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Oral Answers to Questions
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John Mann (Bassetlaw) (Lab)
1. How many prisoners who have completed their tariff remain in prison for the purpose of public protection.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
On 17 November 2010, 14,680 prisoners were serving an indeterminate sentence of imprisonment for public protection, or a life sentence in prisons or secure hospitals. Of those, 6,320 are held beyond their tariff expiry date, excluding offenders who have been recalled to custody following release.
John Mann
Those prisoners have been held in prison for good reasons and on good judgment. Does the Secretary of State intend, as is rumoured throughout prisons, to reduce the number of such offenders in prison? If so, how many sex offenders and violent criminals will be released back into our communities?
Mr Clarke
That rumour is probably on the hon. Gentleman’s website where I have seen that he is telling his constituents that I will release robbers, burglars, drug dealers and so on. Perhaps he will wait for the sentencing review, and stop living in a fantasy world. The indeterminate prison sentence has never worked as intended. The intention was that it would apply to a few hundred dangerous people who were not serving life sentences. The number is piling up, and more than 6,000 have gone beyond their tariff, but they will not simply be released. We will re-address the subject, and we will not release all the people he keeps telling his constituents we will release.
Tom Brake (Carshalton and Wallington) (LD)
Will the Secretary of State look at the Prison Reform Trust’s report and specifically conduct a review of the social and financial costs and benefits of IPP sentences, and examine the available policy options set out by the trust?
Mr Clarke
We are taking a balanced look at the whole subject. The Prison Reform Trust takes quite the opposite view to that of the hon. Member for Bassetlaw (John Mann). It believes that those sentences should be scrapped entirely. It is critical of the way they work, and it is clear that they are not working as intended, but the Government are hoping to take a balanced view. We must obviously protect the public against dangerous people and the risk of serious offences being committed on release. On the other hand, about 10% of the entire prison population will be serving IPP sentences by 2015 at the present rate of progress, and we cannot keep piling up an ever-mounting number of people who are likely never to be released.
Mr Jack Straw (Blackburn) (Lab)
Does the Secretary of State accept that it is inherent in both life sentences and the concept of IPP sentences, which are widely supported throughout the Chamber, that many prisoners will be tariff-expired because the idea is that they are not released until it is judged that it is safe to do so? Does he also accept that although it is true that the precise construction of the clauses was inappropriate and led to some very short tariffs, since the changes that I introduced in 2008, the number of new IPP sentenced prisoners has dropped by 50% from about 1,500 to under 1,000 a year? Would it not be far better for public safety to let that work through instead of prematurely releasing such prisoners?
Mr Clarke
No, it has always been the case that some people are held indeterminately, and certainly those on life sentences. The purpose of IPP sentences was to have a sentence below a life sentence for dangerous people for whom life was not quite justified. The right hon. Gentleman will accept that such sentences never worked as intended, which is why, when he was Secretary of State, he introduced an Act of Parliament to try to correct some of the mistakes that had been made. We are now considering how the sentence works in practice, and we will introduce considered proposals in due course.
Guy Opperman (Hexham) (Con)
2. What proposals he is considering to increase the level of efficiency in the administration of justice.
The Minister for Policing and Criminal Justice (Nick Herbert)
Following the spending review, the Ministry of Justice must make a total budgetary saving, including resource and capital spending, of 25% in real terms between 2010-11 and 2014-15.
Guy Opperman
I remind the House of my former profession of barrister. Eleven years ago, the Labour Government introduced the Woolf reforms, which changed all manner of process in the civil courts. What detailed proposals does the Minister have for the same telephone case management in criminal work, particularly post-not guilty pleas, and after-guilty pleas and sending matters for pre-sentence report?
Nick Herbert
We are certainly interested in improving the efficiency of justice by looking at case management, and some encouraging pilots have been run in London, in which costs have been saved through integrated case management arrangements between the Crown Prosecution Service and the police. We are also very interested in employing the greater use of technology, such as virtual courts, and I would be very happy to talk to my hon. Friend about other ideas as well.
Robert Flello (Stoke-on-Trent South) (Lab)
In the name of so-called efficiency of justice, the Secretary of State has scrapped the post of chief coroner, a move widely condemned by organisations such as Inquest and the Royal British Legion. They point out that tens of thousands of people every year are forced to grapple with the archaic, unaccountable coroners system, which needs the reforms promised by the Coroners and Justice Act 2009. The Minister said that scrapping the chief coroner was necessary to save money, but what assessment has he made of the increased costs that will be incurred through the greater use of judicial review, which is bound to result from this short-sighted decision? May I invite the Secretary of State or his Minister to put on record now exactly what the real cost will be of that false efficiency? Or will he take this opportunity to reverse that misguided proposal?
Nick Herbert
We do not think that this was a sustainable proposal, with set-up costs of £10 million and running costs of £6 million a year. The important thing now is to reform the coroners system appropriately to ensure the efficient administration of justice in this area.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
What steps are Ministers taking to ensure that savings do not simply become higher costs for other Departments or other parts of their own Department, whether in the context of magistrates court closures, which adds to police costs, or changes in the legal aid system that generate demand for expenditure elsewhere? Is there a mechanism for assessing how costs will fall elsewhere?
Nick Herbert
I agree with my right hon. Friend about the importance of ensuring that what he describes does not happen, but he will know that there is significant under-utilisation of magistrates courts. That is why we have had to take this action in consulting about closure, not least in relation to the Tynedale magistrates court, which is adjacent to his constituency in Northumberland and which is operating at a utilisation rate of only about two thirds.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
3. What assessment he has made of the adequacy of the support given by the National Offender Management Service to children in young offender institutions who have been in care.
The Minister for Policing and Criminal Justice (Nick Herbert)
The National Offender Management Service has a responsibility to safeguard the welfare of all young people in custody, and all young offender institutions are regularly inspected by Her Majesty’s inspectorate of prisons. Revised guidance on the responsibilities of local authorities to support young people leaving care is due to be published shortly by the Department for Education. It will include a chapter dedicated to the responsibilities for supporting care leavers involved in the criminal justice system.
Luciana Berger
I thank the Minister for that reply. I recently met representatives of the Liverpool Children in Care Council and heard young people expressing concern about the level of support given to young offenders who are looked-after children. Typically, they do not have the same support networks that other young offenders have. Will the Minister now commit to revisiting this issue to ensure that vulnerable young offenders are given the help and support that they need to get their lives back on track?
Nick Herbert
I certainly agree with the hon. Lady about the importance of providing such support. Last week, I visited Feltham young offenders institution with the Mayor of London and saw how innovative arrangements to provide greater support and counselling for young people had a considerably reduced the recidivism rate on a particular wing in that institution. That shows that, with better rehabilitation, we can get better results. I would be very happy to talk to the hon. Lady about any specific ideas she might have for improving the system.
Mr David Burrowes (Enfield, Southgate) (Con)
Is it any wonder that children in care do not have the necessary continuity of support once they are in custody, given that the full financial responsibility of local authorities is lost at that point? Will the Government ensure that when such children in care are in custody, they are not out of sight, out of mind and off the financial books of the local authorities?
Nick Herbert
It is important to ensure that the incentives are right, that we deter the inappropriate use of custody for young people and that local authorities are fully focused on what they need to do to reduce recidivism before the use of custody becomes important.
Mr George Howarth (Knowsley) (Lab)
The Minister will be aware that, according to a written ministerial statement today, the Omand review of the case of Jon Venables was released this morning. It is 114 pages long. Is he also aware that my constituent, Ralph Bulger, the father of James Bulger, and his brother Jimmy Bulger knew nothing about the release of this report today until the media contacted them, asking for a statement on what they thought would be in this 114-page document? Can he ensure that this kind of thing does not happen again?
Nick Herbert
My understanding is that appropriate arrangements should have been made, and that Mr Bulger was aware of the report but not its release. I shall of course look into the matter, and I am happy to talk to the right hon. Gentleman about what went wrong, if something went wrong in this case.
Sarah Newton (Truro and Falmouth) (Con)
5. What recent progress he has made on reviewing his Department’s policy on unduly lenient sentences.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
The powers of the Attorney-General and Solicitor-General to refer certain Crown court sentences to the Court of Appeal on the grounds of undue leniency are working well.
Sarah Newton
I am particularly concerned with the sentencing of people convicted of paedophilia and believe that the policy review should be based on evidence. What assurance can the Minister provide that data that the Ministry of Justice collects will separate crimes of paedophilia from all sexual offences as currently recorded? Without that data it will be difficult to review the appropriateness or otherwise of current sentencing policy.
