s”,

and that the United Kingdom “led the resistance” to Europe-wide attempts to update the third life directive. Those who argue that Labour alone fell short in respect of reacting to the Equitable Life debacle should realise that the ideological approach pursued by the Conservatives was absolutely central to causing the mess in the first place.

As Members know, the last Government would have chosen a different route to compensation. We were anxious that a poorly designed compensation scheme might entail a person-by-person review aimed at disentangling individual losses one by one, examining more than 30 million investment decisions by 1.5 million people over 20 years. That would have been a mammoth administrative task. Moreover, the ombudsman had implied that individuals would need to prove that they had relied on the regulatory returns and had been misled as a result. The last Government did not believe that such an approach could be feasible.

It was for those reasons that Sir John Chadwick was asked to explore a more realistic and reliable payment scheme methodology. He concluded that the Treasury should deal with the issue by grouping cases into about 20 broad categories of policyholders who were in similar circumstances. The payment scheme would then deduce the relative loss in each category in comparison with the outcomes of a basket of other policies that had not suffered from the same regulatory failings. The Government have clearly embarked on a different course, although they have taken up some of Chadwick’s pragmatic suggestions about the automaticity of compensation. We genuinely hope that that will work.

We are pleased that this short paving Bill is before the House, because we feel strongly that the matter should be resolved. The Committee stage gave us an opportunity to question the Government on several aspects of their approach, and I am glad that we have had an opportunity to draw them out further today.

Let me end by simply raising a question mark over the words of Ministers before May, when the general election took place, in comparison with their actions today. Many hundreds of thousands of Equitable Life policyholders—possibly as many as 1 million—were led to believe that in signing the EMAG pledge, Ministers were supporting a particular outcome that may not now arrive. Most Conservative Members signed that pledge. They pledged to their constituents that

“if I am elected to Parliament at the next general election, I will support and vote for proper compensation for victims of the Equitable Life scandal and I will support and vote to set up a swift, simple, transparent and fair payment scheme—independent of government—as recommended by the Parliamentary Ombudsman.”

As the payment decisions are made in the next few years and the cheques finally start to arrive, EMAG members and policyholders who are not in line to receive 100% compensation for their full relative losses will have to draw their own conclusions as to whether the Government have fulfilled their promises. So far the signs are that many policyholders do not feel that those Members who signed the pledge are keeping their word. They feel that the scheme will fall short of proper compensation and a fair payment scheme.

[Jonathan Evans]

Will the hon. Gentleman give way?

[Charlie Elphicke (Dover) (Con)]

rose—

[Mrs Main]

rose—

[Chris Leslie]

I will give way first to the hon. Member for Cardiff North (Jonathan Evans) as he has attended the entire debate.

[Jonathan Evans]

The hon. Gentleman seems to be suggesting that £1.5 billion does not amount to proper compensation. I came to watch the earlier debate when the Minister was the right hon. Member for East Ham (Stephen Timms), and he was standing by the Chadwick figure, but the hon. Member for Nottingham East (Chris Leslie) now seems to be saying that four times more than the position the Labour party were defending back then is not proper compensation.

[Chris Leslie]

The difference between the hon. Gentleman and me is that I did not sign the EMAG pledge. I always felt, as did many of my colleagues, that there were real and practical difficulties in raising constituents’ hopes in the way that the hon. Gentleman perhaps did. That is a matter for him and his constituents. It is up to him to convince them that the result of these deliberations has been to put in place full and fair compensation in accordance with the pledge. I am simply making the point that this is a matter of honour for those hon. Members who signed the pledge.

[Mrs Main]

Will the hon. Gentleman give way?

[Chris Leslie]

I think the hon. Lady was one such Member.

[Mrs Main]

I rise to gently chide the hon. Gentleman. We have had discussions with EMAG representatives, and I do not think they were under any illusions that they were necessarily going to get back every single penny that was lost. I have talked to my local representatives, and I think they are realistic enough to realise that we have done the best we possibly can. I am not happy with the situation for the pre-1992 annuities, but even so, what we are giving them is 100 times better than previously. They look to us to deliver that, but they are realistic enough to know that, in these hard times we cannot give them everything. I think for the hon. Gentleman to say, “I didn’t sign the pledge” is just copping out.

[Chris Leslie]

I disagree about the pledge, and I did not sign it for particular reasons, but my point is simply that the hon. Lady signed the pledge before the general election and it committed her to a number of things, one of which was somehow to fulfil the aspirations of those policyholders who interpreted the pledge in a particular way. I, too, have met EMAG representatives and they are not as happy and understanding as the hon. Lady suggests.

[Mrs Main]

Will the hon. Gentleman give way?

[Chris Leslie]

Well, if the hon. Lady understands something different, I will give way to her again.

[Mrs Main]

Did those EMAG representatives give the hon. Gentleman some reason to suspect that they were happier with his stance of delivering a much lesser amount?

[Chris Leslie]

The difference is that I did not raise people’s hopes for electoral purposes—because I wanted to harvest their support—only to dash them after the general election. We are very used to Conservative Members making pledges on a whole series of things—not least student finance, which is quite pertinent right now—and then breaking their promises. I am not saying that Members are necessarily in breach of their pledge. All I am saying is that it is for them to honour it, in accordance with their consciences and what their constituents will say to them as to whether the compensation outcome amounts to a fair payment scheme and proper compensation.

[Several hon. Members]

rose—

[Chris Leslie]

Having clearly touched a nerve, it will be interesting to hear from other Members as well.

[Margot James (Stourbridge) (Con)]

There is a key point for the victims of this scandal in my constituency of Stourbridge. Most of those whom I have met understand that the commitments that were given always had the proviso of the state of the public finances. That is a very relevant point.

I wish so much that we could have offered people more, but given the difference between Chadwick’s recommendations, which were the baseline, and the £1.5 billion, as well as the state of the public finances, many people who have suffered in this scandal will feel that they have been treated reasonably, although I accept the hon. Gentleman’s assessment that the EMAG pressure group is still battling for more. That is its role as a pressure group.

[Chris Leslie]

A reasonable point from the hon. Lady. All I am saying is that the pledge that some Members signed did not say explicitly, “As resources allow.” [Interruption.] No, it does not say that in the pledge. The pledge simply says that they will have a fair and transparent payments scheme. I doubt very much that the vast majority of those other policyholders who will not be getting the 100%—clearly it will be welcomed by those with-profits annuitants, who are receiving 100% of their relative losses—but may be receiving, I am told, between 15 and 20% of their relative losses will feel that hon. Members who raised their hopes are actually fulfilling them.

[Jonathan Evans]

I appreciate that the hon. Gentleman is new to his role, but I would have hoped that he had read the ombudsman’s report before representing the Opposition at the Dispatch Box. He would have seen that the ombudsman says that the compensation figure must take account of the effect on the public purse.

[Chris Leslie]

I completely accept that that is what it says in the detail of the ombudsman’s report, but it does not say that in the pledge that the hon. Gentleman signed. In an electoral context, he raised the hopes of many of his constituents. He may be able to face them and say, “Absolutely, I am fulfilling what I promised.” If he feels that and they are happy with it, they will re-elect him, and everybody will be happy and ride off into the sunset, but I have a feeling that some policyholders will continue to be discontented with the Government’s position. It certainly did not say, either in the manifestos or in the pledge that he signed, perhaps scribbled in a little addendum, “Oh, by the way, we are going to give you only a fraction of the £4.5 billion to £6 billion that you understand as the relative losses.” That is simply not there. I am not claiming, because I did not sign that pledge, to have raised those hopes, but Members on the Government Benches did.

[Sir Alan Beith]

Is it the hon. Gentleman’s position that he did not promise anything, he was not going to give anything, Chadwick was the maximum and he might as well vote against the Bill?

[Chris Leslie]

Liberal Democrats need to learn that people should not make promises they cannot keep. There is a suggestion that Liberal Democrats in particular have been growing used to making promises that they cannot keep, so the right hon. Gentleman should pause for a moment because his political arguments are haemorrhaging on a number of fronts. That is because some Members raised a series of aspirations before the election, making suggestions and promises, and there are some who will feel that he is now falling short of that. That is the only point that I seek to make. I am not claiming perfection for my behaviour, nor am I claiming in any way that I could fulfil all the hopes of the policyholders, but my point is that Members on the Government Benches did, and they should be hoist on their own petard for signing that EMAG pledge.

[Charlie Elphicke]

rose—

[Chris Leslie]

I give way to my good friend from Dover.

[Charlie Elphicke]

I thank the hon. Gentleman for giving way. I know him to be a generous Member of the House. With his customary generosity, will he acknowledge that the amount is nevertheless three times that which the previous Government said they would have given as compensation?

[Chris Leslie]

We will not know that, because Chadwick’s report was published after the general election. We had a series of steps that would have then been taken, but history went in a different direction because the spending review and the Budget were undertaken by a different party, not by our party in government. I am not saying that there are magic solutions to this issue. These are complex matters and there are technical reasons for both the methodologies that are being used in the compensation and the timings and the discussions around them. It is important to bear in mind the wider needs of the public purse. We have consistently said that and now the Government have come round to that point of view. I understand why they did.

[Mr Hoban]

The previous Government took six months to dither over what they would do about the ombudsman’s report, whereas we accepted her recommendations straight away—there had been maladministration, there should be compensation for relative loss, and affordability was a key part of her recommendations. We accepted that quickly, whereas his right hon. and hon. Friends sat on their hands.

[Chris Leslie]

I disagree with that. The hon. Gentleman certainly did not say before the general election that this would be £1.5 billion—[Interruption.] Oh, did he? Where did he say before the general election that this would be £1.5 billion? I shall give way to him if he can give a reference for that. Answer came there none—proof in point that after the general election a different set of expectations was set out by the Government than those that might have been an interpretation of the Minister’s words before the election.

[Mrs Main]

Will the hon. Gentleman give way?

[Conor Burns (Bournemouth West) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

I have given way to the hon. Member for St Albans (Mrs Main) several times, so I shall give way to the hon. Member for Bournemouth West (Conor Burns).

[Conor Burns]

Will the shadow Minister at least concede that one of the biggest groups of victims—some were in my constituency—were those who died while waiting for his Government to make any progress? This Government should at least be congratulated on getting on and doing something, because in this context something is definitely better than the nothing that was offered by the Opposition.

[Chris Leslie]

I am not going to claim that everything in the garden was rosy in the period that elapsed between the findings of the various commissions. Suffice it to say that Penrose spent some two and half years on his inquiry and the ombudsman spent nearly four years on hers. This was not simply a Government issue. There were very complex issues in which a set of decisions had to be resolved. There are perfectly good and sound reasons for some of the time that it took to come to conclusions on these questions. Things could certainly have been handled better; I have already said that this evening.

[Mr Marcus Jones]

Will the hon. Gentleman explain the inactivity on the matter while his party was in government, particularly during the demise of the Icelandic banking industry, when his Government bailed out many investors who were affected by that at the drop of a hat?

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Before the hon. Member for Nottingham East (Chris Leslie) answers, may I remind the House that this is Third Reading and that it is timed, which means that it will conclude at three minutes past 5? Members who have sat through the debate this afternoon and who wish to speak on Third Reading might not get the opportunity to do so. I shall call Mr Leslie back to the Dispatch Box to respond to the intervention, but perhaps everybody in the Chamber could bear my point in mind.

[Chris Leslie]

Indeed, Madam Deputy Speaker. It is certainly incumbent on us all to be brief as far as we can. I have set out the position as I see it. I know that Government Members will disagree, but I do not wish to impugn their intentions. I was simply seeking to point out that they are held to a pledge that not all Members are held to and that they will be judged on that.

We are not minded to oppose the legislation this evening. This is a necessary paving Bill, but we accept that the devil will be in the detail and we await the further scrutiny of the measures that will come subsequently.

16:33

[Nadhim Zahawi]

The mere fact that it is 10 November 2010 and I am standing here delivering a speech on Third Reading is something of which I am incredibly proud. This is a sobering Bill, which is long overdue. I thought in Committee that I heard the shadow Minister apologise, but, sadly, I know from listening to his remarks that he obviously has no remorse. Behind him are the hon. Members for Foyle (Mark Durkan) and for Leeds North East (Mr Hamilton), who have been passionate advocates for the victims of Equitable Life and incredible champions for their cause, and they have had to listen to their Front-Bench spokesman speak with forked tongue. He says, on the one hand, that Labour wants to champion the victims of Equitable Life, many of whom sadly have not survived to see this day, but on the other that it did not promise anything. Labour let the victims down in the previous Parliament and tried to get away with delivering what Chadwick recommended.

The Front-Bench spokesman for the coalition Government is to be commended, because we are debating a figure that is four times the amount that Chadwick recommended. I remind the House of the economic landscape that we have inherited. We are borrowing £500 million a day; every time we go to bed and wake up in the morning, we have been saddled with another £500 million of debt by the previous Government. Just paying the interest on that debt costs £120 million a day—just to stand still. Against that background, and within six months of this Parliament, we have been able to deliver the Third Reading of this Bill for victims of the Equitable Life tragedy.

I want to highlight some of the points that my hon. Friend the Member for Harrow East (Bob Blackman), chairman of the all-party group on justice for Equitable Life policyholders, has made. He has made some forceful points, as have my hon. Friends the Members for Nuneaton (Mr Jones) and for Cardiff North (Jonathan Evans). It is important to remember what we heard from the Minister about the additional money that will come as a result of the tax treatment of the payments. He would be right to say that he had already shared this information with us but that it was hidden in the detail. That important point needs further airing.

I repeat a recommendation that I made in Committee, although I know it would be complex: it would be incredibly helpful for us all if the additional benefit for different tax bands provided by that tax treatment could be calculated. As my hon. Friend the Member for Harrow East rightly reminded us, many hon. Members signed the pledge on Equitable Life before the election. I am proud that I signed it and many of my colleagues and I believe that we have absolutely delivered on it. There is a lot of detail to get through and we will all work very hard to ensure that we deliver for the victims of Equitable Life. I hope that the shadow Minister will reflect on his remarks and feel that he could take some of them back. I hope also that he will be much more considered next time he speaks on this topic.

16:38

[Mr Fabian Hamilton]

Given the shortage of time I shall be brief. The hon. Member for Stratford-on-Avon (Nadhim Zahawi) reminds us of the daily interest payments on the current national debt and I could respond that if we delayed payments by two days, we might have enough, by his calculations, to pay the pre-1992 annuitants, but I shall not be frivolous.

In Committee, I might have been a little churlish in my introductory remarks on my amendment, because I really do want to congratulate the Government on what they have done. They have not gone far enough, but they have made progress and I do not want to appear reluctant in congratulating them. Many hon. Members thought I was being reluctant, but my remarks were slightly tongue in cheek. It is good that the Government have introduced a scheme quickly, that payments will be made from next year and that the quantum is now roughly £1.5 billion instead of £0.5 billion—about three times more than Chadwick suggested. That is progress, and many Equitable policyholders will be very pleased.

I hope the Minister will accept that there is still some injustice, not least for those pre-1992 annuitants, for whom 76 right hon. and hon. Members voted for my amendment. As the Minister knows, I do not accept his argument on that. I hope he will understand that injustice still exists, that we will have to deal with it in some way or another if we can, and that EMAG will continue to fight its corner, as it must, until it sees justice for all policyholders and annuitants who took out policies with the discredited Equitable Life.

I and my co-chair, the hon. Member for Harrow East (Bob Blackman), together with the secretary of the all-party group, have written to Ann Abraham, the ombudsman, asking her a number of questions. We hope that in due course we will receive a response, which we would want to share with the House or at least with the rest of the all-party group. On that subject, I hope the Minister will be able to accept my previous invitation to attend one of our meetings at a time convenient to him, so that we can discuss the details of the scheme, understand more clearly how it will work and perhaps add some thoughts of our own on how to make it work more effectively.

Finally, I hope that in passing the Bill today and making it become law, and in paving the way for the compensation scheme, we as parliamentarians all appreciate the lessons that have been learned from the poor or non-existent regulation of companies such as Equitable Life so that future annuitants and policyholders never have to suffer in this way again.

16:41

[Bob Blackman]

I am privileged to follow my co-chair of the all-party group that is seeking justice for the policyholders who were so wrongfully treated by the previous Government. We can see where interest in supporting the policyholders lies. It is on the coalition Government Benches. Sadly, with the exception of those hon. Members who are present, there is a total lack of interest among Opposition Members in listening to or participating in the debate. That is typical of what has gone on for the past 10 years. It is not fair to compare a potential failure to regulate with the fact of conniving with the regulator and the company to prevent people from receiving compensation. That is precisely what the previous Government did.

I congratulate the Treasury team on taking swift, firm and transparent action to ensure that we can pay swiftly those who have been wronged. That is not being done as quickly as I would like, but we have to go through the mechanisms of government and legislation. We must make sure that the people who have been so badly wronged are compensated properly, and that that process is fair and is seen to be independent of Government.

The debate that we had this afternoon in Committee clarified a number of issues. I trust that the people who are watching from home, thinking about how much money they will receive and when they will receive it, will be more satisfied that the Government and the Treasury team have taken on board the lobbying and the actions undertaken by Members, primarily on the Government Benches, to make sure that the scheme is put in place as swiftly as possible and pays the maximum possible.

We should remember that the Bill will enable the Treasury to pay the money out as swiftly as possible. It does not deal with the sums that are due to be paid out, although the Government accept completely the ombudsman’s view that the compensation would be £4.6 billion if the public purse had permitted that. That is massively different from what Chadwick recommended.

[Nadhim Zahawi]

Does my hon. Friend agree that if the previous Government had acted, and acted sooner, more compensation would have been payable to the victims?

[Bob Blackman]

If the Labour Government had acted when they should have done, £1.5 billion would have represented 100% compensation for everyone that had been so badly wronged. However, the dragging of feet over the past 10 years means that we are in the parlous state in which, ever day, people who should be due their compensation are dying and every day that we delay means that, sadly, more people will not receive their compensation.

[James Morris]

Many Members have talked about the moral imperative behind sorting out the situation, but does my hon. Friend agree that moral intervention requires practical Government action, which is what we are seeing today?

[Bob Blackman]

Indeed. That is the clear duty of the coalition Government, and that is why I wholeheartedly praise the Treasury team for demonstrating such action.

There has been no greater issue than the tax treatment of the compensation that is due, and I congratulate once again the Treasury on that measure, because it will add to the compensation. Many people sitting at home will have been calculating their compensation less the amount of tax that they regularly pay. Now they know that they will receive a far bigger tax-free income, and that is something else of which we can be proud.

I would have much preferred more money to be provided. Would not we all? But would not we all rather be in a position whereby the Treasury was not almost bankrupt and we had not been left with a massive deficit? The all-party group will continue to ensure that, in this process, the Treasury will be able to communicate with all parliamentarians, and EMAG will be able to lobby to ensure that, when individuals begin to receive their payments, which will be the acid test, they feel satisfied that the wrong that has been done to them has been compensated. That is something of which we would all be proud. We can take great pride in the fact that the process is happening quickly, with purpose and transparency, and that the pledge that we all signed is being honoured. Some people may say, “It is not being honoured in full,” but it is, and clearly the economic circumstances of the day dictate what we can do.

As I said in an earlier intervention, we should revisit the position in five years’ time when the economy will have recovered and we will be in a much stronger position because of the coalition Government’s decisions. There may be a case then for reconsidering whether the people who took out policies but will not retire for five, 10, 15, even 25 years should receive a top-up. That is a reasonable proposal, and it is sensible for the coalition Government to consider it.

I commend the Bill to the House. I support it 101%, and the Treasury team are to be congratulated not only on what they have done, but on the clear answers that they have given to the points that have been made as we have considered the Bill in detail.

16:44

[Mr Weir]

No one is going to oppose the Bill’s Third Reading, for the simple reason that, if it fell, no one would receive any money. None the less, dealing with the Bill has in many ways been a frustrating experience. It is a paving Bill, as others have said, and the big elephant in the room is the cap and its effect on the overall amount of money available.

It would be churlish not to acknowledge that the Government have moved swiftly, and that is welcome. After 10 years spent arguing about the matter, we are finally getting somewhere with it, but to some extent the Bill is a missed opportunity, because of the cap and the inability to do anything about the Treasury’s decision to introduce one. The effect will be dramatic. Nobody is arguing that, in the current situation, everybody should receive all the money to which they might be entitled. Even EMAG accepts that there will be, as the group put it, a “haircut”, but some people will lose 80% of the compensation that they should have received, and that is not fair.

There are other inequities involved. I was frankly baffled by the Minister’s mental contortions over the exclusion of pre-1992 with-profits annuitants. As I understand his remarks, we are now in the position where maladministration is okay as long as one does not know about it and where it becomes an issue only when one does know about it. That seems utterly perverse. By resorting to these measures, the Government have undermined what could have been a very good end to this long-running matter.

The hon. Member for Harrow East (Bob Blackman) is right—had the previous Labour Government grasped the nettle at an early stage, this issue could have been dealt with much more cheaply. A lot of the fault over the cost lies with the previous Government’s unwillingness to do anything about it. Many of us have spent years in this House arguing that they should have done so; I have not changed my position over that period.

I think that there should be compensation, and I welcome what has been done. It is not sufficient, however, and many policyholders will still feel very aggrieved, and rightly so. It could have been dealt with better had it been done differently, perhaps with a larger cap or payments over a longer period. I can give half a thanks for the Bill, but I think that the Government will face problems in future because of their failure fully to deal with the issue.

16:51

[Sir Alan Beith]

I must declare an interest in that I have a very small Equitable Life policy—so small that I do not think I will qualify for any repayment. My concern is for the large number of my constituents whose entire retirement is dependent on Equitable Life policies. The list of the people who write to me includes many of those who have contributed most to the community over the years: that is a striking feature of the names that I see in the correspondence. Many of them will still be angry at how little they are going to get for all the savings they put by.

The first thing to remember is that the primary responsibility for this situation rests with the utterly irresponsible management of Equitable Life. In many ways, that was a disgrace to the mutual movement. It underlines a weakness in the mutual movement, of which I am very supportive in general, which is that executives who want to advance their own careers favour the acquiring of new members at the expense of the interests of existing members. It happened at Equitable Life, it happened at Northern Rock, and it happens in building societies; it is something that the mutual movement has to watch very carefully.

The regulatory failure that occurred is the basis of the Bill, which I hope we shall give a Third Reading. That regulatory failure has not led to action within anything like the time scale that it should have done. A decade has gone by: people have got older and people have died while action should have been taken.

I very much welcome the action that the Government have taken, very quickly, within a short time of their coming into office. I welcome the further announcements that the Minister has made in saying that there will be no tax liability and no effect on tax credits, and that special considerable will be given to the social care situation, bearing in mind that quite a lot of Equitable Life policyholders are now in social care, either at home or in residential care, and their cases need to be considered very carefully. I am grateful to the ombudsman for the work that she has put into this matter, and for her persistence in doing so, and to EMAG, which has done such a tremendous job.

This is not full redress even for all the regulatory failure that occurred, and I would not expect policyholders to be satisfied that they have got all that they are morally entitled to. However, the fact that the Government have moved quickly to ensure that payments will be made makes me feel entirely justified in going into the Lobby in support of the Bill. I am rather depressed that the response of Labour Front Benchers has been to say to the Government, “You gave people the impression that they might get more, and even though you’re giving three times more than Labour would even have contemplated, we, the Labour party, did not promise anything at all.” We had to act, and I am grateful for the fact that Ministers are doing so.

16:53

[Mark Durkan]

This is a Third Reading debate, and I do not believe that the House should, or will, divide on the Bill at this stage.

As we have rehearsed in debates not only today but on other occasions, this is a can that was kicked in front of the Government for a very long time, to the frustration and disgust of very many people. I am glad that although not everyone who has lost out will be doing handstands, we no longer have the degree of hand-wringing from Government that we had for too many years.

In the earlier debates, I, like others, had some questions and criticisms. Those criticisms were because of the inadequacies and arbitrary limits in the provisions that have been put in place. Some of us have genuine concerns that, notwithstanding how much better the provisions are than those the previous Government were going to make, we as a Parliament should be careful about creating a situation in which we have a cap one on hand and a cut-off on the other, which together will conspire to create a selective injustice against some people.

When the Financial Secretary responded to debates on amendments, he made it clear that assessments of pre-1992 annuitants could be made to allow cases to be identified in which people had benefited from the inadequate regulation rather than losing out. In those cases, we should better provide for a scheme that will deal with everyone on a case-by-case basis, rather than risk class exclusion by assumption, which is what the cut-off provides for. I ask the Government to consider that further as they take the scheme forward.

I appreciate the Financial Secretary’s indications that added consideration has been given to tax treatment and tax credits, and to the social care implications complications that could arise. I give the Government credit for that sensitivity and responsiveness.

My hon. Friend the Member for Nottingham East (Chris Leslie) rightly warned the Liberal Democrats to be careful not to make promises that they cannot keep. As a friend of the Labour party, but someone who was frustrated sitting on the Benches with Labour Members during the last Parliament, may I say that I hope Labour’s Front Benchers also learn to be careful about making arguments that they cannot sustain? He has unfortunately been left in a position of trying to criticise the Bill, but he could not even afford to divide the Committee on straightforward, pure amendments. I feel sorry for him that the last Government’s record put him in that position, and that he was left to make arguments that ended up, with all due respect, veering towards cynicism while the rest of us were trying to keep our arguments within the realms of legitimate criticism. However, I accept fully that he is not responsible for that position.

It is important to remember that this is not just a matter of what one Government or another did. The debates have shown that many Members of all parties have met constituents and carried their concerns. People have suffered compound distress, and that is what cannot be quantified. Someone might quantify what amount of money should be due to people and how much we can afford to give them, but we cannot calculate the compound distress caused to people not just by their loss but by the long indifference and inertia.

I acknowledged earlier the work in the previous Parliament done by my hon. Friend the Member for Leeds North East (Mr Hamilton), and we all acknowledge the work in this Parliament of the hon. Member for Harrow East (Bob Blackman), who has served notice that he will continue it. It is also appropriate to acknowledge the huge role played in the previous Parliament by the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski). Perhaps it is right that a Member from one of the smaller parties says so; as he is currently a Parliamentary Private Secretary, he may not be in a position to participate in the active, vocal way that he so often did.

Many of us have criticised Sir John Chadwick today and at other times. I remember the hon. Member for Shrewsbury and Atcham reminding me of a line that I used to hear about Fanny Craddock. Apparently she used to offer some chicken recipe, and the first line of the recipe was, “First, catch your chicken.” The hon. Gentleman and the all-party Equitable Life group had that difficulty with Sir John Chadwick, in trying to get him in and ensure that he and the Government properly engaged with them. Although many people will see shortcomings in the provisions, the fact is they represent huge and welcome progress. Some redress will now be given to people, and the quicker that that can happen the better.

None the less, we need to iron out any inconsistencies. Some of us are worried about something the Minister said earlier and the sort of precedence that it might create. He said that because people did not know about the maladministration, they can be deemed not to have suffered the same loss as those who did know. That is not an argument that I would ever want to become a rule of thumb for any such scheme again.

17:00

[David Rutley (Macclesfield) (Con)]

Like many others hon. Members, I have had a huge amount of correspondence on this issue. I have also met many of the policyholders and heard their sad tales and the way in which this drawn-out saga has affected their lives. I congratulate the Equitable Members Action Group on its hard-fought campaign and commend the great work that has been going on in the all-party parliamentary group. That has given many of us in this House, particularly new Members, an awareness of the situation. None the less, it has been a drawn-out saga, and I am delighted that the Minister has taken very speedy action to address the outstanding issues. He has made this Bill a priority and put forward £1.5 billion to assist with compensation at a very difficult time for the economy. Those are genuinely positive developments. As my hon. Friends the Members for Harrow East (Bob Blackman) and for Stratford-on-Avon (Nadhim Zahawi) have said, we have also had clarity on the tax treatment, which is welcomed by all of us.

I congratulate the Minister on his quick choice of National Savings & Investment to lead forward the speedy implementation. At the time of his ministerial statement, I remember his assuring the House that there would be a clear communication plan to help him inform policyholders on developments. I continue to urge both him and his Treasury officials to learn from previous compensation schemes to ensure that this one has flawless implementation. That is what the policyholders deserve after years of waiting. We cannot let them down at the point of implementation and operation.

Although it is essential to have clear information available through e-mails and websites, we must not forget the age profile of the people whom we seek to help. They are, typically, older—much older—and will need written communication and properly manned contact centres to ensure that they get the customer service that they need.

[Richard Graham (Gloucester) (Con)]

Does my hon. Friend not agree that it is a real scandal that no settlement was made during the long years of the previous Government while many thousands of innocent victims, including my mother, died, and that that should remain on the previous Government’s conscience for ever?

[David Rutley]

I agree. It is a tragedy that this has taken this long. Today’s debate has been reasonable, but I felt let down by the uncharacteristic tone that was struck by the hon. Member for Nottingham East (Chris Leslie).

17:02

One hour having elapsed since the commencement of proceedings on consideration, the debate was interrupted (Programme Order, 14 September).

The Deputy Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the Bill be now read the Third time.

Question agreed to.

Bill accordingly read the Third time and passed.

European Union Economic Governance

Wednesday 10th November 2010 Commons Chamber

[Madam Deputy Speaker (Dawn Primarolo)]

I must inform the House that Mr Speaker has not selected any of the amendments.

17:03

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

I beg to move,

That this House takes note of European Union Documents (a) 9433/10, Commission Communication on reinforcing economic policy co-ordination, (b) 11807/10, Commission Communication on enhancing economic policy co-ordination for stability, growth and jobs – tools for stronger EU economic governance, (c) 14496/10, Proposal for a Council Regulation (EU) amending Regulation (EC) No. 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure, (d) 14497/10, Proposal for a Council Directive on requirements for budgetary frameworks of the Member States, (e) 14498/10, Proposal for a Regulation of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area, (f) 14512/10, Proposal for a Regulation of the European Parliament and of the Council on enforcement measures to correct excessive macroeconomic imbalances in the euro area, (g) 14515/10, Proposal for a Regulation of the European Parliament and of the Council on the prevention and correction of macroeconomic imbalances, and (h) 14520/10, Proposal for a Regulation of the15 European Parliament and of the Council amending Regulation (EC) No. 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and co-ordination of economic policies; notes the Report from the Task Force on Economic Governance in the European Union; notes with approval that budgetary and fiscal information will continue to be presented to Parliament before being given to EU20 institutions; and approves the Government’s position, as endorsed by the Task Force that any sanctions proposed should not apply to the United Kingdom in consideration of Protocol 15 of the Treaty on the Functioning of the EU.

I welcome the opportunity to set out the Government’s position on the Commission documents to be debated this evening and our broader position on the co-ordination of economic policy in the EU. As right hon. and hon. Friends will be aware, the European Council last month agreed the report of the EU Economic Governance Task Force chaired by Herman Van Rompuy, and we support its work and conclusions, none of which encroaches on Parliament’s economic sovereignty. I want to be clear about that so that there can be no confusion about our position.

Let me deal first with surveillance. Macro-economic surveillance examines the budget plans of member states, and has been around for more than a decade. There is nothing new in that, and a number of international bodies do the same, such as the OECD and the International Monetary Fund. Does the fact that the EU is doing so mean that we will be subject to sanctions? No, it does not, because under protocol 15 of the existing treaty, sanctions do not apply to us.

[Mr William Cash (Stone) (Con)]

Is my hon. Friend aware that the same Mr Van Rompuy has today issued a vicious attack on Eurosceptics throughout Europe, saying that what they argued amounts to a national lie?

[Mr Hoban]

I have not seen Mr Van Rompuy’s comments. As hon. Members will recognise, I have been rather tied up in the Chamber for most of this afternoon.

Let me continue to make the Government’s position clear. Will we have to present our Budget to Europe before we present it to the House? No. Will we have to give Europe access to information for budgetary surveillance that is not similarly shared with organisations such as the IMF, or that is not publicly available on the internet? Again, the answer is no. Will powers over our Budget be transferred from Westminster to Brussels? Again, the answer is no.

[Philip Davies (Shipley) (Con)]

Does my hon. Friend understand that many people have lost confidence in assurances given whenever a new European treaty is discussed that there will be no loss of sovereignty? Ever since we went into the Common Market, the British public have been told at every stage along the way, “Actually, we’re not giving up any sovereignty. This new treaty doesn’t give anything away,” but people have found time and again that these treaties have done just that. Does my hon. Friend understand people’s concerns that although the powers in question do not apply to the UK at the moment, they may well do so in future, as the European Union is clearly looking at extending sanctions to non-eurozone countries as well?

[Mr Hoban]

Nothing in the documents before us today does what my hon. Friend suggests. People should listen and read the documents to which we have subscribed, and understand how firm and robust the Government have been in defending our economic sovereignty.

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

But does Mr Van Rompuy’s report not suggest that there should be a binding minimum set of requirements for national fiscal frameworks that would apply to all member states?

[Mr Hoban]

I think my hon. Friend is reading an earlier draft of the report, because we amended that language at the latest ECOFIN. I will come to this point in a minute, but we believe that fiscal frameworks should be political agreements and should not be driven by directives or regulations.

[Mr John Redwood (Wokingham) (Con)]

Will the Minister please confirm that the directive on budgetary frameworks for all member states will apply to the United Kingdom, that the second regulation on budgetary surveillance for all member states applies to the United Kingdom, and that the regulation for enforcement for all member states also applies to the United Kingdom? There are twin proposals in each case, some of which apply only to euro members and some of which affect all member states. Surely the Minister must confirm that that is a massive extension of European economic government, and the UK has to comply with a lot of it.

[Mr Hoban]

There is nothing new in the macro-economic surveillance processes outlined in the document and, as I have said, we are exempt from the sanctions regime that the Commission and others have proposed, which applies only to eurozone countries. Let me now make some progress.

We need to recognise that there are lessons to be learned from the economic crisis, but one lesson that stands out that is relevant to the debate this evening and to the documents is that in an open, global economy, no economy exists in isolation. The failures of economic policy in one country can be exported to other nations, and the imbalances in one economy can have an impact on others. Imbalances such as excessive domestic demand and growth can lead to asset bubbles, an over-reliance on exports or divergence in competition across countries. It is in all our interests to improve co-ordination and co-operation in policy making, to tackle those imbalances and increase the resilience and strength of the global economy.

However, in our view, increasing co-ordination and co-operation has to be consistent with national sovereignty and the accountability of Parliament. It is those principles that frame our response to the documents and our response to the global economic crisis. There is an intense global debate about those topics in the G20, the IMF and the OECD, and in Europe. We take part in those debates because, as an open economy, we have a strong interest in economic stability. We are acutely aware that imbalances and problems in one economy can have a spill-over effect in another.

[Mr Peter Bone (Wellingborough) (Con)]

Is the Financial Secretary saying that the taskforce document that I have, dated 21 October, has been rewritten? It concludes:

“Endorsement by the European Council of the recommendations in the present report will contribute to strengthening economic governance in the EU”.

It clearly says “in the EU” as a whole.

[Mr Hoban]

But the sanctions regime relates only to eurozone countries, and no sanctions can be imposed on the UK. All that the document is referring to is continuation of the macro-economic surveillance that has been taking place over the past 10 years.

[Mr James Clappison (Hertsmere) (Con)]

My hon. Friend is making his case persuasively, but will he assist me? The same document from Mr Van Rompuy, dated 21 October—I take it that that is the latest report—clearly states in paragraph 34:

“The Task Force recommends deeper macro-economic surveillance with the introduction of a new mechanism underpinned by a new legal framework based on Article 121”

of the treaty on the functioning of the European Union alongside the stability and growth pact

“applying to all EU Member States”.

Perhaps my hon. Friend will help the House by telling us a little about that.

[Mr Hoban]

I know that that paragraph has caused some interest, but many people stop reading after

“by a new legal framework”.

I am grateful that my hon. Friend did not fall into that trap. The provision is based on existing treaties, and it is about macro-economic surveillance. A number of organisations conduct macro-economic surveillance of the UK economy, and there is nothing new in that.

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

I hope that the Financial Secretary realises that we are here to support him in a sensible approach to economic surveillance. Does it not seem rather silly for people to say that a country that is in partnership with many other countries should not be interested if any of those countries are profligate? Clearly, good surveillance and good economic policies throughout the partnership are good for the UK.

[Mr Hoban]

The hon. Gentleman makes an important point, and I am about to come to that, so his intervention is timely. Given the degree of integration of the European economy, it is in our national interest to support work that looks at the causes of instability and to have in place action to help to tackle them. Over the summer, there have been two parallel processes in Europe. The Commission has its own work stream, which is summarised in the documents before us. However, member states have participated in a separate strand of work on the co-ordination of economic policies under the chairmanship of Herman Van Rompuy. Many of the issues covered are the same, but there are essential differences between the two streams. The Commission’s documents detail solutions, and the Van Rompuy work reflects the political agreements reached between member states. The next step is to bring the Commission’s proposals into line with the taskforce’s recommendations.

I shall deal in more detail with three aspects of the taskforce’s work.

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

Is my hon. Friend giving an assurance that not only are there no sanctions—we understand that—but there is absolutely no increase in EU jurisdiction over the British Budget-making process?

[Mr Hoban]

No, there is not, and I shall come to that in more detail. As far as I am aware, there is no difference in the power that the House has to set the Budget for the United Kingdom.

[Mr Jenkin]

I am sorry, but I must insist on the Minister giving way again. Is there any increase in EU jurisdiction over the British Budget-making process as a result of these arrangements? Yes or no?

[Mr Hoban]

I do not believe that there is.

Let me deal with the three aspects. In every international economic debate, the issue of increased co-operation and co-ordination arises. At last month’s G20 Finance Ministers conference, the focus was on exchange rates and current account surpluses. At the IMF annual meeting in early October, there was considerable debate about tackling deficits. Those discussions of macro-economic policy are not a new feature of the crisis. For example, since its inception, the IMF has undertaken regular reviews under article 4 of macro-economic policies and made recommendations on policy response, but they are not binding. The EU has had similar procedures in place for a decade. It is in all our interests for there to be economic stability in Europe, and the process needs to be strengthened. What we are doing is simply renewing the existing framework in the light of the economic crisis and updating the tools that we have, to ensure that we can do what we need to do. The measure will broaden the scope of surveillance, but, as far as the UK is concerned, it will not weaken the sovereignty of this Parliament.

Risks to stability often flow from imbalances in the economy, and it is important to look at factors such as current account balances, labour market flexibility and competitiveness across the European Union and to be able to identify problems that could undermine stability. Macro-economic surveillance has an important role to play as an early-warning system.

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

rose—

[Mr Redwood]

rose—

[Mr Hoban]

I should like to make a bit more progress on this point.

It is right that we should co-operate with this process, but our co-operation should be consistent with the fiscal sovereignty of the UK. The information that we provide to assist with the surveillance will always be information that has been made available to this House before it is passed to the Commission. Everything that the Commission gets will have been in the public domain, to the extent that a member of the public will have been able to unearth the same data using Google, albeit with less efficiency.

[Mark Hendrick]

The information might be available elsewhere, but the Minister will know that, as a result of the proposed new regulation Com. (2010)526, there will be an obligation for the UK to provide far more information than it has done in the past. There may not be penalties involved, and we may well run up budget deficits or levels of debt that were unacceptable to the Commission—I am sure we can do that—but the point is that this country will be obliged to provide far more information formally to the Commission than it has in the past. In my view, that constitutes a degree of transfer of power to the Commission.

[Mr Hoban]

Let me repeat that this involves information that is already out there in the public domain. It is information that will already have been made available through, for example, the House of Commons Library, the Budget documents, the Red Book or the Green Book. It is information that is already out there, so I do not believe that supplying it will be a problem.

[Mark Hendrick]

The point is not that the information will have been made available elsewhere; it is that there will be an obligation on the Government themselves to make it available. If the Commission wanted to go out and find it elsewhere, I am sure that it would do so, but there will now be a new obligation on the Government, as a result of a new treaty, to give it information that they were not previously required to give.

[Mr Hoban]

I simply do not take the view that giving the Commission more information is going to be a problem. This goes back to the intervention by my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who asked whether there is to be an increase in EU jurisdiction as a result of this measure. No, there is not. All that the EU will do is make recommendations, but they will not bind us or be imposed on us. We can simply ignore them. There will be no increase in EU jurisdiction as a consequence of this measure.

[Mr Cash]

rose—

[Mr Redwood]

rose—

[Mr Hoban]

I am being bombarded by requests to give way. I shall give way first to my hon. Friend the Member for Stone (Mr Cash).

[Mr Cash]

The explanatory memorandum dealing with the jurisdictional question, which was supplied to the European Scrutiny Committee on 23 October, states, under the heading “Impact on United Kingdom Law”:

“The Regulations once adopted would be ‘binding in their entirety and directly applicable in all Member States’. However, in accordance with Article 1 of the proposed Regulation, the Regulation on enforcement measures will apply (only) to the Member States whose currency is the euro.”

That is made absolutely clear by the Minister’s own document that he supplied to the Committee.

[Mr Hoban]

Hon. Members should think about this carefully. All that we are doing is providing more information to the Commission, and it is information that is already in the public domain and that has already been presented to Parliament.

[Mr Redwood]

Will the Minister confirm that there are two big new regulations that relate directly to the United Kingdom? One relates to budgetary surveillance on all member states, and the other relates to enforcement against “macro-economic imbalances”, as the Commission so elegantly describes them. These are new powers in new regulations. Why are the Government consenting to them?

[Mr Hoban]

The enforcement point does not apply to the United Kingdom as a consequence of protocol 15 of the existing treaty framework, because we have opted out of that part. My right hon. Friend is knowledgeable about these things, and he will recognise that the Commission makes proposals, and that ECOFIN and the European Council have set out a clear policy framework on this, as reflected in the conclusions of the Van Rompuy taskforce, which make it very clear that sanctions do not apply in the UK.

[Several hon. Members]

rose—

[Mr Hoban]

Let me make some more progress; otherwise, hon. Members will not have the opportunity to participate in the debate. Let me continue for a few more moments.

Many organisations and individuals, including the IMF and the OECD, scrutinise our economy and our budgets. Many make recommendations or, as happened recently, praise our fiscal consolidation plans. We have nothing to hide from any of these bodies that want to look at what we announce to Parliament or at the economic figures published through the Office for National Statistics or through Departments. It is our decision whether or not we listen to their advice. The UK will continue to prepare its Budget independently; others can make recommendations about it, but, crucially, we are under no obligation to take action and, by virtue of our opt-out, we are not subject to sanctions. Any recommendations, as with those made by any other body, will remain just that. It will be down to the Treasury and Parliament, not to the EU, to construct our Budget.

[Lady Hermon (North Down) (Ind)]

I am enormously grateful to the Minister for taking my intervention. As the hon. Member for Stone (Mr Cash) said, these regulations are entirely binding on the United Kingdom. Can the Minister assure us that, if the Government decline to give the information requested under these regulations, the European Commission will not take enforcement proceedings against the UK Government for not complying with them?

[Mr Hoban]

I do not see the point of not sending information that is already in the public domain. Why would we be so churlish as not to send out stuff that could be got from Google or from the Library or by tabling a written question to the Prime Minister?

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

I am getting a little confused. If the information is already in the public domain and any organisation can find it, and if we do not have to listen to any recommendations made, what is the point of our agreeing to this?

[Mr Hoban]

Given that the process is very straightforward, I begin to wonder why it is causing so much excitement. The reality is that the information is already available and the recommendations do not apply to us. The enforcement mechanism applies to eurozone states; they are subject to sanctions, but we have a carve-out from that because of protocol 15.

[Michael Connarty]

May I suggest to the Minister that one of the attractions of the new procedure is that every country in Europe will have to carry this out? They would find out well before any crisis—as we saw in Greece, for example—that they were in trouble. It is a little bit of information to give and a lot to get back. I think that the “Euro-loony party” contingent should leave the Conservative party, so that people with some common sense can deal with Europe sensibly.

[Mr Hoban]

I am not going to go down that route, but it is important that information be available. Over the course of the financial crisis—not just in the EU, but globally—we have seen the importance of understanding structural imbalances and their impact on other economies. This is an important strand of debate and it will be continued when the G20 meets later this week. It was certainly an important strand in the G20 Finance Ministers’ meeting last month, and, indeed, in the IMF’s annual meeting in October. There is nothing new in discussing these issues.

There is an existing mechanism for surveillance in place through the broad economic policy guidelines, but the warning mechanism has been used only twice: it was used for Ireland in 2001, and Greece received a warning in February this year. An improved mechanism would help towards achieving greater economic stability and it is particularly important for the eurozone, where the effects of imbalances and instability have a greater impact on its members, as has been apparent in recent months. That is why eurozone member states support a sanctions regime, penalising eurozone members whose economic policies undermine the stability of the currency and the eurozone economy. The sanctions do not apply to us, as I have said. I give way—

[Mark Reckless (Rochester and Strood) (Con)]

rose—

[Mr Speaker]

Order. Before the hon. Gentleman intervenes, I note that the Minister has been on his feet for 21 minutes and has attended most assiduously to a number of interventions, and that is perfectly in order. However, I emphasise that there is an hour and a half for this debate, and a substantial number of Back-Bench Members have indicated to me that they wish to speak. It would be a very sad and unsatisfactory state of affairs if contributions from those on the Front Bench were to exceed in total those from Back Benchers. On that basis, I feel sure that the Minister, who is an adroit fellow, will be bringing his remarks to a close ere long.

[Mr Hoban]

I thank you, Mr Speaker, for that encouragement and guidance, and I apologise for being generous in taking interventions. Let me make rapid progress.

On the issue of sanctions, the same principle applies for those eurozone countries that are in breach of the stability and growth pact excess deficit procedures. In the run-up to the crisis, there was a lack of fiscal discipline, for those inside and outside the euro. Despite the existence of the stability and growth pact and the excess deficit procedure, the eurozone was still undermined by a failure to exert fiscal discipline, and a number of member states in the eurozone have to take tough action to tackle the deficit.

To avoid a recurrence, the Commission and member states in the eurozone have sought to reduce the discretion on the application of the sanction process. The position reached by eurozone countries is set out in the taskforce report. Again, it is worth reminding the House that the sanctions regime does not apply to the UK by virtue of protocol 15 of the current treaty.

[Mr Edward Leigh (Gainsborough) (Con)]

rose—

[Mark Reckless]

rose—

[Mr Hoban]

I will not give way. I listen carefully to the guidance of Mr Speaker.

To secure fiscal discipline, strong fiscal frameworks are required, as our experience in recent years demonstrates. The fiscal rules developed by the previous Government failed, because their flawed design and remarkable flexibility meant that, despite the rules being met, this country still ended up with a financial crisis. A strong fiscal framework is necessary if we are to have strong public finances. We have shown leadership on that, for example in creating the Office for Budget Responsibility, a move that has been welcomed by the IMF and the European Commission. Our reforms meet the highest possible standards, and we support responsible fiscal rules at home and abroad. We have achieved that through the mandate the Chancellor set in his emergency Budget.

[Mark Reckless]

Will the Minister give way?

[Mr Hoban]

Although strong fiscal frameworks are vital, we also believe that fiscal sovereignty is crucial, and that is why the frameworks—the mandates, mechanisms and institutions—should be decided by national Governments and not by European legislation. That position is reflected in the taskforce report, and it is the position that we will adopt in discussions with the Commission.

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

Will the Minister give way?

[Mr Hoban]

We have protected the sovereignty of the House on fiscal matters, and our position on EU economic governance is clear. We need better macro-economic surveillance and fiscal frameworks, because stable and sustainable economic growth across Europe is in the long-term interest of this country. However, that should not be at the cost of our fiscal and economic sovereignty. The Van Rompuy taskforce updates and strengthens the existing framework. On surveillance, therefore, the taskforce recognises, with explicit references to protocol 15, that the UK’s opt-outs mean that we are not subject to the sanctions regime.

Fiscal frameworks should be stronger, but should not be dictated by Europe. It is the history of this House to defend fiercely our fiscal sovereignty. Through the agreement reached, the Government have achieved that. No sanctions will be imposed on Britain, and we will be free to set the right fiscal policies for our country’s needs.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Members are free to try to intervene whenever they wish, and Ministers can respond accordingly. I simply want it to be understood that the House can do as it wishes, but it should do so with its eyes open.

[Mark Reckless]

On a point of order, Mr Speaker. Did not the Minister agree to take an intervention, before the intervention from the Chair?

[Mr Speaker]

That is not a point of order at all. The hon. Gentleman should resume his seat and not dilate. Mr Christopher Leslie.

17:29

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

Thank you very much, Mr Speaker.

Lurking on the future business section of the Order Paper for some weeks has been a motion for the House to note the European Union taskforce report on European economic governance. Although that gestation period seems to have been overtaken by the events that have transpired following the European Council, it is a pity that an urgent question from the hon. Member for Stone (Mr Cash) was required before light began to be shed on any of the details being considered by the real power brokers in Europe. Our Prime Minister was clearly left on the sidelines in many of the discussions. If I were generous, I might say that that was fair enough, given that we are outside the eurozone. However, the European Council meeting at the end of October showed clearly that the Germans and the French are very much in the driving seat, leaving the Prime Minister with a few scraps to hold aloft as pseudo-trophies in the European Union budget discussions while clearly being unsure how to cope with the prospect of a new treaty being dropped in his lap.

[Mark Reckless]

As the Front Benches appear to be in agreement on this issue, may I ask the hon. Gentleman a question? Surely the point is that, as he said, France and Germany, which are in the eurozone, need something from us. We had a veto, yet we agreed to this notwithstanding the veto. The 2.9% had already been agreed by the Council. We had a veto on the Next Perspective. What do we get in return?

[Chris Leslie]

I shall deal with the nature of the changes in a moment—and there are changes. It would be a bit disingenuous to suggest that nothing is changing in this regard.

From our point of view, eurozone stability and a sensible crisis mechanism are worth while, and it is clearly in our national interest to engage strongly in discussions and reforms that promote economic stability across Europe. We will support sensible changes that benefit the United Kingdom. The core idea of improving the rescue mechanisms for eurozone countries facing severe economic difficulties makes logical sense, and it is also wise to find a permanent footing on which to base any new rules rather than relying on temporary arrangements that might either expire or be subject to legal challenge. However, the Prime Minister and the Government are protesting just a little too much that this is entirely a matter for the eurozone, and absolutely nothing to do with us. In fact, there are indirect implications for our economy because of changes that might affect economic growth in the eurozone, as well as direct policy implications that could change the way in which we operate in the United Kingdom.

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

My hon. Friend will recall that the previous Prime Minister and his Government drew up five economic tests. Had it not been for him, we would not be debating the motion today, because we would be part of the eurozone.

[Chris Leslie]

It was certainly worth punctuating the debate with that point, which my hon. Friend made forcefully and well.

[Mr Leigh]

Will the hon. Gentleman now kindly respond to the intervention from my hon. Friend the Member for Rochester and Strood (Mark Reckless)? Is the Labour party prepared ever to fight for a repatriation of powers, and would it be prepared to use the veto that it has used for the purposes of this measure as a bargaining chip to gain that repatriation of powers?

[Chris Leslie]

Our perspective is clearly different from that of the hon. Gentleman. I want to consider what is on the table. There are details still to come when the European Council meets in December, and we shall have to look at those proposals then. It seems to me that there is a case to be made for some sort of objective analysis of just what transfers of policy may or may not be involved in the proposals that are before us today.

[Philip Davies]

Does the hon. Gentleman think it makes sense for an organisation whose accounts have not been signed off by auditors for 16 consecutive years to be given more powers over economic and financial governance?

[Chris Leslie]

The hon. Gentleman has made his point in his own inimitable way, but I do not want to be diverted from the substance of what is before us. There is a substantial proposition on the table, and I think it is important for all Members to understand it. The detail that will eventually emerge from the final taskforce report is important, and it would be useful if the Minister could deal with some of the question marks that hang over some of the detail, to which Members have already alluded.

For example, a series of new fiscal disciplines—as they are called—will be pursued across the European Union but, of course, largely for eurozone countries; yet the adoption of enforcement measures will apparently be subject to the negative qualified majority voting procedure. That presumably means that the United Kingdom will take part in any of those decisions. If that is so, can the Minister say how we will inform our policy position if we are involved in votes on enforcement measures? While we may not have a vetoing power here, our role could be strategically significant.

[Kelvin Hopkins (Luton North) (Lab)]

My hon. Friend is using terms like “largely” and “presumably”. These are not definite enough for me. Please will he be firmer and clearer in what he is saying?

[Chris Leslie]

I wish I could be firmer and clearer, but we are dealing with a malleable set of proposals. The bundle of directives keeps changing, moving and morphing from phase to phase, and the directives will clearly go into a different phase when the European Council meets in December, but we can discern the rough direction of travel, and many Members will take a firm view on that.

The Minister talked about the sanctions. Yes, it is the case that they may not apply to the UK because of our opt-out from the euro, but the range of non-binding standards and early warning requirements in the event of significant deviation from the adjustment path apparently would apply to the UK; I should be grateful if the Minister would confirm that that is the case. Even if the UK is to be subject only to such commentaries, public observations or other non-binding standards, the Minister should tell the House how they would work and what the implications for us would be. Clearly, what the taskforce report calls the new reputational and political measures will be phased in progressively, but is it correct to read the proposals as also applying to the UK? In other words, is it not true that we will be subject to reporting requirements, potential formal reporting to the European Council in certain circumstances and enhanced surveillance—whatever “enhanced” may mean—if the situation dictates? Is it not also true that we will be subject to onsite monitoring from a mission of the EC—which I thought was curious, and which certainly might be of interest to some Conservative Members—and possible publication in the public domain of these reports and surveillance? Will the proposed regulations to strengthen the audit powers of Eurostat also apply to the UK, and what are the anticipated compliance costs of those changes for the UK and the Treasury? If we fail to comply with the proposed requirements, is it not the case that sanctions could be applied to the UK?

[Mr Redwood]

If this House and a properly elected British Government have chosen a certain course of action on the deficit or the balance of payments—or on whatever—how does it help to have the EU marking the homework, condemning it and using moral suasion to say that this House is wrong?

[Chris Leslie]

Well, my point is that it may or may not be a sensible move—as a pro-European I think benefit could come from it—but what is important is that we get clarity from the Government about what exactly is on the table. If there are to be treaty changes and other new regulations, the Minister has to be straight about that with the country and the House. The latest sanctions in the framework—in terms of interest bearing deposits, non-interest bearing deposits and eventual fines—may not apply to the UK, but there is a first phase to that process which is the application of standards and assessments of our economic and fiscal position, and that will apply to the UK. The motion seeks approval for the Government’s position that any sanctions should not apply to the UK because of our euro opt-out, but there are developments here that strengthen the role of the EU in respect of our economic policy, and while that may be a good thing, some Members of this House would be wary of it.

There are also wider implications for our economy and our growth trajectory. For example, I am particularly intrigued by the German argument that bondholders should have greater liability—such as in the form of interest payment holidays, or bond value haircuts, as they are known—for potential future eurozone bail-outs. The implications for UK banks and bondholders could be significant if they are embroiled to a larger extent in the crisis management mechanism. UK banks hold particularly high proportions of Irish and Spanish liabilities. A recent Bank for International Settlements report found that 22% of Irish bonds and 11% of Spanish bonds are in UK hands. There has been much discussion of whether City investors are therefore subject to higher risk, or whether the markets have already priced that in. Either way, there are indirect implications for British investors. Moreover, the new suite of policy changes affecting eurozone economic governance will not just be on paper; the changes will bite in the real economies in each of the eurozone countries and could have a bearing on their own internal growth and investment plans.

[Mark Hendrick]

My hon. Friend hits the nail on the head. While the UK may not be signed up to the stability and growth pact and we may not be subject to EU deficit procedures, stability and growth in the eurozone are very important to the British economy. Moreover, the way in which the Government are dealing with our deficit will put British growth at risk, and that is part and parcel of how we interact with the other economies in Europe.

[Chris Leslie]

My hon. Friend makes a strong point. If fiscal policies across the eurozone are simultaneously shifted towards a marginally more deflationary stance as a result of the new policy framework that we are debating tonight, the resulting contraction in economic activity and consumer spending could impact on the sale of British goods and services in those countries. In other words, the eurozone—which, as we know, is by far the UK’s largest trading partner, accounting for more than 50% of our exports—could face economic challenges and, in turn, it is likely that UK companies will face problems exporting to those markets. Add to that the G20 discussions on international currency issues and an influx of capital to the eurozone following worries over the dollar and the Chinese renminbi and we can imagine a relative appreciation of the euro afflicting our exporters still further. We will have to see how that latter issue pans out in particular, but this is of significance to the UK.

[Mr Jenkin]

Is the hon. Gentleman arguing that somehow these arrangements will give us more influence and more control over the economies of other member states? On that basis, should we therefore not be seeking to enter into arrangements of the same sort with, say, the United States, so that we can control its deficit? The US deficit will have far more effect on our economy than any individual deficit in any individual member state of the EU.

[Chris Leslie]

Those of us in opposition are merely asking questions and scrutinising what is on the table, but we are trying to find out what will be the impact on the UK. Ministers are arguing, “Don’t worry, absolutely nothing changes and there is no impact whatever.” As far as I can see, there are strands and suggestions that there will be an impact, both direct and indirect. In that respect, although we might have different views, there might be a point on which we can agree.

If the eurozone deflation and the shrinkage of European economic markets affect our exports, that matters, because the Treasury has depended on them so greatly. The June Budget and the spending review were predicated on a return to strong economic growth here in the UK, based principally on higher business investment and strong export growth. The Office for Budget Responsibility analysis shows that the cuts imposed because of the Chancellor’s austerity programme and his overly speedy deficit reduction strategy will see private consumption shrink rapidly and Government consumption doing the same.

Cuts in domestic expenditure will hit growth—that much is clear—but the Chancellor has bet the shop on the countervailing growth in trade and business investment. The Treasury states clearly that it needs £100 billion of growth in exports and business investment, yet the last time we saw such a massive rate of growth for exports was in 1974 and we achieved that rate of improvement in business investment only in 2005, but the Chancellor’s sums depend on the UK achieving both those record levels in each of the next three years—a very tall order indeed, equivalent to tripling our exports to the US and seeing our exports to China grow 20 times or to India 40 times.

Clearly, our reliance on the eurozone’s appetite for our exports is central to the Chancellor’s strategy, so there are implications for British fiscal policy here.

[Kelvin Hopkins]

I thank my hon. Friend for giving way yet again. He focuses on trade, but it is in trade that we have our worst possible relationship with the rest of the EU. We have a gigantic trade deficit. We buy billions more from them every month than they do from us. The only advantage we have had in the last year or two is that we have depreciated the pound relative to the euro and we have started to see a slight improvement in our trade balance with the EU.

[Chris Leslie]

If we see growth dented here in the UK because those ripples flow from the eurozone—changes as a result, perhaps, of the measures we are debating—we could see further implications for spending cuts here in the UK in respect of vital public services and more austerity when perhaps stimulus would be the order of the day. However, there is a balance of risks here and it is clearly important for fiscal discipline to be exercised, but responsibly so. We have argued for a sensitive and measured approach to deficit reduction in this country, rather than the doctrinaire approach of steep and swift cuts favoured by the parties whose Members sit on the Government Benches.

I am glad to note the ironic analysis of the Minister in the explanatory memorandum that was referred to, which he signed last week. He said that he believed

“that the main consideration should be whether a Member State’s debt is on a downward trajectory, rather than the specific pace of annual debt reduction”.

He also said that the numerical pace should remain

“only as an indicative benchmark…that…is not used as a concrete rule by which Member States’ debt reduction plans are judged.”

How right he is—if only he applied such pragmatic sense to our economy and public services in the UK, too.

[Claire Perry (Devizes) (Con)]

I am enjoying the hon. Gentleman’s measured canter around the potential risks associated with this legislation and I am also entertained to hear the words “stability and growth” coming from Members on the Opposition Benches—something that perhaps they did not achieve towards the end of their time in office. However—perhaps I am front-running his conclusion—is he going to vote for or against the legislation tonight?

[Chris Leslie]

As I see it, it is difficult to know yet what propositions are before us. I want to hear the Minister’s answers to our questions and we will make up our minds then. The substance of the regulations and the eventual treaty changes might be beneficial, but we also have to wait and see what President Van Rompuy proposes in his eventual treaty amendment and what emerges from the December Council meeting. We are not at the end of a process; we are in it. There are further propositions to be put on the table.

[Mark Hendrick]

One regulation that might well be on the table is for any member state of the European Union, within or outside the eurozone, that has a debt level of greater than 60% of GDP to reduce that debt at a rate of at least 5% per annum. That could well be a regulation that the Government sign up to, even though they might not be subject to penalties if they do not keep to it.

[Chris Leslie]

Indeed. There could be significant direct policy changes as regards transfers of policy and also indirect economic impacts on the UK. We have to see more detail about what will emerge from those who are in the driving seat—unfortunately, that does not seem to be either our Chancellor or our Prime Minister.

[Matthew Hancock (West Suffolk) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

I want to make a bit of progress—but it is too tempting.

[Matthew Hancock]

I am extremely grateful. The Minister made a clear statement that this House, under this Government, will retain fiscal sovereignty. Would the hon. Gentleman?

[Chris Leslie]

We take the view, as we always have, that where it was in the British interest to co-operate with our European colleagues, we would do so. The hon. Gentleman’s continuing loyalty to the Chancellor is laudable—he has a record of that—but I am not sure that he has convinced the colleagues on his own side. The coalition remains precarious on Europe, straddling so many major divisions on how to proceed. It is little wonder that the Prime Minister is on the margins of these discussions in Europe when he is buffeted between the margins of his own Government. He is caught somewhere between the pro-European enthusiasms of the Deputy Prime Minister—at least, that used to be his position before the general election, and I am not quite sure what his position is now—and the anti-European Union noises from a sizeable chunk of his party. Will the Prime Minister persuade his colleagues that any treaty should not require a referendum? We shall have to wait and see. Although the Government might be concentrating on papering over the cracks in the coalition, the Opposition will monitor closely the impact of these changes on exports, growth, jobs and the prosperity of this country. Those are the issues that matter to our constituents and they are our priorities.

[Several hon. Members]

rose—

[Mr Speaker]

Order. We have fewer than 45 minutes and approximately 15 Members are seeking to catch my eye. Right hon. and hon. Members can do the arithmetic for themselves, but a certain economy will be required if many are to be satisfied.

17:48

[Mr William Cash (Stone) (Con)]

This debate and the Minister’s remarks remind me of what Alice said in “Through the Looking-Glass”, when she referred to Humpty Dumpty and his rather scornful tone:

“‘When I use a word,’ Humpty Dumpty said…‘it means just what I choose it to mean—neither more nor less.’

‘The question is,’ said Alice, ‘whether you CAN make words mean so many different things.’

‘The question is,’ said Humpty Dumpty, ‘which is to be master—that’s all.’”

That is the essence of the question of European economic governance. We have been told that it is good for us, that it does not affect us and that it does not make a difference. However much one gets into the interpretation of those words, the European Scrutiny Committee’s report makes it clear that there are significant differences, in aggregate, between different parts of the regulations and directives. If the proposal is accepted by the Government, they will effectively cross the Rubicon and similarly, by acquiescing in ever-greater European governance over our economy, they will significantly undermine our ability to govern ourselves. We need less Europe, not more.

The proposals extend to the United Kingdom, as a member of the European Union, thereby raising questions of sovereignty. Under the aegis of the forthcoming Bill on the European Union, my Committee will hold an inquiry so that we can sort out once and for all whether it is the House of Commons, Parliament and that sovereignty which governs the country, or whether it is the European Union. Under Standing Orders, the Committee’s duty is to report to the House, not to the Government, on matters that we regard as requiring debate by reason of their legal or political importance. The scrutiny reserve remains in place until the debate has taken place, and thereafter Ministers can, and no doubt will, vote and/or agree the proposals, but may continue negotiations.

I was glad that the Minister’s explanatory memorandum stated specifically, on several vital matters, that the Government would

“seek to ensure in negotiations”

that matters of concern would be improved. In doing so, the memorandum by definition conceded that these issues have not been resolved entirely, that negotiations could improve them, that they do make a difference to the United Kingdom, its Government and its Parliament and that they have to be remedied. As Chairman of the Committee, I have placed in the Library a note in my name on all these matters, so anyone who wishes to look at them may do so.

I was puzzled by the Prime Minister’s response to a question that I asked during his statement to the House on the outcome of the European Council meeting. He accepted that the matter was complex and required a greater opportunity for exchange of opinions and explanation, but he also said:

“This is not a new framework.”—[Official Report, 1 November 2010; Vol. 517, c. 614.]

I find that extremely puzzling, however one construes it, given the evidence before us and the specific reference to a new surveillance framework in the taskforce report and in the presidency conclusions that he signed off. The truth is that the Commission intends to exert peer pressure on all member states of the European Union. The taskforce report of 21 October preceded documents being placed in the Library, following an urgent question I asked, emblazoned with the word “limité”, which means very restricted circulation. They included a letter of 9 July from the Chancellor of the Exchequer to other member states. It might be thought that there was every reason to present those documents to the European Scrutiny Committee, even if they were not specifically depositable. The Committee does not operate by website.

A substantial question on whether the UK is affected has been dealt with in a note that I received from the Library, from which I shall quote, on increased macroeconomic surveillance. It says:

“It is proposed that a greater role is played by the Commission in macroeconomic surveillance. This surveillance mechanism would be distinct from that currently taking place under the SGP”—

the stability and growth pact—

“because it is non-fiscal in nature; it will focus on countries’ broader macroeconomic positions in relation to the rest of the EU.”

The note goes on:

“The idea of deeper macroeconomic surveillance was put forward in March this year as part of the…Europe 2020 proposals”,

which were, of course, under the previous Government. The note continues:

“As originally envisaged, the deeper surveillance framework would apply only to the euro area countries; however, the Commission proposals of 30^th June”—

after the general election—

“and the Task Force Report of 21^st October”

both apply to “all Member States”. That is a matter of considerable concern. Why have the coalition Government agreed to extend the framework to all the member states, whereas the previous Government appear to have confined it exclusively to the euro area? As my hon. Friend the Member for Hertsmere (Mr Clappison) said, the taskforce recommends deeper macroeconomic surveillance, with the introduction of a new mechanism underpinned by a new legal framework based on article 121. The Minister’s explanatory memorandum specifically refers to the legal impact and therefore the jurisdiction of these matters, as I have already mentioned, which clearly shows that there is a legal impact on the UK. Therefore, by definition, the proposed mechanism affects the UK and hands over jurisdiction in these matters to the European Court of Justice for interpretation and construction.

Furthermore, it is possible, and even likely, that the stricter reporting requirements will apply to the United Kingdom under the macroeconomic surveillance proposals, particularly if the UK were placed in an excessive imbalance position. We have always conceded, right from the beginning, way back to the time of the Maastricht rebellion, that there would be no sanctions because of the opt-out that we achieved. The fact that the Government continuously state that it is a victory not to have had sanctions imposed is merely a statement of the obvious. I go further. I would be grateful if someone could tell me which member states have ever paid any fines or had any sanctions imposed upon them under any of these arrangements. The answer is none, and there are those who argue that there never will be.

We are in a difficult situation with regard to how we will vote on the motion. Serious questions arise, and I was concerned when I read the letter and the appended document from the Chancellor of the Exchequer, which I had to extract by way of an urgent question, for which I was most grateful, Mr Speaker. In that, there is a description of economic governance, the words of which would not be easily understood. It states:

“Democratic legitimacy is vital to everything that the EU does, and Ministers need to be accountable both to other Member States and to their electorate.”

I find that a new and strange doctrine, and a rather dangerous one. I had no idea that Ministers were accountable to other EU member states. It is conceded, and I agree, that the United Kingdom Budget will be presented first to the UK Parliament, but the essence of the problem is that in the compilation and the construction of the Budget, a series of data and statistical information would have to be provided. That in itself creates the framework that constricts our ability within our parliamentary process to act on our own terms and in line with the principles that underpin our parliamentary Government—that matters of taxation and spending and the formulation of them depend upon the House of Commons, not upon the European Union.

Given the significance that has been attached to these ideas, they represent a drift and an acceptance of European economic government through the surveillance framework by increasing the powers available to the Commission. This does not in any way alter the degree of intrusion into the construction of our Budget before it is presented to Parliament. One of the most difficult aspects is that far from our having a need for much less European economic governance, we are having more. As we move further forward and become more absorbed into this arrangement, we have to ask what is actually happening in the EU itself. As one of the other national European scrutiny committee chairmen said to Mr Van Rompuy when I was in Brussels the other day, “Will the European Union go bankrupt if we refuse to obey your rules?” Other member states are beginning to get the message, which is why I think Mr Van Rompuy issued that assault on Euroscepticism throughout Europe. He is getting the message that people in national Parliaments are not prepared to accept, for example, the fact that their economies have failed because of the EU’s refusal to deregulate and repatriate. I mention in brief the Deputy Prime Minister’s remarks on that subject, because he clearly stated that there would be no repatriation, despite what my right hon. Friend the Prime Minister asserted in his speech to the Centre for Policy Studies in 2005.

We need to generate enterprise for small and medium-sized businesses. There is the failure of the Lisbon agenda, massive unemployment, of more than 20% in some countries, riots, protests and a sense of failure, despair and democratic hopelessness. This is reflected—

[Mr Speaker]

Order. The hon. Gentleman is straying very considerably wide of the matters under discussion. I know that he is a sensitive fellow and will be aware of the significant number of other Members who wish to contribute, so I feel sure that, in bringing his remarks to a fairly early close, he will focus on the matters that are before us, rather than those that are not.

[Mr Cash]

I entirely accept that and will bring my remarks immediately to a conclusion.

Rules and regulations will not turn the European Union into a thriving economy with which we trade. It is said that 50% of our trade is with the European Union, and that the proposals before us are necessary to achieve stability in the European Union. The crucial point is that, underneath all those rules and regulations and the determination to achieve European economic governance, we are going the wrong way, not the right way. The measures do affect us. We need more enterprise, more small businesses, more deregulation and repatriation. I am not surprised, therefore that in a recent opinion poll 80% of people said that they wanted the repatriation of powers from the European Union.

We are being more and more absorbed by a failed European Union. Under this coalition, roadblocks are being put up to prevent us from sorting that out, and the new surveillance framework is part of the problem, not the solution. I shall vote against the motion.

18:02

[Austin Mitchell (Great Grimsby) (Lab)]

I shall join the hon. and long-winded Member for Stone (Mr Cash) in the Lobby tonight, because, whatever our Front Benchers say, there is enough lead in my pencil to realise that the proposals should be opposed, and that the Government’s long-winded motion is unacceptable. The measures will impose additional obligations on the United Kingdom, but I shall not go into them, because my hon. Friend the Member for Nottingham East (Chris Leslie) made the main point. It is a question not so much of the obligations, but of the economic effects of the measures on European markets.

Even if, as the Minister said, the measures are enforced only on eurozone states, they will still have an economic effect on us, because when discipline is tightened in the eurozone, there is eurozone deflation. That is already in progress. It was built into the exchange rate mechanism, and it is now built into the euro, because Germany has abnormally low inflation. Germany has a marvellous co-operative arrangement with the unions and with industry. It has heavy investment, powerful producers and abnormally low inflation, but because all the other eurozone states, which have customarily had higher inflation, wage inflation and costs, are involved in the same currency, they are forced to deflate to German levels. In other words, the euro is a deflationary mechanism that forces other nations down to the abnormally low rate of inflation in Germany, and that has consequences. They are all increasing unemployment, cutting public spending and deflating their economies, and therefore the demand for Germany’s powerful exports falls.

Our exports are also affected. We now need a period of export-led growth, having not had that and having built up an enormous deficit in the European Economic Community. The 25% devaluation that we have experienced because of the previous Prime Minister’s wisdom in keeping us out of the euro allows us to take the adjustments on the exchanges, which Greece and the other countries cannot do, but we are not getting the benefit of that because of the deflation in European markets. Deflation has been forced on Greece, Portugal, Italy, Spain and Ireland, which are all very seriously deflated. Demand in Europe is therefore cut, and it will be cut further if these measures are introduced. We need export-led growth and we are not getting it. That is my main argument; I will be very brief.

I am frightened that the Minister’s approach, and the approach involved in the motion, means that on another issue we will fudge, not fight. Fudge is built into this Government because it is a coalition between the Liberal Democrats, who are Euro-daft, and my friends and allies the serried ranks on the Conservative Benches, whom I hope to join in the Lobby. There is a built-in tendency to fudge that we have already seen in the approach to the European budget, where without opposing, fighting or contesting it, we have agreed a 2.9% increase which will mean an increase of £440 million in our contribution to £7 billion next year. This country can ill afford that when we are cutting public services. I want to avoid the tendency to fudge that is built into this Government and to encourage them, by our votes tonight, instead to fight on these issues.

18:06

[Mr James Clappison (Hertsmere) (Con)]

Let me begin by congratulating my hon. Friend the Minister on his very full opening speech. I want to say a few words about one or two things that perhaps did not creep into his remarks.

I should like to pay a compliment to the President of the European Union; I suppose that he does not often get that in this place. The words in his report are very clear about what he was trying to do—to put in place a new mechanism. That is what he was charged with doing by the European Council, and that is indeed what he did. It will be no surprise that the President of the European Union should seek to discharge that duty by putting in place a whole raft of new measures giving new powers and responsibilities to the European Commission.