Mr Blunt
I can well understand my hon. Friend’s concern. All offences of sufficient seriousness to be tried only in the Crown court can be referred through the unduly lenient sentences process to the Attorney-General or the Solicitor-General; and 17 of the 31 offences that are triable either way and listed in statutory instrument 2006/1116 refer to offences against children, which reflects how seriously the House takes the matter.
Sadiq Khan (Tooting) (Lab)
Thank you, Mr Speaker. You will be aware that on three occasions over the past two weeks the Secretary of State for Justice and the Deputy Prime Minister’s deputy—the Parliamentary Secretary, Cabinet Office, the hon. Member for Forest of Dean (Mr Harper)—have come to the Chamber and essentially repeated from the Dispatch Box announcements already made in the media.
I want to ask the Minister about reports in this Sunday’s papers on the Department’s sentencing plans. The current Prime Minister in March, the Conservative party manifesto in April and the Secretary of State in June all said words to the effect: “We will introduce a system where the courts will specify minimum and maximum sentences for certain offenders. These prisoners will only be able to leave jail after their minimum sentence is served by having earned their release, not simply by right.” Will the sentencing review ditch that policy or keep it?
Sadiq Khan
It is outrageous that we have to buy The Times and read The Daily Telegraph to see what the Government are planning. That is not new politics, that is not the way to do things, and the Secretary of State, who has been an MP for 40 years and served in three Cabinets, should know better.
The Minister ducked the previous question, but he and, indeed, the Secretary of State know that knife-crime cases cause real and lasting misery to the victims, to bereaved families and to communities. Before the general election and in their manifesto, the Conservatives were quite clear, because they said that
“anyone convicted of a knife crime can expect to face a prison sentence.”
We know what the press say their Government will do, but what will the Minister do in the sentencing review to be published next week?
Mr Blunt
This may be slightly tedious, but I must say again that the shadow Secretary of State will have to wait until the proposals are presented in a comprehensive fashion to the House. Of course, knife crime is an extremely serious offence, as we have acknowledged, but, as far as the precise proposals are concerned, the right hon. Gentleman, like everyone else, will have to wait until they are presented in a coherent fashion to the House first, as is appropriate.
Roberta Blackman-Woods (City of Durham) (Lab)
6. What discussions he has had with the Deputy Prime Minister on the effects on prisons and prison staff of making arrangements for the implementation of voting rights for prisoners.
Mr William Bain (Glasgow North East) (Lab)
9. What discussions he has had with the Deputy Prime Minister on the effects on prisons and prison staff of making arrangements for the implementation of voting rights for prisoners.
John Woodcock (Barrow and Furness) (Lab/Co-op)
10. What discussions he has had with the Deputy Prime Minister on the effects on prisons and prison staff of making arrangements for the implementation of voting rights for prisoners.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
Ministers are considering how to implement the judgment of the European Court of Human Rights, and when decisions have been taken, they will be announced to the House in the usual way.
Roberta Blackman-Woods
I am sure the Secretary of State is aware that prison staff already have to deal with requests for further information about how voting rights will be implemented—not only from prisoners, but from local communities who have grave concerns about the matter. Will he meet a group of MPs for whom that is a particular concern, so that the needs of our constituents might be considered?
Mr Clarke
I will consider that request when we have announced our conclusions, which we will, to the House. The previous Government were incapable of taking a decision on the Hirst recommendation, which was made five years ago, and we are about to produce our proposals. I would point out that remand prisoners already vote, and always have voted; they vote by post, and it has never caused any difficulty. In the end, there is no suggestion that prisoners are going to be registered in the prison at which they are Her Majesty’s guests. Those that bother to get registered will be registered in constituencies scattered across the country. Of course I will consider the logistics if, after we have produced our proposals, it is apparent that any particular logistical problem will be posed.
Mr Bain
When the Secretary of State meets the Deputy Prime Minister, will he pass on the grave disquiet of the people of Glasgow that the 93 convicted sex offenders, 10 convicted murderers and 15 convicted attempted murderers in Barlinnie jail in my constituency have not been exempted from the Government’s review on the right to vote? The Secretary of State knows that neither the European Court of Human Rights nor case law from Strasbourg requires that such individuals should have the right to vote, so why do the Government not just do the right thing and rule it out?
Mr Clarke
There is no suggestion—and there never has been—that every prisoner is going to get the vote. It is not the Government’s consultation that is responsible, but a judgment given five years ago by the European Court of Human Rights—a Council of Europe institution —and we are now deciding how to implement it. I cannot anticipate the Government’s decision, which will be taken collectively by Ministers, but the idea that lots of murderers and rapists in Barlinnie prison are all going to be given the vote is, I suspect, rather fanciful.
John Woodcock
The Secretary of State must understand the grave concern about this measure from the public and, I hope, from both sides of the House. If the Secretary of State is clear that there is no suggestion that murderers and rapists will be given the vote, why will he not simply rule out at least those two categories right now?
Mr Clarke
The principal consideration is to take a decision and present it to the House. I am trying to shoot down some of the fanciful ideas that have been expressed. I understand the real concern about this: most of the House would have preferred not to change at all the existing ban on prisoners voting, but doing nothing—the previous Government’s position—and allowing solicitors to go running around prisons signing up prisoners to get compensation for having their civil liberties denied is piling up quite a bill. I can assure the hon. Gentleman that Ministers will very soon resolve any uncertainty.
Mark Pritchard (The Wrekin) (Con)
But is there not a contradiction at the heart of the Government’s policy? Currently, all Members of Parliament represent all prisoners living in prisons within their constituency, yet the Secretary of State has said that they will be represented by Members of the constituencies where they were last registered. That contradiction needs to be resolved if representation of prisoners by prisoners is to be taken seriously.
Mr Clarke
I think there is some confusion in the House about the convention that applies, which both I and my hon. Friend should resolve—although it is not my responsibility to resolve it. I take the view that I represent my constituents when they are in prison wherever it is that they are imprisoned, but I know that other MPs take the view that they represent every resident of a prison in their constituency. Perhaps we should resolve the parliamentary conventions on this matter at the same time as we have a look at which prisoners might have voting rights.
Mr Robert Buckland (South Swindon) (Con)
In considering the Government’s policy on this thorny issue, will the Secretary of State, if he has to abide by the ruling of the European Court of Human Rights, restrict the right to vote to those prisoners at the lowest level of seriousness—for example, those dealt with by the magistrates courts for summary offences only?
Mr Clarke
This applies only to prisoners—obviously, people who have not been in prison do not lose their vote at all. We have to comply with the judgment of the Court. The problem is that this extremely annoying issue will become even more annoying to the public and everyone else if we simply do nothing and wait until some huge financial judgment is made against the taxpayer, which will turn the present public anger into fury. That is why we are going to bring forward considered proposals. At the moment, someone not sent to prison does not lose their vote—irrespective of what other punishment they receive in their summary trial.
Mr David Ruffley (Bury St Edmunds) (Con)
The Hirst judgment says that article 3 of protocol 1 of the European convention on human rights obliges this House to give some prisoners the vote; as we have heard, it also gives rise to financial compensation to some prisoners who have been denied that right. Although I sympathise with my right hon. and learned Friend, does he accept that there is an intellectual case for, in time, bringing powers back to Westminster in this area by repealing the Human Rights Act 1998 and withdrawing from the European convention of human rights?
Mr Clarke
There has been another British case today, which has clarified the situation slightly and has underlined the fact that the Government have discretion on how to comply with their obligations. In due course, obviously, we shall establish a commission on how best to give effect to our human rights obligations in this country, but that will not happen until at least next year.
The coalition Government do not intend to withdraw from the European convention on human rights, which was imposed by the victorious British on the rest of Europe after the war in order to establish British values across the countries that were recovering from fascism and was drafted largely by Sir David Maxwell Fyfe, who put what he thought were the best principles of British justice into it.
Andrew Rosindell (Romford) (Con)
7. What steps he is taking to increase the number of prison places.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
Our current plan is to build the prisons to which we are contractually committed. On the basis of current policies, we expect prisoner numbers to rise from about 85,393 last Friday to about 88,000 in 2015, and we expect the implementation of the proposals that will be outlined in the forthcoming Green Paper to reduce that number to about 3,000 fewer than today’s figure. We will always provide enough prison places for those who the courts judge should receive a custodial sentence.
Andrew Rosindell
Notwithstanding the Government’s efforts to stabilise the prison population, will the Minister assure us that those who commit crimes and deserve to go to prison will continue to do so?
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
The Minister will know that it is a basic human right for people to be incarcerated as near as possible to where they reside. When will the Government comply with that basic requirement by providing a prison facility for north Wales, especially as we understand that Shrewsbury prison is to be closed? Such a prison would serve the whole of mid-Wales as well as north Wales, and, as the Minister knows, its establishment is long overdue.