The Minister helpfully set out those new powers in the Government’s explanatory memorandum. That makes it clear that the European Commission, whether we say that it has new responsibilities, new roles or new powers, is going to be very busy giving a good going over to this country’s economic performance, reaching public judgments that could well have an effect on our economic reputation. It sets a scoreboard for how well the country is doing, and judges the country by that scoreboard. It carries out reviews and investigations and sends delegations, and if the country in question is not responding appropriately, the Commission has the power to recommend to the Council that that country be placed in the excessive imbalances procedure—something that I think the Minister did not have quite enough time to mention.

Whether one regards that as a sanction depends on an interesting choice of language. In my previous career as a member of the Bar, I never thought to console a prisoner who had just been sentenced to immediate custody by saying to him, “Well, at least you didn’t get a fine.” The excessive imbalances procedure could well be borne in mind by those who frame economic policy and wish to avoid such a consequence. Other Members will have far more experience of financial services and the markets than me, but I do not think that anybody in the markets would be dancing with glee at the news that the country was just about to be placed under such a procedure. This is all down to the very wide range of new responsibilities of the European Commission, which is being allocated a much more intrusive role by this document.

The alternative argument is that it is a good thing that this is happening; we heard shades of that from the Labour Front Bench. However, how much confidence can we place in the economic management and judgment of the European Commission, considering matters starting with its rather cavalier treatment of recommendations for the European budget in the current economic circumstances, and going all the way back to the fudged criteria for European economic and monetary union?

Even if one does have great confidence in the European Commission, there are bigger questions that should loom in all our minds. To whom is it accountable? Can we ask it questions? Can we hold it to account in this House, and whom does hold it to account? What can the man in the street, the voter, do if he is not happy with the economic criteria that it has fashioned for this country?

Ministers should be very careful indeed about the responsibilities that are allocated to the European Commission. I know that there is a choice of language and a judgment to be made, but after looking through the long list of new responsibilities that have been given to the Commission, I think we should be very careful. We have heard talk of surveillance and informal discussions, but Ministers should remember that not all that long ago, justice and home affairs, and the common foreign and security policy, were said to be matters on which Ministers would simply carry out informal discussions between themselves. It was said that they would never come within the purview of European institutions. Today, of course, justice and home affairs are very much within the grasp of European law makers and the European Union, and we now have a European Foreign Minister and a European diplomatic service. Not that long ago, those things were the subject of informal discussions.

We should be very careful indeed before setting foot down this path. We should consider the matter carefully this evening and face up to the enormity of the responsibilities that we are placing upon the European Commission.

18:11

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

First, I wish to put on record what we are supposed to be debating, because Members have wandered all over the place. We are debating a series of six documents sent to the Government by the European Scrutiny Committee, on which the Government have now taken a position. Four are about the stability and growth pact—our Committee reference numbers for them are 32036, 32043, 32044 and 32047. The other two relate to the excessive imbalances procedure—documents 32045 and 32046.

In the main, those documents make no difference whatever to procedures that the UK has to carry out. However, a lot of heat has been made about the fact that they affect other countries, and that if the conspiracy theory of the hon. Member for Hertsmere (Mr Clappison) is borne out, they may affect our Government, who will have to give up their fiscal veto. The same was said in the exchanges on the recent urgent question asked by the hon. Member for Stone (Mr Cash). However, we are quite clearly protected in the Lisbon treaty and do not have to go down that road.

The documents will not have any effect on us, because we are not a member of the eurozone. They can be read in detail, and Members will find that the coercive measures set out in them do not relate to anyone outside the eurozone. The Government’s position is therefore to note the documents.

On 27 October, the Government made their position clear in response to the hon. Gentleman’s urgent question. The Financial Secretary quoted the report of the taskforce on strengthening economic governance in the EU, which has been referred to today as though it were a conspiracy document. It states 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”.

That is quite clear. The hon. Gentleman reiterated that

“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.”—[Official Report, 27 October 2010; Vol. 517, c. 319.]

It is important that we are clear about what we are trying to do.

We should be sensible in our debates, and I say to Members to whom the EU is anathema, or who are Eurosceptic to a great degree, that they should not diminish what they have to say about important matters relating to the Government’s position on the EU by arguing that somehow we are selling out if we do what is asked in document 32047, which is about the surveillance mechanism in the reporting regime. If we do not know what 26 of the 27 countries are doing in their budgets, we must agree on a proposal for everyone to put in information, so that both we and the Commission know what other Governments are doing. If we had done that we would have known how badly Greece’s economy was faring when it was suddenly found not to be putting accurate figures in to the European Commission.

[Mr Jenkin]

Just for the convenience of the House, will the hon. Gentleman explain why the numbers of the documents that he has read out do not correspond with the numbers in the Government’s motion, because those are the documents that we are scrutinising?

[Michael Connarty]

The Government use the nomenclature of the EC reference and I am giving the Committee reference. When people want to find things, it is much easier to look at what the European Scrutiny Committee does under its numbers than to try to find it in EU documentation. They are, in fact, the same documents.

There is a very good advert on television—“Calm down, dear, it’s only an advert.” To people who try to say that this motion is a major sell-out by the Government, I say, “Calm down, dear, it’s only an information exchange.” Frankly, if there is a vote tonight, I will be voting with the Government. I will not be voting for any of the absurd amendments that have been tabled. The Government are doing the right thing. I am not out to score points on behalf of my party against another party. Our relationship with the other 27 countries with which we do most of our trade is far too serious for that. We must not kid people. The hon. Member for Hertsmere, with whom I sit in the European Scrutiny Committee, did not complete his quote from paragraph 34, page 8 of the taskforce report, which said:

“taking into account the specificity of the euro area.”

Paragraph 35 talks about the Commission conducting in-depth analysis and surveillance missions

“in liaison with the ECB for euro area…states.”

It is quite clear that these documents are about the eurozone. I know that there are problems in the eurozone, but when signing up to the euro one takes on such responsibilities.

[Mr Clappison]

rose—

[Michael Connarty]

Given that we are trying to let people speak, I will not give way.

Let us be sensible. To give and exchange information is sensible, as is surveillance. Without any wish to criticise anyone in this or the previous Government, I say that when comments were being made about our imbalances, perhaps our Government should have listened, and then we would not be living in such straitened times.

18:17

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

The question that this House must face is this: do these measures and the possible treaty change that they presage constitute a threat to the sovereignty of this country or an opportunity for us to regain a little sovereignty? If the measures envisage a substantive transfer of sovereignty, restricting our fiscal and economic freedom, then the issue is clear: we should veto them or seek a full exemption from them. If the Government were to contemplate accepting them without a full exemption, there would have to be a referendum. Indeed, the very prospect of a referendum would be enough to gain us full exemption. My hon. Friends have concerns, which I fully understand and respect, that although limited to giving information and possibly signing up to targets that we could not be compelled to meet, these measures may be the thin end of a Trojan horse—if I may mix my metaphors.

We have seen in the past how wording that has been glossed over has led to the transfer of powers. So far, I am not persuaded that the measures and what is envisaged in the treaty changes would result in a substantial transfer of sovereignty. However, I shall listen closely, and advise others to inspect thoroughly and scrutinise deeply. If at the end of the day we are signing up just to the sort of surveillance that we already receive from the IMF, that would not worry me too much. Indeed, then I would say to myself, “This is an opportunity.” If the measures solely concern the members of the eurozone, but none the less require our assent before they can go ahead, we should say to them, “We will let you do to yourselves what you want. We will give you the necessary approval, if in return you let us do some things that we want to do, which won’t concern you, by repatriating some powers.”

We on the Conservative Benches were elected on a manifesto that said:

“We will work to bring back key powers over legal rights, criminal justice and social and employment legislation to the UK.”

We have a target, and this is an opportunity, so we should seize it. However, we are, of course, a coalition Government, so we should seek modest returns of powers that are compatible with the objectives of the whole coalition. Liberal Members in the west country expressed their hope for a return of powers over fisheries; indeed, they stood at the election on it. Fisheries are not a big issue in my inland constituency, but I would be prepared to work with those Members for a return of powers.

However, the coalition agreement is quite specific. It says not only that we will

“ensure that there is no further transfer of sovereignty or powers over the course of the next Parliament,”

but that we will

“examine the balance of the EU’s existing competences and will, in particular, work to limit the application of the Working Time Directive in the United Kingdom.”

I therefore have a simple question for the Minister, which I hope he will answer in the affirmative in his winding-up speech. Will we be using this opportunity both to meet the objectives laid out clearly in the coalition agreement and, in return for our consent to such measures, to seek to limit the application of the working time directive to the United Kingdom?

18:22

[Kelvin Hopkins (Luton North) (Lab)]

I shall speak briefly, but it is important for the House to know that there are also Members on the Opposition Benches who will be voting against the Government motion, and on similar grounds to do with the implicit transfer of sovereignty in the Commission’s initiative. I congratulate the Chair of the European Scrutiny Committee, the hon. Member for Stone (Mr Cash), on ensuring that the House is fully aware of the concern about such matters and on the fact that we are having this debate, as it is largely down to him.

There is serious confusion about the wording of the documents. The terms “all member states”, “eurozone states” and “non-eurozone states except the UK” are used at different points throughout. It would be simpler if only the term “eurozone states” was used throughout, so that we could be absolutely clear that the provisions apply only to the eurozone states. In the first draft regulation—on the preventive arm of the stability and growth pact, as it is called—reference is made to all member states. In the second draft regulation—on what is known as the excessive deficit procedure—reference is made to all member states, but a little later it refers in two places to the eurozone. The third draft regulation talks about eurozone states. The two further regulations, on macro-economic imbalances, refer to member states—not “all member states”—or, alternatively, to eurozone member states, but right at the end there is a reference to non-eurozone member states except the UK. I want to be clear that the provisions apply to the eurozone, not to the United Kingdom, so that we can know precisely where we stand on sovereignty over our own economy.

[Stephen Williams (Bristol West) (LD)]

I, too, had to read the documents several times before I began to understand what was being proposed, but is not the simple distinction that the information-sharing provisions apply to all EU member states, whereas the sanctions under the stability and growth pact apply only to eurozone members?

[Kelvin Hopkins]

The Minister himself said that any information about the economy that was needed could be found by Googling it, and there is also the Library note on economic indicators, which I use regularly. All the information is there—for example, in the Budget statements and so on—and we do not need to provide much more than that. There is masses of public information. We do not need to have it in regulations. It can be provided as a matter of course. We must put down a marker for the European Union saying that we will not go this far, and that we do not want changes that show political creep or gradual encroachment of the European Union into British sovereignty over our own economy, going beyond the treaties.

I agree with my hon. Friend the Member for Great Grimsby (Austin Mitchell) about the nonsense of the eurozone and the economic arrangements that it entails. There is a reference to “surveillance of macroeconomic imbalances”, but the trade imbalance that I focused on earlier in the debate is serious. We have a massive trade deficit with the rest of the European Union, particularly Germany, which sustains a massive trade surplus. Will the European Union focus on that imbalance?

In 1944, Keynes said that countries running massive trade surpluses should be required to appreciate their currencies to bring them into line. Will that be suggested to Germany? That cannot happen because Germany is in the eurozone, and all those other countries that cannot compete and cannot inflate at a greater rate are having severe difficulties, which are becoming worse year by year. Will that imbalance be addressed? When it is, I will start to take the European Union a little more seriously on economic matters.

I have probably said enough. I intend to vote against the motion, and I hope that the Government will challenge the European Union to make the wording of its documentation right and acceptable to the United Kingdom.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I intend to call the Minister to wind up the debate no later than 6.31 pm, and I am sure that that will be borne in mind.

18:26

[Mr Douglas Carswell (Clacton) (Con)]

I shall be brief, and I shall vote against the motion. The House is being asked to endorse an agreement that would strengthen European Union economic governance. It is not in dispute that the new measures would give EU institutions, the Commission and the Council greater powers. What is in dispute is, first, the extent to which such changes would involve the United Kingdom, and whether the new arrangements would apply only to the 16 members of the eurozone, or to all 27 member states, including Britain.

The second point of contention is the extent to which Britain is now subject to EU oversight when we set our own Budget. Having gone to Brussels promising not to give away so much of our money, Ministers seem to have returned having given Brussels the right to have a say in how we spend the rest of our Budget.

No one was more heartened than I to hear the Prime Minister tell the House back in June that any new deal with the EU

“should not interfere with national competencies”.

He also said:

“On budget surveillance, let me be clear: the UK Budget will be shown to this House first and not to the Commission…co-ordination and consultation, yes; clearance, no, never.”—[Official Report, 21 June 2010; Vol. 512, c. 35.]

Such assurances were welcome, yet within a couple of weeks we heard Olli Rehn, the Economic and Monetary Policy Commissioner, spell out the details. He said:

“All member states would submit their fiscal programmes at the same time in April to allow the Council to issue country specific policy guidelines”.

Is it any wonder that when the Chancellor appeared before the Treasury Select Committee he was able to reveal the date of the next Budget? It is now part of a timetable set in Brussels.

Ministers have claimed that the level of disclosure is nothing new, and that it is no more than what a think-tank might find out about UK fiscal policy via Google. Indeed, but think-tanks do not have the power to issue guidelines, and they cannot pass legislation on the basis of the analysis that they then make.

Ministers are keen to tell us that as a result of the new arrangements Britain would not at this time be subject to sanctions. To the best of my knowledge, no one is suggesting otherwise. The issue at stake is not whether the new EU regulations apply sanctions to the UK, but whether, from now on, the EU has the right to make laws on UK fiscal policy in the first place.

At his press conference on 17 June, the Prime Minister assured us that because we are outside the eurozone our opt-outs would be safeguarded. He talked of Van Rompuy’s efforts to “strengthen Eurozone governance arrangements”. He referred to the eurozone, not the EU. Since then, the talk has been not of eurozone economic governance arrangements, but of EU governance arrangements. Within a couple of weeks of the Prime Minister’s assurances, talk shifted from measures that would affect just the 16 eurozone members to measures that would apply to all 27 member states, including Britain.

Angela Merkel made it clear that economic governance should apply to all EU states, not just the eurozone. Barroso declared with reference to economic governance:

“Europe must show it is more than 27 different national solutions”.

He said 27, not 16. It is clear that his intention is that the new arrangements apply to the UK. Van Rompuy went out of his way to warn against creating what he called “dividing lines” between 27 member states and 16 eurozone countries. What were clear assurances to be welcomed and embraced in early summer had, by the onset of autumn, become dividing lines to be done away with.

Paragraph 34 of the Van Rompuy report states that there will be a new legal framework

“applying to all EU Member States”.

Can the Minister explain what part of “all” excludes Britain? Regardless of paragraphs 35 and 39, or reference to protocol 15 of any treaty, such wording creates ambivalence at the very least. It suggests that EU institutions will now be able to legislate in areas of UK national competence in which they could not previously legislate. Has the precedent now been set? Is the field occupied? Is not the stage set for the day when some other Minister returns from Brussels to explain to the House how we have been sadly outvoted?

So who is right? Ministers who assure us, or Eurocrats who do not? How can we explain the differences between Ministers’ assurances and what lies in the small print of what is before the House today? At best, this can be explained by sloppy drafting by officials, but if that is the case, why are we employing sloppy drafters to negotiate matters of such fundamental importance? Are those officials the ones on whom we will depend to turn the contents of the Van Rompuy report into the treaty changes? I cannot support the motion, as it will mean a further transfer of powers from this country to Brussels. I urge colleagues to oppose it.

18:30

[Mr Hoban]

I have listened carefully to hon. Members’ concerns tonight, and I want to state yet again that the proposals from the Van Rompuy taskforce strengthen an existing framework, crucially without encroaching on fiscal and economic sovereignty. There is much more work to be done on this, but let me assure my right hon. and hon. Friends that the Government are committed to securing the best outcome from the proposals, to defending Britain’s interests and to protecting this Parliament’s right to set and scrutinise our fiscal policy. Anything less would not be acceptable.

I shall deal with some of the issues that have been raised in the debate. Does the fact that the EU, along with other organisations, undertakes surveillance mean that we will be subject to sanctions? No, it does not. Does the measure mean that we will need to follow any of the recommendations made? No. Will we have to present our Budget to Europe before we present it to this House? No. Will we have to give the EU information that has not been presented to this House first? No. Will the provision of information erode our sovereignty? No. Perhaps more importantly, will any powers over our Budget be transferred from Westminster to Brussels? Again, no. I hope that I have been clear and explicit on those points, and it is for those reasons that I ask Members to support the motion tonight.

Question put.

18:32

Division 115

Ayes: 296

---

Conservative: 243
Liberal Democrat: 48
Labour: 2
Social Democratic & Labour Party: 1
Alliance: 1
Green Party: 1

Noes: 40

---

Conservative: 23
Labour: 12
Democratic Unionist Party: 5

Resolved,

That this House takes note of European Union Documents (a) 9433/10, Commission Communication on reinforcing economic policy co-ordination, (b) 11807/10, Commission Communication on enhancing economic policy co-ordination for stability, growth and jobs – tools for stronger EU economic governance, (c) 14496/10, Proposal for a Council Regulation (EU) amending Regulation (EC) No. 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure, (d) 14497/10, Proposal for a Council Directive on requirements for budgetary frameworks of the Member States, (e) 14498/10, Proposal for a Regulation of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area, (f) 14512/10, Proposal for a Regulation of the European Parliament and of the Council on enforcement measures to correct excessive macroeconomic imbalances in the euro area, (g) 14515/10, Proposal for a Regulation of the European Parliament and of the Council on the prevention and correction of macroeconomic imbalances, and (h) 14520/10, Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No. 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and co-ordination of economic policies; notes the Report from the Task Force on Economic Governance in the European Union; notes with approval that budgetary and fiscal information will continue to be presented to Parliament before being given to EU institutions; and approves the Government’s position, as endorsed by the Task Force that any sanctions proposed should not apply to the United Kingdom in consideration of Protocol 15 of the Treaty on the Functioning of the EU.

Business without Debate

Wednesday 10th November 2010 Commons Chamber

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Freedom of Information

That, at this day’s sitting, Standing Order No. 41A (Deferred divisions) shall not apply to the Motion in the name of Mark Hoban relating to European Union Economic Governance. —(Mr Dunne.)

Question agreed to.

House of Commons Members’ Fund (Discretionary Payments)

Motion made, and Question put forthwith (Order, 2 November, and Standing Order No. 118(6)),

That, pursuant to section 4(4) of the House of Commons Members’ Fund Act 1948 and section 1(4) of the House of Commons Members’ Fund Act 1957, in the year commencing 1 October 2010 there be appropriated for the purposes of section 4 of the House of Commons Members’ Fund Act 1948:

(1) The whole of the sums deducted or set aside in that year under section 1(3) of the House of Commons Members’ Fund Act 1939 from the salaries of Members of the House of Commons; and

(2) The whole of the Treasury contribution to the Fund in that year. —(Mr Dunne.)

Question agreed to.

Factory Farming

Wednesday 10th November 2010 Commons Chamber

18:48

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

The petition states:

The Petition of residents of the Coventry South constituency,

Declares that the Petitioners believe that animals in British factory farms are pumped full of protein to speed up their growth; notes that soy is a major source of protein; further notes that, in order to produce enough protein, precious habitats like rainforests are cleared in South America to make way for vast soy plantations; and further declares that this increases climate changing gases in the atmosphere, damages the Earth's free life-support systems, which provide us with clean water, healthy soil and air to breathe, forces small farmers off their land, making them unable to grow food for their families, and fails UK farmers, leaving them vulnerable to fluctuating commodity prices.

The Petitioners therefore request that the House of Commons urges the Government to take steps to shift subsidies away from factory farming, to support farmers to grow their own animal feed and to ensure supermarkets offer fair deals to everyone.

And the Petitioners remain, etc.

[P000866]

BBC Funding (CSR)

Wednesday 10th November 2010 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Dunne.)

18:49

[Ian Murray (Edinburgh South) (Lab)]

Mr Deputy Speaker, all day long colleagues have been tempting me to say, “Nice to see you, to see you—”

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

Nice!

[Ian Murray]

I thank the hon. Lady for that sedentary intervention.

Ever since the BBC’s inception in 1922, it has played a major role in this country. The public not only admire the BBC; they trust the corporation to deliver real value and quality while they watch and listen to its channels or, more recently, surf its online content. Indeed, the quality of the BBC output could only be improved by you, Mr Deputy Speaker, appearing as the guest presenter on “Have I Got News For You” or by light-footed former Conservative Members appearing on “Strictly Come Dancing.”

We must, however, protect what the BBC provides and how it is paid for. The licence fee enables our national public-sector broadcaster to provide 10 TV channels, 10 UK-wide network radio stations, 46 national and local radio services, regional options, interactive services on BBC iPlayer, and high definition television, as well as the ever-popular BBC websites which attract 22 million unique users in the UK every week. On top of all that output, the BBC is the engine room of the country’s hugely important creative industries.

Let us consider the value of the licence fee. It costs about 40p per day, which is less than half the cost of many daily newspapers and about the same as the price of a pint of milk or a first-class stamp. It costs less than the price of half a loaf of bread, 20 times less than the average cinema ticket, and a 25th of the cost of joining the Liberal Democrats. The licence fee also enables the BBC to invest in the UK as a whole, with a commitment to 50% of network production coming from outside London by 2016 as well as a commitment to the BBC regions in Scotland, Wales and Northern Ireland.

Most importantly, the BBC delivers a significant contribution to the creative industries and the UK economy. Britain’s creative sector, which accounts for about 6% of the UK’s GDP, can make a significant contribution to economic growth and employment. Having grown at a faster rate than the general economy in recent years, the creative industries are now expected to grow by 4% on average in the next five years. The beneficial impact of the BBC to that is some £7.6 billion a year, including more than £150 million through BBC Worldwide.

[Robert Halfon (Harlow) (Con)]

I congratulate the hon. Gentleman on securing this important debate. He has made the case for the licence fee, and there is obviously a case for it, but does he not agree that the big problem with it is that no licence fee payer has a say in how the BBC is run? We need to democratise the licence fee and give licence fee payers the vote, at least in respect of the board and trust and the BBC’s direction.

[Ian Murray]

I think the BBC has a lot to learn on those principles. However, I will talk shortly about what the Government have done by not including licence fee payers in the comprehensive spending review and the future of the BBC.

The BBC is a globally respected brand, which is why the House should be concerned for its future, and it has been described as a national treasure, which is why Labour Members will always stand up for it as a friend, although a critical friend. I must state clearly at the outset that the BBC should not be immune from reform or cuts at a time when we are all supposed to be in this together, but that reform process has to be done through negotiation and with respect for what the BBC delivers and the people—its staff—who deliver the service on behalf of us all.

The outcome for the BBC from the CSR has shown contempt for the corporation, and the opportunity has been lost truly to change the organisation in the context of a new digital age, changing and fast-moving markets and, significantly, shrinking budgets across the sector in programme making.

The BBC also has a responsibility to consolidate its own activities within the continual pursuit of excellence alongside an honest examination of the role of both the BBC and, more importantly, public sector broadcasting. The final settlement for the BBC through the comprehensive spending review is yet another example of the Government’s undue haste. We have seen that with the dangerous too-deep, too-soon, too-quick cuts that will harm jobs, harm growth and threaten the already fragile UK economy.

The CSR deal for the BBC was put together in 72 hours. It was a dubious deal, with Ministers embarking on a strategy to intimidate the BBC into accepting whatever came its way. Why? Because the outrageous proposal that the BBC take responsibility for free TV licences for the over-75s hung over it like a guillotine. What would be next? The licence fee paying for the winter fuel allowance, child benefit or perhaps even the Prime Minister’s new personal photographer?

That threat ensured that the BBC would grab the deal given to it through the CSR quickly and with both hands. Let us look at the settlement it was given. It includes a freeze in the licence fee for the remainder of the charter period and the BBC taking on funding for the BBC World Service, BBC Monitoring and the Welsh language channel S4C. In addition, the BBC will be supporting the Secretary of State’s pet project, the new City TV, through a £25 million ring-fenced partnership fund. It will also be given responsibility for delivering broadband services. All in all, there is a £340 million bill alongside a 16% real-terms reduction in licence fee income over the period.

This “delicious” deal, as the Prime Minister described it, was so hastily contrived that it prevented proper consultation and debate with licence payers, stakeholders and, most importantly, BBC staff themselves to the extent that we are left with no real way of knowing the true impact on the BBC. Will it affect the quality of programming? Will it mean the BBC stopping services? Will it mean significant job cuts? Will it damage the independence of the BBC and the BBC World Service? Will the board of S4C take the Government to court, due to it not being consulted about its funding being transferred to the BBC?

Conversely, this rushed deal has also restricted the opportunity to keep the pressure on the BBC to continue on its programme of reform in terms of bureaucracy and excessive executive pay.

[Graeme Morrice (Livingston) (Lab)]

I am grateful to my hon. Friend for giving way. Has he, like me, received many representations from constituents arguing against any freezing of, or indeed cuts in, the licence fee and supporting its retention so that a quality service can continue to be provided by the BBC?

[Ian Murray]

I welcome the intervention from my hon. Friend, who raises an important point. Many Members, I am sure, will have received dozens, if not hundreds, of e-mails, letters and telephone calls from people who are concerned about the BBC, cuts to it and what it delivers. Constituents have raised that point with me on numerous occasions.

To go back to the missed opportunity, the BBC was entering into a new culture of transparency and accountability—a programme that was, on its own measurement, to save £2 billion by 2014. I want to ask the Minister some questions about the future of the BBC. Is this deal on top of the BBC’s current strategy to save £2 billion by 2014? What criteria will be applied to where the cuts will fall? Will there be job losses and a reduction in quality? What impact will the cuts have on the move to the media city in Salford and the programming being transferred to the regions—50% by 2016, I think? Who is now responsible for the roll-out of broadband—the Department for Culture, Media and Sport, the Department for Business, Innovation and Skills or indeed the BBC? What will the future hold for the BBC World Service? What budget protection will the World Service have? Will that critical service have to compete with other parts of the BBC budget in due course?

[Anna Soubry (Broxtowe) (Con)]

Is not the real problem with the BBC the fact that it has expanded into areas that it should not have expanded into, and that it has lost sight of the fact that it is a maker and broadcaster of programmes? In moving into websites, it is taking away from other websites. Most importantly, it is taking away the ability of people to work in print journalism. It is really threatening newspapers and other websites.

[Ian Murray]

I appreciate that intervention, but the BBC has been involved in a programme of reform of what it supplies on the website. The list of duties that has been placed on the BBC by the comprehensive spending review has given it more responsibility, not less. It is the opposite idea to that which has been given by the—

19:00

Motion lapsed (Standing Order No. 9(7)).

Motion made, and Question proposed, That this House do now adjourn.—(Mr Dunne.)

[Ian Murray]

I will get used to the procedures in this Chamber, I am sure, Mr Deputy Speaker.

On the World Service, will the BBC have budget protection or will the World Service have to compete with other parts of the BBC budget in due course? What role will the Foreign Secretary have in that process? The Secretary of State mentioned that the BBC would have to seek the Foreign Secretary’s approval for World Service closures. The fact that the word “closure” is used must concern staff and lovers of the service. Furthermore, the BBC World Service is well regarded as the best international diplomacy and peacekeeping device that the UK has—more effective, indeed, than the UN or any military might.

Indeed, if you will indulge me, Mr Deputy Speaker, the BBC World Service won several awards just last night, demonstrating the distinctive programming that it can provide. At the Association for International Broadcasting awards, the BBC World Service won the best current affairs documentary on radio award and the best single news event radio award for its “Connexion Haiti” team and a drama award for the best creative feature on radio for “The Day that Lehman Died”. That shows that listeners the world over appreciate the role of the World Service.

Will the Minister tell the House what the future is for S4C, given that the Secretary of State recently wrote to the chair of the BBC Trust stating that

“if the new partnership model between S4C and the BBC proves unviable…the BBC contribution required for S4C will be taken from the licence fee”?

I read that to mean that S4C could potentially be closed if it becomes unviable. Crucially, how will licence payers, BBC staff and stakeholders be consulted in that process?

If the economic situation changes, will the Government assure the House that the Government do not reserve the right to go back to the BBC licence fee issue in the course of this licence charter period? If the Secretary of State cannot answer those questions this evening, will he be willing to provide me with a written answer to those points?

The comprehensive spending review reduced the BBC to the status of just another arm of government where the veil of deficit was used to disguise rash decisions free of proper scrutiny or credible analysis, leaving the question of where the axe will fall. We have seen the response of the public to decisions on axing BBC services—we need merely look back to earlier this year, with the campaigns to save the Asian Network and 6 Music. Those services were seen by many as benchmarks of diversity, equality and innovation in public sector broadcasting.

There has been no statement in the House on the issues to do with the comprehensive spending review and the BBC. I respectfully ask the Government to provide space in their time for proper debate on and analysis of the consequences of the CSR, the future of the BBC and the future of public sector broadcasting in the UK. This situation shows the Government’s attitude towards the BBC. The “delicious” cuts comment by the Prime Minister was, as he later admitted, “ill conceived” and disrespectful to the BBC and showed a callous disregard for the potential job losses at the corporation akin to the Government’s ideologically driven 1 million cuts through the CSR in general.

The future of the BBC is a matter of significant public interest. Opposition Members will stand up for the BBC, for what it provides for the cultural make-up of this country and for the contribution it makes to the UK economy. It projects the best of the UK abroad and is undoubtedly a national treasure that is well loved, respected and should be protected for the future at all costs.

19:04

[Graham Jones (Hyndburn) (Lab)]

I congratulate my hon. Friend the Member for Edinburgh South (Ian Murray) on securing this vital debate. We all recognise the role of the BBC in the world. The then shadow Foreign Secretary, my right hon. Friend the Member for South Shields (David Miliband), said that the World service is an independent

“credible voice in parts of the world where the only other messages blend threats and propaganda”.

That is quite true. I echo those worlds and support the World Service, which is a vital service.

The changes being made following the comprehensive spending review raise serious concerns about the future of the BBC World Service and about the BBC’s ability to continue providing a public broadcast service that is informative and represents value for money. Transferring budgetary responsibility from the Foreign and Commonwealth Office or the Treasury to the BBC opens the door to editorial cuts. There has been concern recently that the BBC World Service could be forced to pull out of certain countries, which would be a tragedy given the turbulence in Burma and Iran. I know that the BBC has reinstated its World Service in those areas, but we do not want future cuts to compromise Britain’s interests.

I recognise that the BBC, as a publicly funded body, is obliged to consider its expenditure and whether savings can be made, but that cannot be at the expense of a public service that is valuable at home and abroad. The BBC World Service is one of Britain’s most effective and vital assets and we should protect and promote it. We should not reduce our investment in international broadcasting. The National Union of Journalists has said it will fight any proposed cuts, adding that the BBC World Service is a “clear success story”. The cuts represent a threat that we can ill afford to that vital service and to jobs. We have to think of the BBC as a world employer because it does not operate only in the UK.

I am a passionate defender of the organisation and I believe not only in retaining the licence fee but in extending the BBC as a British institution. I have experienced television in many countries, most notably in the USA where freedom and open markets have resulted in massively dumbed-down television and a race to the bottom, with programmes between adverts. The quality of BBC broadcasting provides a high water mark for others to match and raises the bar of programme quality. The BBC leads the world in quality, innovation and impartiality.

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

Does my hon. Friend agree that the BBC is the envy of broadcasting institutions the world over and that we parliamentarians, who are being broadcast live as we speak, should be very proud of it?

[Graham Jones]

My hon. Friend is quite right: the BBC is the envy of the world and is a good business that we should promote. We should see it in that way rather than as a drain on public resources. It is one of the last great vestiges of British influence abroad. BBC online and BBC news provide the world with a British perspective and a brand that should be protected at all costs. A commercial, or part-commercially dependent, BBC would need to survive from advertising revenue and would have to focus on mass-market universal appeal, but that market is filled by ITV, Sky and Channel Five domestically. That would involve, in short, a dumbed-down, broadest-appeal schedule. I cannot support anything that undermines the BBC and I congratulate my hon. Friend the Member for Edinburgh South again on securing the debate.

19:08

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

I, too, congratulate the hon. Member for Edinburgh South (Ian Murray) on securing the debate. Let me declare an interest: I worked for the BBC before coming to Parliament and I am still engaged in a financial transaction with it. That aside, I want to pay tribute to the Secretary of State for Culture, Media and Sport for the role he has played in working with the BBC, as well as to the Minister answering the debate, the Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the for Wantage (Mr Vaizey).

I am a passionate defender of the BBC and I value what it brings to our country and our worldwide reputation. I have heard the points in favour of the World Service and similar services, and I want to give some assurances. I appreciate that a little knowledge is a dangerous thing, but I believe that the BBC can perfectly well survive on the comprehensive spending review settlement of a frozen licence fee for the next few years. It has made a good start with the executive board deciding to slim down. That is good news and will help the BBC to continue to be a dynamic organisation. It has tackled the difficult pension dispute, although I must admit that if I still worked there, I would have bridled at the original pension deal. It has now come up with a sensible solution and I hope that the NUJ will eventually recognise that.

The BBC still has a lot to offer our country, not only through programmes such as “Strictly Come Dancing”, with a former Member of the House doing rather well, but by continuing to provide excellent programmes of which we can be genuinely proud and that are sold around the world through BBC Worldwide. The BBC now recognises that its role is not to go off and buy things like the “Lonely Planet” guide—it will not do anything like that again—but to make use of the licence fee to subsidise programmes going forward.

[Ian Murray]

The hon. Lady has mentioned examples of the BBC slimming down, to use her words. The BBC was already undertaking such a programme, and the comprehensive spending review settlement may have taken its eye off the ball. Will she comment on that?

[Dr Coffey]

I do not work there any more, so I cannot give a personal comment on that, but the settlement concentrates the mind. I know that when I was there and we were talking in staff meetings, scenario planning was going on—for example, if there was a 20% cut, or a freeze—and there was genuine debate about what that would mean for the BBC in future. The settlement will force the board to think through what it is trying to achieve, what makes the BBC special, what it has to do and what it is nice to do. I welcome that journey because we also have to do in government—let us be honest about it—when we are trying to ensure that we live within our means.

[Anas Sarwar (Glasgow Central) (Lab)]

Will the hon. Lady give way?

[Dr Coffey]

I can speak for only two minutes, so I will carry on, if the hon. Gentleman will forgive me.

The hon. Member for Edinburgh South asked what the BBC licence fee would pay for in future. Let us remember that a certain part of the licence fee was hypothecated for the digital switchover. The success of various schemes has meant that that part of the licence fee now does not need to be used; it might be said that it is being used only for broadband. However, YouView, which is coming, will be one of the game-changing things that the BBC delivers to this country, in conjunction with its media partners, and broadband is required to deliver that. It is right that the BBC is involved in the provision of broadband to the country. That is a rather good use of the licence fee.

Given that I was an unexpected participant in the debate tonight, I will not continue further. The BBC is safe in the Government’s hands through its relationship with the Secretary of State. A large amount of reconciliation goes on between the World Service and the BBC to make sure that each part does not subsidise the other. That is wasteful work, and those costs will not have to be borne any more, so they can go into protecting the overseas bureaux. There are opportunities for economies, and I know that the board is working hard on them.

I am confident that the Government, with the Minister and the Secretary of State, will continue to have a fruitful partnership. I look forward to the next debate when we discuss the future governance of the BBC. I have been delighted to participate in the debate and I wish all my former colleagues at the BBC well.

19:12

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)]

I am grateful for the chance to respond to this important debate. I congratulate the hon. Member for Edinburgh South (Ian Murray) on securing it and on making such an eloquent speech setting out his views and support for the BBC, as well as his concerns for its future.

I thank the hon. Member for Hyndburn (Graham Jones) and my hon. Friend the Member for Suffolk Coastal (Dr Coffey) for their excellent contributions, with the hon. Member for Hyndburn focusing on the importance and value to him of the BBC World Service, and my hon. Friend bringing to bear her experience as an insider who has worked in the organisation. I was pleased to hear from a former BBC employee about her confidence in the BBC’s ability to continue to move forward on the basis of the superb licence fee settlement.

[Anas Sarwar]

The Minister speaks of a superb settlement. The BBC is one of the largest employers in my constituency in Glasgow. Does he accept that as a result of the decisions taken in the comprehensive spending review, there will be job losses in the city of Glasgow?

[Mr Vaizey]

The BBC has already significantly slimmed down. Job losses or future jobs will be a matter for it. The debate has been suitably non-partisan. I hate to bring it down a level or two, but I am always pleased to hear from Opposition Members about their conversion to supporters of the BBC. For those of us who remember the previous Government hounding out the BBC’s chairman and director-general over the David Kelly and Andrew Gilligan affair, such conversions always ring ever so slightly hollow. That was the greatest crisis of BBC independence in living memory, so it is worth remembering that it is not always bad news with the Conservatives. Other Governments have behaved very badly indeed towards the BBC, in my view.