Mr Blunt
I am not sure that I recognise that as a basic human right, but it is certainly operationally sensible. Providing support for prisoners when they are incarcerated away from their families is an important part of assisting their rehabilitation into society. However, speculation about which prisons might or might not close in future is not appropriate at this stage. We will conduct a review of prison capacity in the light of the Green Paper and the responses to it, and only at that stage—
Mr Speaker
Order. I think that we have the drift of the Minister’s answer. We are grateful.
Tim Farron (Westmorland and Lonsdale) (LD)
Surely the reoffending rate is a critical factor affecting the number of prison places that are required. Restorative justice programmes such as that of the Sycamore Tree foundation, which operates at Haverigg prison in Cumbria, are both inexpensive and highly effective in reducing reoffending. What steps is the Minister taking to increase the number of restorative justice programmes in Britain’s prisons?
Paul Goggins (Wythenshawe and Sale East) (Lab)
According to the latest figures, more than half the prisons in England and Wales are officially overcrowded. If the Minister is ultimately successful in reducing the number of prisoners, what will his priority be—to close prisons or to reduce overcrowding?
Mr Blunt
It is a bit rich for the right hon. Gentleman to ask that question. As a former Prisons Minister, he bears part of the responsibility for the level of overcrowding that we have inherited.
Sadly, the answer is that we are not in a position to create enough prison places to be able to address the problem of overcrowding. That will probably have to wait for more economically propitious times. It will take us a while to get the economy into the shape that will enable us to deal with the prison overcrowding that we have inherited.
Mr David Evennett (Bexleyheath and Crayford) (Con)
8. How much was spent on legal aid for cases in respect of immigration appeals in the last 12 months.
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
In 2009-10, overall legal aid expenditure on advice and representation in immigration and asylum appeals was £85 million. I should, however, point out that it is not possible to identify expenditure for initial advice separately from expenditure before the immigration and asylum tribunal in cases in which both advice and representation are provided.
Mr Evennett
I thank the Minister for his response. Can he confirm that, under the coalition Government proposals, immigration cases will be taken out of the scope of legal aid?
Mr Djanogly
Yes, I can confirm to my hon. Friend that we are consulting on removing all immigration matters from the scope of legal aid, other than for those in immigration detention. That means removing matters such as varying leave to remain—for example, if a foreign student wants to change their visa to get permission to work instead, or, indeed, to stay here for longer. Such cases will no longer be at the taxpayer’s expense.
Keith Vaz (Leicester East) (Lab)
One of the ways in which we can cut down on waste in the legal aid budget is to address no-shows by Home Office officials at immigration hearings. Can the Minister tell me the number of cases in which Home Office representatives do not turn up to these hearings and the cost of that to the legal aid bill, or will he write to me with that information?
Mr Djanogly
I will write to the right hon. Gentleman with that information, but I can tell him that it is an issue. Defendants’ representatives not turning up for hearings is also an issue.
Mr Andy Slaughter (Hammersmith) (Lab)
Responding to Lord Carter’s 2006 review of legal aid, the Minister said it put very vulnerable individuals at risk, that people were not being represented and that the structure was “being destroyed”, and he concluded:
“I would say it’s a meltdown.”
Carter reduced the budget by about 5%, whereas the current Government’s Green Paper cuts civil legal aid income by 42%. How would the Minister describe that?
Mr Djanogly
The important point to make is that the last Government did, indeed, look at legal aid: they had more than 30 consultations over a five-year period, including Carter. The result of that was that providers and those in receipt of legal aid were lost within the system and did not know where cuts were coming from, and what we are doing now is putting forward a comprehensive review of legal aid, whereby providers and all stakeholders will be able to see their position within the system—and as a result the consultation will be accurate.
Mr Slaughter
Well, we can all make what we will of that, but the fact remains that more than half a million people who may have unfairly lost their job, their income, their right to decent housing or access to their children—or, indeed, who may have been deported from the country, as the Minister has just said—will now go without advice or representation, whereas criminal legal aid and some of the high-cost advocates earning more than £900,000 a year are largely untouched. The Secretary of State said in his statement on these measures that it was important to strike a balance. Does the Minister not think that the balance has been got wrong in this case?
Mr Djanogly
I refer the hon. Gentleman to the consultation document, which has clearly got a section on very high-cost cases, and on which we have significant proposals. More particularly, the Labour manifesto said it wanted to cut legal aid, so if he is going to talk about our cuts, perhaps he might like to say where he would be making cuts in legal aid.
Katy Clark (North Ayrshire and Arran) (Lab)
11. What recent discussions he has had on the provision of services to people who have experienced trauma as a result of a miscarriage of justice.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
We want to help people who have suffered trauma as a result of a miscarriage of justice to access support that ought already to be available, for instance through the national health service. We will work with the Department of Health, other Departments and the voluntary sector to that end.
Katy Clark
I thank the Minister for that answer. I recently met the Miscarriages of Justice Organisation, as constituents of mine have been affected by having been wrongly imprisoned for lengthy periods. I understand that under the previous Government, the Justice Ministry was looking at how better to provide support services to such people. Is that work still going on, and will the Minister be willing to meet me and other Members with constituents who have been similarly affected, because we are not dealing with this issue well enough at present?
Mr Blunt
I am afraid that we have concluded that, due to the extremely challenging financial climate, it no longer makes sense to go ahead with the work started by the last Government on identifying the unmet medical needs of those who have suffered a miscarriage of justice because there are not going to be additional funds to meet those needs.
Mark Durkan (Foyle) (SDLP)
Despite that answer, will the Minister still agree to meet those interested MPs, because in a previous answer he said the Government would ensure that services were available through the NHS, whereas the fact is that they are not? These particular needs can best be met—and most effectively and most cost-efficiently—by having a more discrete system, and it would pay the Minister and the Department to meet these MPs and MOJO.
Mr Blunt
I am, of course, very happy to meet parliamentary colleagues to discuss this issue. Meetings are due between Ministry of Justice officials and those in the Department of Health to see how matters can be improved. I am sure that those discussions will be improved by the knowledge that I will gain from colleagues, so I am happy to have the meetings.
Christopher Pincher (Tamworth) (Con)
12. What steps he plans to take to fulfil the aspiration in the coalition agreement to increase the efficiency of the legal aid system.
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
The consultation document “Proposals for the Reform of Legal Aid in England and Wales”, published on 15 November, sets out proposals to make the legal aid scheme more efficient. We looked from first principles at its scope, the eligibility rules, and the fees paid to lawyers and other providers of legal aid. We looked at alternative sources of funding, and we are also consulting on reducing administrative bureaucracy and making the system simpler to operate.
Christopher Pincher
I am grateful to my hon. Friend for that answer, but will he take this opportunity to make it clear that the issues raised by Des Hudson of the Law Society are unfounded, that access to justice will still be available for people who really need it and that worthy organisations such as Citizens Advice are valued by this Government?
Mr Djanogly
Yes, we are certainly very keen to work with voluntary organisations such as Citizens Advice to ensure more efficient and focused provision of legal aid, and included in that will be our proposals for a civil law telephone gateway service. By refocusing legal aid we aim to ensure that taxpayers’ money will be prioritised to help the vulnerable receive the legal support that they need.
Mr Jamie Reed (Copeland) (Lab)
The Secretary of State will know that proposals to close both the county court and magistrates court in my town of Whitehaven have been met with widespread anxiety and have been condemned by the local bench and local solicitors. Will he agree to meet us, so that he can learn at first hand just how ruinous the proposals would be if enacted?
Mr Djanogly
The courts consultation closed in mid-September. We have been examining the significant number of responses and will be reporting back to the House on them before the new year. I am sure that the representations that the hon. Gentleman has made on his local courts will be examined and, following our decision, I would be happy to meet him.
Nick Smith (Blaenau Gwent) (Lab)
13. What recent estimate he has made of the number of offenders with an alcohol dependency.
Mrs Jenny Chapman (Darlington) (Lab)
17. What recent estimate he has made of the number of offenders with an alcohol dependency.
The Minister for Policing and Criminal Justice (Nick Herbert)
In a survey carried out in 2005-06, 23% of prisoners sentenced from one month to four years reported having drunk alcohol four weeks prior to custody and said that they would find it quite difficult or impossible to stop drinking. We also estimate that 37% of offenders subject to community orders have an alcohol-related problem linked to their offending and their risk of reconviction.
Nick Smith
I thank the Minister for that reply. Given that alcohol misuse is estimated to cost £7.3 billion in crime and antisocial behaviour, and that it was a factor in 18,000 incidents of violent crime in Wales in 2008, can he assure the House that help for prisoners with alcohol problems will be given the same priority as help for offenders with drug problems?