However, I want to put on the record this Government’s strong support for the BBC—a complete commitment to the independence of the corporation, which, as the hon. Member for Edinburgh South said, has formed the cornerstone not only of public service broadcasting in this country, but of the success of our creative industries. I never tire of pointing out that many of our successful independent production companies and, indeed, other companies in the creative industries are often filled with people who received their training from the BBC.

The BBC is not set in aspic; it remains a dynamic and forward-looking organisation. Not only is it one of the most respected broadcasters in the world, but it continues to innovate with the BBC iPlayer; YouView, a consortium in which the corporation is the cornerstone partner; BBC Worldwide, which has taken the BBC all around the globe; and even the pioneering archive and digital archive work being taken forward by Tony Ageh, which we all admire. We also fully respect, of course, the BBC’s editorial and operational independence.

[Graham Jones]

Does the Minister approve of BBC World Service television and its commercial success? Does he think that it should be expanded as a business, or that the service should be reduced because it is not what the BBC is about?

[Mr Vaizey]

BBC Worldwide, which has a superb chief executive in John Smith, who really has transformed that organisation, occasionally causes controversy in the House. Its business is to maximise the value of the BBC’s assets, and it does so very well, but we in the House and individual politicians take views, such as on the purchase of Lonely Planet, and, as I shall say at the end of my speech, the BBC Trust has made it clear that it wants the BBC to divest itself of its magazine business, because it is very important that it leaves room for commercial operators to make a living in the media. One of the great ironies is that the BBC is so successful that it can often easily squash its competition.

[Charlie Elphicke (Dover) (Con)]

rose—

[Graham Jones]

rose—

[Mr Vaizey]

I shall take an intervention from my hon. Friend, who has not yet spoken.

[Charlie Elphicke]

We have heard much about the excellence of the BBC, but does my hon. Friend agree that we should also pay tribute to the excellence of ITV and of BSkyB? They have outstandingly good output, too, and it is important to ensure that the BBC’s state subsidy does not crowd them out.

[Mr Vaizey]

I absolutely accept my hon. Friend’s point, and I congratulate him on his excellent work to try to secure the future of Dover port, working with Dame Vera Lynn, who broadcast her great songs that lifted the morale of British troops during the second world war via the BBC. I also pay tribute to the many successful media companies that operate in the United Kingdom.

The hon. Member for Edinburgh South was concerned about the speed of our negotiations. I was slightly surprised by that, because I read in his biography that he used to work for an organisation called 100mph Events. I thought that he was a man who felt the need for speed, but now he wants to be in the slow lane. A year-long negotiation of the licence fee would have taken the BBC’s eye off the ball in respect of running a successful media organisation, and there would have been a year of sniping from the BBC’s competitors, with people calling into question the licence fee and so on.

[Graham Jones]

The Minister and other Government Members have mentioned crowding out, but is it not the case that The Times and The Sunday Times have a paid-for service that is beginning to wipe its face? If the BBC were impinging on the profits of the online print industry, would The Times and The Sunday Times be able to wipe their face with that paid-for service? It seems to be quite successful, and there does not seem to be any evidence of crowding out. Does he accept that point?

[Mr Vaizey]

I suggest that the hon. Gentleman talks to those at The Guardian, as it is they who usually complain about the BBC crowding them out. The Guardian website remains free, and they claim that one of the difficulties they are finding with monetising its website is the presence of the BBC.

The agreed settlement that we reached with the BBC is a good deal for all parties that reflects the current economic environment. Most importantly, of course, it is an excellent deal for licence fee payers, delivering a freeze in cash terms in the £145.50 colour licence fee for the next six years. I was interested to hear the hon. Member for Livingston (Graeme Morrice) suggest that many of his constituents are writing in, wanting to pay more for the licence fee. I am not sure that that view is held nationwide.

[Julie Hilling (Bolton West) (Lab)]

I am concerned that a freeze for four years in fact represents a year-on-year cut, particularly when inflation is predicted to rise much higher than was expected, and with VAT increases coming in as well. Does the Minister agree that more than the initial cuts will need to be made because of the budget restrictions, but we will then face year-on-year cuts in the BBC that reduce its services and its ability to be the wonderful broadcaster that it currently is?

[Mr Vaizey]

As I say, the BBC will have to find savings; I shall come to that in a moment. It is important for Labour Members to make their position clear. If they think that the BBC licence fee should be increased, they should say so, and they should state the level at which they think it should be set.

The current licence fee settlement remains at £145.50. It is important to remember that for the first year this was volunteered by the BBC and the BBC Trust, and it was likely to be volunteered for the second year, and then we negotiated a freeze for the four years after that until March 2017. Within that settlement, as the hon. Member for Edinburgh South pointed out, the BBC has agreed to play an active role in supporting new local television services through a partnership fund providing capital costs of up to a total of £25 million in 2013-14 for up to 20 local TV services—city TV stations to provide truly local content rather than the regional content people have at the moment. The BBC will also commit to ongoing funding of up to £5 million per year from 2014-15 to acquire content for use on its own services from these new services. Should capital costs be required earlier, this will be facilitated by access to the existing digital switchover underspend by mutual agreement.

[Robert Halfon]

Does my hon. Friend agree that this is not just about the level of the licence fee but the fact that licence fee payers have no real say over what goes on in the BBC, whether it is salaries, the make-up of the BBC Trust, or the number of stations? The answer, surely, is to democratise the licence fee by giving licence fee payers a vote.

[Mr Vaizey]

My hon. Friend is a pioneer in this House. He is already proposing and taking forward an internet bill of rights, which has enlivened the blogosphere, and he has radical proposals for the democratisation of the BBC. Given his campaigning record, I will leave him to take those forward.

The BBC World Service will now become part of the licence fee-funded BBC from 2014-15, but the BBC will remain independent in all matters concerning the content of World Service output as regards times and the manner in which it is supplied and the management of its affairs. The BBC’s editorial guidelines, values and standards will be set by the BBC Trust and will continue to apply to the BBC World Service. The BBC will continue, as now, to set the objectives, priorities and targets for the BBC World Service with the Foreign Secretary, and will obtain written approval from the Foreign Secretary for the opening or closure of any language service. The BBC will also assume responsibility for funding BBC Monitoring from 2013-14.

The hon. Gentleman asked about S4C. The BBC has undertaken to provide the majority of funding to the Welsh language service, S4C, from April 2013. We in the Government remain absolutely committed to a strong and independent Welsh language TV service, which was of course set up under the last Conservative Government.

[Charlie Elphicke]

Opposition Members are arguing for an increase in the licence fee. [Interruption.] They are as far as I can tell—they say that they have received representations to that effect. In my experience a lot of older people, particularly those who get by on their pensions, have trouble affording the current licence fee. Can anything more be done to help people in that position, and should the BBC take a greater role in funding such help?

[Mr Vaizey]

My hon. Friend makes an interesting point in his forensic intervention, which secured an immediate U-turn from Opposition Members on a licence fee increase. Perhaps he and I should talk later about what further help can be given to the elderly, but I would say that freezing the licence free is substantial recognition of people’s difficulty in paying it.

The Government have put forward a new partnership model between the BBC Trust and S4C as the best way of securing the latter’s future. Under that model, funding for S4C will come from three sources in future: the licence fee, a continued subvention from the Government and commercial income. The BBC will contribute £76.3 million to S4C in 2013-14 and £76 million in 2014-15. The Government will contribute £6.7 million and £7 million respectively. The service will be operated by a joint management board, with a majority of independent directors appointed by the BBC Trust.

I am aware that I am running out of time, but I wish briefly to mention broadband. The current ring-fenced funding for digital switchover of approximately £133 million per annum will be raised to, and capped at, £150 million per annum to fund broadband. It is important to say that the switchover money was never part of the licence fee funding for the BBC, so in effect the £150 million a year broadband money simply continues an arrangement made under the last Government whereby part of the licence fee is used for what could broadly be called “digital switchover”. When one talks about the BBC taking on £344 million of extra liabilities, one is really talking about only £200 million.

[Graeme Morrice]

The point that I was trying to make earlier was that I and other Members have received numerous representations from constituents expressing concern about the freezing of the licence fee for the next four years, because in effect it will mean a real-terms cut. People are concerned about a reduction in the quality of the service. The hon. Member for Harlow (Robert Halfon) made a point about democratisation. What consultation has there been with the licence fee payer about that real-terms cut?

[Mr Vaizey]

As I have said, we felt that there was a meeting of minds between us and the BBC, and that it was best to get on with it rather than detain the BBC for a year in negotiating the licence fee.

We welcome the BBC’s plans to enhance its national DAB coverage, although we remain in discussions with it about its obligations as regards local DAB. I hope that we can take forward developments on local DAB coverage with the BBC and the commercial radio sector.

Outside the formal licence fee agreement, the BBC has also made assurances to the Government about the scale and scope of its future activities in three areas. First, the BBC Trust has assured us that it considers it desirable to dispose substantially of BBC Worldwide’s magazine business. Secondly, the trust recognises the principle that the BBC should not launch services that are more local than its current offerings on radio, the web and television, to give our local newspapers a chance to survive and thrive. Thirdly, it has assured the Government that it will pursue a 25% reduction in the budget of BBC Online, which will please The Guardian. I hope that those assurances from the BBC will be viewed in a positive light by those who have expressed concerns about its income—sorry, impact—on the market. That was a Freudian slip.

I end by reiterating the Government’s full commitment to the BBC’s independence. We regard it as a fantastic organisation and a beacon of excellence in Britain. I thank the hon. Member for Edinburgh South for securing the debate. In my opening remarks, I forgot to thank him especially for one of the reasons he will now remain my favourite Labour MP—during his speech, he promoted me from Under-Secretary to Secretary of State. For that I will always remain grateful.

Question put and agreed to.

19:29

House adjourned.

Petitions

Wednesday 10th November 2010 Petitions

Wednesday 10 November 2010

Elizabeth Regina Love Correspondence

Wednesday 10th November 2010 Petitions

The Petition of Mr Martin Burke,

Declares that on 10 December 2004 Her Majesty the Queen honoured Mr Martin Burke with the invitation that the badge for his business, the letters E and R with a heart design, be Her Majesty’s (with effect from 28 February 2004). Declares that the correspondence between the petitioner and Buckingham Palace in 2004 was private, however sometimes confusion has arisen so in June 2007 the letters were made public.

Declares that at first glance the correspondence may appear to say the opposite of what it does say so a detailed analysis has been given, available at the new web address www.elizabethreginalove.com/correspondence (changed from www.eheartr.com).

Declares that this analysis firstly notes the way of operating in the petitioners’ first letter dated 28 February 2004: that if you announce your intention to do something and nothing is said then leave is granted, and further declares that in now over 6 years since no instruction to cease and desist has been given, on the contrary. Notes that further detailed analysis of the correspondence is given in this analysis. Further declares that the petitioner was asked very courteously that the badge for Emotion Records be The Queen’s Cypher. Declares that in respect of this the trading name of Emotion Records Limited was changed to Elizabeth Regina Love and its range of activities further widened.

Further declares that the guidance from the Lord Chamberlain’s office on the use of Royal Arms, Names and Images is that the use of the Royal Arms and of Royal Devices, Emblems and Titles, or of Arms, Devices, etc., [ ... ] is prohibited by the Trades Marks Act 1994, unless the permission of the Member of the Royal Family concerned has been obtained, and that the Lord Chamberlain’s office gave the Queen’s permission.

Notes that the apparent ambiguity in the correspondence was not a mistake, and that the petitioner was being asked to take the consequences of any misperception.

The petitioner therefore requests that the House of Commons accept a copy of the analysis of the correspondence for inclusion in the House of Commons Library, and that were the question put the House consent to the request(s) in this Mr Burke’s 17th petition first emailed to the House on 30 March 2010, and amended and added to on 5 August 2010.

And the Petitioner remain, etc.

[P000867]

Intercity Express Programme

Wednesday 10th November 2010 Petitions

The Petition of residents of the Sedgefield constituency, and others,

Declares that the petitioners believe that the Government should implement the procurement of rolling stock through the Intercity Express programme, which would lead to Hitachi building a manufacturing site in Newton Aycliffe; and further declares that this would result in the creation of hundreds of direct jobs and thousands of jobs in the supply chain, of which the majority would be in manufacturing, giving a much needed boost to the North East economy and improving rail services nationwide.

The Petitioners therefore request that the House of Commons urges the Government to implement the procurement of rolling stock through the Intercity Express Programme.

And the Petitioners remain, etc.—[Presented by Phil Wilson, Official Report, 13 October 2010; Vol. 516, c. 459.]

[P000863]

Observations from the Secretary of State for Transport:

In February 2009, Agility Trains, a consortium of Hitachi and John Laing, was appointed preferred bidder to build and maintain a fleet of new Super Express trains under the Intercity Express Programme (IEP). The initial order, together with all of the options, would have brought the total fleet size up to 1,400 rail vehicles.

If the order goes ahead, Hitachi has made clear its ambition to establish a new assembly plant at Newton Aycliffe in the Sedgefield constituency, within County Durham to build the new trains. The new plant would employ around 500 people, and a further 200 during construction.

The Government also understand how important this project is to British manufacturing and the north east, and how seriously the project is being taken in Japan.

In his recent review of IEP, Sir Andrew Foster suggested that the programme should be paused while possible credible alternatives are assessed, and the Department has been progressing this work. Agility Trains made a submission to the Department during September, and it improves the business case for that particular option.

The work has been focused on how this option compares to the others: in terms of value for money and affordability.

We are currently giving further consideration to the revised proposals from Agility Trains for the Intercity Express Programme, and announcements on other DfT rolling stock programmes will be made in the light of the Government’s ongoing work on IEP.

Westminster Hall

Wednesday 10th November 2010 Westminster Hall

Wednesday 10 November 2010

[Mr Mike Weir in the Chair]

UK Software Industry

Wednesday 10th November 2010 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Angela Watkinson.)

09:30

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

It is a pleasure to serve under your chairmanship for the first time, Mr Weir. I am grateful for the opportunity to hold the debate. I take a keen interest in the UK software industry, and I am proud that Sunderland Software City, which is a centre of excellence, covers my constituency.

I thank the Minister for coming to the Chamber to put the case for the Government—I am sure that we are all eager to hear what he has to say. I would like to extend to him and his colleagues an invitation to meet me after the debate to address any points that we might be unable fully to thrash out in the time available to us.

The UK software sector has compound growth of 5.6% and is now worth £100 billion to the UK economy—almost as much as the financial services sector. The industry benefits from low capital costs, and its products are instantly exportable. Its technology can also make non-software companies more efficient, further adding to its worth to our economy. Figures from the UK’s Technology Strategy Board show that 29% of the $3.4 trillion of worldwide spending on information and communications technology in 2007 was spent on ICT software. Such spending is expected to reach some £2.6 trillion in 2011. I am sure we can all agree that Britain needs to be at the heart of that new wave of ICT innovation and investment.

The US is currently the world’s largest software market. We are all familiar with some of its major exports. We all use Microsoft operating systems and office software in our parliamentary offices, and I am sure that we all know of the success of Apple’s iPhone and iPad. However, I am proud that behind that American muscle is British innovation. Specifically, the technology of Britain’s chip maker ARM Holdings—including firmware, which is a subset of software—is in 95% of the world’s mobile handsets, including products such as the iPhone and BlackBerry, and in more than a quarter of all electronic devices.

The Labour Government left Britain in a good position to become the world’s leading exporter of ICT software and services. From the story of ARM, it is clear that Britain has what it takes to compete in the global market, as long as the Government provide the tools and support that the industry requires.

According to “Resilience amid turmoil: Benchmarking IT industry competitiveness 2009”, the Economist Intelligence Unit’s third annual study into information technology sector competitiveness, Britain was ranked third for human capital in the world, and fourth for support for the IT industry as a whole. However, I want Britain to do even better. The report found that access to broadband networks, investment in skills and business support, and an adequate legal framework that strikes the right balance between promoting technology and allowing market forces to work were vital for the industry to prosper.

It was the Labour Government who developed the framework that pushed Britain to become the fifth largest ICT market behind the United States, Japan, China and Germany. However, I fear that the actions of the coalition Government since the election will jeopardise that. I hope that the Minister can alleviate some of my fears in his reply.

Let us consider the record of the coalition Government so far. Labour promised universal access to broadband by 2012, but the coalition has scrapped that pledge. A joint report by the Boston Consulting Group and Google showed that the internet economy in the UK represented 7.2% of our gross domestic product, and that we led the world in e-commerce, exporting nearly £3 for every £1 imported. The report also found that 250,000 jobs were dependent on the internet. The future of the software industry in Sunderland will rely on the ability to communicate digitally, and a strong broadband network is at the heart of that. It is estimated that it would cost more than £500 million to bring superfast broadband to the north-east. Without it, creative industries could move their business elsewhere. Will the Minister tell me his plans for broadband, particularly in the north-east?

The coalition has announced a review of our intellectual property laws with the aim of relaxing the rules, but that could leave Britain’s intellectual property exposed and unprotected. What assurances can the Minister give me, as well as UK software and new media industries, that that will not happen?

The Tories and Liberal Democrats previously committed to providing tax breaks to the computer games sector. I know that many of my colleagues have spoken about that in this Chamber and on the Floor of the House on many occasions, and that there are strong feelings about it. I support their views on the need for tax breaks for the industry. The industry body states that, without them, the UK will be at a disadvantage compared with foreign competitors. What is the coalition’s justification for reneging on that promise?

On education and training, instead of incentivising software development as a viable career, the coalition will increase tuition fees for students taking mathematics and ICT-related degrees, despite pledges to the contrary from some of coalition Members before the election. It has even cut the body tasked with buying computer equipment for schools. Will the Minister tell me how children in this country can be expected to use ICT in the school environment and go on to become a future Steve Jobs, Paul Callaghan or Chris Curry without any co-ordinated approach on ICT provision?

Support for the software industry is about not just investment in business and education, but a whole package of measures. Another consideration of businesses that I wish to draw to the Minister’s attention is the availability of conventional transportation: road and rail. He might not be aware that two large capital transport projects in Sunderland—the central route and the strategic transport corridor—are in jeopardy. The success of those projects is vital for the north-east to access the rest of the UK, but also for the UK to access the north-east. Does the Minister agree that if we make the north-east as interconnected to the rest of the UK as possible, we will have a more balanced economy?

I wish to dedicate the concluding part of my speech to a success story: Sunderland’s developing software industry. Thanks to some remarkable people, Sunderland has more tech start-ups than any other region in the UK, with the exception of London. Almost 50 software companies operate in Sunderland, and almost 300 across the north-east, and the number grows every week. One North East estimates that the annual size of the north-east’s new media, games and software industry is more than £250 million. Sunderland city council’s business team has opened the e-volve centre in my constituency, which provides start-ups with vital tools for their development such as office and server space, and a bespoke package of advice and support. It also works with Sunderland university to offer internships to ICT students. It is vital that the region can offer highly skilled jobs to graduates, particularly to allow our young people to remain in the area rather than feel that they have to move elsewhere, often after they have studied at our world-renowned universities.

The software industry provides an ideal opportunity for growth to provide the highly skilled jobs that the north-east needs to continue to attract investment and develop. However, that potential for growth and development faces significant challenges. The coalition has cut One North East, the region’s hugely successful development agency, but let me tell the Minister what One North East achieved for the UK software sector and the region.

Fifth Generation Technologies, an Indian company that produces business intelligence tools for companies, came to Sunderland thanks to One North East. Codeworks, a centre for digital innovation based in the north-east, and DigitalCity, a successful and self-sustaining digital media, digital technology and creative supercluster based on Teesside, are what they are today thanks to One North East.

The best example of the success of One North East, however, is Sunderland Software City. This innovation was developed in partnership with Sunderland city council, the university of Sunderland and private sector partners. It inspires and supports the growth of the software industry across the north-east, and makes the region the location of choice for software businesses.

From a single, easily accessible point that local companies have found invaluable, Software City provides local companies of all sizes, from the smallest start-up to firms with multimillion pound turnovers, with the support that they need to succeed. It helps companies to raise capital and find investors and customers, provides one-to-one business and technical support, and helps with access to foreign markets such as India, China and the US. More than 80% of participants in its student placement scheme have gone on to permanent jobs with the companies to which they were assigned. Since Software City started in 2008, it has helped almost 200 companies, including Test Factory, Raise a Tree, and Guroo, which has managed to get almost 500 clients in just two years.

I shall conclude by offering the Minister an opportunity to recognise the software industry and to invest in the north-east. Software City was made possible by One North East, but its £6.5 million grant will run out in March 2011. I welcomed the Government’s announcement last week of a £200 million fund to invest in high-tech hubs. Will he support the use of part of that fund to secure funding for Software City up to and including 2015?

09:40

[Dr John Pugh (Southport) (LD)]

It is a pleasure to serve under your chairmanship, Mr Weir. I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on having started an important debate on an important theme. She will understand that I cannot comment on the situation in the north-east, so I shall concentrate my remarks on the contentious issue of video games—that has been the matter of some parliamentary discussion—and on Government procurement, which is an issue that interests me even more.

I am not especially interested in video games per se. I have not played them since the days when I had a Commodore 64 and played a game called “Pesky Painter”, which unfortunately I have not been able to obtain since. If anyone listening to this debate has a copy, I would be pleased if they wrote to me so that I could have access to the game again. Gaming is an addictive pursuit that takes up a lot of time, and someone who has other interests in IT—as I do—finds other things to do. There is, however, an argument in favour of Government support.

There are basically two extreme views on Government support. One is that the Government should always support successful and/or sometimes failing industries, and the other is that the Government should never interfere in the market. A friend of mine who is a software engineer alleges that any IT company that needs Government investment ought not to be backed in the first place, because there is enough venture capital out there and IT is a progressive and successful market.

I do not think that anyone seriously believes in either of those extreme positions. People who do not believe in state intervention at all are a bit like the people who do not believe in censorship at all. A case in which censorship was needed can always be cited, as can a case in which the state needed to intervene. The arguments usually centre on not the principle of state intervention, but the degree of it and the method used. I think everyone accepts, including the video games industry and all other branches of the software industry, that there is a role for the Government in incentivising economically useful behaviour. The video games industry supports the continuing policy of research and development credits, and of such credits that are specifically aimed at smaller businesses, presumably smaller software houses and the like. New starts are plentiful in the industry, and new starts can often become very big companies.

All the companies that we are talking about, including all those in the north-east, favour a sensible regime of business taxation. We can all talk about that, and about levels of corporation tax and the like. I guess that everyone nowadays accepts that tax incentives and breaks are better than direct subsidies, because they are a more effective way of encouraging winners and of getting the kind of behavioural impact that people want. I accept that a tax incentive is a form of sectoral subsidy, as essentially an amount that is due is not being paid, but the issue here seems to centre on whether a sectoral subsidy is, on the face of it, justifiable and necessary. It has to be necessary to be justifiable. On the face of it, there seems to be a pretty good case. I think we all accept that the industry has huge potential. The hon. Lady laid out very well what kind of potential it can offer, not only for the country as a whole but in areas of substantial deprivation. An area such as Sunderland is not necessarily associated, in the way that California is, with the IT industry, but the association is certainly helpful to Sunderland.

There is obviously a huge native skill-base in this country. I was surprised when, during the general election, individual constituents of mine e-mailed me to say that they were very much involved in a video games or software business, and they made representations on behalf of the industry. I was surprised at how many of them there were, and I was also surprised, in these days of the internet, that they did not know one another very well. I felt that after the election I could perform the useful function of putting them all in touch with each other. The hon. Member for Liverpool, Wavertree (Luciana Berger)—who has just arrived—is well aware that Liverpool has a burgeoning software industry involving a lot of small companies. We should support that industry emphatically, because it is very green, forward-looking and progressive.

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

Does the hon. Gentleman agree that we should introduce some kind of domestic tax incentives and support not only to boost the industry, but so that we can compete on an equal playing field? Other countries across the world that produce software and video games have additional incentives for the industry, in both research and development and in the wages of people who come from abroad. Because we do not, we have dropped from sixth to fourth place in the world in video games production. We have so many people leaving the UK to go to other countries, such as Canada, the United States—

[Mr Mike Weir (in the Chair)]

Order. I remind the hon. Lady that interventions should be brief.

[Dr Pugh]

I am not sure that the causal chain is as emphatic and clear-cut as the hon. Lady represents it, but later I shall come to the business of a level playing field.

It could be argued, could it not, that the indicators for what the industry offers and its potential are so good that the case for state investment is almost being undermined? If it is that good and there is that much potential, why would the Government be needed? Why should venture capital not be there; why would it not be there? I suppose there are some answers to those questions. It could be argued that this country’s financial sector is notoriously short term, which indeed it is. It is somewhat tax averse, and we have seen plenty evidence of companies preferring to go to places where the tax burden is less. The companies are certainly not patriotic and if they have scope elsewhere in places such as Canada, they might well decide that they want to place their funds there.

There are other strong arguments against the state getting too heavily involved in managing the industry. One is that the IT industry is notoriously volatile and unpredictable. One only has to look at the giants of the past that have crashed in the night—the IBMs, the Lotus Notes and the strange fall and rise of the Mac. One need only consider what would have happened had they put their money into floppy disc manufacture a few years ago, or into CD-ROM manufacture in the past five years. When someone puts money into the software industry or the IT industry more generally, they do so at an appreciable risk.

It cannot be in the long-term interest of the nation—of all nations—to base national taxation, for any sector, on the lowest common denominator of international taxation. Although the video games industry has said a lot about Canada, I would like to see what is happening in other areas where the software industry is also thriving and is competitive with Canada. I shall not rehearse the arguments that we could have about state aid and protectionism. I do not understand, however—the Minister can help me here—the argument presented by the Chancellor for not giving tax relief to the video games industry. He said that it could not be well targeted. I do not grasp that, and some evidence in the notes that have been provided makes it less than clear what is being said, meant or agreed by the Treasury.

[Jim McGovern (Dundee West) (Lab)]

I think the Chancellor actually said that the tax breaks were poorly targeted, rather than not well targeted. I have since had meetings with Ministers who have said that it is Government policy no longer to target any industry for tax breaks. Does the hon. Gentleman have a view on that?

[Dr Pugh]

The second answer that the hon. Gentleman was provided with seems to possess greater clarity than the first, because the first is, I guess, contestable. We can have a long discussion about how we can and cannot target breaks. A rational argument can quite decently be made that the software industry, given its potential for the capital venture market, is a lower priority than some other industries in a context of scarce resources; or it could be said that a break would be an unnecessary fiscal discount. The Minister can perhaps explain later exactly what is meant by the poverty of targeting in this case.

It is true that under our existing taxation policy some industries have failed, but even some of those mentioned in the notes we have been provided with have failed not because of the taxation policy, but because other things have gone wrong in the software development world and the product simply has not taken off. It is an intrinsically risky market, and the state ventures into it with some caution.

Just to extend the debate, there are other things that we should be talking about. I do not think the Government’s role in encouraging the software industry simply starts and finishes with tax breaks. They have a definite role in education. The hon. Member for Houghton and Sunderland South underplayed the continuity of British education between one Government and the next with regard to developing the software engineers of the future. In that context, I have a general worry about how the curriculum shapes up. In the initial phases of IT education, children were taught about programming and so on, but a great deal of recent IT education is simply about how to use applications. The people who are going to produce the applications of the future will not be the British: they will be Indian, Chinese and possibly American. There is a decline in IT education in this country—or, rather, it is not what it could be.

On the Government’s role, there is a further aspect to consider. The Government are probably the biggest customer for IT. Some 40% of all IT products, software included, are ordered by Departments. Government procurement is extraordinarily difficult for small software companies to work with, the process often being so prolonged that they cannot sustain their interest in applying for work, which the big companies ultimately get. The Cabinet Office and the Department for Culture, Media and Sport should consider how that process operates.

Labour Members must forgive me for going in this direction, but I have to say that huge software projects that were going to be embraced in the Building Schools for the Future programmes were, by and large, built by allowing the biggest players—the big American software firms—to engage with the process. Small British software firms found it difficult to get on the British Educational Communications and Technology Agency list. I have complained about BECTA in this Chamber in the past and I am glad that, as a result of my representations, it has been abolished.

There is a close and unattractive relationship between big government and big IT. We are blessed with the Connecting for Health project, with all its problems, ramifications and extra costs, largely because of close connections and conversations between the previous Prime Minister and Bill Gates. There has been a slow commitment to interoperability, open standards and open source in IT procurement in this country—particularly state and government IT procurement—all of which has effectively shut out the burgeoning British software engineering companies and favoured the large players, including Microsoft and Oracle.

I noted the Chancellor’s suggestion before the election—I am sure the Minister can comment on this—that by adopting a more favourable position towards open source and open standards, the country would save £500 million. I have not seen that in the comprehensive spending review so far. I can provide the press releases if any hon. Member doubts it, but I am sure we would all want to follow that up. That must surely be better than falling for the trick, as has happened in the past, where we receive memorandums of understanding and order shed-loads of products from big software houses abroad, simply because they give us the licenses at slightly less than the exorbitant prices they would charge a private customer.

The Government can do a huge amount in monitoring how taxation policy plays out. If there is a case, and serious empirical evidence is produced, showing that the video games industry is deserting the UK purely off the back of current taxation policy because the Government are reluctant to follow through on some suggestions made prior to the election, they will need to look at that. We cannot afford to stand by and let the industry go, because that would be a serious loss to the country.

We need to keep an open mind on fiscal measures and what will work, and to take a hard, prolonged look at both our education—

[Jim McGovern]

Before the general election, the Conservative and Lib Dem spokesmen on this subject both said unequivocally that they would support tax breaks for the video games industry. Why has that changed?

[Dr Pugh]

I am not party to the discussions that have led to that change. Clearly, there were opportunities for previous Governments to do precisely that.

The opportunities for the British software industry are huge. The Government just need to make the right move. Some of the right moves are plain and obvious, and I hope they will make them.

09:55

[Mike Weatherley (Hove) (Con)]

I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on securing this debate.

The Government have made a number of announcements in the past weeks emphasising the importance of innovation to the UK economy. In particular, I welcome the Prime Minister’s “Blueprint for Technology” and the specific measures set out to support technology-based innovation. The UK software industry is at the heart of such innovation, and none more so than the video games and interactive entertainment industry.

The UK video games industry—the fastest-growing creative industry in Britain—is one of the biggest in the world. More video games than ever before are being played on an ever-growing range of platforms: consoles, online, mobile phones and interactive TV, to name a few. One in three voters consider themselves gamers. My hon. Friend the Member for Southport (Dr Pugh) mentioned his preferred game; mine is “Command and Conquer: Red Alert 2”.

A large part of the industry’s strength lies in its development of original intellectual property. The UK video games industry excels in innovation and research and development. It is anticipated that the growth in mobile and online gaming in particular will provide new opportunities for original IP development. Sussex is home to a number of content creators and digital media companies, poised to play their part in the UK’s economic recovery. In my constituency—Hove and Portslade—and in the wider Brighton and Hove area, companies such as Black Rock Studios, NCsoft, Eurogamer and Futurlab are meeting demand from a thriving home and export market.

Government support is needed to ensure that the UK remains at the forefront of this thriving industry and to ensure that it continues to grow. IP protection is crucial in that regard. I am sure that I do not have to remind hon. Members of the importance of intellectual property rights, particularly in the online space. I welcome, and I hope other hon. Members do, the Government’s commitment to IP and the Gowers report, and to pursuing infringers through the Digital Economy Act 2010, although it is not perfect in respect of the appeals procedure. It is right that the Government continue this good work, making the IP framework more conducive to innovation.

As the Prime Minister reflected this week, IP is not just about protecting the end result; it is also about ensuring originality in creation. Will the hon. Lady join me in welcoming innovations in the video games sector that are allowing the UK to harness its talents and exploit its advantage? For example, the university of Abertay Dundee, is achieving great things with Government support. With support from the Department for Business, Innovation and Skills and from the European regional development fund, Abertay university is establishing a video games centre of excellence and a prototyping fund, allowing small games developers throughout the UK to apply for grants of up to £25,000 to support the development of fully working prototypes.

[Jim McGovern]

When will a member of the coalition Government visit Abertay university?

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

On 3 February.

[Jim McGovern]

The Secretary of State for Scotland has visited, but no Conservative Member has done so.

[Mike Weatherley]

I thank the Minister for his intervention.

Commercialisation and project management support will also be provided from Abertay’s business and computer games experts, giving each successful applicant the best chance of establishing or developing a thriving business. The spill-over effects into other areas are plain. For example, talented students and graduates will gain important work experience opportunities on project teams, working in the same studio environment as computer games companies. Overall the project can be described as a pipeline for the creation of new intellectual property and it is expected to stimulate the economy by attracting private sector investment.

Similarly, a partnership between Cardiff schools of creative and cultural industries at the university of Glamorgan and Swansea Metropolitan university will support companies holding creative IP in exploiting that resource through identifying routes to market and developing capacity. The DigiLab will ensure that games prototypes for further investment are generated, and that subsequent end products reach the key games publishers quickly to the benefit of participating companies and sponsors.

I call on hon. Members to support those and other initiatives, which are providing crucial commercial and intellectual partnerships to spur innovation and sustain a sector that is at the heart of our economic recovery. I welcome recent announcements about the Government’s intention to establish technology and innovation centres and to use Intellectual Property Office savings to support UK business, helping companies to develop new technologies and offer advice in developing their intellectual property. I look forward to seeing how those projects develop in the coming months.

Finally, the Government have signalled that they will consult business later this autumn on the taxation of IP, and the support that research and development tax credits provide for innovation. That area is of vital importance to the software industry, and I urge my hon. Friends to engage with industry bodies such as the Association for UK Interactive Entertainment, and provide a framework for the industry to flourish.

10:00

[Justin Tomlinson (North Swindon) (Con)]

I rise to support the principle of this excellent debate secured by the hon. Member for Houghton and Sunderland South (Bridget Phillipson). Let me provide a little context on why I have come to support the debate. At midnight on Monday, “Call of Duty: Black Ops” was launched as the latest product in a series of the world’s best-selling computer game. More than 100 HMV stores were open, and queues of people were waiting to get hold of the game. About £1.5 million of sales were expected on the first day, and worldwide sales are expected to exceed £1 billion, which will make it the best-selling computer game ever. It was my birthday on Friday, and I am hopeful that when I return from Westminster at the end of the week, a copy of the game, along with “Football Manager 2011”, will be waiting for me. I must, however, confess that I am exceedingly average at both games.

I have spoken to a lot of hon. Members about this debate, and the average level of knowledge about computer games among MPs is not fantastic. I have done a little research, and found that Positech Games has launched games called “Democracy” and “Democracy 2”, where there is the opportunity to be the Prime Minister. I am sure that the Leader of the Opposition will soon be ordering a copy.

I have taken part in many debates in which we sought to identify new markets to allow the UK economy to expand and diversify. The information and technology market is happening now. As has been mentioned, the worldwide ICT market is expected to reach $4.3 trillion in 2011. UK studios already generate global sales of £1.7 billion a year, with the UK market in the region of £3.5 billion a year. It is essential that we are best placed to benefit from that.

Interestingly, the market is changing and in many ways it is going full circle. Although big budget games can cost around £25 million to develop and are therefore dominated by the big players, many of the early software industries in the ’80s initially expanded from a bedroom industry to become the multi-million pound industries of today; for example, Codemasters, which was set up in 1986 by Richard and David Darling. With iPads, iPhones and Facebook applications, once again, new players can enter the market. We should encourage and support that.

My constituency can play a part in helping the UK to benefit from that growing market. The head office of the Technology Strategy Board is based in Swindon, and I had the pleasure of meeting its chief executive a couple of weeks ago. Part of the company’s remit is to invest in stimulating business innovation in ICT, and its primary role is to work with e-skills UK, professional societies, and research councils—many of which are based in Swindon—the Department for Business, Innovation and Skills and the Department for Education. Through its co-ordination, expertise and funding, the UK should, and can, fully benefit from that crucial market.

I extend an invitation to the Minister to meet the Technology Strategy Board. As an incentive, Swindon—in its second role in the industry—is home to the Museum of Computing, which I support. All hon. Members who have referred to computer games, or to their original computers, can go and see those things proudly on display, and the museum would be delighted to welcome them.

10:03

[Ian Lucas (Wrexham) (Lab)]

It is a pleasure to serve under your chairmanship once more, Mr Weir, and to have listened to the various hon. Members who have contributed to our debate about an extremely important industry for the United Kingdom. The ICT industry has developed hugely over recent years. I remember that when I was a bright-eyed, bushy-tailed candidate in 1997—I was one of the few Labour candidates to lose—we talked about giving computer internet access, as we then called it, to schools. Now, 13 years later, much of that optimism and much of the commitment made by the previous Government to putting schools online and introducing computers into schools has been realised. We easily forget the scale of the change that has taken place in our schools as a result of investment over the past 13 years.