Nick Herbert
It is important that alcohol problems are tackled, both among offenders given community orders and those in custody. We know that treatment for alcohol problems is cost-effective; the United Kingdom alcohol treatment trial found that for every pound spent on treating problem drinkers £5 is saved on costs to health, social and criminal justice services. That is why, in the long term, providing such services on a payment-by-results basis is the answer.
Mrs Chapman
Given the undeniable link between alcohol misuse and crime, does the Minister believe that someone’s being excessively drunk is seen as sufficiently aggravating by the courts when they pass sentence?
Nick Herbert
We have not received any representations to the contrary. These matters can be considered by the Sentencing Guidelines Council, and we believe that sufficient powers are available to the courts. The important thing is that when offenders are sentenced, they should receive adequate treatment—that applies both to community and jail sentences—so that addiction can be dealt with.
Richard Harrington (Watford) (Con)
14. When he expects to publish his proposals on the future of sentencing policy.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
We intend to publish a Green Paper setting out proposals on sentencing and rehabilitation in December.
Richard Harrington
On a recent visit to the Hertfordshire probation trust in Watford, I was impressed by the efforts it has made and the success it has achieved in reducing reoffending rates. The staff told me, in particular, of their view that short-term prison sentences were detrimental to those efforts. Will the Secretary of State come to Watford to meet them, so that he can share those experiences?
Mr Clarke
I am grateful for that invitation; I have already received a letter. I shall do my best, although I am not quite sure when I will get to visit the probation trust. The Government are placing particular emphasis on rehabilitation and on reducing our quite appalling reoffending rates, as we have ever since my right hon. Friend the Minister for Policing and Criminal Justice led for us on this matter in opposition. I accept that a great deal of good work is being done on the ground now and obviously we will have to build on it. I quite agree with my hon. Friend the Member for Watford (Richard Harrington) about the ineffectiveness of some short sentences, because nothing whatever is done when people go out of the gate once they have finished their sentence, but I am quite clear that we cannot get rid of all short-term sentences. I have always believed that for a certain number of cases no alternative is reasonably practical for magistrates.
Mr David Hanson (Delyn) (Lab)
The crimes of child abduction, gross indecency with children, sexual activity with a child under 13, sexual assault of a female and sexual assault of a male have all attracted custodial sentences of six months or under in the past year. Will the Lord Chancellor give a commitment that under the sentencing review none of those crimes will be subject to community-based sentences, as he has proposed potentially in comments that he has made to date?
Mr Clarke
I have no idea why the heart of our sentencing reform is described by sections of the press and some Members of Parliament as just getting rid of all short-term sentences and replacing them with community sentences. I have no doubt that there is an important role for community sentences, and we must make them more credible, more punitive and more effective—some of them already are. The important thing is that every case should receive the right sentence based on the facts and the offender in order to protect the public. That will be the underlying aim of the entire sentencing review.
Dr Sarah Wollaston (Totnes) (Con)
15. What assessment he has made of the effects on the NHS of removing clinical negligence from the scope of legal aid.
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
Clinical negligence cases against the NHS are funded approximately 50:50 between legal aid and no win, no fee agreements with lawyers. We will be interested to understand through our consultation the specific impact on the NHS of the removal of clinical negligence cases from the scope of legal aid, which should save some £17 million to legal aid. However, we also estimate that our proposals to reform no win, no fee conditional fee agreements will save around £50 million each year to the NHS in reduced legal costs.
Dr Wollaston
Could reducing legal aid for clinical negligence lead to an upsurge in no win, no fee deals and an increase in the compensation culture?
Mr Djanogly
My hon. Friend is right to point out that changes in one area can have knock-on implications in another area. It is important to point out that that is precisely why we put out the legal aid consultation document on the same day as Sir Rupert Jackson’s proposals on no win, no fee agreements. The two can be weighed up together and the consultation will therefore take a holistic approach.
Stephen Timms (East Ham) (Lab)
On legal aid, the Minister has spoken today about working with voluntary sector organisations. Community Links’ welfare advice service in my area has seen 9,000 people so far this year. It is very cost-effective and has been paid for until now by legal aid. Under the Minister’s proposals, it will not be in the future. How will that work be supported by the Government in the period ahead?
Mr Djanogly
People have the option of getting conditional fee agreements, also known as no win, no fee agreements. They can go to a lawyer and that lawyer will take a view on the chances of success. The question that must be asked—we will be very interested to hear the responses to it during the consultation—is whether, if the private sector is not prepared to take on the risk, the public sector should be prepared to do so and what proportion of that risk it will be prepared to take on.
Robert Halfon (Harlow) (Con)
Following my question to my right hon. and learned Friend the Lord Chancellor and Secretary of State for Justice during his legal aid statement, is there not a danger that, given the complexity of clinical negligence cases, the most vulnerable will not have access to no win, no fee simply because such companies will not offer their services to them?
Mr Djanogly
There will still be power to grant legal aid in exceptional cases where a CFA will not be available, although that power will be restricted. The fact remains that CFAs will still be available for people with no ability to fund their cases so that they can take proceedings.
Tony Lloyd (Manchester Central) (Lab)
16. What estimate he has made of the reduction in the number of family law cases that will be eligible for legal aid during the period of the comprehensive spending review.
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
We estimate that removing from the scope of legal aid most private family law cases, except for those involving domestic violence, forced marriage and international child abduction, would reduce the number of people receiving advice under the legal aid scheme by about 211,000 annually and of those represented in court by just under 54,000 annually. Together, those figures represent an estimated annual saving of £178 million. However, we have also decided to retain legal aid for mediation to help separating couples sort out their issues without the courts where possible.
Tony Lloyd
The Minister’s last point is very important. In many such private cases, child-protection issues arise. Can he give the House an absolute guarantee that private cases in which child protection becomes an issue will still receive legal aid? If not, these cost savings will be at the expense of our children’s future.
Mr Djanogly
Absolutely; where a public family law matter arises, that case will remain within scope. If a child is subject to being taken away from their parents, legal aid will be available.
Mrs Jenny Chapman (Darlington) (Lab)
T1. If he will make a statement on his departmental responsibilities.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
Following the conviction of Jon Venables on 23 July for possessing and distributing indecent images of children, I commissioned Sir David Omand to undertake an independent review into the management of Jon Venables from his release from local authority detention in June 2001 until his recall to custody on 24 February 2010. Today, I have placed a copy of Sir David’s report in the Library. Sir David has concluded that Jon Venables was effectively and properly supervised at an appropriate level and frequency of contact, having regard to the particular circumstances of his case. Sir David also concludes that no reasonable supervisory regime would have been expected to detect his use of the computer to download indecent images. The report contains a number of recommendations on the future management of this and similar cases that will be taken forward by the National Offender Management Service.
Mrs Chapman
Nineteen-year-old Scots Guardsman Andrew Gibson was killed in a Darlington nightclub. Yesterday, the Attorney-General said that he was unable to refer what many view as an excessively lenient sentence of just two and a half years to the Court of Appeal. Will the Secretary of State undertake to investigate the awarding of lenient sentences in which alcohol is an aggravating factor?
Mr Clarke
The Attorney-General has a power to exercise in these cases and he has to exercise it in his quasi-judicial role by making a proper judgment and not just reacting politically. I understand the hon. Lady’s concern about that case, but sentences are normally imposed by the court that has had the opportunity to hear all the evidence, facts and information about the accused person. The Attorney-General takes seriously his responsibility to step in where a mistake seems to have been made and ask a higher court to consider imposing a more serious sentence. I cannot claim to exercise any control over him in that regard; it is his difficult judgment to take in each case.
Andrew Rosindell (Romford) (Con)
T2. The Lord Chancellor will be only too aware that one of his key responsibilities is looking after the Crown dependencies of Jersey, Guernsey, the Isle of Man, Alderney and Sark. Will he explain to the House why the Crown dependencies were yet again refused the right to lay a wreath on Remembrance Sunday this year? Will he address this issue to ensure that next year they can do so like other countries in the Commonwealth?
Mr Clarke
My right hon. Friend Lord McNally has the responsibility and the honour to lead on matters concerning Crown dependencies, which I assure my hon. Friend he takes very seriously. I keep discovering that he has made visits to the Crown dependencies to discuss these matters. I was quite unaware of this problem and I shall make inquiries of Lord McNally and those responsible for the ceremony about the background to this issue of laying a wreath on behalf of the Channel Islands and the Isle of Man.
Sadiq Khan (Tooting) (Lab)
The Secretary of State announced in the House last week—a day after ITN—that significant sums of money were to be paid to British residents and citizens who were detained at Guantanamo Bay, and he explained the factors behind the decision. Does he agree that there is an urgent need to resolve the claims of British victims of terrorist attacks overseas and will he commit today to such compensation being paid as a matter of urgency?