There is no doubt that when the Labour party left office, the British software industry was strong on the national stage with 1.2 million people working in it to service the 22 million people throughout the UK who access IT and use computers every day in their work. We must try to ensure the continuation of our competitive advantage and knowledge base that has enabled the success of the international UK computer industry.

Today, thousands of students are marching in London in response to the Government’s proposals for university tuition fees. That is relevant to today’s debate, because over the past 13 years, there has been major investment in higher education and an increase in the number of students going to university. If one industry is knowledge-based, it is the IT and software industry. Those students who went to university and were attracted by all the games—of which hon. Members know much, and I know very little—have grown our IT industry. Many imaginative and successful small companies in the UK have come out of universities. My fear is that as we go forward, given that it is proposed that student tuition fees will rise to £9,000 a year, many people similar to those who went to university over the past 13 years will be discouraged from attending university and therefore from going into an educational, innovative atmosphere that could lead them into that innovative industry.

[Dr Pugh]

The hon. Gentleman will recall that he voted for tuition fees in the last Parliament and I did not. I say nothing about the current policy, but at the time I said that the introduction of tuition fees and top-up fees would reduce the number of people applying to university. As a matter of empirical detail, I turned out to be wrong. There is an outside chance that, regardless of the merits of this policy, the hon. Gentleman could also turn out to be wrong, as I was.

[Ian Lucas]

The hon. Gentleman is wrong to state that I voted in favour of tuition fees—I did not. I have always opposed tuition fees. There is a difference in kind between the tuition fees introduced through legislation in 2003-04 and the present position. The fees introduced in 2003-04 were supported by a generous bursary scheme that the Government put in place, which was the main reason why the proposals went through. We now have a situation in which fees of £9,000 a year are being proposed. Before the introduction of those fees, when Parliament will be asked to increase the cap to £9,000, we will not have any discussion about the bursaries that will be put in place. The White Paper on higher education—one of the most important subjects for our nation—will not be produced until after we have voted on the cap, and that is a matter of profound concern. I have always shown a great interest in this issue and, for the benefit of the hon. Member for Southport (Dr Pugh), I can say that it is one of two occasions when I voted against the Labour Government. The matter goes to the heart of whether the UK software industry succeeds in the future.

Of all the countries that compete with us, we are alone in cutting back on investment in higher education. Teaching grants for most of the subjects that will lead to people studying IT at university will be removed. That cannot make us more competitive as a nation, because it will make our students less knowledgeable. It is therefore necessary that we say that the removal of those teaching grants will have profound effects.

In its 2008 “Developing the Future” report, Microsoft stressed explicitly the importance of industry placements for students. When talking about the lower level of tuition fees, it stated:

“The introduction of tuition fees may have created a deterrent to students considering taking up a placement as they are likely to be more anxious to finish their studies as soon as possible in order to repay their loans and avoid further debt.”

How much greater will that deterrent be as tuition fees are set to triple?

That is not the only area of uncertainty created by the present Government. Labour made a clear commitment to universal broadband by 2012, but it has been scrapped by the Tory-Lib Dem Government. That will create a competitive disadvantage for many companies away from the south-east of England and centres of population in general. It will inhibit the development of innovative small businesses, which are so evident in the software industry. Even more serious is the uncertainty about the expansion of high-speed broadband services, which are key to the development of software companies. We all know that the £530 million docked from the licence fee will be insufficient to pay for universal high-speed broadband across the UK. Will the Minister please tell us where the Government believe the money for that will come from?

The Government have set their face against support for the video games industry by scrapping Labour’s games tax relief. We heard today that we need a clearer explanation of why the Government believe that that step—it contradicts the Conservatives’ pre-election stance, although we have come to expect that from the present Government—should be taken. My hon. Friend the Member for Dundee West (Jim McGovern) has been doggedly pursuing the matter for as long as I can remember, but he is still to receive straight answers to the straight questions that he has been putting. Why is an industry that we know is successful and that is in a very competitive environment not receiving the support from the Government that the Conservatives stated before the election that they would provide?

[Justin Tomlinson]

Will the hon. Gentleman clarify whether it is still Opposition policy to support those tax incentives? If so, how would they be funded and where would that funding come from?

[Ian Lucas]

Let me give the hon. Gentleman one example of what the Government whom he supports have chosen to do. They have chosen to reduce corporation tax rates year by year, and they are paying for that by taking away tax incentives for industry to make capital investment. The Labour party believes that that approach is wrong, because lower corporation tax has a huge effect on banks’ income, and the approach detrimentally affects investment and manufacturing in this country. We want to support investment and manufacturing in this country, so we favour tax incentives and relief for investment made by business. That is the line that we are taking. We took it in government, and we believe that it is correct.

[Luciana Berger]

Is my hon. Friend aware that the Red Book cites the amount involved in not introducing the video games tax relief as £200 million, but that that does not take into account the net benefit of introducing a video games tax relief, which conservative estimates have put at an additional £200 million?

[Ian Lucas]

I am very grateful to my hon. Friend. That sounds like a good deal to me, so perhaps such an approach that should be followed. We have a successful industry. We should be encouraging it to prosper, not taking away its advantages.

Last week, the Prime Minister made a speech about information technology. Interestingly, he chose to make it in east London. I note that this debate was secured by my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson). We want innovative companies throughout the UK—in England, including the north-east of England, in Scotland, in Wales and in Northern Ireland.

My hon. Friend made the excellent point that the north-east had one of the best regional development agencies in the country in One North East. She talked about Sunderland, its Software City and its computer city-approach. We all know about the success of the investment levered into the UK from Nissan by One North East, working with Her Majesty’s Government. That £400 million of investment came at a cost of £20 million. That is the type of work that has been going on in the north-east to bring innovative new companies and investors from abroad to the UK. Unfortunately, One North East has gone and, as we speak, Sunderland does not have a local enterprise partnership.

We heard the Prime Minister talk last week about a fund of £200 million for new technology and innovation centres, so I would like some information from the Minister about the money. Is that sum separate from the regional growth fund? If so, who will administer it and how does one access it? If part of the country, such as Sunderland, does not have a local enterprise partnership, how will it access finance from the fund? Is the fund intended to be solely for the benefit of east London or is it a national fund? [Interruption.] The Minister chuckles, but it tells us something that the Prime Minister shuttles across to the east of London to make such an announcement instead of going, for example, to the north-east of England, which has many great industrial stories to tell.

I would also like to pick up the point that the hon. Member for Southport made about Microsoft having a close relationship with the previous Prime Minister—or was it the Prime Minister before? There was evidence in last week’s announcements of another close relationship between a Prime Minister and a major multinational software company—Google. Strangely, however, the hon. Gentleman did not refer to that. In particular, there was an announcement of a review of the intellectual property system, which the Prime Minister himself said frustrated Google in this country. It is interesting that on the very day the Prime Minister announced that there would be a review of intellectual property rights in the UK, Google announced that it would be taking part in the east London high-tech city project.

[Dr Pugh]

We all need to be cautious about such things, and I must add to that the fact that my right hon. Friend the Deputy Prime Minister made some significant announcements the other day at the event involving Microsoft. We all need to be wary about these issues.

[Ian Lucas]

We do indeed, but the hon. Gentleman raised the issue initially—specifically in connection with the Labour party and Labour Prime Ministers. I thought it only fair to illuminate the debate by highlighting the announcements that were made only last week.

When examining issues such as intellectual property, which is extremely important and does need to be examined, we need to be conscious of not only freedom of expression and access to information, which are of course vital and needed to make our nation competitive, but the rights of those who create original material, who are often the small people in all this and do not have access to Prime Ministers, and sometimes have difficulty gaining access to MPs. Their rights concerning their intellectual property need to be retained. I shall therefore be watching the review with great interest. It is important that there is broad input into the review and I encourage anyone who has interest in this area to contribute. We are at a positive stage for the UK software industry. We have great talent, great innovation and great originality. My contention is that much of that arises from the positive intellectual atmosphere that has been fostered generally in the UK, and specifically in our universities. I am worried that that atmosphere might disappear because of the environment in which we operate.

[Jim McGovern]

I thank my hon. Friend for giving way; I went to my usual seat in the Chamber over here, so I seem to have split from the Opposition.

On the subject of access to MPs, prior to the previous Labour Government’s March Budget statement, numerous Ministers—the Chancellor, the Secretary of State for Scotland, and Ministers from the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport—visited Abertay university. They saw for themselves just how important the industry was to Dundee and, on the back of that, the Chancellor announced a tax break for computer games. However, since the general election, there has been not one visit to Dundee.

[Mr Vaizey]

Just the Secretary of State for Scotland.

[Jim McGovern]

Prior to the withdrawal of tax breaks for the computer games industry, not one Minister visited Dundee. Does my hon. Friend the Member for Wrexham (Ian Lucas) agree that that was unfair, at the very least?

[Ian Lucas]

We all benefit from close contact with not only our constituents but, for example, universities. I am delighted that the Minister will be visiting the university in Aberdeen—[Interruption.] Dundee; I am corrected. I am sure that he, like all of us, would benefit from such a visit. It is important that we understand how different universities are from when some of us attended university.

As I mentioned, another area about which I have particular concern is high-speed broadband. I speak as a Member of Parliament for Wrexham and for Wales, and I am worried that uncertainty around the proposals for developing high-speed broadband, and indeed universal broadband before that, is leading to an atmosphere in which businesses away from the south-east of England will suffer a competitive disadvantage. In an area such as software, that will be crucially important.

[Justin Tomlinson]

Will the hon. Gentleman clarify what speed he would classify as high-speed broadband?

[Ian Lucas]

Speeds of 10 megabits-plus are commonly perceived as high speed, although figures of up to 50 megabits are valued in some areas of the computer industry. Those are the sorts of speed that I would like to see. The problem is that there are many parts of the country—rural areas, which are not normally represented by Labour MPs—that do not as yet have even 2 megabits. Under this Government, there is no commitment to ensure that individuals from these areas will receive such support for broadband services in the future.

YouView will be introduced into this environment next year and demand for broadband services will increase as a result. This important area is at present below the radar—if I may mix all my metaphors and technological expressions—but it will become more evident in the next year or so because of the expansion of such services. If we are to maintain a broad-based industry across the country, it is important that we focus hard on this and also that we get some detail and certainty about how the investment will be delivered right across the United Kingdom.

10:24

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

I am grateful, Mr Weir, to be serving under your chairmanship today, instead of serving with you in Committee as we were yesterday, and will be again tomorrow.

I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on securing this important debate. May I give her one quick, straight answer, which is that I would be delighted to meet her at a later date if she finds my speech unsatisfactory? I can make a safe prediction that because I am a Minister and she is member of the Opposition, my speech will almost certainly fall short in some respects of what she wishes.

I would also be only too delighted to visit Sunderland and see some of the innovation and technology happening in that city. The hon. Lady used her speech to highlight brilliantly the sort of technology expertise that now exists in Sunderland. In fact, as pointed out, in the north-east alone it is said that the software and IT industry is worth something like £800 million; there are almost 2,200 businesses, 27,000 people and companies such as 5G, which she mentioned, and, in other parts of the north-east, Sage, Reflections and Eutechnyx. Sunderland is a hub of high-tech industry.

I am grateful to some of the other hon. Members who have contributed to the debate. The hon. Member for Southport (Dr Pugh) made a thoughtful speech, which was not partisan but reflected on many of the issues that affect the software industry. He effectively turned the debate, for a moment, into one on the video games industry. Another point, which I shall return to, and which I absolutely support him on, was his reflection that in schools children today are learning how to use applications rather than how to programme.

In fact, the hon. Gentleman might have shared with me some of the anecdotal experiences of talking to some of our top games developers, many of whom learned their trade, as it were, on the BBC Acorn computer in the ’80s. We simply do not have such access to the nuts and bolts of technology. One of the things that I want to work on, in a big society kind of way—I am one of those Ministers who fully understands what the big society is—is some sort of after-school club where children can sit down with developers and learn how to programme. I also took on board the hon. Gentleman’s points about big IT and big government. He will be well aware that many members of the new Government, particularly the Chancellor, are keen supporters of open source software. The Government are very focused on ensuring that small and medium-sized enterprises get a fair share of the cake from the Government.

I was pleased that the hon. Gentleman took a realistic view about the fate of BECTA—we should not always focus on the quango as the be-all and end-all of Government policy. I am sure that schools will continue to access excellent high-tech IT equipment for their children, not least from RM plc, one of the foremost educational technology providers in this country, based in my constituency, at Milton park in Didcot.

It was good to hear the speech of my hon. Friend the Member for Hove (Mike Weatherley), whose soon-to-be constituency I visited during the election. I am not sure whether I made a big impact; I suspect it was his hard work and dedication to his now constituents that secured him the seat. He has already made a name for himself in the House with his passionate support for the creative industries. He used to work in the film and music industry. His focus is on piracy, to ensure that there is a balanced debate and that we remember that rights holders deserve to make money from their creations. I take on board his points about the R and D tax credits.

I am delighted to see my hon. Friend the Member for North Swindon (Justin Tomlinson) in the Chamber, having won his seat at the election. His remarks reflected the change of tone in the House on video games. When I was an Opposition spokesman and talked about the importance of video games, the only Labour Member who would talk about video games was the right hon. Member for Leicester East (Keith Vaz), who regularly criticised them for their violence and their effects on society—he alleged. It is good that my hon. Friends are now standing up and saying proudly that they are players of video games.

[Jim McGovern]

Does the Minister accept that “video games” is perhaps the wrong title for the subject? Anyone who has visited Abertay university would see that what are called video or computer games can be applied to construction, architecture or medical science. It is wrong to say that “video games” just involve young lads sitting at a computer playing “APB” or “Grand Theft Auto”.

[Mr Vaizey]

Obviously, the software industry is far wider than simply video games. We tend to call it the video games industry in the vernacular, although some people call it the interactive entertainment industry. However, I have said consistently over many years that what one loosely calls the video games industry is at the heart of a whole range of technologies in defence, education, health and the wider creative industries, such as architecture. That is why it is so important to support the core skills and companies in the industry.

My hon. Friend the Member for North Swindon invited me to meet the Technology Strategy Board. I have done so. It is incredibly important to the debate about the future of the software industry, as well as across a range of other areas. I am delighted that it is in Swindon, just down the road from my constituency; indeed, several of its employees are constituents, so they are clearly people of great judgment. Let me take this opportunity to wish my hon. Friend a happy birthday for last Friday.

Last but not least, I welcome to our Benches the hon. Member for Dundee West (Jim McGovern). I cannot work out why he is sitting where he is, and I had better tread carefully in making an analogy, but he resembles one of those soldiers from the last war who was so dedicated to his craft in taking on the enemy that he dug deep, burrowed down, hid and covered himself in camouflage. In coming to his usual seat, he is as yet unaware that the last war has concluded, victory has been declared and there is a new Government. Alternatively, his choice might simply reflect the huge success of the coalition’s policies over the past six months, particularly pertaining to the software industry, to which I am about to turn.

[Jim McGovern]

Let me say in response that I might be the first, but I will certainly not be the last, to split this coalition.

[Mr Vaizey]

The hon. Gentleman indicates that he is simply acting as a buffer between Conservative and Liberal Democrat members of the coalition. I wonder what other conflict spots we could send him to, given that he is doing such an excellent job this morning.

I have mentioned the huge importance and success of the software industry in Sunderland. The hon. Member for Wrexham (Ian Lucas) talked of the success of the UK software industry, and I heartily endorse what he said. More than 500,000 people work in it, and there are more than 100,000 enterprises, generating more than £39 billion of gross value added. The UK market for software products and services is the largest in the European Union and has sophisticated leading-edge consumers in sectors such as logistics and financial services. As a result, almost all the world’s major software businesses have a substantial presence in this country, whether in research and development, logistics or sales and marketing.

The software industry is not immune to the pressures being felt across the UK economy. In the longer term, globalisation will create additional pressures, as routine tasks and activities continue to be relocated to lower-cost economies. However, there are also tremendous opportunities for the sector, and I am certainly from the school that sees the glass as half full, rather than half empty. Innovative software technologies will underpin many of the fundamental shifts that we see in our society and our economy—everything from how we shop and access entertainment such as television and video to how we improve our transport networks and manage our scarce natural resources. In all those areas, new software systems will be the key enabler and driver of growth and innovation. As a result, the sector’s importance extends far beyond its direct contribution to UK GDP and employment, vital though that is. The sector will be in the vanguard of our broader economic renewal.

The coalition Government are absolutely committed to creating the right conditions to allow software and other UK technology companies to flourish. That means responding to the sector’s distinct requirements to ensure that the software businesses of tomorrow are nurtured today. Last week, the Prime Minister launched “Blueprint for Technology”, which clearly stated the Government’s ambition to make the UK the No. 1 place in the world to start and invest in a technology company, as well as our ambition to be the most technology-friendly Government in the world.

The hon. Member for Wrexham took huge exception to the fact that the blueprint was launched in Shoreditch, not Sunderland, and I assure him that I will be writing to the hon. Member for Hackney South and Shoreditch (Meg Hillier) to tell her that one of her party’s spokesmen deems her constituency unworthy of the prime ministerial launch of a technology blueprint. The hon. Gentleman gave no reason, but if he wants to clarify why he has a downer on Shoreditch, he has only to intervene.

[Ian Lucas]

I would be delighted to intervene. I made it absolutely clear to the Minister, who clearly was not listening to my speech, that a commitment to the regions, which is so important to the future of the software industry across the UK, is lacking. I am sorry that Her Majesty’s Government, and particularly the Prime Minister, have not, for example, put in place a local enterprise partnership in Sunderland, which is an extremely important industrial city in the north-east, where one of the world’s most important automotive companies is based. I was illustrating the fact that the Prime Minister’s priorities appear to be focused on the south-east, which is where he launched the blueprint.

[Mr Vaizey]

The hon. Gentleman might as well say that the fact that we are having this debate in Westminster indicates that the Opposition’s priorities are focused on the south-east, rather than on Sunderland. It is slightly crass to rubbish the technology blueprint on the basis of where it was launched. It was launched in a Labour constituency, and the Government were absolutely adamant that it would be, to show our support for the Opposition.

As for the LEP, the hon. Gentleman well knows that individual local authorities and areas were invited to bid for an LEP. Sunderland’s bid did not get through the first phase, and it is now part of a wider bid for the Tees valley. I am certain that it will be constructively listened to and will progress. The idea that the north-east is somehow not getting LEPs is another complete myth; indeed, the hon. Gentleman’s speech was full of myths, to which I will return from time to time in my remarks.

For example, if the hon. Gentleman wishes to intervene again, perhaps he could elaborate on his remark that Google was rewarded for coming on board the east London project—along, I have to say, with important British companies such as Vodafone and BT—with a review of intellectual property. Is it his allegation that there is some corrupt deal between Google and the Government? If it is, he is free to intervene to make that point. I notice that he is not going to.

Software companies have said that their top priority is the ability to access the right skills in the right place at the right time. Those skills range from specialist capabilities in science and engineering through to practical know-how in systems maintenance. The relevant sector skills councils, including e-skills UK—the sector skills council for business and information technology—are working closely with software employers and the Government. The aim is to bring together the education system and workplace training to create the pool of skilled workers needed to generate and exploit innovative technologies. It is important to note that the Government announced early in their time in office the Livingstone-Hope review of skills for the video games industry, which is progressing extremely well and has generated enormous support from the sector. It will no doubt complement the other review that I mentioned.

The Government recognise that the software and technology sectors are globalised and highly mobile. We will therefore ensure that investors and entrepreneurs who want to operate in the UK can enter, while we are reducing the overall level of immigration to a manageable level. That is why the technology blueprint introduces a new entrepreneur visa to make sure that someone with a great business idea who receives serious investment from a leading investor can base their business in the UK.

[Ian Lucas]

indicated dissent.

[Mr Vaizey]

The hon. Gentleman shakes his head. We all know the Labour party’s record on talking about immigration, and we have been only too interested to see the leaflets that it was putting out during the election. Our policy takes a slightly more sober and reasonable approach to what can sometimes be an emotive issue.

[Bridget Phillipson]

The Minister may be aware that the Select Committee on Home Affairs, of which I am a member, gave careful consideration to the immigration cap. Some of the concerns that were raised, particularly from ICT companies, were about how it would work and whether it would be a deterrent for business investment, particularly in relation to highly skilled jobs such as those in scientific industries. I know that the Minister is making a party political point, but there are serious issues for the Government to consider about the working of the cap and the impact that it may have on the UK software industry.

[Mr Vaizey]

I should love the hon. Lady to point out what party political point I made. I was simply setting out our policy and the fact that we responded to the concerns in question with an entrepreneur visa. I noted that the hon. Member for Wrexham was shaking his head. Clearly, he simply opposes the policy for the sake of it, rather than considering what it does.

The blueprint also announces a review of the intellectual property framework, to ensure that its design will support the growth of both new and existing businesses. That review is incredibly important, because it will focus on the needs of small and medium-sized enterprises. We want to give our full backing to the high-growth, innovative companies of the future, whether they specialise in software or other disciplines. Part of preparing for the future is looking critically at the frameworks that we have in place to protect innovators. The review will focus on identifying and dismantling barriers to growth in the IP system, and will look at how the IP framework could better support new business models as they develop.

The third important element of our blueprint is the framework for supporting future technological innovation in software and other disciplines. We are now pledged to establish a network of elite technology and innovation centres, based on the model proposed by Hermann Hauser and James Dyson, to commercialise new and emerging technologies in areas where there are large global market opportunities and a critical mass of existing UK capability. The recent comprehensive spending review has provided £200 million of funding for the technology centres over the next four years. The network will be overseen—in answer to the questions of the hon. Member for Wrexham—by the Technology Strategy Board. Individual centres will operate with a high degree of autonomy, to give them the flexibility to respond to business needs and emerging opportunities, but the board will provide the overarching framework.

Our vision for technology and innovation centres is that they should help industry sectors to exploit new and emerging technologies, and bridge the gap between original research and technology commercialisation, reducing some of the attendant risks to business. I am aware of the issue from my constituency where there are several high-tech companies that can benefit from spin-off research. Each idea appears to me to be potentially world-changing, but the struggle they have to take that research to market and commercialise it cannot be underestimated. The centres will support projects that businesses and universities often cannot undertake, or that they do not have sufficient incentive to undertake on their own. They will help new technologies get to investment readiness so that they are a viable proposition for venture capital or other forms of investment, and will help, we hope, to accelerate their journey to market.

We want to get the network up and running as soon as possible, so the Technology Strategy Board will work closely with industry, stakeholders, and the Government to identify the priority sectors, the scale of initial investment required and the governance structure for the network of centres by April 2011. I urge the hon. Member for Houghton and Sunderland South and any other hon. Members who are interested in the issue to contact the board to discuss it.

The Technology Strategy Board plays an important role in supporting the software sector. It already supports innovation among software-intensive firms in a number of ways, either through sector-specific programmes or through cross-sector projects designed to deal with a particular challenge, such as low carbon. It also backs the software sector via initiatives such as knowledge transfer partnerships. Several of the Technology Strategy Board’s programmes routinely invest in initiatives where more than 90% of the business activities are software-related. That is true of its information technology programme, as well as its creative industries, intelligent transport and network security programmes. In addition, the board has identified its recently formed digital programme as one of its five strategic priorities in the period ahead. In total, over the past year the board has launched 13 software-intensive competitions for projects with a combined value of around £100 million, including £50 million of private investment.

Some other issues were raised, including broadband. Again, some myths were propagated by the Opposition. I think that we all agree that superfast broadband and that kind of infrastructure is essential to the future of the economy. However, I find it odd that the Opposition seem to believe that we have reneged on a promise, or that we do not share their view of its importance. The previous Government had a very poor ambition, which was simply to get universal broadband of 2 megabits at the end of 2012. They proposed to pay for that with a telephone tax that would have hit some of the poorest in society, as well as being a disincentive.

[Jim McGovern]

Will the Minister give way?

[Ian Lucas]

Will the Minister give way?

[Mr Vaizey]

I will take the intervention of the more senior Member first.

[Jim McGovern]

On the subject of promises, prior to the general election, the Minister was quoted—I shall have to paraphrase—as saying that his party unequivocally supported tax breaks for the computer games industry. What has changed his and the Chancellor’s mind?

[Mr Vaizey]

As to promises, the hon. Gentleman’s party said in, I think, the 2001 election manifesto, that they would not introduce tuition fees. So if the hon. Gentleman wants to accuse me of broken promises, perhaps he should look to his own party’s huge record of broken promises, not the least of which is leaving the British people with the biggest deficit in peacetime history, having promised to end boom and bust.

As I said, the telephone tax would have been a huge disincentive to investment. It would have hit small businesses and the poor—all for the paltry ambition of 2 megabits universal broadband.

[Ian Lucas]

Will the Minister give way?

[Mr Vaizey]

Let me develop the policy. Then the hon. Gentleman can come in. He does not have a broadband policy, so perhaps he should listen to someone who does. Then he can make his point—if I may set out our policy.

[Ian Lucas]

On a point of order, Mr Weir. Is it in order for a Minister to misrepresent the stated policy of Her Majesty’s Opposition and not to allow an intervention so that he can be corrected about that?

[Mr Mike Weir (in the Chair)]

It seems to me that that is a matter for debate, not for the Chair.

[Mr Vaizey]

Thank you, Mr Weir, for reminding the hon. Gentleman that he has plenty of opportunities to make his point. It is a bit rich for a Labour politician to talk about the misrepresentation of other parties’ policies, given what we have seen in the news this week, after the first election court for almost a century was called on the basis of Labour party leaflets in the general election. Sheer brass neck does not even begin to describe it.

This is a debate in which I have an opportunity to set out our policy on broadband in response to the comments of the hon. Member for Houghton and Sunderland South about its importance. That is what I intend to do.

As I said, we want the best superfast broadband in Europe by 2015. We have secured the funding for it—£530 million to the end of the spending review, and a further £300 million after that. We have launched four super-fast broadband pilot projects, in the highlands and islands, Herefordshire, Cumbria and North Yorkshire, so that we can identify early lessons and work out how to proceed in the most cost-effective way. We shall also launch in more detail at the end of the year our policy on broadband, setting out some of the nuts and bolts issues. We have made huge progress on regulatory issues, such as duct access for competitors to BT and the opportunity to roll out broadband on telegraph poles.

[Justin Tomlinson]

On new developments, are there any thoughts about treating broadband in the same way as utilities such as gas, electricity and water? Having been a councillor representing new developments that have waited years for broadband access, I know that the introduction of that would be welcome.

[Mr Vaizey]

That is certainly a very important element of the question. I hope that we shall shortly be able, with the Department for Communities and Local Government, to publish a code for developers, to ensure that broadband is at the heart of their thinking.

[Ian Lucas]

I want to correct the Minister simply on a point of fact. The change to 2-megabit broadband was to be funded out of the money that he is using from the BBC licence fee—money that was left over from the digital switchover. The telephone tax was for the development of high-speed broadband. That was the position, and if the Minister wishes to, he can read about it in “Digital Britain”.

[Mr Vaizey]

I have read that report, and I am happy to stand corrected. We are in a similar position, except for the fact that the Government are not imposing a tax; we plan to get superfast broadband to as many people as possible by 2015, while the Labour party remains stuck in the slow lane at 2 megabits.

I now tackle the thorny issue of video games and tax breaks. Again, I shall try to knock down a few of the myths that have been propagated. To hear Labour Members speak, one would have thought that the land of milk and honey had arrived with the last Labour Government. When I was Opposition spokesman, I sometimes felt like a lone voice when talking about the success of the video games industry over the last three or four years. However, I pay tribute to the hon. Member for West Bromwich East (Mr Watson), who has been a fantastic advocate of the video games industry.

I remember that the Labour Government ruled out a video games tax break. When in opposition, we mentioned competition from Canada, and were told that the Government were going to refer the matter to the World Trade Organisation. However, a chance conversation with an insider revealed that that was a red herring. When I tabled a parliamentary question about it, the Government were forced to perform a U-turn and reveal that the reference to the WTO was an excuse for inaction. Finally, they were converted to a video games tax break.

At what point did that amazing conversion come? Was it at the beginning of a Parliament, when the Government had a strong majority and a lot of energy? No; it came with the last Budget of a discredited Government who were about to lose an election. They knew that they would not have to implement that tax break—and it was not implemented. It was an extraordinary U-turn; despite the comprehensive spending review of October the year before, that decision would still have had to go to Brussels for approval. The sound of Labour MPs clambering on to bandwagons now that they have no public policy responsibility for the matter is quite extraordinary.

[Jim McGovern]

I resent the Minister’s comment that Labour Members are jumping on a bandwagon. I have supported the computer games industry in Dundee for a number of years, and several Ministers have visited us. Why did Ministers not visit Dundee prior to withdrawing the tax break?

[Mr Vaizey]

Dundee is an incredibly important part of the video games sector in the UK. We have invested £2 million in the university of Abertay to support video games, but video games do exist in other parts of the country, and it is not essential to visit Dundee to decide whether we should have a tax break. But I intend to visit because it is a pioneering area with a world-class university. I am raring to get up there. Indeed, given the austere times that we live in, I hope that the hon. Gentleman will put me up for the night. It is a bit odd for Labour MPs to claim that if you cut them open, “video games tax relief” will be written on their hearts; the relief was a political ploy to win support from the industry in the run-up to the election, and they knew full well that they would not have to implement the policy.

Let us be clear about it: people want a video games tax break because of the competition that we face from Canada. A tax break is not a panacea; France has a tax break, but we have a more successful video games industry. Canada does not have a national tax break for video games. It has two strong regional Governments who actively compete for the video games industry; they made that decision 10 or 15 years ago and they are throwing money at the industry. They are handing over millions of dollars—there is nothing wrong with that—to tempt developers and publishers to base themselves in Canada, and that means salary holidays, rent holidays and other kinds of support.

I want to put in place a strategy for the video games industry—for example, so that it can access the regional growth fund that we announced, and can take advantage of the numerous funds that I have discovered in the Department for Business, Innovation and Skills. Partly because of exchange rates, we are close to Canada, even without a tax break. One company that has invested in Canada showed me the numbers; without breaking commercial confidentiality, I can say that there was a difference of about 10 or 15% in costs per employee. However, as the hon. Member for Southport mentioned, we have a fantastic skills base, and that is another important reason to invest here.

This has been a good-natured and good-humoured debate in which we have found a great deal of common ground, huge support for the software industry and a passion for the video games industry. There has been recognition of the pioneering role of the north-east and Sunderland in ensuring that the UK remains a world leader in this important industry. I set out our policies—the technology blueprint, our plans for technology innovation centres and entrepreneur visas, and our plans to review intellectual property law. However, there is broader support, too.

I was disappointed to hear that it is now the Labour party’s policy to push up corporation tax. Under this Government, corporation tax will fall year on year; that is an important point to make. We have also increased entrepreneurs’ relief for capital gains tax. Our tuition fees policy is progressive, and it will mean people paying back their debt when they are at a higher income level than applied under the Labour Government. We have made significant progress in empowering our universities. As the hon. Member for Southport pointed out, despite Labour’s U-turn on tuition fees, their introduction did not stop people wanting to go to university.

I was privileged to be at the graduation of four apprentices at Culham Science Centre in the constituency of my hon. Friend the Member for Henley (John Howell). It is worth remembering that we have a fantastic Minister for Further Education, Skills and Lifelong Learning in this Government; he has put together a national apprenticeship policy, which is important for high-tech industry. People leave school and go on to be apprentices, and the four whom I met were formidable. As the head of the Culham Science Centre said, they are as qualified as any graduate, but have been paid for four years and have no debt. Many will be going on to do higher degrees. They will be at the heart of a high-tech industry in Culham. Thanks to that Minister, this Government, unlike the last, have—at long last—a clear policy to promote apprenticeships and skills, which are important to both the IT and software industries.

I cannot read the face of the hon. Member for Houghton and Sunderland South, and I am not sure whether I have allayed all her fears, but she seems to be in a slightly happier mood than when the debate began. I am happy to sit down with her and talk through the issues at a later date, and to visit her in Sunderland.

Local Enterprise Partnerships (South-West)

Wednesday 10th November 2010 Westminster Hall

10:59

[Mr Ben Bradshaw (Exeter) (Lab)]

A more accurate title for this debate than local economic partnerships in the south-west would be the absence or lack of local economic partnerships in the south-west. When the Government launched their flagship regional economic policy the week before last, most of the south-west was completely missing. Only Bristol and Cornwall are covered by these new bodies.

This sorry saga began with the Government’s ideologically driven determination to abolish the regional development agencies. That of the south-west, like most of those around the country, was successful. It had brought much-needed strategic coherence to our region, as well as valuable investment. It had managed to overcome the age-old political in-fighting between the different parts of the region, and the RDA could take a view as to what was in the interests of the region as a whole. I am afraid that, like so much of what the coalition Government are doing—and in spite of the Business Secretary’s support for RDAs before the election —regardless of their merits RDAs had to go, because they were a Labour creation.

Soon after the election, in preparation for the new policy, the local business leaders in our half of the region—led by Tim Jones and the Devon and Cornwall business council—started an early promotion of the idea of a peninsular local economic partnership, comprising Cornwall, Devon and Somerset. The business community felt scale and capacity were vital for these local economic partnerships to succeed, and I wholeheartedly agree. In his letter of 29 June, the Secretary of State invited local areas to come together and put forward bids for LEPs in their areas by 6 September. That precipitated a two-month period of chaotic negotiations, lobbying and planning. That happened largely behind closed doors and was led, not primarily by business, as was supposed to be the case, but by the upper-tier local authorities—in our case, Cornwall, Devon, Plymouth and Torbay. Somerset county council was effectively frozen out of those discussions. It was clear that the four upper-tier authorities in Devon and Cornwall did not want Somerset’s involvement in the discussions or in any subsequent local economic partnership for the area.

My own local authority, Exeter city council, and the Exeter business community, led by our chamber of commerce, were totally excluded from the discussions. They were never formally consulted on any of the emerging proposals. That was in spite of numerous requests to be involved as one of the two key economic drivers in our peninsula. Exeter’s exclusion was also in clear contravention of an instruction in a letter of 25 August from the Minister with responsibility for decentralisation, the right hon. Member for Tunbridge Wells (Greg Clark), to Gary Porter, chair of the district council network, in which the Minister said,

“It is essential that district authorities are included.”

He went on to say that he did not expect county councils to act as “sole building blocks”, and that

“We want to see economic geographies reflected in proposals, not just administrative ones.”

It soon became clear that Cornwall, as is so often the case, wanted to go it alone—a move unfortunately endorsed by the Government for political purposes, much to the consternation of the Cornwall business community and business leaders in the rest of the peninsula.

I have a number of questions for the Minister today. First, does he agree with me and the business community in the west country that local economic partnerships should have sufficient scale to add value and to have clout? Does he also agree that they should reflect real functional economic areas? Is it not the case that the first of those objectives has been compromised by his Government’s decision to accept Cornwall’s bid to go it alone? Is it not also the case that the Cornwall bid did not meet the criteria the Government laid down and did not enjoy sufficient business support? Will he explain how, exactly, a Cornwall local economic partnership will differ from or add value to the economic development functions of the unitary Cornwall county council? Does he also agree with me that it is vital urgently to salvage something from this sorry mess, and that the most sensible solution would be for Devon, including Plymouth and Torbay, to work with Somerset and, if they are interested, those western parts of Dorset that look west rather than east? Will he confirm that the Government have been pressing such a solution?

When questioned in the House on the day of the announcement, the Business Secretary blamed the situation in the west country on the lack of agreement between the local authorities involved. That, I am afraid, is an understatement. In spite of the fact that Devon, Somerset, Plymouth and Torbay are all Conservative-controlled councils, which one might think would make the process of negotiation easier, they have been fighting like rats in a sack. We have seen a return to the worst sort of petty political in-fighting that blighted economic development so badly in our region in the past, and was one reason why Labour set up the RDAs in the first place. I understand that there is little love lost between the Conservative leaders and the councils involved. At one stage, to illustrate the ludicrousness of the whole process, Somerset became so frustrated by Devon county council’s behaviour that Somerset suggested a tie-up between it and Cumbria, based on the nuclear industry.

Will the Minister please start banging some heads together and tell his political friends in the south-west that they must stop their childish squabbling and work together in the interests of the public and local businesses? If they cannot, or will not, do that, will he please tell them to get out of the way, and let the business community get on with it? Business leaders are keen to move forward with a partnership on the basis I have outlined.