Mr Clarke
The right hon. Gentleman rightly expresses irritation about leaks to newspapers and the television, and I assure him that I share all that irritation. [Interruption.] If I were indulging in the kind of masterful spin-doctoring of the previous Administration, I would have trailed them better than occurred either in the newspapers or ITN. I made the statement when I did because I was told that ITN had carried the news the night before. I assure the right hon. Gentleman that, if he helps me to find out where the information is coming from, I will take appropriate steps.
On compensation for victims of terrorism and crimes, we are having to review the criminal injuries compensation scheme. We are having to look at the prospects for the compensation for terrorism scheme. The fact is that we were left with a system of criminal injuries compensation that was not working. We have enormous liabilities piling up for which the previous Government had not made adequate funds available, so we have hundreds of millions of pounds-worth of arrears of claims.
Mr Speaker
Order. There is a lot of interest and little time. From now on, we need short questions and short answers.
Andrew George (St Ives) (LD)
T3. What assurance can Ministers give my constituents in west Cornwall that the legal aid reforms published last week will not adversely affect the coverage of, or reduce access to, legal aid, particularly in civil and family proceedings?
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
The hard facts are that the amount of legal aid being paid out in civil cases will be reduced. As part of the Government’s savings of £2 billion, £350 million is subject to be taken out of legal aid by 2014-15. That means that we will focus legal aid on the most vulnerable who need legal representation.
Toby Perkins (Chesterfield) (Lab)
T4. A number of professionals have contacted me about their worries that, once the Youth Justice Board disappears, there will be a lack of co-ordination and an increase in reoffending by young people. Can the Secretary of State give any reassurance to those professionals that when their work disappears inside the Ministry of Justice, that co-ordination work will still be taken seriously?
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
Yes, I can give the hon. Gentleman that assurance. As the Minister with responsibility for youth justice, I will make sure that the functions carried out by the Youth Justice Board will be properly executed within the Ministry of Justice. The Youth Justice Board has done good work, but now it is time for Ministers to take direct responsibility for the work.
Priti Patel (Witham) (Con)
T5. Families in Witham town are concerned about the presence of paedophiles and sex offenders, and the risk that they pose to children in our local community. What steps is the Secretary of State taking, in conjunction with other Government agencies, to ensure that my constituents are protected from those dangerous individuals?
The Minister for Policing and Criminal Justice (Nick Herbert)
My hon. Friend might know about the child sex offender disclosure scheme, which is being extended to 24 police forces, having been successfully piloted in 11 police force areas. It allows members of the public to ask the police to check whether people have contact with their children at risk. They have already successfully protected children and provided considerable reassurance to parents.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
T6. It is clearly inappropriate for convicted criminals to celebrate Christmas with raucous parties in prison. Is the Secretary of State certain that present Ministry of Justice guidance will prohibit such activity this Christmastime?
Mr Clarke
I hate to tell the hon. Lady that there are no good parties going on in prisons to which I can invite her over Christmas. The whole story about parties was faintly ridiculous. The announcement by the Under-Secretary of State for Justice, my hon. Friend the Member for Reigate (Mr Blunt) did not mention parties and had very little to do with parties. Time was—I can remember from my youth—when a popular song began with
“The warden threw a party in the county jail,”
but we do not approve of that kind of thing nowadays.
Bob Russell (Colchester) (LD)
Every suicide is a tragedy, but particularly in prisons it is more harrowing for the family, other prisoners and the prison staff. With that in mind, can one of the Ministers give an update on the programme of installing safer cells?
Mr Blunt
About 6,200 safer cells have been provided since 2005. I acknowledge my hon. Friend’s consistent interest in that. Our objective is to make sure that safer cells are available in all circumstances for offenders deemed to be vulnerable and to require such accommodation.
John Woodcock (Barrow and Furness) (Lab/Co-op)
T7. It was as recently as 30 June, when the Government had had nearly two months to examine and find how unexpectedly bad the public finances were, that the Secretary of State said that he would explore “proposals to restore public trust through minimum/maximum sentencing”.Can he tell us what has changed since then?
Mr Clarke
Not much has changed. We are exploring proposals of all kinds. We are about to produce a Green Paper in December, and as is always the case—there is nothing new in this—people try to guess what might be in it. Some people make informed guesses, some make uninformed guesses and some get it right. The hon. Gentleman will have to wait until December to see our final judgments about how best to reform a sentencing system which is over-complicated, difficult for the judges to understand and ripe for reform, and which is completely failing to protect the public by getting reoffending rates down to a sensible level.
Jack Lopresti (Filton and Bradley Stoke) (Con)
Recently, a group of Travellers was served with an eviction order from the site next to St Peter’s, a new school in my constituency of Filton and Bradley Stoke, only for another group of Travellers to move in as soon as the site was vacated. Will the Minister look at the law in question to see whether it can be changed so that it is site-specific, rather than applying to individuals in certain cases?
Kate Green (Stretford and Urmston) (Lab)
T9. As part of the review that the Secretary of State is carrying out into implementing giving prisoners the right to vote, will he consider the issue as, in some ways, a positive opportunity to prepare them for reintegration into society? How is he approaching that?
Mr Clarke
Of course we would welcome prisoners preparing in any way for rehabilitation as honest citizens in society. I wait to see how many prisoners will actually take advantage of the opportunity when we decide the extent to which we have to go to comply with the Court judgment. It is conceivable that in some cases the vote would widen the mind of prisoners and prepare them for taking on the obligations of citizenship. I actually do not think, however, that we should take that too far.
Duncan Hames (Chippenham) (LD)
The Government intend to amend the law on the prosecution of universal jurisdiction offences. Does the Lord Chancellor agree that it would be unseemly for decisions relating to those prosecutions to rest with the Law Officer who is also a politician, as would be the case for the Attorney-General?
Mr Clarke
The consent of the Director of Public Prosecutions is what we are contemplating. The Government have committed themselves to that. This is a question of arrest; we are looking at citizen’s arrest. We want to keep the right of citizen’s arrest but we do not want it to be a publicity stunt based on inadequate evidence, so we are contemplating making it subject to the DPP’s consent. We are simply trying to find the legislative time to do it. The Government have committed to doing this as rapidly as possible.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Can the Justice Secretary tell us how many times he or his Ministers have spoken to the Scottish Justice Minister about prisoners voting rights?
Andrea Leadsom (South Northamptonshire) (Con)
Last Friday, a 16-year-old boy in my constituency was horrifically beaten and stabbed outside his school in full view of his classmates. Does my right hon. and learned Friend agree that we need to reserve the harshest penalties for those who viciously wield knives and to make sure that there is a strong deterrent against doing so? That young man lost his life as a result of that horrible crime.
Mr Clarke
I am, of course, shocked to hear of the outrageous nature of the crime in my hon. Friend’s constituency. We have to make sure that all our sentencing proposals give the courts all the powers they need. It is a question of how to set out the severity of the appropriate sentences, at the same time leaving the court in the end to decide on the exact sentence, based on the circumstances of the case and the offender. Although the recent habit—particularly under the last Government, who produced 21 different criminal justice Bills—was to keep producing very elaborate rules, in my experience judges do not need to be told that an offence of the kind described by my hon. Friend deserves the full force of the law and the severe punishment that the public would undoubtedly expect for such a case.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Is not the vote for prisoners a dyed-in-the-wool Lib Dem policy? Is that not the real reason why the Secretary of State will not stand up for us and tell the European Court that the ruling is simply unacceptable to the British people and the vast majority of our MPs?
Mr Clarke
It is not a dyed-in-the-wool Conservative policy, it is true, but it should be the policy of every responsible Member of the House to accept that we have to comply with a judgment of the European Court, because nobody is advocating withdrawing from the convention. The hon. Gentleman’s party accepted that. His party never repudiated the judgment; it always accepted that it was going to have to give votes to prisoners. It wasted five years and two consultation exercises, however, because it was incapable of taking a decision in advance of an election—or at all, as it happened.
Miss Anne McIntosh (Thirsk and Malton) (Con)
On a less controversial subject, what scope is there for mediation in family law cases, and will such cases continue to qualify for legal aid?
Mr Djanogly
We have taken the view that mediation should be retained within the scope of legal aid, and we think that it should be thoroughly encouraged. Too often, people take the course of court when they should look towards sorting out issues between themselves, and mediation will play a big part in enabling them to do that.
Mr Jack Straw (Blackburn) (Lab)
On prisoner voting, will the Secretary of State have the grace to accept that before the election, given the implacable opposition from the whole of the Conservative party from top to bottom, with the then shadow Justice Secretary describing the proposal as “ludicrous”, and deep and profound concern on our Back Benches, it was not that one did not want to do something, but that there was no way in the world that such a measure would have passed through this House?
Mr Clarke
I am relieved to hear that the right hon. Gentleman, my predecessor, was so implacably determined to press on with this issue throughout his five years. He should perhaps have a word with the hon. Member for Birmingham, Selly Oak (Steve McCabe), who could explain how committed he was. I am impressed that it was solely the opposition of Conservative Front Benchers that caused this five-year delay. I suspect that the right hon. Gentleman was having difficulty with Downing street and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) and others in coming to any decision about anything, or doing anything about it, before the general election. [Interruption.]
Mr Speaker
Order. There is so much noise in the Chamber that the hon. Member for Hertsmere (Mr Clappison) could not hear me call him.
Mr James Clappison (Hertsmere) (Con)
Can my right hon. and learned Friend take the time to remind the House which party was in power when the Human Rights Act 1998 was incorporated into British law, and, more pertinently, who was the Secretary of State responsible for it?
Mr Clarke
It was certainly the Blair Government who introduced the Human Rights Act. I regret to say that I cannot remember who the Secretary of State was, but it was probably the right hon. Member for Blackburn (Mr Straw). Actually, he probably has more things to answer for than that, but that was certainly one of the things that he put on the statute book.
Natascha Engel (North East Derbyshire) (Lab)
Will the Secretary of State meet me to discuss setting up an employers liability insurance bureau to ensure that victims of asbestos-related diseases who cannot trace either employer or insurer are compensated? I am sure that if he will meet up with me, I can fill him in and persuade him why it is so important.
Mr Clarke
The Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly), will probably be in touch with the hon. Lady to deal with that suggestion. There are obviously very difficult issues involved in these asbestos claims—they troubled the previous Government, and there have been decisions for the courts. We will therefore consider her suggestion with interest; it has been made before, but we will consider it again and come back to her.
Greg Mulholland (Leeds North West) (LD)
The Government are rightly focused on getting more people who are out of work into work, but a particular group of concern is ex-offenders. Will the Government, as part of the big society, continue to support charitable organisations such as the Apex Trust, which does a wonderful job in getting those offenders back into work?
Controlling Migration
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for the Home Department (Mrs Theresa May)
With permission, Mr Speaker, I would like to make a statement on immigration.
Controlled migration has benefited the UK economically, socially and culturally, but when immigration gets out of control, it places great pressure on our society, economy and public services. In the 1990s, net migration to Britain was consistently in the tens of thousands each year, but under Labour, net migration to Britain was close to 200,000 per year for most years since 2000. As a result, over Labour’s time in office net migration totalled more than 2.2 million people—more than double the population of Birmingham.
We cannot go on like this. We must tighten up our immigration system, focusing on tackling abuse and supporting only the most economically beneficial migrants. To achieve that, we will have to take action across all routes to entry—work visas, student visas and family visas—and break the link between temporary routes and permanent settlement. That will bring significant reductions in non-European Union migration to the UK and restore it to more sustainable levels. We aim to reduce net migration from the hundreds of thousands back down to the tens of thousands.
On the work routes to entry, all the evidence shows that it is possible to reduce numbers while promoting growth and underlining the message that Britain is open for business. After consulting widely with business and with the Migration Advisory Committee, I have decided to reduce economic migration through tier 1 and tier 2 from 28,000 to 21,700. That will mean a fall of more than a fifth compared with last year in the number of economic migrants coming in through tiers 1 and 2, excluding intra-company transfers.
Business groups have told us that skilled migrants with job offers—tier 2—should have priority over those admitted without a job offer, who are in tier 1. I have therefore set the tier 1 limit at 1,000, a reduction of more than 13,000 on last year’s number. Such a sharp reduction has enabled me to set the tier 2 limit at 20,700, an increase of nearly 7,000 on last year’s number.
The old tier 1, supposedly the route for the best and the brightest, has not attracted highly skilled workers. At least 30% of tier 1 migrants work in low-skilled occupations such as stacking shelves, driving taxis or working as security guards, and some do not have a job at all, so we will close the tier 1 general route. Instead, I want to use tier 1 to attract more investors, entrepreneurs and people of exceptional talent. Last year, investors and entrepreneurs accounted for fewer than 300 people, and that is not enough, so I will make the application process quicker and more user-friendly, and I will not limit the numbers of those wealth creators who can come to Britain.
There are also some truly exceptional people who should not need sponsorship from an employer but whom we would wish to welcome to Britain. I will therefore introduce a new route within tier 1 for people of exceptional talent—the scientists, academics and artists who have achieved international recognition, or are likely to do so. The number will be limited to 1,000 a year.
Tier 2 has also been abused and misused. Last year more than 1,600 certificates were issued for care assistants to come to the UK. At the same time, more than 33,000 care assistants who were already here were claiming jobseeker’s allowance, so I will restrict tier 2 to graduate-level jobs.
We have listened to business and will keep intra-company transfers outside the limit. However, we will place a new salary threshold of £40,000 on any intra-company transfers of longer than 12 months. Recent figures show that 50% of intra-company transfers meet those criteria. That will ensure that those coming are only the senior managers and key specialists who international companies need to move within their organisations.
I should like to thank the Migration Advisory Committee for its advice and recommendations. Next year, I will ask it to review the limit in order to set new arrangements for 2012-13.
However, the majority of non-EU migrants are, in fact, students. They represent almost two thirds of the non-EU migrants entering the UK each year, and we cannot reduce net migration significantly without reforming student visas. Hon. Members and others might imagine that by students, we mean people who come here for a few years to study at university and then go home. However, nearly half of all students coming here from abroad are actually coming to study a course below degree level, and abuse is particularly common at those lower levels. A recent check of students studying at private institutions below degree level showed that a quarter could not be accounted for. Too many students at lower levels have been coming here with a view to living and working rather than studying, and we need to stop that abuse.
As with economic migration, we will therefore refocus student visas on the areas that add the greatest value, and in which evidence of abuse is limited. I will shortly launch a public consultation on student visas. I will consult on restricting entry to only those studying at degree level, but with some flexibility for highly trusted sponsors to offer courses at a lower level. I will also consult on closing the post-study route, which last year allowed some 38,000 foreign graduates to enter the UK labour market at a time when one in 10 UK graduates were unemployed.
Last year, the family route accounted for nearly 20% of non-EU immigration. Clearly, British nationals must be able to marry the person of their choice, but those who come to the UK must be able to participate in society. From next week, we will require all those applying for marriage visas to demonstrate a minimum standard of English. We are also cracking down on sham marriages, and will consult on extending the probationary period of settlement for spouses beyond the current two years.
Finally, we need to restrict settlement. It cannot be right that people coming to fill temporary skills gaps have open access to permanent settlement. Last year, 62,000 people settled in the UK on that basis. Settling in Britain should be a privilege to be earned, not an automatic add-on to a temporary way in, so we will end the link between temporary and permanent migration.
I intend to introduce these changes to the work route and some of the settlement changes from April 2011. I will bring forward other changes soon after. This is a comprehensive package that will help us to meet our goal of reducing net migration, at the same time as attracting the brightest and the best, and those with the skills our country needs. This package will serve the needs of British business, it will respond to the wishes of the British public, and it will give us the sustainable immigration system that we so badly need.
Ed Balls (Morley and Outwood) (Lab/Co-op)
Let me start by thanking the Home Secretary for the—rather late—advance sight of her statement, for coming to the House this afternoon in person, and for clarifying the confusion caused by the misleading leak of the contents of her statement to the BBC this morning. The Home Secretary is right to say that migration has made, and continues to make, a vital contribution to the economic vibrancy, business strength and vitality of our country. She is also right to say that it is essential for migration to be properly controlled, for reasons of economic well-being and social cohesion. But the question is: how? The Labour Government put in place transitional controls on EU migration, a suspension of unskilled work permits, a tough but flexible points system to manage skilled migration, and tighter regulation of overseas students. They closed 140 bogus colleges, and imposed new citizenship requirements on those seeking settlement.
At the general election, the leader of the Conservative party proposed to go further in two key respects. First, he proposed a new target to reduce net migration to the
“tens of thousands by 2015.”
To meet that target, he pledged a cap on immigration, which he said would be tougher than the points system. At the time, the leader of the Liberal Democrat party said:
“We can’t come up with promises like caps which don’t work”.
He then agreed to the cap in the coalition agreement. Since then, the Government have been in wholesale retreat, and today they are in wholesale confusion over this policy. The Confederation of British Industry, the chambers of commerce, universities, Nobel prize winners, and UK and foreign companies—large and small—have all highlighted the huge damage that the Government’s proposals would do to investment and jobs.