[Anne Marie Morris (Newton Abbot) (Con)]

I am delighted that the right hon. Gentleman has given this debate an airing, because it is crucial that we have LEPs in the south-west. Would he agree with me that, in the vein of what he has just said, we should put political divides aside and move forward and get an LEP for Devon, and I suspect for Somerset, as quickly as possible? I believe the business community is now absolutely behind it.

[Mr Bradshaw]

The hon. Lady is right; the business community is behind it. The point I was trying to make is that this is not about putting political differences aside, because the four local authorities involved are all Conservative controlled. They do not—or should not—have political differences but they have been completely incapable of working together on a sensible local economic partnership for our region. I hope we can see them make swift progress toward doing so now. If they will not do it, I want the Minister to tell the local authorities to get out of the way and leave the field clear for the business community, which, as the hon. Lady rightly says, is keen to make progress, so it can put in a bid. Will the Minister confirm, on that basis, that the business community is entitled to come forward with a bid—that it is perfectly possible for it to bypass the fractious local authorities? Will he assure the business community and me today that the Government would look favourably on such a bid? Will he also reaffirm the instruction of the Minister with responsibility for decentralisation: that it is essential that Exeter, which is so important for our region’s future prosperity, be included at the table? If I were the Minister here today, I would be hopping mad at Devon’s deliberate and calculated rebuff to his colleague’s instruction that Exeter should be included in the process.

As the head of Britain’s leading business organisation, the CBI, said recently, this process has been a shambles. We now know that the Minister’s own colleague, the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), warned the Business Secretary in a letter of 14 September that the Government’s local economic partnerships were in danger of failing. I quote from his letter:

“There is a strong view amongst the business community that many LEPs lack the ambition to make significant economic impact undermining our agenda for growth. Key messages I have been made aware of include: a lack of credible business representation on LEPs Boards; negotiations dominated by local politics and a lack of a clear focus on economic growth. They also report different messages coming from Government about LEPs. John Cridland [of the CBI] specifically was concerned that the process has not been transparent, business engagement was poor overall and exacerbated by a tight timescale. He and other senior business leaders from Tesco and Ford have expressed their concern that in their view the policy is in danger of failing to aid economic growth.”

That is exactly what the Labour party warned would happen if the Government went ahead and abolished RDAs. The public and businesses of Devon and most of the south-west have been badly let down by the Government, and the Minister and the Government need to get a grip before it is too late.

11:09

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

It is a pleasure to speak on this subject and I congratulate the right hon. Member for Exeter (Mr Bradshaw) on securing this debate. I think that he and I first faced each other many years ago when he was fisheries Minister. In those days, he was in government and I was in opposition, but to the relief of fishermen, their friends and many other people, the boot is now on the other foot.

I thank the right hon. Gentleman for drawing these important matters to the attention of the Chamber. Creating the right framework for local economic growth and renewal in the south-west and throughout the whole country is an important issue that the Government take seriously. Indeed, it is one of our core priorities. As my Department—the Department for Business, Innovation and Skills—is the Department for growth, I am pleased to be able to respond in that spirit.

It is important to understand that as we manage growth, and as we stimulate business to deliver the additional growth that we need to move from recession to recovery and ultimately to prosperity, we take account of the economic profile of different parts of the country. Contrary to what was at least suggested in the right hon. Gentleman’s remarks, this issue is not a matter of disagreement among the coalition partners. The two partners in the new coalition Government are both committed to the principle of having a local, regional and sub-regional structure to stimulate growth; we have been committed to that principle before and after the election.

Local enterprise partnerships are a vital element in the broader reforms that we are implementing to create the new framework for local growth. They are underpinned by three important principles, which I shall outline at the outset. The first principle is that the economic geography of our country is not fixed, but changes as the character of the economy changes. It is widely understood that as economies advance, their needs—for example their skills needs—also advance. However, it is not so often said that economies also become more dynamic as they develop, and our prospects for growth will depend on creating the right framework to facilitate and stimulate that dynamism.

The second principle is that economic prospects can be transformed when enterprise is free to innovate. That additional freedom is about creating the right conditions in which entrepreneurs, businesses and commerce can thrive. I think that it would be vulgar to make too many narrow party political points, but I am not sure that even the greatest advocates of the last Government would argue that they had created the right environment for business to thrive.

The third principle is that lasting economic renewal requires civic and business leaders to feel empowered to shape their own community and its economic interests. That principle has long been embedded in our assumptions about the role of local government. At district, unitary and county level, local government has long had an economic purpose: to produce an economic development strategy and to ensure that that strategy married with the wishes and desires of local business people, as well as those of the wider population, in the interests of the common good.

I believe that private enterprise is the dynamo that will power our future prosperity and fuel the innovation that will underpin our future global competitiveness. The White Paper on local economic growth, which was published on 28 October, sets out our detailed proposals, as the right hon. Gentleman acknowledged. Those proposals are designed to promote economic development and spread economic opportunity right across the country, and they rest on four foundations.

The first foundation is the strengthening of national economic leadership for the activities that enable the UK to compete internationally: trade, inward investment and innovation. At the risk of digressing—I know that you will not let me digress too much, Mr Weir—I also will add the issue of skills, which was referred to in the previous debate by the Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Wantage (Mr Vaizey). Skills are critical for driving economic growth, because if an advanced economy is to become more dynamic, its skills needs also need to become more dynamic and advanced. That is why we are putting so much emphasis on skills, and I hope that I will be forgiven for repeating the fact that we are making apprenticeships the pivot of our skills policy, with substantial additional investment. Indeed, many business people have written to the national press today to celebrate that fact.

The second foundation of our proposals is investing in crucial infrastructure such as broadband and high-speed rail. As you know, Mr Weir, the Government have already said much about that. The third foundation is establishing the regional growth fund to support jobs and growth, which is worth £1.4 billion over three years.

The fourth foundation of our proposals is to create local enterprise partnerships, which is the central issue of this debate. However, before I deal with the specific matters on which the right hon. Gentleman understandably concentrated, let me set out the case for local enterprise partnerships before I say a little about their application in the south-west.

If we are to succeed in rebalancing the national economy and kick-starting local economies, including in the areas that the right hon. Gentleman mentioned, we need a framework that recognises the economic geography of the country rather than one that is twisted to fit arbitrary administrative structures. I think that I can warmly support what the right hon. Gentleman said in that regard. I believe he said that the system should match “real” areas of economic growth and economic interest rather than being an artificial construction.

The role of LEPs in those terms will be to build genuine and effective partnerships of local business and civic leaders. Once again, I do not think that there is any disagreement between us on that point. I have already mentioned the long-standing commitment of local government to economic planning, and indeed to economic development. That idea is central to what I think is our shared understanding of the role of these new LEPs. It is absolutely right that civic leaders who identify with their area, share an ambition to grow the local economy and believe in creating jobs, wealth and so on should play a part in ensuring that measures taken by Government and other agencies match the priorities of their local area.

[Duncan Hames (Chippenham) (LD)]

Given those requirements, will the Minister tell us what the Government consider should be included in the bid for an LEP, including what requirements the bid for a Wiltshire LEP is yet to meet? Will he also explain to us the timetable for the announcement of further LEPs?

[Mr Hayes]

The hon. Gentleman knows that I will not go into details about a timetable because he also knows, given his interest in the particular matter to which he refers, that that is very much under discussion. Indeed, representations that have been made in that area are being considered in detail by my Department. As he is probably aware, there is an ongoing discussion between the locality and the Department. However, it is reasonable to say that we do not want any undue delay in establishing the parameters of each area, because to do so would create uncertainty. The right hon. Member for Exeter is right that we need to establish the parameters within which people are going to work clearly and reasonably speedily so that we can then move forward to the next stage of development. I will therefore not give the hon. Member for Chippenham (Duncan Hames) a definitive answer now, but I think that he will understand the emphasis that I have placed on dealing with the perfectly proper intervention that he has just made.

Let me go on to talk a little about how we will assess success, because I think that that issue relates directly to the hon. Gentleman’s intervention.

[Neil Carmichael (Stroud) (Con)]

rose—

[Mr Hayes]

Before I do so, however, I give way again.

[Neil Carmichael]

I would just like to make a couple of points about LEPs. The first, of course, is that they really should co-operate with each other. I would certainly expect to see such co-operation when Gloucestershire’s relationship with Swindon—or some other relationship—is established, particularly in connection with the west of England LEP, which is of course centred around Bristol. My second point—

[Mr Mike Weir (in the Chair)]

Order. Will the hon. Gentleman resume his seat? This debate is about the south-west. I think that Swindon might get into that region—my geography of southern England is perhaps a bit uncertain—but I think that the west of England does not form part of the debate.

[Neil Carmichael]

May I just say that all Back Benchers in the Chamber at the moment are south-west Members? I am; the right hon. Member for Exeter (Mr Bradshaw) is; the hon. Member for Chippenham (Duncan Hames) is; and my hon. Friend the Member for Newton Abbot (Anne Marie Morris) is.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I am from Yorkshire.

[Neil Carmichael]

My hon. Friend is not from the south-west. Nevertheless, this is an important question, because what happens in Cornwall or Somerset affects what happens in Bristol or Gloucestershire, because they are in the south-west and all under the one regional development agency which, thankfully, will be abolished in 2012.

My second point is about the necessity for local authorities to co-operate with each other, specifically in connection with economic development, and I think that that point needs to be discussed in this debate.

[Mr Hayes]

I am delighted to say that my hon. Friend is absolutely right that local authorities should co-operate with each other in pursuit of that objective of economic development. We would expect them to co-operate, but the early stage will inevitably involve a process of negotiation and of bid and counter-bid. That is not unhealthy, provided that it does not delay progress unduly and Government play a helpful mediating role in assessing those representations against the core criteria, which I am about to discuss.

We announced the first wave of successful LEPs alongside the White Paper on 28 October. The first 24 partnerships—of many more, I am sure—all shared certain characteristics. Perhaps it will help the hon. Member for Chippenham and my hon. Friend the Member for Stroud (Neil Carmichael) if I describe those characteristics: they have a strong local identity; they have a buy-in from the business community; and they are a testament to the ambition and ingenuity of local people. That is what we expect of local enterprise partnerships.

In the south-west region, we received seven applications, two of which were approved. Each of the remaining five groups of applicants has been asked to do further work to develop their proposals, and we are supporting them as they do so. I understand why the right hon. Member for Exeter is making a strong case for his area—it is right that he should do so—but he should know that Devon, Plymouth and Torbay have been asked to hold further discussions with local business, civic leaders and the Government to develop the long-term vision for their partnership. In addition, they have been asked to consider in more detail their economic links with neighbours, particularly Somerset. The chief executives of Devon, Torbay, Plymouth and Somerset have embraced that feedback and are working together to secure the best outcome for their area, and we hope to say more in due course. The right hon. Gentleman will also be mindful that I have said that undue delay would be unhelpful.

[Anne Marie Morris]

I am delighted to hear what the Minister is saying. I am glad that progress is being made, and I welcome LEPs. They are absolutely the right vehicle, and the combination of local government and businesses is on point. I ask that a decision be made quickly—subject to all the bodies concerned giving him all the information that he needs—so that the deadline to apply to the regional growth fund is not missed. I hope that that will be present in his thinking and timeline, even though he cannot be specific.

[Mr Hayes]

My hon. Friend, like me, will want to ensure that the criteria are applied robustly and consistently. The right hon. Member for Exeter made the good point that we need to be certain that the marriage between local authorities is right, as is the link between them and business. I repeat that I share the view that the construction of areas should reflect their economic profile. That seems fundamental to making the scheme work well.

The right hon. Gentleman mentioned Cornwall, so I will give him a straight answer. Cornwall made a powerful argument for a local enterprise partnership covering Cornwall and the Isles of Scilly, making it clear that it was a functional area. The Department examined it closely and we decided, in the end, to support the partnership. I know that counter-arguments will be made, but as he knows from his long experience as a Minister, the Government sometimes have to take decisions. We took that decision, and I think that we can justify it based on the criteria that I have outlined. People from Cornwall would certainly argue that the area’s profile is very particular. The right hon. Gentleman will know the economic challenges that face Cornwall. Its issues include skills, employment and the character of the local economy, which legitimises the case that Cornwall made.

South-west Members, including the right hon. Gentleman, understandably make the argument that they do not want the south-west to be left behind. I assure him that we are keen to see as many local enterprise partnerships taking root as possible, both across the whole of England and in the south-west. We do not want any part of the country to be left behind, so as soon as a bid can demonstrate that it meets the assessment criteria, it will be given the green light.

I will say a word about Exeter in particular, as the right hon. Gentleman would expect me to do. I am aware that he is worried that his constituency might suffer disadvantage and that it will not be able to bid to the regional growth fund because it is not part of a partnership. Let me reassure him that although we expect many LEPs to submit project bids to the fund, it is not a prerequisite that applications for funding must be submitted by partnerships—any public-private partnership may apply. Exeter’s business community and local council—along with other potential partners, such as the city’s excellent university, which he and I both know—may work together on an ambitious plan for economic development and then apply for funding accordingly. Indeed, I take this opportunity to encourage them to do so. I know that the right hon. Gentleman, as a diligent local Member, will work with them to make it a success.

[Mr Bradshaw]

My concern was not simply that Exeter would not be able to access the funds; it was more about the whole process. Devon county council has deliberately excluded Exeter, for which it was criticised by the hon. Gentleman’s ministerial colleague in the letter that I quoted. Will he deliver a message to Devon today that Exeter needs to be at the table?

[Mr Hayes]

Although the right hon. Gentleman probably did not know it, he was quoting a letter to the leader of my district council, Councillor Gary Porter, who also holds national office. I know that Councillor Porter was anxious to ensure that district councils played their part.

The Government’s position is clear and resolute. We want local government to play a part. Local government is, as I said earlier, district, unitary and county government. Circumstances will differ in different parts of the country, and that encourages—indeed necessitates—different approaches. We do not take a vanilla-flavoured view about what will emerge, although we are clear that the criteria must be met. The criteria should be consistent, but the character of local partnerships might be different, given that the local economic profiles of various parts of the country differ. We want all partners to be involved. As I think I have suggested, there is a degree of permissiveness about who may bid.

Given that enterprise, investment and innovation are the south-west’s route to lasting prosperity, as is the case in other parts of the country, we are clearing away the panoply of failed quangos that we inherited and replacing them with local enterprise partnerships as part of our new framework for economic growth and renewal. The new framework will recognise functioning local economies rather than imposing arbitrary boundaries. It will offer civic leadership and a genuine partnership between local businesses and councils instead of assuming that Whitehall knows best. It will be less about targets and micro-management, and more about the inspirational qualities of local businesses and local people. It will combine a strong voice for business with democratic accountability to local people. It will also have the flexibility to respond to local economic priorities.

The Government are determined to make the next decade the most dynamic and entrepreneurial in Britain’s history. Britain’s future can be as great as its past, and local enterprise partnerships have a vital role to play in making our ambition a reality.

11:28

Sitting suspended.

Science Research

Wednesday 10th November 2010 Westminster Hall

[Annette Brooke in the Chair]

14:30

[Nicola Blackwood (Oxford West and Abingdon) (Con)]

I am absolutely delighted to have secured today’s debate on science research. The contents of my inbox show that Oxford West and Abingdon is a constituency that surely must contain more STEM—science, technology, engineering and maths—researchers and science-based companies per square mile than any other, and it is a great privilege to represent them today. My predecessor was a great advocate for science and I aim to continue his excellent work to the best of my ability.

Although I am not a scientist, as the daughter of a very single-minded doctor, I spent many a breakfast time having the parasympathetic nervous system or the role of the white blood cell explained to me in great detail—Rice Krispies were never quite the same to my seven-year-old mind. Despite my father’s best efforts, I did not follow him into medicine, but he succeeded in instilling in me a deep respect for the value of science research—not only for the future of medicine, but for giving our industrial sector a competitive edge, for developing a greener transport system and a more advanced telecoms infrastructure, and for giving our troops the best intelligence and protection possible. Most importantly, my father taught me the intrinsic value of looking at the world as a problem solver and about the innate desire in all scientists to understand better how the world around us works. We must protect and strengthen that sense of curiosity. Perhaps speaking up for this issue today will make up just a little for my non-medical career path.

Medic or not, I understood from the moment I was selected and had knocked on my first door as a candidate the value that my constituents place on science. As a candidate, I visited Begbroke science park with my right hon. Friend the Member for Havant (Mr Willetts)—he is now the Minister for Universities and Science—where we glimpsed just the tip of the iceberg of the richness of STEM-based research and industry in Oxfordshire. Since then, I have had the opportunity to meet businesses such as Nexeon, which is developing next-generation lithium batteries. I have also met Professor Rawlings and some of his team to hear about the role that Oxford university’s astrophysics department is playing in the extraordinary square kilometre array project. In addition, I have visited the Joint European Torus at the Culham centre for fusion energy, where many of my constituents work.

Just last week, I took part in the Royal Society’s MP-scientist pairing scheme, which does exactly what it says on the tin. The scheme was set up in 2001 to help build bridges between parliamentarians and some of the best science researchers in the UK by pairing MPs and scientists in an exchange programme. More than 200 MPs have taken part in the scheme including, I understand, the Minister himself. The pair spend one week in Westminster, during which the scientist has the opportunity to observe an MP in their natural habitat, while in the second week the politicos venture into the laboratories, so both scientists and politicians get a chance to walk for a week in the other man’s shoes. Such a scheme offers the hope of better networks between Westminster and the science community and aims to lead to more evidence-based decision making in Parliament, more targeted lobbying from the science community, and far better communications between both sides. Perhaps it might even tempt a few more scientists into Parliament.

When I participated in the scheme, I had the good fortune to be paired up with no less a luminary than Professor David Wark, who is fellow of the Royal Society, a leading international authority on neutrino physics and—along with his family—my constituent. I obviously cannot speak for him but, so far, I have found the experience extraordinarily eye opening. The Government’s statement on higher education, my meetings with Oxfam about the situation in southern Sudan and my meetings with the Independent Police Complaints Commission on the challenges facing policing have all been reflected back to me through the prism of a particle physicist’s perspective. I have yet to find out what I will learn from accompanying Professor Wark to his work at Rutherford Appleton laboratory, but I can only hope that, during that time, I will gain a deeper insight into how Government policy can better encourage and support science research and development in the UK.

One of the ways the Government can do that is, of course, is to keep funding science. Before the comprehensive spending review, my inbox was filled with e-mails from science supporters who were deeply worried that the cuts would fall especially hard on science. The Chancellor’s extremely welcome decision to freeze the science budget in cash terms at £4.6 billion a year was therefore a great relief to many. I thank the Minister for the role I am sure he played in securing that commitment, but it still represents a cut of roughly 10% over four years. Even with the speculated savings, that will be a challenge for a historically underfunded area. We also need to consider the announced reductions in university funding. Although such reductions are sustainable, they do not represent any real closing of the funding gap for major research universities competing on an international stage, and that is cause for concern.

I am sure that the Minister is aware that UK scientific research is among the best in the world. With just 1% of the global population, the UK produces 11.8% of the world’s scientific citations, which are the most reliable measure of academic excellence. The UK also has three of the world’s top 10 research universities, one of which is, of course, in my constituency. All that has taken place despite the comparatively low funding that UK science receives. In 2007, for example, Germany, the USA, and France spent 0.71%, 0.77% and 0.81% of their gross domestic product on public research and development, while the UK spent just 0.55%.

Clearly, UK science already does extraordinarily well with less, but just think what we could do if there were a level playing field. In the context of the current fiscal situation, increasing research and development spend might not be immediately possible, but it is worth noting that our competitors, such as Germany and the US, are both increasing science funding in real terms. They recognise, as I believe the Government do, that STEM funding is not a net loss to the country, but an investment in the smarter, greener and more sustainable growth that all hon. Members agree should be our aspiration.

To achieve that growth with the kind of investment we are able to make right now, we have to make absolutely sure that we spend the money in the best possible way. One of the key concerns raised with me is that the short-term funding models of our four or five-year Governments are naturally at odds with the more long-term investment that is typically needed to reap significant results from STEM R and D. Moreover, the frequent changes of funding models and strategies undermine the stable growth in STEM fields. Our top priority, therefore, must be to outline as clearly as possible the entire funding structure and the Government strategy for STEM, not only so that current researchers will be on solid ground with their planning, but so that graduates and students deciding on their career paths will know that the Government value them and that they have a secure future in the UK.

We are in an environment in which we risk losing our best graduates to other countries’ facilities if we cannot assure them of our long-term commitment to funding research programmes in the UK. Inward investors must be shown that this is a sector to which the Government are fully committed, both through funding and by creating a competitive and attractive R and D environment.

In that spirit, will the Minister clear up a few uncertainties that have remained following the spending review? Research councils’ capital expenditure has been excluded from the science settlement. The total capital budget available to the Department for Business, Innovation and Skills next year has been set at £1.8 billion and will fall to £1.1 billion the following year. However, it is not clear how much of that will be made available for science and research. As well as investment in bricks and mortar, such as new labs, that capital spend supports the maintenance of existing facilities, training, and investment in essential but non-tangible infrastructure, such as digital. A significant reduction in capital expenditure funding will potentially lead to funds being diverted away from research and into facilities maintenance.

The Science and Technology Facilities Council is the research council that relies most heavily on capital expenditure. By way of background, it is worth noting that it is also the research council that the previous Government created in 2007 from the Particle Physics and Astronomy Research Council and the Council for the Central Laboratory of the Research Councils. That merger was administered in such a ham-fisted way that it led to an almost catastrophic funding crisis in particle physics, nuclear physics and astronomy, which arose in part because the capital liabilities of the CCLRC meant that funding for research had to be diverted into funding expensive facilities. Today, those facilities—such as the Diamond synchrotron and the ISIS neutron source in the Minister’s constituency—are the responsibility of the STFC, along with the experiments now running in CERN, the Institut Laue-Langevin and the SKA project I mentioned earlier. In short, capital expenditure makes up more than a sixth of the STFC’s entire expenditure.

In case anyone listening thinks that spending on such physics experiments is a luxury that can be forgone in times of austerity, let me assure them that that is not the case. The Wakeham review of physics found that 6.4% of the UK’s GDP came from physics-based industry. A constituent recently sent me some excellent examples of the valuable real-world outcomes of research at the ISIS neutron source. The ISIS has improved the medicine that is sprayed into new-born babies’ lungs to help them breathe and has created a new technique to fix cleft palates in babies. It is performing vital research that is needed to make hydrogen fuel cells market-ready so that they can play their role in solving the energy crisis. It also performed the majority of world research on data storage and LCD screens more than 20 years ago, which led to innovations such as the iPod and the modern laptop, which illustrates the role that physics plays in major industry. In addition, it studies why oil companies’ pipes clog, which is a problem that leads to billions of pounds of losses for those companies and the UK economy each year.

Despite the Government’s commitment to the Diamond synchrotron, which I know the Minister welcomed as much as I did, he will recognise that there are many worried STEM researchers who are awaiting clarification on capital expenditure, because the ramifications go well beyond just keeping up the buildings in which they work. We do not want to make the same errors that the previous Government made and fail to attach sufficient significance to the availability of capital funding.

In addition to capital spend, there is the issue of the funding that reaches STEM via the Technology Strategy Board and R and D tax credits. So far, the Government have not announced plans for those funding routes. While that uncertainty remains, companies cannot include such support for innovation on their balance sheets as an incentive for investment. However, the Government have announced that they will spend more than £200 million over the next four years to establish a network of technology innovation centres that will be overseen by the Technology Strategy Board. I understand that those centres will be based on the recommendations of the Hauser and Dyson reports, which in turn were loosely modelled on the German Fraunhofer centre networks. Given the prohibitive cost of such undertakings, it is unlikely that Government funding alone will be able to achieve that. The Government have said that they wish to encourage private investment, but so far they have not released a target for such investment or explained how they intend to attain it. Will the Minister go into further detail on that point?

My father would not forgive me if I did not take a moment to mention the importance of world-class medical research. Charitable organisations contribute greatly to scientific inquiry in the UK. The recently announced £50 million project on tumour profiling, which is funded jointly by the Medical Research Council and Cancer Research UK, is a great demonstration of the continuing commitment of DBIS to supporting charity-based medical research. I know that the Minister will be aware of the charity research support fund, which is a programme through which the Government support the infrastructure costs of charitably-funded pure research. However, for those in Oxford West and Abingdon and elsewhere whose hopes are pinned on the research coming out of these projects, I hope that the Minister will clarify the Government’s plans for the future of that fund.

The Government have also announced the introduction of a £1.4 billion regional growth fund over three years. Local enterprise partnerships will be able to make bids to that fund, and they will have a role in supporting regional R and D. As the Oxfordshire city region has deservedly won its bid to be an LEP, and because Oxfordshire is well placed to lead as we seek to achieve sustainable growth in the STEM sector, will the Minister give an insight into the Department’s strategy for the role that regional growth funds and LEPs will play in creating an internationally competitive environment for UK R and D and innovation?

Clarification of these funding questions will be valuable to the STEM community. If the Minister is unable to answer my entire shopping list of questions today, I know that he and his Department will be working hard to clear them up as soon as possible. However, the fact is that without a clear, long-term strategy that sets challenges and the direction for UK science, we will not achieve the stability and certainty that is needed to attract inward investment and retain the brightest and best graduates in UK institutions.

On the other side of the question about exactly how much research funding will be available is the question of exactly how the money will be allocated. Some scientists have expressed concern that if they are to receive research council funding, they will have to demonstrate the short-term economic benefits of their work. I am perfectly sure that that is not the intention of any part of the Government or the research councils, and I know that the Minister for Universities and Science has expressed his support for a dual funding system based on scientific independence and excellence. However, there has been some uncertainty over the past few years about the interpretation of the Haldane principle, and I know that the Minister for Universities and Science has recently announced that he will, in consultation with the scientific community, develop a clearer statement on the principle. It would be helpful if the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Wantage (Mr Vaizey), today reiterated the Government’s position on the role of pure research in our STEM strategy. Neither lasers nor MRI scanners would be saving lives today were it not for the blue-sky research that began their development into applied technologies. When determining exactly which streams of research receive funding, we need a strategy to ensure that we do not exclude the research that will lead to the vital discoveries of tomorrow.

Such a strategy cannot be achieved by DBIS alone. The key growth sectors of low-carbon technology, biotechnology, advanced manufacturing and electronics will rely on a good supply of scientists, engineers and technologies, and that goes far wider than the Department.

[Mr David Lammy (Tottenham) (Lab)]

Does the hon. Lady agree with me that, in relation to those future innovations, subjects beyond those that are traditionally described as STEM are of critical importance, and that we need design and creativity, including the overall arts and humanities? Is she therefore concerned about the decision to withdraw state funding for teaching anything other than science? We need interdisciplinary and multidisciplinary practice in our universities if we are to pioneer the innovations of the future.

[Nicola Blackwood]

I thank the right hon. Gentleman for his comments. As a musicologist, it is hard for me to disagree, so I will be interested to hear the Minister’s response to those points.

To continue with my range across the Departments, the Home Office must take a wider strategy into account when setting the permanent cap for tiers 1 and 2. We all know that STEM research is a highly international and mobile field and that we need sufficient flexibility in our immigration system to enable the UK to recruit the brightest and best into key areas that the domestic work force cannot fill. That point has already been made by a number of groups, including the Home Affairs Committee, of which I am a member, and I know that it is something of which the Minister for Immigration is well aware.

The role of the Department for Education is also integral to creating an environment in which our young men and women are excited about pursuing careers in science. I heard from dozens of constituents earlier in the year about the need for more specialist physics teachers, as a quarter of all schools for 11 to 16-year-olds in England have no specialist physics teacher. A sixth of those schools—more than 500 institutions—fail to send a single pupil on to study physics A-level. It is important that our schools ensure that the invaluable subjects of science and maths are taken up and that students are given the support necessary to allow them to excel.

The Department for Education must ensure not only that schools are able to achieve that—for example by offering triple science—but that the right careers and financial advice is available to both girls and boys. That advice must give them the best possible options, whether that is to pursue science degrees through an entirely academic route, or to take up an apprenticeship, or through a combination of the two. The Government’s commitment to offer 75,000 more apprenticeships is welcome, but it will improve student choices only if the right information gets to the right students at the right time and with the right funding support. The previous Government’s record on that count must stand as a warning that things can go wrong if the information does not reach the students at the right time.

Even after education, we must consider how we support researchers and scientists as they go into the work force, and that is especially important for female scientists. Although, according to Research Councils UK, the number of women studying STEM subjects at undergraduate level has increased at a greater rate than that for their male counterparts over the past six years, the drop-off rate between qualification and employment in science, engineering and technology is still higher for women graduates. Of the 600,000 SET-qualified women in the UK, 97,000 are inactive and 70% are employed elsewhere in the economy. Women still make up just 9.1% of the total SET work force in the private sector.

Most barriers affect women and men, but they are often more decisive for women. After a break to take up caring responsibilities, for example, women commonly lose their place on the career ladder and are unable to regain it. Women do not reach senior levels in the same proportions as men with the same qualifications. A number of businesses, labs and institutions, including many in my constituency, are making positive improvements in their workplace and trying to create viable career paths through increasing flexible working, through fair, transparent and anonymous recruitment processes, by offering parental leave, or quality part-time or job-share roles, and with inclusive workplace cultures.

However, DBIS and the Government Equalities Office can play a role by finding ways to support better practices by employers and to provide better indicators to measure progress. Of course, UK Trade and Investment must also play its role in working effectively with UK STEM-based business to attract inward investment and advise innovative start-ups in how to leverage that crucial early years financing. The best research in the world will be lost to the UK if start-ups and entrepreneurs do not get the right advice to support such development at the outset.

I could continue my speech for some time, but I am aware that many Members would like to speak and I think that I have made my point. The role of science in our society is not just a matter for DBIS. Science touches on so many parts of our society that it needs to be on the agenda for all parts of the Government. Now that the Treasury, by protecting the science budget, has sent the message that science research is a priority, we need to fill in the details and move to a cross-departmental strategy that can create the long-term certainty that is needed for sustainable growth and investment in STEM research and development. UK science is already world class—the growth rate of the space sector is evidence enough of that. With a Parliament and a Government who are behind it, there are no limits to what it can achieve.

14:49

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

I congratulate the hon. Member for Oxford West and Abingdon (Nicola Blackwood) on securing this debate and on making a splendid speech. There are two sentences I would delete from it, and I would be happy to claim the rest as my own. She was perhaps misled while eating those Rice Krispies. It is a great pity, because there is a huge link between music and mathematics, and it is always great to see more young women, in particular, coming into science and engineering. It is a pity that perhaps she missed her vocation. We might attack her on other things as time goes on, but I congratulate her now.

On the hon. Lady’s general points, she was absolutely right about the importance of the Royal Society pairing scheme. It is a huge asset to the House because so few Members have had any experience of working in the science, technology, engineering and mathematics sector. I would encourage as many Members as possible to think about signing up for it next year, particularly colleagues who do not have a STEM background. The scheme is hugely beneficial to us, and to the science community, who can see how we solve the problems that face us.

Not the least of those problems is the challenge of the comprehensive spending review. I agree with the hon. Lady: the Minister for Universities and Science did a splendid job in arguing the case for the core science budget. She was right to say, nevertheless, that there will be a 10% reduction over the four-year spending round. More important is a point on which I would press the Minister; in fact, I have pressed his colleagues on it during successive Question Times—[Interruption.]

[Annette Brooke (in the Chair)]

As Members can tell, there is a Division in the House. The sitting will be suspended and will resume in about 15 minutes. Ten minutes will be added for any immediate subsequent Division. I was intending to call winding-up speakers at 20 minutes to 4, so if you add the time that we take out, you will be aware of when the winding-up speeches will occur. Also, people need to be mindful of how many Members wish to speak.

14:51

Sitting suspended for a Division in the House.

15:02

On resuming—

[Andrew Miller]

Before I was rudely interrupted—not through any fault of yours, Mrs Brooke—I was going on to draw something from the observations that the hon. Member for Oxford West and Abingdon made about this being a cross-governmental issue. I have been trying, in a series of questions—three of which I raised on 1, 2 and 3 November with different Ministers—to find out what happened with the cross-departmental analysis of the impact of the whole comprehensive spending review. The CSR’s impacts on science will not only be seen in the block grants to the research councils; very serious impacts will be caused by any cuts that might occur in departmental science spending, the details of which have yet to be announced. The Browne report—I say that loudly, given the noise of the students drumming away outside—also has an impact, as does, perhaps in a slightly more sensitive way, the migration cap, which is a cause for concern. All those items together need a cross-departmental analysis, so that we can be certain that none of them causes long-term damage to the science base. I hope the Minister will be able to throw some light on that, because I am trying very hard to get to the bottom of what analysis has occurred, and to find out what contingency plans there are for any unforeseen effects of the impact of any of those items on another one. That is hugely important.

I also want to comment on the hon. Lady’s remarks about education, which is a significant area for us. I appreciate that this goes well beyond the Minister’s brief, but we need to look deeply at how we incentivise young people to switch on to science. The hon. Lady went into music despite the efforts of her father. We have to go right down to the core of how primary education is taught, how we train our primary teachers and keep them up to date, and how we partner them with industry and academia to inspire them to pass on the exciting things that are happening in the world today to the children around them. One of my favourite examples, which happens to be led by a constituent of mine, Professor Mike Bode, is the National Schools’ Observatory. It is hugely disappointing how few primary schools use that tool. It is there, it is free and it is hugely exciting, so we have to ask ourselves, “What is it that is frightening teachers?” It is not the curriculum, because the tool can be used in the context of the curriculum without any difficulty, but there must be problems and we need to work with our colleagues in the Department for Education to find out what the underlying problem is, and solve it.

The hon. Lady touched on technology innovation centres, which are, in principle, a very important development. She was right that the development stemmed from Hermann Hauser’s report to the previous Government and James Dyson’s to the current one. Both those reports picked up on the same theme. As shorthand, a number of people have said that this is like lifting them out of the Fraunhofers and planting them in the UK, but it cannot be that, because it would miss the point about what is here already. We do need to learn, however, from what happens elsewhere in the world: for example, how it is that venture capital works better on the west coast of the States, and how it is that state involvement in the Fraunhofers seems to help more longer-term finance to emerge in the German market. Those are hugely important issues. We need to learn from them, and we need to apply the British solution using tools like that in our economy. The technology innovation centres provide a way forward, but we should not go for a one-size-fits-all solution. Alternative models might evolve, based on the structures that are already in place, in the public, private and not-for-profit sectors.

I shall make one more remark on the CSR, which I know will get support from my colleagues from outside the golden triangle—apologies to my colleagues within it. I welcome the four big capital projects in the CSR, as they are very important to UK science, but I hope that Her Majesty’s Government will not forget that science occurs right across the nation, outside the golden triangle. We must not forget the centres of excellence in universities in the regions of this nation outside that area, for example the Daresbury laboratory.

My final point stems from the privilege—it is a privilege—I have as Chair of the Science and Technology Committee. Doors have been opened to me that I did not know existed. Just yesterday I found myself sharing a platform with Professor Brian Cox, which was a fantastic honour. We were addressing a group of engineers in an innovation competition run by National Instruments, and he made the point that the hon. Lady has just made: that we ignore blue-skies thinking at our peril. On the panel with me were a very successful entrepreneur, someone from National Instruments and Professor Cox, and all four of us saw the link between the small entrepreneur and blue-skies thinking. For goodness sake, I hope that at no stage during this Parliament will anyone inside the Department for Business, Innovation and Skills or elsewhere start to make suggestions against blue-skies thinking, against the need to support some of the big science projects such as Rutherford Appleton, Daresbury, the space programme and CERN.

Those hugely important projects have direct benefits for some of our smaller companies, so let us make sure that we join up the needs of our business and academic communities. Let us find ways further to inspire young people to take up exciting careers in science and engineering and to make sure that this Parliament goes down in history as the one that really sought—on a cross-party basis, I hope—to make a difference in this hugely important field.

There is no doubt that the success of our economy in years to come will depend on our continual investment in science and engineering and in all the education programmes I have touched on. It is vital that Parliament take the lead in ensuring that there is no diminution in investment; in fact, investment should move in a positive direction, and we should drive it up in the sectors we are talking about.

[Several hon. Members]

rose—

[Annette Brooke (in the Chair)]

Order. The winding-up speeches will now commence at 3.51 pm unless we have another Division.

15:11

[Dr Julian Huppert (Cambridge) (LD)]

It is a great pleasure to serve under you, Mrs Brooke. Before I start, I should declare an interest as a member of the Institute of Physics and the Royal Society of Chemistry, as well as a Research Councils UK academic fellow, although I am on long-term leave. [Laughter.] This feels like the Floor of the House during Prime Minister’s questions earlier. I was, therefore, an academic scientist before I fell in with a bad crowd and ended up here.