The Home Affairs Committee and the Migration Advisory Committee have said that the proposed cap applies to only 20% of non-EU migration. As a result, we have had the unedifying sight of the Prime Minister hinting at concession after concession—in the face, we read, of opposition from the Home Secretary, thanks to the excellent public lobbying and guerrilla tactics of the Business Secretary, who, sadly, is not in his place this afternoon. In his use of such tactics, he is less Stalin and more Trotsky—and certainly not Mr Bean.
Today the Home Secretary has come to the House to confirm the details of the retreat. We will keep a close eye on her proposals to see how they affect business and science. None the less, we join business representatives in welcoming her decision to exempt intra-company transfers of workers. What has caused confusion is this morning’s briefing to the BBC that the total cap would be 42,700 work permits. Her officials then had to clarify the fact that there is no such cap on that scale. She has now said that she will allow 21,700 tier 1 and tier 2 work permits, but with no cap on migration caused by intra-company transfers. If the number of intra-company transfers goes up, will she put in place an offsetting cut in tier 1 and tier 2 work permits? If not, and I very much hope that she will not, will she confirm that her supposed cap is a con, a guess and a fig leaf—in fact, no cap at all?
The permanent secretary revealed today that 9,000 jobs will be lost from the Home Office, the bulk of which will be from the UK Border Agency. Will the Home Secretary confirm that she can implement the policy that she has outlined today, and keep our borders secure, with those cuts? On family reunification she had nothing new to say—no target—and on overseas students she announced no action, just another consultation.
I have learned in the past few weeks that it is a mistake to ask the right hon. Lady a long list of questions, but there is one question to which it is vital that she should give an answer this afternoon: is it still the objective of the Prime Minister and the Government to cut net migration to the tens of thousands by 2015? In her statement she repeated the goal, but she omitted to put a date on it. Will she reaffirm the 2015 promise? In recent months—on VAT and tuition fees—the Deputy Prime Minister has got into a habit of breaking pre-election promises. Can the Home Secretary reassure us that the Prime Minister has not caught the same disease? This is a simple question. Is the “tens of thousands” pledge still binding by 2015—yes or no?
Mrs May
I thank the right hon. Gentleman for that response. During the Labour leadership campaign, he said:
“as many of us found in the election, our arguments on immigration were not good enough.”
Listening to him today, I realised that Labour’s arguments on immigration are still not good enough. He made a number of claims about what the Labour Government did on immigration, including the claim that they introduced transitional controls when new member states entered the EU. I seem to remember that when the first tranche of new member states entered the EU, that is precisely what they did not do, despite every blandishment from the Conservatives to encourage them.
The right hon. Gentleman then said that the previous Government took action on the points-based system limits. I accept that, but what happened? They closed tier 3 of the points-based system of entry into the UK, but nothing else, so when tier 3 shut down, the number of student visas went up by tens of thousands. That is why this Government know that when we deal with one part of the immigration system, we must act across the whole of it.
I made the figures for the tier 1 and tier 2 caps that we are introducing absolutely clear in my statement. The right hon. Gentleman asked whether the UK Border Agency could manage the cuts and keep our borders secure with the changes in personnel that will be made, and the answer to that, unequivocally, is: yes, it can.
Finally, the right hon. Gentleman asked me to confirm what I said in my statement, which is that we aim to reduce net migration from the hundreds of thousands back down to the tens of thousands—[Hon. Members: “When? By 2015?”] If he is to criticise the Government’s plans on immigration, the right hon. Gentleman must have a plan. So far he does not even have an immigration spokesman, let alone an immigration policy. The British people, who according to his own words felt that Labour was no longer on their side and no longer stood up for them on immigration, will not listen to him until he has an immigration plan.
Tom Brake (Carshalton and Wallington) (LD)
If the cap is set too low—in other words, at a level that stops UK businesses creating wealth and jobs—or too high, how quickly can it be adjusted, and how will the adjustment process work?
Mrs May
We are confident in the work that we have done, and in the fact that we have got the cap—and, crucially, the changes to policy—right. The announcement is about not just the figure, but the change in policy. The Migration Advisory Committee will undertake an annual review, so it will be able to advise the Government on what the figure should be in future, after considering how behaviour has adapted to the policy changes that we are introducing.
Fiona Mactaggart (Slough) (Lab)
The right hon. Lady says, “We will end the link between temporary and permanent migration.” How can temporary migrants, whether spouses or workers, earn permanent settlement?
Mrs May
I am grateful to the hon. Lady, because she gives me the opportunity to say that we will be making initial changes to the settlement proposals, but that we also intend to consult more fully on exactly how we will introduce changes to settlement more widely. The initial changes will relate to the language requirements, but we will also look at the salary levels required for a sponsor to bring somebody in for settlement, and at the criminality thresholds. Those are the immediate issues that we will consider. I also intend to ask the Migration Advisory Committee to do some more work on changing the settlement requirements in the longer term.
Nicholas Soames (Mid Sussex) (Con)
I congratulate the Home Secretary and the Minister for Immigration on this admirable programme and the excellent start made. May I press her a little further on the breaking of the link between settlement and people coming here to work temporarily? At what stage does she expect to introduce the measures necessary to achieve that?
Mrs May
I thank my hon. Friend for that question, and echo his thanks to my hon. Friend the Minister for Immigration for his sterling work. We are keen to look at these other routes, particularly the settlement route, as well as at the other aspects, and over the coming months, as I indicated in response to the hon. Member for Slough (Fiona Mactaggart), we will be asking the Migration Advisory Committee to consider the matter so that we can introduce the changes. I hesitate to put an absolute date on that, but I hope that we will be able to announce something next year.
Keith Vaz (Leicester East) (Lab)
The Home Secretary is more famous for her footwear than her headgear, but may I welcome the exemptions to the cap that she has announced today? The Home Affairs Committee made recommendations on intra-company transfers and elite scientists, and this is the right approach for the immigration policy that the Government have decided to pursue. On students, however, she will not be able to tackle the issue of bogus colleges unless she accepts a previous recommendation by the Committee to restrict the use of the word “college”. It is because this word continues to be used that people enter this country and pursue non-educational courses. Will she please look into that? Will she also examine how the whole administration of the immigration system operates in relation to illegal immigration?
Mrs May
I thank the right hon. Gentleman for his question. His turn of phrase encourages me to enjoy my time in front of the Home Affairs Committee when that happy occasion next comes around. He also made a serious point about his Committee’s past recommendations on this issue. We will certainly look at his specific suggestion. We need to consider a number of ways of ensuring that students coming to the UK are genuinely coming as students and to institutions properly offering an education and providing a qualification. This is not just about the immigration system, but about the reputation of the UK, because we do not want people to come here thinking they are coming to a college on an educational course, but then find that they have come to something quite different.
Mr Stewart Jackson (Peterborough) (Con)
I generally welcome my right hon. Friend’s statement—but on EU migration, are we not in danger of ignoring the lessons of the past six years, when we imported more than 1 million low-wage and low-skilled workers, despite having 5 million of our own citizens on out-of-work benefits? Will she also explain why importing highly skilled workers is practical, when we have record numbers of UK and British graduates who could and should do those jobs?
Mrs May
My hon. Friend is right about the need to ensure that people in the UK are skilled enough to take up the work available. The figures show that EU-UK immigration and emigration numbers have broadly balanced out, and that net migration is coming predominantly from outside the EU. Our immigration policy has to fit in closely with the skills agenda that my right hon. Friend the Business Secretary announced last week. On occasions, however, there will be highly skilled workers with a specialism that a British company needs—in areas such as the energy sector, for example—and it is right for Britain to be open for business, and for us to allow companies to grow by introducing those workers into the UK.
Mr Frank Field (Birkenhead) (Lab)
Given the views that were so robustly expressed during the general election campaign, I welcome, on behalf of many of my constituents, the Home Secretary’s statement. Will she bear in mind another of their views, which is that they are now aware that the population of this country is primarily pushed by immigration? Will she tell us more certainly when she will return to the House to give a statement on breaking the link between coming here to work, which is often welcome, and almost automatically getting the right to citizenship?
Mrs May
I am grateful for the right hon. Gentleman’s comments, and for his work, with my hon. Friend the Member for Mid Sussex (Nicholas Soames), on settlement in the UK. They have both done a lot of important work in highlighting the issue. I am afraid that I will disappoint the right hon. Gentleman in not being able to give him a date when I will come to the House, but I assure him that I will do so in due course, to show how we will be able to change that route. As he said, the British public were absolutely clear that the Government should do something about this matter. They saw a Labour Government who did not do anything about immigration. We are a Government who will deliver for the British people.