It is a great privilege to follow the hon. Member for Ellesmere Port and Neston (Andrew Miller), who is the Chair of the Science and Technology Committee, and the hon. Member for Oxford West and Abingdon (Nicola Blackwood), whom I congratulate on securing a debate on this important topic. As she commented, her predecessor, Dr Evan Harris, was a great champion of science in Parliament, and, in that respect, there is a lot of work to do to replace him.

It is great that the hon. Lady gave such a well-researched speech, which dealt with so many of the issues that are dear to the hearts of many scientists around the country. I would, however, take issue with her description of Oxford West and Abingdon as having the highest density of STEM researchers and science-based companies. We will have to measure that properly, because I suspect that Cambridge could do rather well, given that it is the best university in the world, according to one recent rating.

I have experience in a number of areas of science, which says a lot about how we can do interdisciplinary science. I am a chemist, and I used to work on biology in a physics department. It is becoming much easier to break through. If I have any issue with triple science, it is with the idea that there are three separate sciences. We need much more integration.

I should also tell hon. Members that I set up a spin-out company. If they are interested, I will tell them later exactly what it was trying to do.

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

Now.

[Dr Huppert]

We were aiming to make it easier to collect virgin female fruit flies, and I will explain later exactly why we wanted to do that.

Scientific research is extremely important. This country has a proud history of scientific research. We have Newton, who was, of course, also a Member of Parliament, Watson and Crick, a whole series of people based in Cambridge and the fantastic glut of Nobel prizes that we won this year, although, in some cases, the work involved was not based in Cambridge.

As well as our history, however, there is also the issue of our future. What is our economic future? What will this country be doing in 2050? If we actually mean it when we say that we want to rebalance our economy, science and high technology will surely be how we do that and where we go. I have been working on this issue with various people, and I draw hon. Members’ attention to an article that I have written with another new Member of Parliament, the hon. Member for Mid Norfolk (George Freeman), about the appliance of science. We discuss some of the issues and some of the blocks, and the article is available in selected newspapers, possibly near you, depending on where in the country you are. We look at how we can advance in biotech, cleantech, agritech and digital technologies, in which we really have the capacity to be world leading and to change what happens over the next 40 years.

I do not, however, want to talk about all those issues. Instead, I want to pick up three key issues that feed into our scientific research, and I apologise in advance if I give them a slightly more academic than industrial slant. Those three issues are people, money and freedom.

We cannot do scientific research without good people or the right people. As we have heard, we have problems right at the beginning, at school. We have problems in teaching STEM subjects, and the shortage of physics teachers has been mentioned. Work is being done to alleviate that; in fact, there are possibly too many different initiatives. I am delighted to be shadowed today by James Glover, from Mott MacDonald, who is an ambassador for the Science, Technology, Engineering and Mathematics Network. It is sheer coincidence that he is here today, but STEMNET does a lot of work linking industry with schools to make sure that they are aware of what can be done, so that practicals become exciting, relevant and interesting, unlike some of the staid practicals that many of us had to experience.

We have problems at school with people falling out of STEM subjects. We possibly make people make decisions about A-levels too early, and we lose them that way. We then have problems at universities with the perceived ease of STEM subjects and their relative attractiveness. Increasingly, many courses are for four years, which automatically makes them less attractive than three-year courses, and Browne, if I can mention it—it has suddenly gone quiet outside—will make the problem worse. If fees go up to between £6,000 and £9,000, people will think about what they should do. Will they do that fourth year, which is so necessary to have a full grounding in a subject? I worry about that. For the record, I do not support increasing the fees, and I have campaigned against it for many years, since Labour first brought fees in.

[Mr Lammy]

Will the hon. Gentleman give way?

[Dr Huppert]

I was wondering whether I could tempt the right hon. Gentleman.

[Mr Lammy]

I want to add something on that specific point, although I think that the hon. Gentleman will welcome what I have to say. The House will continue to have a big debate about the level of fees, and we are aware of what is going on outside. However, we have not discussed what student debt at the end of the undergraduate experience will do to domestic students who want to go on to postgraduate study. Is the hon. Gentleman as concerned as I am that UK students will be put off going into postgraduate study and engaging in the innovation that we really need?

[Dr Huppert]

I thank the right hon. Gentleman for that comment. Indeed, that was my next point, so it was very helpful. We do have a problem. I used to teach students, and they were concerned about debt. We can discuss to what extent it is a debt and so forth, but they were concerned. The issue of whether to go on to relatively low-paid PhD positions is a real concern. Furthermore, I welcome the fact that PhDs are changing from being typically three years long—or at least paid for for three years, although they normally overrun—to four years long. Although that gives a more rounded experience by the end, however, it also means that people are delaying serious earning potential for a lot longer, and I worry about how that fits with the increase in debt.

There are issues about the quality of PhD programmes. I was recently told that one university has given out one PhD in the past seven years. Although I have not verified that figure, I would be concerned if we had institutions that gave so few PhDs, because there would be questions about the quality of such qualifications. There is also a problem with availability in some subjects, and some very good students struggle to get positions or funding. We therefore have problems attracting people to do science-based PhDs.

If those who go on through PhDs, having sacrificed many years of earning potential, want to stay in academia, they will look for a post-doctoral position, but we have a big bottleneck in terms of the availability of such positions. Even if someone gets one, such positions tend to involve very short contracts—two or three years are typical. That causes problems getting money for the next position. It takes such a long time to find money for the next job—I will come back to this later—that a lot of postdocs do not have the freedom to focus on their work. The fellowship schemes that exist are fantastic, partly just because they allow postdocs to focus on their work.

That uncertainty—that hopping from one short-term contract to another—has real issues for gender balance. We talked about the gender balance at earlier stages, but there is an issue at the post-doc level as well. Women in general do not like this process, and it is a real disincentive for them.

Once people finally make it through the post-doctoral position, they may be fortunate enough to get one of the few academic positions available. That will finally complete the process, but the steps at every stage make it harder to attract and keep people.

So far I have talked only about domestic students. Of course we do not get all our scientists from Britain. We get a huge number from overseas, and that is essential. Science is a global activity. It does not make sense to say that Britain should supply all the skills it needs for science. We cannot draw up barriers. I have been very concerned about the Government’s proposed immigration cap, and many hon. Members will know about concerns that have been expressed. The cap causes problems; it makes it hard to get good quality people from outside. There are many stories of people not coming, and others of people who have made it clear that they would not have come under such a system. Venki Ramakrishnan is one example. We have heard some instances already, and I have heard of students not being given visas to come to Cambridge for a four-day conference, because the UK Border Agency was not satisfied that there was sufficient evidence that they would not require benefits while they were here. Given that they had already paid the fees for a four-day conference I think that it would be safe to assume that they would have come to the conference and then gone again. There is increasing concern from the university of Cambridge that we cannot get PhD viva examiners from outside the EU, because that is classified as work. We do not want to stop that activity. I find it bizarre that the cap includes exemptions for elite sports people and ministers of religion, but not for doctors, scientists or engineers, who contribute much more to our economy.

Another issue is people—just as people. When I talk to representatives of high-tech companies around Cambridge, I find that many of their concerns are not just about the things we have discussed already. The No. 1 concern that people talk about in Cambridge is housing—the cost of affordable housing there, by which I mean affordable for science researchers, and not in the sense that was used in the rather ill-informed debate that we had in the House yesterday. People also talk about transport problems and how to get where they want to go. They talk about the problems of finding good education for their children, and the issues of the environment that they live in. Those issues affect scientists and their choice to continue working in this country rather than moving elsewhere.

Money, of course, is another factor, and scientists, like all people, are motivated by money. We had a freeze on the total science budget, as has already been discussed—the £4.6 billion. That is good news. It is not as good as it could be. Other countries, such as Germany, invest more in their science funding. However, it is helpful, and I thank the Deputy Prime Minister in particular for getting the last £200 million that came into the science budget on the Sunday night just before the comprehensive spending review. I share hon. Members’ concerns about lack of knowledge about the capital budget. A comment was also made about long-term security, and I have in the past asked the Minister for Universities and Science whether we can have at least a 10-year funding horizon, because science projects often take that long.

There are also problems with the cycle of allocation of money by research councils. I am well aware of the Haldane principle and would not dream of telling research councils how they should operate. They did not give me the grants I deserved and I am sure that they will continue not to give people the grants that they deserve in future, but the real problem is the slow pace. An application goes in, and it takes six to nine months, typically, to get a response. If people are on contracts of one to two years, that is a huge amount of time for them not to know the result. Success rates are phenomenally low. Academics apply for grant after grant, driving up the number of applications that must be studied, and filling up the system. There must be a way to run the system faster and more efficiently.

We need financial support from industry, and good relations with it. Cambridge is fortunate because we have an excellent cluster. One of the features of that is to do, again, with people. People can work in industry or academia and can move between them. Scientists are often married to other scientists, so both partners can have jobs in the same area, with the same level of security. We have a number of successful spin-outs. Research and development tax credits were also mentioned. They play a critical role in supporting industry systems. Companies have highlighted that time and again as essential.

I support the moves for greater procurement by small and medium-sized enterprises. A detailed analysis by entrepreneurs in Cambridge shows that if there is a client when someone sets up a company, it works. It is much better to have a client. The success of silicon valley has been largely due to Government procurement with small start-up companies, really giving them the initiative to go. However, the issue is not only public. I think that Max Perutz was responsible for the excellent comment:

“We’ve got no money, so we’ve got to think.”

[Hon. Members: “It was Rutherford.”] I am grateful that so many hon. Members can correct me on that: my thanks to them. The sentiment stands, none the less. It is the freedom to think that makes a difference. We cannot predict which research will be world-shattering. We cannot say that lasers or the internet will be the thing that matters. DNA was first discovered in pus, and was a curiosity. It was believed to be the way in which phosphate was stored by the body. It was completely uninteresting; and now it leads to all the advances in genetics, health and biotechnology. We cannot predict such things, so we must allow academics the freedom to explore. There is a false split between pure and applied research, which I am very concerned about. Pure research often leaps into applications and I am very concerned about the increasing drive to impact. It does not make sense to ask people to estimate the economic impact of a piece of research.

[Graham Stringer (Blackley and Broughton) (Lab)]

The hon. Gentleman is making an interesting speech. Does he agree with Professor Cox who said when he came to the previous Select Committee on Science and Technology that he found it impossible to know what to put when assessing impact? It is not do-able.

[Annette Brooke (in the Chair)]

Order. If I may intervene; there are 25 minutes left, and at least three speakers before the winding-up speeches.

[Dr Huppert]

I am about to finish, Mrs Brooke. I think that Professor Cox is to some extent right, and to some extent wrong, because universities have begun to provide the text to put in those boxes. I think that a form-filling exercise is developing.

I join in the support for the technology and innovation centres, whether they are Fraunhofer or Hauser models. That will make a big difference in enabling us to do true translation that works.

We know what we need. We must make sure that we provide it, whether it is money, freedom or support for the people involved. I take the point that we should look more broadly than just to the sciences. Humanities, classics and other subjects have a lot to provide. I have one last request to the Minister. I have asked before whether the Treasury could have a chief scientific adviser so that its staff could understand science. They say they cannot see why they need one: that is exactly why they do.

15:27

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate my neighbour, the hon. Member for Oxford West and Abingdon (Nicola Blackwood), on securing the debate, and on her speech. Her timing is exquisite, whether by accident or design, as she has picked the day when more than 50,000 students are protesting outside at the damage to be inflicted on higher education by the 80% cuts in teaching grant and huge increases in student fees. I particularly welcome and support the students from the university of Oxford and Oxford Brookes university, both of which have most of their students, and key science facilities, in my constituency. Those include the Oxford science area and the Oxford science park, although of course the Begbroke science park is in the constituency of the hon. Member for Oxford West and Abingdon, the Diamond synchrotron is in the Minister’s constituency of Wantage, and the Culham science centre is in the constituency of the hon. Member for Henley (John Howell). There is a huge Oxfordshire-wide and cross-party interest in the health of scientific research. The work of scientists in our area is of global as well as national importance, and makes a huge contribution to the economy, which is crucial to the competitiveness and future prosperity of our country.

It is to the credit of the Labour Government that they were responsible for record investment in science. [Interruption.] I am pleased to hear the Minister applauding that. The Government’s investment was amplified by the invaluable contribution of the Wellcome Trust, the medical research charities and others. However, as the hon. Member for Oxford West and Abingdon pointed out, when we consider publicly funded science as a share of GDP it is not as though no more needs to be done. I echo the call made by my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) for us to pull together to do more.

Given the context of massive and ill-judged public expenditure cuts, it is also right to recognise that the Government have afforded science and research a measure of protection in the recent spending review. I know that that the higher education Minister fought for that, and I thank him. I am sure that the Minister who is present today fought for it too, and if so I thank him too. I am not going to let them off the hook, however, given the real cuts, the big outstanding uncertainties still affecting science funding and the challenging context in which scientists will be working in the years ahead.

I should like the Minister to answer a number of questions. First, as we have heard, the cash freeze over the next four years represents a 10% real cut. Although welcome protection for medical research is provided, there are worries that that could involve bigger real cuts in other areas of science, such as physics and engineering. What is the position on that?

Secondly, the Science and Technology Facilities Council has already, as we have heard, had a tough three years and is not facing further cuts from a position of enormous strength. It is not clear whether the commitments to improve STFC’s situation, made by Lord Drayson last January—to cover exchange rate fluctuations in the costs of international subscriptions—will be honoured by the coalition Government. It would help if the Minister confirmed that that undertaking still stands.

Thirdly, the severe cuts to the Minister’s capital budget could, as we have heard, have a serious impact if they feed through directly to research council funding. Capital is not just about new projects, which can of course be delayed, albeit at some cost to our international research competitiveness. A significant proportion of the running costs of facilities, for example, the routine replacement and upgrade of equipment, are classified as capital. Almost a quarter of the running costs of the ISIS centre at Rutherford Appleton, which does cutting edge atomic work advancing a range of physical, biological and material sciences, are classed as capital costs. Cuts would reduce the amount of time that that vital facility could operate each year. Can the Minister assure us that such factors will be given sympathetic attention when his Department makes its capital allocation?

Fourthly, what is the position on the overall budget of the Technology Strategy Board over the spending period and how much redirection of current funds will be required to support the operation of the new technology innovation centres that were recommended by the Hauser report? Obviously, if that amounted to a big sum—tens of millions of pounds a year, or whatever, from a static TSB budget—it would represent a significant cut in other important areas of its work, such as collaboration with business on knowledge transfer. Can the Minister clarify that position?

As the hon. Member for Cambridge (Dr Huppert) said, success for science research depends on more than the science budget, critical though that is. I should like to mention a couple of other areas. Keeping up the high quality of our science depends in no small part on the quality of science teaching in our schools, as the hon. Member for Oxford West and Abingdon said. In a written parliamentary answer on 26 July, to my question on incentives for physics graduates to enter teaching, the Minister of State said:

“We are considering a scheme to repay the student loans of science and mathematics teachers.”—[Official Report, 26 July 2010; Vol. 514, c. 817W.]

Where has that consideration got to? It is clearly all the more relevant, given the huge increases in fees that the Government are now imposing.

My hon. Friend the Member for Ellesmere Port and Neston and the hon. Member for Cambridge mentioned the immigration cap. I would like to press the Minister on what representations he is making across Government on the real threat to our scientific excellence and standing posed by the coalition Government’s proposed annual limit on economic migration and changes to the visa regime. Nearly a third of Oxford university’s academic teaching and research staff, and 46% of its research-only staff, are from overseas. Although some of those people are of European economic area origin, a lot of academic staff hold tier 1 highly skilled migrant programme visas, and more than 700 are work permit/tier 2 visa holders and sponsored researcher/tier 5 visa holders. As the vice-chancellor of Oxford university said in his evidence to the Migration Advisory Committee:

“Most of our current Tier 1 visa holders are in highly specialised research areas, and many are working in strategically important subject areas such as engineering and technology, environmental science and the biosciences…It would be disastrous for international relations and research programmes if we at Oxford were not able to continue to welcome overseas researchers at current levels under all tiers. This would seriously affect recruitment and retention particularly in all the physical, bio and clinical sciences, and in technology, engineering and mathematics”.

I hope that the Minister is concerned about this as well. Can he assure me that, in view of the contribution that their teaching and research make to knowledge, the economy and society in general, top internationally mobile academics and researchers will be exempt from the immigration limit or, at the very least, that the visa and work permit regulations will be operated in such a way that Oxford and other universities and research institutes will be able to recruit all the people they need to sustain their international standing?

Science and successful business spin-offs do not just need funding, research facilities and the best researchers; their staff—managerial and technical as well as scientists—need somewhere to live, a good environment, transport infrastructure and room for businesses to grow. However, these things are all too likely to be a casualty of the coalition Government’s decision to abandon all the evidence and careful consideration that went into the south-east and other regional plans and leave planning up to district councils. An example of the disastrous effect that this is having is that a significant housing development to the immediate south of Oxford, in the planning jurisdiction of South Oxfordshire district council, is now most unlikely to go ahead, given that nimbyism seems to be that council’s principal planning policy. [Interruption.] The Minister may laugh, but if I recall correctly, he once famously told the Conservative party conference that he was greatly in favour of additional housing in Oxfordshire, as long as it all went into my constituency, although it is not quite big enough to take it all. I welcome the expansion of my constituency to make room for the growth south of Grenoble road.

Part of the development that I have mentioned was an expansion of the Oxford science park, providing exactly the sort of facilities that are needed to harness our scientific excellence to business success, jobs and prosperity. Will the Minister consider that, bearing in mind his comments to the Conservative party conference, and chat about it with his colleagues in Department for Communities and Local Government?

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

The right hon. Gentleman has asked the Minister a number of questions—I agree pretty much with all of them—and I should like him to ask one on my behalf. For every leading research scientist there are dozens, if not hundreds and thousands, of lower-level lab technicians, who are just as important a part of our national science research base as those guys at the top. Perhaps the right hon. Gentleman will ask the Minister what he is doing to ensure that we get 17 and 18-year-olds into science research, through apprenticeships, further education and workplace training, because these guys are just as important as the people at the top.

[Mr Smith]

The hon. Gentleman makes a good point, which I shall add to my list of questions. We will all be looking carefully at the announcement of the Government’s skills strategy next week to see what specific component it contains to address those important issues.

We can have higher, sustainable economic growth if we really want it. But if we are to achieve it we need more housing and better transport in places such as Oxfordshire, across the south-east and in other regions where science is so important, so that business can do still more to make the most of the scientific excellence that we are investing in.

Those are a few questions for the Minister to consider. If he does not have time to answer them all this afternoon, I should be grateful if he wrote to me. It is important, as other hon. and right hon. Members said, that we keep up the pressure in the cause of science, which it is no exaggeration to say is vital to the quality of life, living standards and our whole civilisation, now and for generations to come.

[Annette Brooke (in the Chair)]

There are 12 minutes remaining. I wish to call two speakers—Gavin Barwell and David Mowat—and I call Gavin Barwell first.

15:39

[Gavin Barwell (Croydon Central) (Con)]

Thank you for those clear instructions, Mrs Brooke. I will watch the clock carefully. I congratulate my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) on her excellent opening speech, and all hon. and right hon. Members who have spoken in this high-quality debate.

I start by declaring a personal interest: I am a science graduate. I studied theoretical physics at Cambridge, although I am ashamed to say that I have not used a great deal of that study since I graduated. However, I now have the opportunity to do so because I was recently elected to the Science and Technology Committee. I am also taking part in the Royal Society pairing scheme, and I echo the comments made by several hon. Members about its importance. I am paired with Dr Emily Nurse from the high energy physics group at University college London. I represent a London constituency, and while we have heard a great deal about Oxford and Cambridge universities throughout the debate, London has Imperial college, UCL, and other leading institutions.

I have been asked to stick to time but, luckily, those hon. Members who have spoken have covered many of the points that I wished to make, so I can be relatively brief. There is political consensus about the need to diversify our economy, and one of the lessons we must learn from what has happened over the past few years is the need for a broader economy. One of the strengths of UK plc is our scientific base.

My hon. Friend the Member for Oxford West and Abingdon cited figures from “The Scientific Century”, which is an excellent report by the Royal Society. Let me set out the full figures for the world: we have 1% of the population; 7.9% of scientific papers; 11.8% of world citations; and just under 15% of the most highly-cited papers. This is an area of excellence, and we also have the second strongest higher education sector in the world, after the USA, so we must build on that strength.

Like other hon. Members, I am grateful for the work carried out by my right hon. Friend the Minister for Universities and Science and the relative protection of the science budget. I echo the points raised about the Science and Technology Facilities Council, and the issue of capital funding, which accounts for just more than a third of its budget.

[Neil Carmichael (Stroud) (Con)]

It is good to see science supported and to ensure that science works with business. Many business men have asked me how we can protect our patents and our value in an international sphere, so the Department for Business, Innovation and Skills needs to think about that.

[Gavin Barwell]

My hon. Friend makes an important point to which I am sure that the Minister will respond. My point is that the Science and Technology Facilities Council has a high dependency on capital funding. If we do not have clarity on that matter, there is the danger that we will see significant cuts in the general grant spend. Its dependence on capital is higher than that of other councils.

Although it is important that the Government look at the benefits of science—economically and to wider society—there is also a benefit to society from knowledge in its own right and from pure research that is designed to extend the sphere of human knowledge. It is sometimes difficult to quantify that, and I appreciate that the Government have to cost such matters. However, it is important to put on record the significance of knowledge in its own right, which is often the primary motivation of scientists, rather than some putative economic return.

Let me echo the points that have been made about the immigration cap. I am a strong supporter of the cap, and although my constituents feel strongly about immigration, they are not worried about leading scientists coming into the country to drive our economy forward. Their concern is about the numbers of people who have been brought into the country and take jobs that should have gone to economically inactive British people who could have gone back to work during the last boom but failed to do so. Their concern is not with people who come in to create businesses, opportunities and jobs for other people, and I hope that the Government will be sufficiently flexible on that issue.

My hon. Friend the Member for Oxford West and Abingdon pointed out that these matters are not only ones for the Department for Business, Innovation and Skills, and I echo that sentiment. A number of members of the Science and Technology Committee have spoken about whether the Government office that deals with science would be better located in the Cabinet Office because of the overarching role that science plays across Government activity.

I shall conclude with a point about education which, again, several hon. Members have touched on. I have read a piece by Simon Schama about the teaching of history in our schools. It contrasted children’s great fascination with detailed works such as “The Lord of the Rings” with our failure to make the story of our history sufficiently interesting to children. The same is true of science education. I have an eight-year-old son. Any conversation with him quickly becomes a succession of “Why?” questions. He has complete fascination with the world around him and why it is as it is. As children get older, however, we somehow fail to maintain their enthusiasm to find out about the natural world. Developing that passion for science in the critical phase of secondary education is a key area that the Government must look at.

I am conscious of the time and I know that my hon. Friend the Member for Warrington South (David Mowat) wishes to speak. I end by congratulating my hon. Friend the Member for Oxford West and Abingdon on securing the debate and thanking other hon. Members who have taken part.

15:44

[David Mowat (Warrington South) (Con)]

I thank my hon. Friend the Member for Croydon Central (Gavin Barwell) for giving me the chance to speak. I am one of three hon. Members in the Chamber from Imperial college—I think that there are only three of us—so we should get our retaliation in first—[Interruption.] My hon. Friend the Member for Windsor (Adam Afriyie) is one of them.

I wish to talk about the application of science. We have heard a lot about pure research and so on, but when we think about the economy over the next 20 or 30 years, and the fact that we can no longer rely on the City and North sea oil to the extent that we have over the past two decades, we must ask where the innovation will come from. With respect to the right hon. Member for Tottenham (Mr Lammy) and the large contribution made by arts graduates, that innovation will, to a great extent, come from science.

My constituency, like many in the north-west, will lose around 2,000 public sector jobs over the lifetime of this Parliament. The Office for Budget Responsibility has forecast that it will gain 5,000 private sector jobs. All north-west Members, and those more widely, must think about where those jobs will come from and what we can do to help their creation.

Hon. Members have mentioned silicon valley, and it is interesting to note that companies such as Microsoft, Google, Yahoo!, Dell, Apple and eBay, and their supply chains, have probably generated in excess of 1 million jobs over the past two decades. For the most part, those companies did not exist 30 years ago. In 20 or 30 years’ time, there will be another list that people will talk about. I do not know what companies will be on it—if I did, I would probably not be in the Chamber—but they will come from innovation and science. We must do what we can towards achieving that.

On the border of my constituency is a place called Daresbury. We have heard something of the golden triangle, which makes me feel a bit outnumbered, but Daresbury is a fantastic place that, together with Harwell, is one of two SFTC locations in the UK. Daresbury is a little different from Harwell because it focuses strongly on innovation as well as on pure science. There is also pure science, however, and Daresbury has a fourth-generation accelerator—a lot of the design work on the Diamond synchrotron was carried out there. However, the distinctive thing about Daresbury—if the Minister has not seen it, he should come and visit—is that there are about 100 small companies that are growing, taking output from the universities and turning that into commercial exploitation. On average, those organisations have grown by 20% over each of the past two years. That has happened through the recession, so it is quite a thing. A 36,000 square feet extension is being built and is already nearly full. There is a significant chance that 10,000 jobs will be created by those 100 companies and the public-private partnership that is being put into place.

[Andrew Miller]

Does the hon. Gentleman agree that those 100 or so tiny companies are in Daresbury as a result of the magnet provided by the research facility? They would not have come there on their own; this is part of the integration between very small and very large companies that I was speaking about.

[David Mowat]

I agree with the hon. Gentleman. The key term is multidisciplinary. Those companies interact with each other, and the pure science laboratory, which was there in the first place, has been the driver.

I want to contrast the multidisciplinary model of the Daresbury campus with some of the ideas that have come out of the Hauser review. That is more about excellence, with the Government picking areas in which they want to invest and going for it. I am not against that, but there are two models to determine how we invest in science and applied science. One is what could be called, “Let’s pick a winner and go for it,” and the other is, “Let 1,000 flowers bloom. Let’s try lots of things. Some of them will be brilliant and some of them won’t.”

My hon. Friend the Member for Cambridge (Dr Huppert) pointed out that silicon valley was created by Government procurement, but I do not think that that is true. I think that it was created by innovation, entrepreneurship, encouragement and the linkage of money to brilliant technologists.

I do not wish to overrun my time, but I have two minutes left and a couple of concerns to raise, to which I shall be interested to hear my hon. Friend the Minister’s response. I welcome the local enterprise partnerships as a way forward. There is a risk, however, that they will be quite fragmented in a way that the regional development agencies were not and other things are not. I recently had a ridiculous conversation with a colleague who said to me, “Which LEP is Daresbury going to be in?” That is not the right way for us to think about how we do all this, and if we let that mindset grow, it will be quite dangerous.

I mentioned the Hauser review and technology and innovation centres. It is not clear to me how they will interact with what we call regional growth hubs—or at least there is a lot of language in this area that seems to be quite loose—so I would welcome input on that.

With regard to the success of Daresbury, I have a bit of concern about the way in which the Science and Technology Facilities Council funding goes between Daresbury and Harwell. I am not an expert in how that works, but I think that nearly all the members of the board of the STFC are Harwell-based, not Daresbury-based. We must be careful that we do not have a south-centric civil service and a south-centric triangle driving science in a way that we do not want.

You will be pleased to hear that I shall stop speaking shortly, Mrs Brooke. I just want to reiterate that this has been a good and positive debate, principally because it has not been party political. We have much more in common with one another—especially those of us who went to Imperial college—than party politics allows, and it is extremely important to us all and to our children that we get this right.

15:52

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I congratulate the hon. Member for Oxford West and Abingdon (Nicola Blackwood) on securing a debate on such an important subject and on the excellence of her speech. As one of those STEM-qualified women who are no longer working directly in STEM, I was very impressed by the breadth and depth of her analysis, even if I do not agree with every one of her conclusions. Her constituency certainly has an excellent advocate.

Oxford West and Abingdon is home to excellent science research, as are many of our great university towns: London, Manchester, Cambridge, Liverpool, Bristol, Southampton, Edinburgh and, of course, my own constituency of Newcastle, to name but a few. However, it is clear from the speeches and interventions made today that hon. Members on both sides of the Chamber have concerns that go wider than the science research carried out in their constituencies.

I am sure that even if his colleagues in BIS had not been in China or otherwise engaged, the Culture Minister would still have been eager to come to this debate and set out the Government’s policies on science research. That is recognition of the hugely important role that science plays in our society. From the sharpened stone to the mobile phone, scientific developments have changed society and brought new opportunities. Indeed, I am sure that if decent research grants had been available in prehistory, it would not have taken 2 million years to go from sharpened stones to the stone axe. Equally, the Egyptian pyramids would not have required quite so much slave labour—the wheel could have taken a bit more of the strain.

To take an example closer to our own day and age, the mobile phone—we all have one—is a result of decades of public sector defence research into wireless transmissions; billions of private sector investment in R and D, infrastructure and commercialisation; academic research into cutting-edge modulation techniques; and Government-led access to spectrum and global protocol standardisation. The result is a technology that enables a farmer in Kenya to know the market price of corn on the Chicago stock exchange, and ensures that information about voting irregularities in Burma or Iran can be tweeted across the world before the voting is over.

Science changes society, and generates wealth. The Campaign for Science and Engineering has estimated that investment in science research gives a return of 30% a year in perpetuity. Right now, we need that return more than ever, so we are right to treat this debate as hugely important. To be fair, the Chancellor of the Exchequer, in the comprehensive spending review statement, claimed that he was protecting the science budget, as many hon. Members have gratefully commented. In his final flourish, under the sub-heading “growth and promoting a private sector recovery”, he said:

“I have decided to protect the science budget. Britain is a world leader in scientific research and that is vital to our future economic success. That is why I am proposing that we do not cut the cash going to the science budget.”—[Official Report, 20 October 2010; Vol. 516, c. 961.]

Now let us consider what the Chancellor did not say. As has been pointed out, a cash freeze means a 10% cut—assuming current rates of inflation—in real terms, or £460 million, at a time when the rest of the world, including the US, China, France and Germany are increasing their science spend. Also, what the Chancellor calls the “science budget” is only 50% of Government science investment in the UK. The rest, including departmental R and D, capital expenditure, R and D tax credits and RDA spending, has not been frozen or ring-fenced and therefore is vulnerable to cuts. In the case of the RDAs, we know that their science funding of £440 million a year has been lost. If other expenditure is cut at the same rate as departmental expenditure—let us remember that this is science funding that has deliberately not been ring-fenced—we are looking at a cut of 10% in cash terms.

In July, the Royal Society said that

“severe cuts of 10% or more in cash terms...threaten to devastate British science, impair the future growth of the economy and derail the UK’s ability to govern effectively and tackle global challenges. Regaining our scientific pre-eminence, with all the economic and social benefits that this brings, would be impossible or cripplingly expensive for future generations.”

Although the upgrade of the Diamond Light Source synchrotron in the Minister’s constituency has been secured, the rest of the capital budget, as has been pointed out, has not been safeguarded. Nature reports that the research councils have been warned to expect at least a 30% cut in their capital funding. Hon. Members have pointed out that as a result of those capital cuts, the Science and Technology Facilities Council, which funds the Rutherford Appleton laboratory in the constituency of the hon. Member for Oxford West and Abingdon—

[Mr Vaizey]

It’s in mine.

[Chi Onwurah]

I apologise. The STFC, which funds that laboratory in the Minister’s constituency, is likely to be hit as the bulk of its budget is capital. High-tech European partnership projects such as JET—the Joint European Torus at the Culham centre for fusion energy in neighbouring Henley—are funded through the capital budget. They will need to find extra money to cover inflation. That might result in UK researchers having to cut usage while still paying high fixed costs, or to cut other areas. As the Royal Society says, that would dramatically reduce the efficiency of our investment.

Overall, there could be far-reaching consequences in the UK economy. Research Councils UK has calculated that a cut of £l billion in science spending results in a drop of £10 billion in gross domestic product. Therefore, the protection offered by the Chancellor seems rather flimsy, especially in the competitive world of global science. China is stoking its engine of innovation with 2.5% of its GDP and an 8% rise this year. I hope the Secretary of State for Business, Innovation and Skills will be listening to his hosts in China in that regard at least.

The situation is somewhat worse than it first appears. We have agreed that we need to rebalance our economy, but we do not want to do that by reducing the financial sector—absolutely not. We want to do it by growing other sectors, such as advanced manufacturing.

In addition to the cuts to science funding, we have further cuts disabling the vital economic levers that translate scientific understanding into commercial ideas. For example, programmes funded by the RDAs, which supported the commercialisation of scientific discoveries, which we have discussed, have already been cut—such as the Innovation Machine in Newcastle.

It was mentioned that the Prime Minister announced funding for the technology and innovation centres to the tune of £200 million. However, in Germany, where the model they are based on is located, six times more is spent each year on running costs.

Given that our situation and the funding for science are under such threat, I ask the Minister to confirm a number of points. Will Government spending on science that is not in the £4.6 billion be safeguarded? Are the Government intending to increase science spend as a proportion of GDP, in line with European targets? Do they acknowledge the vital role they must play in helping to commercialise new technologies? Finally, will R and D tax credits be safeguarded?

We need the jobs that come from the timely exploitation of scientific discoveries. The Government’s plans for science and research endanger all our futures.

16:01

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

I am grateful for the chance to speak under your chairmanship, Mrs Brooke. The last times I spoke in a debate, I had the full might of the Welsh Labour party ranged against me, so 50,000 students making noises off is slightly easier to deal with.

I congratulate my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) on securing this important debate. One of the great advantages of having new Members of Parliament is that those of us who have been in Parliament for merely five years get the chance to patronise them, so let me say what a pleasure it was to be at her parliamentary birth, at the Abingdon leisure centre on that momentous night when she became the Member of Parliament for Oxford West and Abingdon.

I put on record what a hugely successful job my hon. Friend is doing—slightly too successful, as my Conservative association in Wantage keeps asking whether we can have her to speak instead of me. Also, almost all the companies in my constituency seem to want her to come and visit them. In fact, she mentioned one that I, too, visited on Friday—she had got there before me—Nexeon, in Milton park in Didcot.

If my hon. Friend the Member for Warrington South (David Mowat) wants to know what the future is, he should resign his seat and go and work for Nexeon. It is making extraordinary lithium ion batteries, which are another example of British scientific expertise. The discovery was about the use of silicon, which stores more energy, and Nexeon’s way of putting silicon into batteries promises the future—houses powered by batteries, apparently.

One of the great pleasures of representing my constituency is that I wish I had won the lottery and could invest in almost every company that I go and see there. One is literally “The Man in the White Suit” company—coat a shoe or shirt with its material and water literally drips off without leaving any damp patch at all. However, I digress, and we do not have much time.

We have had a fantastic number of excellent contributions to the debate, such as those from the Chair of the Science and Technology Committee, the hon. Member for Ellesmere Port and Neston (Andrew Miller), and from the hon. Member for Cambridge (Dr Huppert), who reminded us why it is so important to have scientists in the House, because of his chalk-face experience, if I may put it that way, and his ability to talk us through what happens with scientists on the ground.

Another such contribution came from the right hon. Member for Oxford East (Mr Smith) who, as I have said many times before, is only in the House because I was the press officer of the Oxford university Conservative association when he was fighting Steve Norris in 1987. However, what is absolutely true is that he, I, my hon. Friend the Member for Oxford West and Abingdon, my hon. Friend the Member for Henley (John Howell), the Prime Minister and my hon. Friend the Member for Banbury (Tony Baldry) all work well together on Oxfordshire interests, even if we might clash on national policies.

My hon. Friend the Member for Croydon Central (Gavin Barwell) made a valuable contribution to the debate, and I have renewed respect for him now that I know he is a theoretical physicist, while my hon. Friend the Member for Warrington South has a distinguished degree in engineering, although he left it for accountancy. I propose a twinning arrangement with my hon. Friend the Member for Warrington South: I would certainly like to see his facilities in Daresbury, if he will come and see my facilities in Harwell.

The debate covered a huge range of subjects. We even got on to housing shortages, nimbyism and transport networks. However, what it boils down to—stating what I regard as the highlights—is essentially: the myth and reality, as it were, of the science budget; the need to engage young people in science, even those in primary schools; concerns about whether the coalition Government’s immigration policy will impact on scientific research in the future; and some specific Government policies, notably on technology and innovation centres.

[Adam Afriyie (Windsor) (Con)]

May I bring the Minister’s attention to another point that was raised? In my time as the shadow Minister for Science and Innovation, I was keen to have a chief scientific adviser in the Treasury. Can he shed any light on that matter or on any progress that might be taking place in that regard?

[Mr Vaizey]

If I can make a career-ending response to that, in my short experience as a Minister I have discovered that the Treasury thinks it knows absolutely everything, so the idea that it needs to be advised on science or, indeed, any other subject would clearly be anathema to it. That, I am sure, is why it is resisting the appointment of a chief scientific adviser—I shall turn to the role of the Government’s chief scientific adviser in a minute. I also congratulate my hon. Friend, because he was a distinguished shadow science spokesman for us. I have no doubt that, behind the scenes, he influenced the Government’s approach to the science budget.

To give credit where it is due, however, the Minister for Universities and Science, my right hon. Friend the Member for Havant (Mr Willetts), who cannot be here because he is flying the flag for UK plc in India, I think, ought to be hugely credited with securing the important settlement that we have had for science.

I would like to say that I played a role in that settlement. There was a moment when I was in the Secretary of State’s office and I noticed a paper on the Diamond synchrotron, so I said to his private secretary, “You really want to sort out the Diamond synchrotron because they have a really effective MP and you don’t want to cross him.” He looked at me and said, “Who’s that?” So, I am not sure how much influence I had, although as a politician I would like to take the credit.

Other issues raised were the allocation between specific research councils—the charity research fund referred to by my hon. Friend the Member for Oxford West and Abingdon—and the capital funding. The debate was not partisan and has been conducted on a good cross-party basis.

One of the things that I note about science, which we should all treasure, is that people from different places work together. [Interruption.] That is probably my right hon. Friend the Minister for Universities and Science ringing—

[Mr Andrew Smith]

Or the Chancellor.

[Mr Vaizey]

Yes, that is the Treasury on the phone.

Going to such large scientific facilities—I was struck in particular going to the large hadron collider—one sees Iranian scientists working next to Israeli scientists. That for me, if we are talking about bringing science alive, brings alive the global, co-operative nature of science.

I can tell hon. and right hon. Members that I cannot tell them anything about some of the questions they asked, because the negotiations are still ongoing. I can tell them that we hope to conclude them by Christmas.

[Mr Andrew Smith]

The Minister is doing very well in the limited time, but can he write to us on the specific questions that he does not have time to answer now?

[Mr Vaizey]

I thought about standing up and simply saying that I would write to the right hon. and hon. Members, given that approximately 35 questions were asked in the course of the debate. However, I will certainly ensure that we give a comprehensive response to all the questions of right hon. and hon. Members who attended the debate.

We talked about research budgets from other Departments. Yesterday the Department of Health signed an agreement for a UK Centre for Medical Research and Innovation, with £220 million for the construction of this new centre, which will bring together the Medical Research Council, University college London and medical charities.

Reference has been made to the £69 million secured by the Diamond synchrotron, as well as other important innovations such as the European Space Agency, which is also in my constituency. I was delighted to see the report this week, pointing out that space success has rocketed in this country; the industry is now worth £7.5 billion, and it employs 25,000 people, which is an increase in a year of 11%. When the right hon. Member for Oxford East said that our scientists have a global reach, I would correct him and simply point out that they now have an intergalactic reach, which we should praise.

The important question of immigration was raised. It is absolutely part of our strength as a scientific nation that we attract the best scientists to live and work here. As I said earlier, scientists working together from different countries that may be politically hostile to each other is very important. It is an extraordinary experience to visit leading scientific institutions and see the range of people from across the world who have been attracted to them. We must secure that sort of international work force working together.

Last week, my right hon. Friend the Minister for Universities and Science met representatives of further and higher education and of the UK Border Agency, and had the opportunity to hear their concerns directly. My Department is working closely with the Home Office to develop a system that, while delivering the Government’s objective—as my hon. Friend the Member for Croydon Central pointed out, it is strongly supportive of reducing the overall level of immigration—allows those who can make a positive contribution to the UK, such as researchers and academics, to continue to come here.

The hon. Member for Cambridge spoke about people being denied a visa to attend a legitimate high-profile conference. I understand his frustration. We need to establish a system under which reputable institutions should be trusted to vouch for those who attend conferences.

Exeter to Plymouth Railway

Wednesday 10th November 2010 Westminster Hall

16:11

[Anne Marie Morris (Newton Abbot) (Con)]

During the next 10 to 15 minutes, I shall speak about the south Devon railway line. It is close to my constituents’ hearts, and I am clearly looking to the Minister to support continued investment in it.

The line goes from Exeter to Plymouth, and part of it goes through my constituency. It goes through Starcross and down the coast through Dawlish and Teignmouth. From there it divides, and goes on either to Torbay or Plymouth. It is one of the most picturesque stretches of railway in Europe; indeed, it is a tourist attraction in its own right.

The line is hugely important to the Devon economy for two reasons: because of the role it plays in supporting tourism, and for its role in helping my constituents to commute to work and back. In my part of the world, public transport is important, as it is a very rural community. The Minister will be delighted to hear that the more rail travel we have, the smaller will be our carbon footprint, so I hope to achieve some support in that regard.

I shall dwell first on the economic value of the line and explain how important it is for Devon. Tourism accounts for 7% of the Devon economy, a substantial part. We have 5.3 million visitors a year, which is no mean feat. Teignbridge, the part of my constituency through which the railway runs, is the second most important destination for tourists. As a result, it is no surprise that 30% of the local work force are engaged in tourism or related industries. While tourists are in Devon, they spend in excess of £2 billion a year. That is a significant sum.

I turn to the commuting element, and the economic and environmental benefits of the line. The Minister may be surprised to learn that 2 million people used that line during the last 12 months. Indeed, Network Rail’s estimate is that we will see 19% growth over this year and next. It has been identified as one of the fastest growing lines.

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

I thank my hon. Friend for giving way, and I congratulate her on securing this debate. I give her my support and the support of all Members of Parliament who represent Cornwall.

All trains from Paddington to Cornwall use this line, but we in Cornwall are even more remote and peripheral to the UK than Devon. The line is vital to us, and it should be protected and upgraded, especially given the environmental problems that I hope my hon. Friend will mention. The line is important not only for Devon, but will play an important role in the future economy of Cornwall.

[Anne Marie Morris]

I thank my hon. Friend for that valuable contribution and for the support she offers.

As I said at the outset, I am seeking the Minister’s support for continued investment, and I shall explain why. During the last Parliament there was a House of Commons inquiry into an alternative inland route, which resulted from concerns about the viability of continuing investment, given the coastal path that the route takes. The inquiry findings were made public in February this year; its view was that, at a cost of £100 million, it simply was not viable. We now have a new Administration, and I therefore seek an assurance that the Government see the coastal line as a priority. That is particularly important as it will allow Network Rail and the Environment Agency to plan for the future, and it is clearly important that such planning be put in place now.

Why is it important that we plan now? It is important because, as many will be aware, this line has its own challenges, which are not new. They have been well rehearsed; indeed, the matter was last debated in 2006. The main challenge is this: as a coastal line, it is inevitably affected by erosion and a rise in sea level. The line follows 13 miles of tidal water, four of which are aligned with or cross open sea. The Met Office prediction is that sea levels will rise by 0.32 metres over the next 100 years. That may seem a lot, and we need to plan now because of the consequences.

Another factor needs to be taken into account. The Minister may know that the UK is on a tilt: the south-west is tipping into the sea, and the north-east is going the other way and rising out of the sea. As a consequence, the south-west is sinking by between 5 mm and 10 mm a decade. We need to consider what has to be done sooner rather than later.

I have discussed the problem with Network Rail, the body responsible for maintaining the line. It is more than happy—it believes that it is viable—to continue investing £500,000 a year to ensure that the sea wall remains rugged and fit for purpose. However, when looking forward to 2025, it believes that more investment will be required. If we are to make that further investment, we need to consider its quantum and what sort of disruption would be caused to local businesses, tourists and commuters, as we need to manage the process in a sensible way.

In my discussions, I have discovered two problem areas. One is in Dawlish Warren, where there has been consistent erosion; the sand has moved, to the benefit of Exminster and the detriment of Dawlish Warren. The Environment Agency’s position is that we can hold the line, but come 2025 it believes that managed realignment will be needed. What will happen then, and what will the cost be? The second difficult area is Powderham bank. As the sea level rises there, the wetland will begin to disappear. We need to ensure that we still have the wetland, with its birds and wildlife, which means we will have to create a causeway for the railway line. The appropriate spot for that is Powderham bank, but significant engineering problems and costs will need to be evaluated.

We need a shoreline management plan, and the Environment Agency is responsible for ensuring that it is in place. As expected, it has developed an overarching coastline strategy. It has been diligent in renewing groynes and gabion defences. Recently the Environment Agency spent £100,000 on emergency repairs and, as we speak, is considering putting sand deposits on to Dawlish Warren to deal with the erosion problem. However, there is a challenge in getting agreement between all the interested stakeholders in Shoreline Management Plan 2, as it is called. That plan was discussed before the election, and was put on hold as we moved towards the election. Post-election, it is to be re-visited. There is a meeting in two weeks’ time of the western structure team, at which Teignbridge district council, the Environment Agency, English Heritage, the Countryside Council—indeed, all parties—will be present. My concern is that at that meeting there needs to be a real focus on what the priorities should be. That is why I would like the Minister’s assurance that the priority is to ensure that line continues to run.

Therefore, I am looking for three things: a statement on the Government’s behalf that it is their priority to keep the line running; confirmation that there is no plan to resurrect a debate about the alternative inland route at a cost of £100 million; and for the Minister and the Government to direct Network Rail and the Environment Agency to work together to find a way forward, putting this route and its long-term viability and infrastructure at the heart of the plan going forward. I might be so bold as to suggest to the Minister a time line, because I am conscious that with a plan and a time line, we will have a result. I suggest that in the rail regulatory period 5, running 2009-14, the Minister propose that the group look at putting in place a proper plan and implementing proper consultation, because the changes required in 2025 will have significant local implications. I then suggest that during rail regulatory periods 6 and 7, which run from 2015-24, we look at the design and the building of the work that needs to be put through. The Minister will already be well aware that the Government are committed to a high-speed train between London and Torbay; indeed, that starts next month. I hope that, given that commitment, I and others can expect support for this line. Otherwise, it will be a wasted investment.

In conclusion, I want to make clear on behalf of my constituents and those of adjoining constituencies how important this line is to the local economy of Devon and Cornwall and to the south-west in general. I make my case to the Minister on our constituents’ behalf that this line needs to be protected and to have continued investment. We need confirmation that this is a priority line that will receive direction from the Government and, where relevant, funding.

16:23

[The Parliamentary Under-Secretary of State for Transport (Norman Baker)]

I congratulate my hon. Friend the Member for Newton Abbot (Anne Marie Morris) on securing the debate. She set out with great clarity the importance of the Exeter-Plymouth railway line to her constituency and the south-west in general. I welcome the opportunity to reassure her that the issues she raised about the route’s long-term resilience are being taken seriously by the rail industry and the Government.

The Exeter-Plymouth railway line is of great importance to the economy of south Devon, Torbay, Plymouth and whole of Cornwall. It makes a significant contribution to tourism in the area. I am sure that there are many people whose first glimpse of the Devon seaside came from the window of an express train as it hugged the coast on the line between Exeter and Newton Abbot.

The line is also important for people getting to work and college, and also for the businesses that rely on it to maintain efficient contacts with the rest of the country. However, as my hon. Friend notes, its proximity to the coast is the line’s Achilles heel, and it has been subject to temporary closures from time to time. Network Rail is responsible for the operation, maintenance and renewal of the rail network and it takes very seriously the long-term resilience of the network in the face of climate change.

It falls to Network Rail to continue to monitor the likelihood of risks to the safety and operational integrity of the railway in the Dawlish area and to propose further appropriate measures of protection from flooding and coastal erosion. Network Rail is fully aware of the importance of the section of coastal main line between Teignmouth and Dawlish Warren. I understand that around £9 million has been invested in recent years to maintain the integrity of the sea wall and the stability of the cliff face. Network Rail does not believe that the railway sea defences in the Dawlish area are likely to fail in the foreseeable future, thanks to the works carried out and ongoing maintenance and monitoring.

Network Rail advises that it spends around £500,000 each year, as my hon. Friend notes, on maintaining the sea walls and estuaries. A dedicated contractor work force is based at Dawlish. The sea walls are subject to an enhanced structural maintenance inspection regime, with an additional post-storm element, to ensure railway safety and performance, and to target resources at where the risk is greatest. Weather forecasts and tidal predictions are monitored, and when the combination of events reaches a pre-determined level, additional inspections are undertaken.

The implications of climate change will stretch into the long term, however. On 16 September, my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs responded to a report published by the adaptation sub-committee, which was set up as a result of the Climate Change Act 2008. She said:

“Although we need to bring down greenhouse gas emissions internationally and to drive down our own emissions at home, we need to mitigate and adapt to the potential consequences of climate change. This is one of the key priorities contained in the coalition agreement.”

This is a challenge that Government must rise to, but they cannot do it alone. Transport infrastructure providers need to recognise both the economic and social necessity of taking steps to protect the areas for which they are responsible.

Network Rail has been taking action for some time. It is working with the Met Office by using its data to help to stress test thousands of miles of rail tracks, embankments and bridges to determine whether they can stand up to the patterns of extreme weather predicted over the coming decades. The process is not cheap. The investigation itself will cost around £750,000, but when Network Rail points to such early action leading to savings of around £1 billion over 30 years, the work starts to look incredibly good value for money.

This new piece of work builds on an earlier technical study undertaken by Network Rail and the Rail Safety and Standards Board in 2008. The railway lines adjoining the Teign and Exe estuaries and the south Devon coast were used as case studies, and the conclusions suggested, not surprisingly, that the frequency of disruptions along the main line was likely to increase over the next 70 years as sea levels rise.

Network Rail has therefore identified that there is a problem—not just in south Devon but on other parts of the network—that needs to be addressed. The Department for Transport is funding a major research project with Network Rail to understand the impact of climate change on the railway. The project has already identified wave over-topping and flooding at defended coastal and estuarine railways at Dawlish as a priority. The next phase of the project will provide the quantified evidence needed to decide where and when investment may be needed to maintain the resilience of the railway to increasingly extreme weather.

No conclusion has yet been reached on what mitigation measures might be required to minimise the risk to the rail network from rising sea levels at locations along the coast and river estuaries. Nevertheless, along with the key objective of protecting the railway, its users and properties adjacent to it, it must be a priority to maintain access by rail to the areas of south Devon and Torbay.

My hon. Friend asked whether keeping the line running was a priority, and I hope I have answered that question—it is. Do we see it as the main line to Cornwall—this point was also referred to by my hon. Friend the Member for Truro and Falmouth (Sarah Newton)—in the indefinite future? Yes, we do. I will turn briefly to the question of whether we intend to resurrect the debate about an alternative route. A number of suggestions have been made about building alternative routes away from the coast or reopening former railway lines such as the Exeter-Okehampton-Tavistock-Plymouth line. As I have pointed out, any solution cannot ignore the needs of south Devon and Torbay, so reopening that line alone would not meet one of our key objectives. That is not to say, however, that if the line were to open, it would not be welcome. It would be welcome but, in our view, it would not be a substitute in any shape or form for the main line along the coast.

My hon. Friend the Member for Newton Abbot also mentioned CP5 and the considerations for 2025, which she identified as a key date. I undertake to pass on her comments to the Minister of State, Department for Transport, my right hon. Friend the Member for Chipping Barnet (Mrs Villiers), so that she has them in mind as she discusses the contents of CP5 with Network Rail.

I am encouraged that Network Rail is engaging with other organisations to tackle the issue and taking it very seriously. My hon. Friend the Member for Newton Abbot referred to the Environment Agency, which has a key role to play. To meet her suggestion that we direct Network Rail and the Environment Agency to find a solution, I will be happy to write to them following the debate to stress the importance of maintaining the line to the economy of south Devon.

Housing Revenue Account Subsidy (Wales)

Wednesday 10th November 2010 Westminster Hall

16:30

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

May I begin, Mrs Brooke, by saying that it is a pleasure and an honour to serve under your chairmanship this afternoon?

The topic of my debate is the housing revenue account subsidy scheme, and it aims to highlight one of the great injustices of public housing policy in Wales during the last 20 years. That policy has led to a reported £2 billion in cash terms—not taking into account inflation—of the rents of some of the poorest people in Wales being returned to the Treasury. It has also led to chronic under-investment in the Welsh public housing stock, which is among the poorest and of the worst standard in Europe, with the associated social and health implications. It has deprived our communities of a significant cash investment. Furthermore, it has driven the stock transfer agenda.

With the UK Department for Communities and Local Government scrapping the housing revenue account subsidy scheme for England in September—a decision that we in Plaid Cymru welcome wholeheartedly—there can be no justification for Welsh local authorities having to continue paying around £100 million per annum to the Treasury.

As far as Wales is concerned, the story of the housing revenue account subsidy scheme is one of great incompetence by both Labour and Tory politicians, who have miserably failed some of the poorest people in Wales. Perhaps that is not surprising, as I am reliably informed that only a very few individuals understand the full complexity of the scheme.

As part of the then Conservative Government’s relentless attack on public housing, the Local Government and Housing Act of 1989 led to the confiscation by the Treasury of a large part of the rents paid by tenants. The complication of the new arrangements was hardly helped by those arrangements being labelled as a “subsidy”. My understanding of the word is that “subsidy” should mean some sort of financial benefit, but that was certainly not the case in this instance.

The effect of the 1989 Act was to undermine the attractiveness of public housing by running down its quality, as investment was redirected from local communities. Rents in Wales were lower than those in England—they still remain lower now—and that led to less revenue in general. The quality of housing in Wales is also generally poorer. However, under the terms of the Act, local authorities were forced to return any surplus from expected rent, after operational and maintenance costs were met, to the Treasury, rather than investing those moneys in the housing stock. That had the bizarre effect of promoting the stock transfer of public housing, which is a theme I will return to later.

Perhaps the use of the word “subsidy” comes from the effect of the new arrangements, which meant that those council tenants who were able to pay their rents were, via the new funding mechanism, paying for the housing benefit entitlements of others. Of course, that did not apply to private rented sector tenants or to tenants of registered social landlords.

With HRA payments being used to fund housing benefit, the greater the money that the Treasury could accumulate via the scheme, the less it needed to pay out directly in benefits. Indeed, the 1989 Act allowed UK Government Ministers to set the expected level of rent income from each local authority, as well as the expected level of expenditure on maintenance and management of their homes.

[Guto Bebb (Aberconwy) (Con)]

First, I congratulate the hon. Gentleman on securing this debate. On that specific point, it is also worth pointing out that the decision in 1989 to introduce those changes also meant that there was a more equal distribution of rents among the local authorities in Wales. Indeed, there was a cap on the increase in rents for local authority housing at that time.

[Jonathan Edwards]

The hon. Gentleman makes an honourable point, but I am trying to point out the perverse effects of the 1989 Act and I am sure that he will give me some time to do so.

As I was saying, the 1989 Act allowed UK Government Ministers to set the expected level of rent income and the expected levels of expenditure on maintenance and management of the local authority homes. The policy motive of the UK Government was to drive up council rents while decreasing expenditure on housing, in order to increase the differential and gain maximum financial advantage from the new arrangements. As a result, the quality of publicly owned housing stock in Wales significantly worsened.

The then Secretary of State for Wales, Peter Walker, was guilty of a dereliction of duty of the greatest scale, as Wales was included under the terms of the new arrangements while the Secretary of State for Scotland, Michael Forsyth, refused to sign the Scottish clause, meaning that Scotland was exempted from the 1989 Act. Considering that housing benefit is a UK function, there was no reason at all why Scotland should have been excluded and Wales included, apart from the ineptitude of the Wales Office and its Conservative occupants—if the hon. Member for Aberconwy (Guto Bebb) will forgive me for saying so.

New Labour being new Labour, it continued the policies of the previous Tory Government on public housing for the first three years after the 1997 election. In 2000, however, following a backlash among local authorities, the UK Government introduced proposals to amend the scheme without legislation. To end the deduction of rents from local authorities, the Treasury introduced in each housing revenue account an amount for spending on the renovation of properties. That new budget line was called the major repairs allowance and it was set at a level to ensure that local authority expenditure exceeded rental income, with the immediate effect of halting the Treasury’s rent grab.

The increase in funding brought about by the MRA for England was from UK Government sources and the UK taxpayer, and hence a Welsh equivalent should have been introduced by increasing the block grant by the Barnett formula. However, and critically, those new changes were only applied to England. In what has been described as “the year of the great mistake” by Paul Griffiths, a former Labour Welsh Government special adviser, in an excellent Bevan Foundation article, for some reason the Treasury again decided to make Wales a special case and Labour, which was in control of the Welsh Government, totally missed the significance of the changes applied to the HRA in England. As a result, since devolution, Wales has lost a further £1 billion, with an average of around £100 million per annum being siphoned off from council rents in Wales.

It is true that the Welsh Government could have made a unilateral decision and left that money with the councils, but as devolution guidance notes insist that any policy decision must be neutral in its impact upon the Treasury that would have meant that the Welsh Assembly Government had to find a further £100 million from its already underfunded Budget to give to the Treasury. Therefore, that is a change that can be made only with Treasury consent.

We in Plaid Cymru continuously make the case that Wales is ill-served by the UK Government. The Barnett formula continues to underfund Wales to the tune of £300 million per annum. We welcome the announcement of a review of the formula, which will take place shortly, although for the life of me I cannot see why that review has to take place after the referendum. However, given its attitude on Barnett and other issues, it is no surprise to us that the Treasury would consider Wales as an afterthought in relation to the introduction of the MRA in England in 2000.

The gross incompetence of the Welsh Government of the time is less easy to understand. Quite how successive Welsh Ministers and Welsh civil servants have failed to challenge the inequity of the situation is beyond me. With a Labour-controlled Welsh Government more concerned with placating their London masters, it is hardly surprising that the people of Wales are being let down so badly. Indeed, it has taken a Plaid Cymru Housing Minister to put this issue on the agenda at all. In short, the Treasury, under Labour control, threw a hospital pass to the Welsh Government in 2000, with a tragic £1 billion consequence for some of the poorest communities in my country.

In 2004, the Welsh Assembly Government created its own MRA out of its own funds, which further confused the issue. It meant that around £100 million was diverted from other areas of devolved responsibility each year, when the right course of action was to demand what was rightfully Wales’s from the Treasury. Therefore, despite the introduction of the Welsh Government-sponsored MRA, the Treasury continued to rake in their £100 million per annum from the HRA scheme in Wales.

As I mentioned earlier, one of the direct consequences of the HRA scheme has been to make the sale of publicly owned housing far more attractive, either under the terms of the right to buy or by the wholesale selling off of stock to registered social landlords, because housing associations are not covered by the scheme and are free to spend this money as they see fit on improving housing stock.

To date, the local authorities of Bridgend, Ceredigion, Merthyr, Newport, Monmouthshire, Rhondda Cynon Taff, Gwynedd, Torfaen and Conwy—the local authority of the hon. Member for Aberconwy—have all transferred their stock to housing associations, with many more local authorities seeking to follow the same path, due to their inability to access funds to help them to meet the Welsh housing quality standards set for 2012.

[Guto Bebb]

On that specific point, it is interesting to note that some local authorities in Wales have identified the issue and embarked upon stock transfer as a means by which they can invest in repairing the properties that they hold. Indeed, it is very interesting that Gwynedd council, which is actually controlled by Plaid Cymru, has also followed that procedure. However, I am sure that the hon. Gentleman will concur that it is interesting how often local opposition to such a move has been led by Labour politicians. In view of how the Labour Government in Wales failed completely in 2000 to address that issue, is it not surprising that local Labour politicians have been so opposed to those stock transfers?

[Jonathan Edwards]

The hon. Gentleman makes an excellent point. It is a shame there are no Labour Members here to debate that issue with us. Of course, he and I have divergent views on stock transfer. I will return to the situation in my home county of Carmarthenshire later.

[Guto Bebb]

My understanding is that Plaid Cymru party members are extremely supportive of the stock transfer undertaken in Gwynedd. In the county of Conwy, which I have the pleasure of representing, it has been deemed a great success, even though Labour party members opposed the decision.

[Jonathan Edwards]

The hon. Gentleman makes a point. To be honest, there is a debate within the party about the merits of stock transfer. I, for one, am not as persuaded as some of my colleagues in the north of our great country may be.

The stock transfer agenda has been driven by the denial of funds to Welsh local authorities that would not necessarily have wanted to go down that path, because of the housing revenue account subsidy scheme. The HRA scheme has therefore had the undoubted effect of driving greater change in Wales than was ever envisaged, and, in my view, not necessarily a change for the better.

My local authority, Carmarthenshire county council, which is keen on keeping its housing stock, was recently forced to borrow money in order to introduce its housing plan to keep its stock in public ownership. If the money from the council’s own rents had been available to it, it would not have needed to borrow money; it could have used the revenue generated by its stock’s rents. As a ring-fenced account, money collected in this way can only be used on housing. Why is that option simply not available for local authorities in Wales?

Due to the scale of the situation, it is perhaps surprising that the Treasury was unable to provide details of the HRA contribution made by Welsh local authorities when I asked a parliamentary question on the subject in July. Thankfully, it seems the Welsh Government are better at keeping records of that sort of financial transaction. Their response to my freedom of information request made clear the scale of the great rent robbery.

As the Treasury has been unable to provide the figures, it will be useful for the record and indeed for the Treasury’s records if I outline each Welsh local authority’s contribution in cash terms since 1999. If I may try the patience of the House, Mrs Brooke, the figures are, to the nearest million: Blaenau Gwent, £12 million; Bridgend, £16 million; Caerphilly, £70 million; Cardiff, £139 million; my home county of Carmarthenshire, £51 million; Ceredigion, £15 million; Conwy, £14 million; Denbighshire, £32 million; Flintshire, £62 million; Gwynedd, £53 million; Ynys Môn, £23 million; Monmouthshire, £33 million; Neath Port Talbot, £52 million; Newport, £75 million; Pembrokeshire, £63 million; Powys, £60 million; Rhondda Cynon Taff, £2 million; Swansea, £56 million; Torfaen, £71 million; Vale of Glamorgan, £56 million; Wrexham, £110 million. Merthyr was the only Welsh council in surplus of £5 million. If the Minister wants, I can provide an annual breakdown for each year since 1999, but I might try his patience a bit too much.

[Guto Bebb]

Do the figures quoted date from 2000 onwards, or from the 1989 decision?

[Jonathan Edwards]

From 1999, because the Welsh Government can provide figures only since devolution, but 2000 would have been the benchmark.

Considering the pressure on housing waiting lists, it is sobering to think that if those moneys had been retained over the past decade, 10,000 brand-new family houses could have been built in Wales, all eco-friendly and built to modern specifications. That could have helped address major social justice issues such as fuel poverty. Some 30% of households in Wales, not just those living in public stock, are in fuel poverty. We could have addressed Wales’s terrible legacy of poor housing and associated poor health. The money could also have provided enormous benefits for the local construction economy, which is part of the backbone of Welsh employment, and improved the circulation of money inside some of the poorest communities in Wales.

I am informed that by now the Treasury will have received a letter on the issue from the Welsh Minister for Business and Budget and Deputy Minister for Housing and Regeneration. The letter encloses a report by Professor Wilcox, an expert on housing finance. I have not been privy to that report, but I believe that it argues that Wales should have parity with Scotland. I agree, as I hope will all parties in Wales.

Furthermore, the new UK Government’s decision to scrap the housing revenue account for England this September means that there is no justification whatever for the Treasury’s insistence that the scheme should continue to apply to Wales alone. Such is the inequity and injustice at the heart of the whole affair that I believe, as I said in a recent early-day motion, that the Treasury should make reparations based on the real-terms amounts of money accumulated over the past two decades. At the very least, the Treasury must make a clear statement that the provisions of the HRA and the great pillage of Welsh rents are to cease with immediate effect.

In terms of the UK Budget, this ever-decreasing figure, which lessens every time a local authority transfers its housing stock, is small, but to the tenants who must make do with poorer-quality housing than they deserve and the local authorities that want to provide new and better-quality housing for their residents, it is a significant amount. This is not just the right thing to do; it is the best thing to do and the fair thing to do. Diolch yn fawr.

16:45

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

It is a great pleasure to serve under your chairmanship, Mrs Brooke. I congratulate the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) on securing this debate and presenting his case with such eloquence and detail, although I am grateful to him for not providing the breakdown of every local authority for every year since 1999.

I am pleased to have this opportunity to discuss the Government’s policy on the housing revenue account subsidy system and its financial consequences in Wales. Housing policy, as we heard from the hon. Gentleman, is governed by the same primary legislation in England and Wales, and the public spending framework is also similar. However, it is important to remember that housing policy itself is a devolved matter.

The HRAS system in Wales is based on notional income and expenditure on council housing, which is derived from information provided by local authorities. If the overall HRAS system is in surplus once all local authority expenditure has been totalled, the surplus is collected by the Welsh Assembly Government and given directly to Her Majesty’s Treasury as annual managed expenditure.

I recognise that the existing centralised system is seen as complex and opaque and is therefore unpopular with local authorities across Wales, a point made by the hon. Gentleman. That is why the Welsh Assembly Government launched a review of the HRAS system last December. My colleagues in Government and I look forward to the outcome of the review. As he said, there is certainly potential to improve the current system, and any recommendations will be duly considered as part of our wider reform agenda.

It might be helpful for me to touch briefly on the example of England, about which we have heard a little bit. As part of the spending review, we announced that we will be ending the current HRAS system in England and introducing a new self-financing model for council housing that will abolish the annual centralised subsidy and replace it with a more transparent system that gives greater power to local councils and authorities.

As in many areas of public service provision, we seek to devolve responsibility away from the centre so that communities have more of a say in what goes on in their local area. The measure will enable councils to keep their rental income and use it to maintain homes for current and future tenants, providing new opportunities and incentives for authorities to plan for the longer term. That approach will allow councils better to meet the housing needs of their specific areas. Decisions will be made based on local knowledge and priorities, not a central Government formula. Details of the new system will be introduced this autumn as part of the localism Bill.

In principle, it would be feasible to construct a similar solution for Welsh authorities, if that is what they wish to propose. However, there are some differences between the HRAS systems in England and Wales that will need to be bottomed out. As I said, it is a devolved matter. Any decision on the future of the Welsh HRAS system will be made by the Assembly Government, subject to agreement by HM Treasury. I note some of the hon. Gentleman’s criticisms of the Welsh Assembly Government—not all coalitions work as harmoniously as others do. His points are very much on the record.

It might be helpful for the hon. Gentleman to know that, earlier this week, my right hon. Friend the Chief Secretary to the Treasury wrote to Jane Hutt, the Welsh Finance Minister. He offered officials to work with Welsh colleagues on developing a similar reform to the Welsh HRA subsidy system, with the same protections provided for the position of the Exchequer.

[Guto Bebb]

I am obviously delighted to hear that because this is an important subject. Although I have made the point that stock transfer has been a way of dealing with the matter and providing a more local approach, it is fair to say that there is a cross-party feeling in Wales that the issue should be dealt with. It is part of the localism agenda and the Minister’s comments are very welcome.

[Mr Gauke]

I am grateful to my hon. Friend for his comments. Indeed, I have a lot of sympathy with what he has said about stock transfer. If there is a consensus within Wales, from the position of the UK Government, the Treasury is keen to engage. As I said, Treasury officials are available to work with their Welsh counterparts to find a way in which we can move forward in this area. Yes, there are differences between the English and the Welsh system, but we are keen to consider the matter and engage in a positive way.

I thank the hon. Member for Carmarthen East and Dinefwr for securing today’s debate. He has raised some important points and I am grateful to him and my hon. Friend the Member for Aberconwy (Guto Bebb) for their contributions. It is incredibly important to address the issue of housing needs across Wales—and the UK more generally—and the Government are keen to do so. I look forward to seeing the proposals for reform of the HRAS system that the Welsh Assembly Government are currently putting together and, as I mentioned earlier, the Treasury is keen to engage in that process. I hope that, through working in partnership with the Welsh Assembly Government, we can find a solution that meets the needs of local authorities in Wales set out by the hon. Gentleman. I also hope that we can deliver similar protection to the Exchequer as that achieved by the reforms we have undertaken in England, which have been assessed by the Office for Budget Responsibility as being fiscally neutral. In that context, I would like to say that this has been a useful debate. I am grateful to the hon. Gentleman for securing it and I hope he feels that it has enabled us to make some progress in this area.

Question put and agreed to.

16:52

Sitting adjourned.

Written Ministerial Statements

Wednesday 10th November 2010 Written Statements

Wednesday 10 November 2010

Economic and Financial Affairs Council (11 November 2010)

Wednesday 10th November 2010 Written Statements

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

I plan to represent the Government at the Budget ECOFIN to be held on 11 November in Brussels.

Budget ECOFIN will prepare a conciliation meeting with the European Parliament on the EU budget for 2011, and handle the outcome of that conciliation meeting.

The Government remain committed to opposing the increases of around 6% in the 2011 EU budget, above 2010 levels, proposed by the Commission and the European Parliament. These are simply unacceptable at a time when Governments across the European Union are taking difficult decisions to reduce national deficits and ensure the sustainability of their public finances.

The Government have called for a freeze in the 2011 EU budget at 2010 levels. We voted for this when the Council adopted its position on the budget earlier this year, which proposed a 2.9% increase over 2010 levels. Six other member states also voted against Council’s position. It was nevertheless adopted by a qualified majority.

Along with 12 other member states’ Governments, the Government have made it clear that they cannot accept any increase beyond 2.9% in the 2011 EU budget compared to the 2010 budget. Those are the terms of agreement that this Government will pursue at Budget ECOFIN on 11 November.

Call-Out Order to Support Operations in Afghanistan

Wednesday 10th November 2010 Written Statements

[The Minister for the Armed Forces (Nick Harvey)]

With the expiry of the call-out order made on 11 November 2009, a new order has been made under section 54 of the Reserve Forces Act 1996 to enable reservists to continue to be called out into service to support operations in Afghanistan. The new order is effective until 10 November 2011. Reservists continue to make a valuable contribution to operations in that country and some 1,280 reservists are currently called out and serving, of whom 530 are deployed in Afghanistan.

Localism Bill and Planning

Wednesday 10th November 2010 Written Statements

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

On 6 July 2010, the coalition Government revoked all regional strategies under section 79(6) of the Local Democracy, Economic Development and Construction Act 2009. This action was challenged in the High Court by developer CALA Homes, and the decision today concluded that section 79 powers could not be used to revoke all regional strategies in their entirety.

While respecting the court’s decision this ruling changes very little. Later this month, the coalition Government will be introducing the localism Bill to Parliament, which will sweep away the last Government’s controversial regional strategies. It is clear that top-down targets do not build homes—they have just led to the lowest peacetime house building rates since 1924, and have fuelled resentment in the planning process that has slowed everything down.

On 27 May 2010, the Government wrote to local planning authorities and to the Planning Inspectorate informing them of the coalition Government’s intention rapidly to abolish regional strategies and setting out their expectation that the letter should be taken into account as a material planning consideration in any decisions they were currently taking. That advice still stands.

Today, the Government’s chief planner has written to all local planning authorities and the Planning Inspectorate confirming that they should have regard to this material consideration in any decisions they are currently taking.

Moreover, to illustrate the clear policy direction of the coalition Government, the proposed clause of the localism Bill that will enact our commitment to abolish regional strategies is being placed in the Library. The Bill is expected to begin its passage through Parliament before Christmas.

We are determined to return decision-making powers in housing and planning to local authorities and the communities they serve, alongside powerful incentives so that people see the benefits of building. We will very shortly provide more details about one of the most important such incentives, the new homes bonus scheme, which will come into effect from April. This means that new homes delivered now will be rewarded under the scheme.

The coalition Government remain firmly resolved to scrap the last Government’s imposition of confusing and bureaucratic red tape. This was a clear commitment made in the coalition agreement and in the general election manifestoes of both coalition parties. We intend to deliver on it.

Parliamentary Written Question (Correction)

Wednesday 10th November 2010 Written Statements

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

An error has been identified in the written answer given to the hon. Member for Dudley North (Ian Austin) on 19 July 2010, Official Report, columns 45-46W. The correct answer is as follows:

The number of court proceedings processed in the magistrates courts in England and Wales, England, and the West Midlands Local Criminal Justice Board area, from 2007 to 2009, is given in the table. Statistics are not available prior to 2007 on a comparable basis.

Parliamentary Assembly of the Council of Europe and Assembly of Western European Union (UK Delegation)

Wednesday 10th November 2010 Written Statements

[The Prime Minister (Mr David Cameron)]

The United Kingdom delegation to the Parliamentary Assembly of the Council of Europe and Assembly of Western European Union is as follows:

Robert Walter MP (Leader)

Parliamentary Assembly of the OSCE (UK Delegation)

Wednesday 10th November 2010 Written Statements

[The Prime Minister (Mr David Cameron)]

The United Kingdom delegation to the Parliamentary Assembly of the Organisation for Security and Co-operation in Europe is a follows:

Peter Bottomley MP (Leader)