Mr Speaker
Order. A great many Members are seeking to catch my eye, and I should like to accommodate as many as possible, so brevity from the Back Benches and the Front Benches alike is required.
Henry Smith (Crawley) (Con)
I warmly welcome my right hon. Friend’s statement. She correctly mentioned student visas, and then mentioned consultation. Given that we have had 10 years of almost mass immigration, will she assure the House that that consultation will be swift?
Pete Wishart (Perth and North Perthshire) (SNP)
The immigration cap may be designed for the south of England, but it definitely does not fit Scotland. Does the right hon. Lady not even start to understand and appreciate that Scotland has a different range of population and demographic issues? How can immigration caps possibly help Scotland, which is suffering from structural depopulation?
Mrs May
This proposal will help all parts of the United Kingdom, because it does two crucial things. It meets the British people’s need to see us controlling our immigration system, but it does so in a way that will enable business to bring in skilled workers. Many businesses in Scotland have spoken to us about the need to bring in skilled workers—in the energy sector, for example—and I believe that they will welcome our decision today.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
Specifically on the energy industries, on which so many jobs in my constituency depend, I welcome the flexibility and movement. Will the Home Secretary assure those industries that small companies in the supply chain will not face too bureaucratic a process for tier 2 applications, and that intra-company transfers will not be so time-limited as to make projects impossible to deliver?
Mrs May
I am happy to give the comfort that my hon. Friend asks for. Indeed, we will look at the administrative process for tier 2 applications to ensure that they involve as little bureaucracy as possible, with small companies particularly in mind. I hope that he will see some benefits from that.
Mr Denis MacShane (Rotherham) (Lab)
I wonder how many of us would be sitting here today, if in the 20th century our parents and grandparents had had to go through the sieve that the Home Secretary is putting in place to slow down the number of people coming to the UK. Does she agree, and will she say so more strongly, that the arrival of 10% of the English population in the form of Huguenots enriched Britain, that Jews who came here enriched Britain, and that Muslims and Pakistanis in my constituency have enriched Britain, and will she be very careful before she gives any comfort to Migrationwatch, the British National party and the United Kingdom Independence party, and their horrible anti-immigrant line?
Mrs May
I have to say that several of the groups that the right hon. Gentleman has mentioned came here as refugees, and we are not talking about the asylum system today. We do need to examine the operation of our asylum system to ensure that it operates swiftly in the interests not only of the UK, but of those who are seeking asylum. However, that is not what we are debating today.
Mr Peter Bone (Wellingborough) (Con)
Hon. Members will be delighted that the Home Secretary has announced this policy to the House first, and that the BBC was so wonderfully misinformed this morning. In Wellingborough, immigration is the No. 1 issue, but my constituents are more concerned about people coming from the European Union. I wonder how that question is going to be addressed.
Mr Dave Watts (St Helens North) (Lab)
Are not these proposals a damp squib that will have no real impact on the number of people coming to Britain? Bearing in mind that the Government have already ruled out EU migrants, intra-company transfers, students, sportsmen and women and anyone in the arts, who is left?
Mrs May
Labour Members really are going to have to get their story in order as to exactly what they want to do on immigration. We want to ensure that Britain is open for business and that we can bring in skilled workers, which we will be doing, but that we can put in a cap that enables us to reduce net migration into this country. That is what the British people want, and it is what this coalition Government will deliver.
Rehman Chishti (Gillingham and Rainham) (Con)
May I welcome the statement as representing a constructive way forward? Does the Minister agree that foreign students should leave the country and reapply if they want to change their course or apply for a work permit?
Mrs May
My hon. Friend has raised an important point. One of the issues around students relates to those who come here to study one course and then move from course to course in order to be able to stay here. We will be looking at that issue in the consultation, and I can assure him that the proposal he has just made is exactly the kind of thing that will be in the consultation.
Jim Shannon (Strangford) (DUP)
The Home Secretary has suggested that there might be some concessions for those involved in the fishing industry. By and large, I welcome the proposals put forward today, but she has mentioned a concession of a year until September 2011 in regard to work permits for Filipino fisherman. Would she be prepared to consider extending that arrangement for another year, given that the fishing industry feels that it cannot do without it?
Mrs May
I think that we will have to look at that matter again closer to the September 2011 deadline. I simply say to the hon. Gentleman that the more exceptions to the rules that people claim, the less effective the overall rules will be. We are absolutely clear that, within the rules that we have set, there are groups of very specialist workers. A number of issues have been raised with me about people with very particular skills who are needed by certain industries, and who we believe can come in, within the routes that we are setting out.
Mr Aidan Burley (Cannock Chase) (Con)
Tony Blair’s adviser once said that the sharp increase in immigration over the past 10 years was partly due to
“a driving political purpose: that mass immigration was the way that the Government was going to make the UK truly multicultural”.
Can the Home Secretary confirm today that so-called social objectives are no longer acceptable as a reason for immigration, and that it should be based instead on the economic benefits that immigrants can bring to this country?
Mrs May
As I said at the beginning of my statement, controlled migration can benefit this country economically, socially and culturally, but we are absolutely clear, in looking at the routes into the country for economic migrants, that the people who are coming in will bring a genuine economic benefit to the UK.
Mark Tami (Alyn and Deeside) (Lab)
Does the £40,000 figure for intra-company transfers refer only to salaries or to salaries plus benefits?
Mark Reckless (Rochester and Strood) (Con)
Immigration from Ireland to the UK has doubled from 7,000 to 14,000 as the euro crisis has developed. Will the Home Secretary confirm that, as well as having a legal right to come, those young people will be welcomed to our shores, and that we will continue to create the jobs that they need?
Mike Gapes (Ilford South) (Lab/Co-op)
What procedures and resources will be available for enforcing these proposals, given that one of the problems, under successive Governments, has been people overstaying when their visa has expired?
Mrs May
One of the issues that we will look at among specific groups, such as students, is the number of people who overstay. That is one of the problems and abuses of the system, but, unlike the previous Labour Government, the current Government are committed—in addition to what we are doing on immigration—to proper UK border controls, through our work to ensure a UK border force.
Mr James Clappison (Hertsmere) (Con)
May I warmly welcome the sensible decisions that my right hon. Friend has taken? Does she agree that, although the economic migration that she intends to permit is clearly of benefit to the nation, a population pushed up to 70 million is not? That is the inheritance she faced, on official figures, from the policies of the Labour party.
Mrs May
I thank my hon. Friend for his intervention. It is clear that, if we take no action, the numbers of net migrants to the UK are likely to continue to be about 200,000 a year. We think that we need to do something about that, which is why we are introducing the package today and will be introducing further measures on other routes of entry.
Caroline Lucas (Brighton, Pavilion) (Green)
English language schools in my constituency contribute more than £100 million to the local economy, yet they face real difficulties because of the uncertainty surrounding the student visa system. Will the Secretary of State ensure that a cost-benefit analysis to the UK economy of overseas students who study at our schools is carried out? What words of reassurance can she give to bona fide language schools that there will be a swift resolution to the issue?
Mrs May
A number of hon. Members from all parts of the House with English language schools in their constituencies have raised the question of such schools. We take the issue very seriously, and one aspect of the student visas consultation will be aimed specifically at such schools and how we can introduce to the system some changes that will benefit them.
Gavin Barwell (Croydon Central) (Con)
I thank my right hon. Friend for her statement, which will be welcomed in my constituency by people of all backgrounds and political persuasions. In particular, I welcome the exemption for wealth creators and the re-focusing of tier 1 on eminent scientists. Will she tell the House a little more about how the 1,000 limit will work?
Mrs May
We are finalising the details of exactly how the 1,000 limit will work. We are also considering a role for bodies, such as research councils, in confirming those people who would be of benefit. We want to include not just those who are at a point in their career when they are known to be great scientists, artists and so forth, but also exceptionally talented people who are at the beginning of their careers.
Derek Twigg (Halton) (Lab)
The Home Secretary says that the aim is to reduce net migration from the hundreds of thousands to the tens of thousands. Will she specify when she intends to do so? I thought I heard her say 2015, but doing that while slashing the border agency staff who need to do the job of policing is not going to wash with the British public.
Mrs May
I had answered the point about what I said in relation to tens of thousands, and I answered the shadow Home Secretary’s point about the UK Border Agency. As I said, we will be able to deliver the policy through the agency, and we will be able to ensure that the agency can deliver on its requirements, and we as a Government are committed to reinforcing our border security by introducing a border police command in the new national crime agency.
Stephen Lloyd (Eastbourne) (LD)
There are many approved, well-established and highly reputable English language schools in my constituency. I support much of the statement’s content, but I am profoundly concerned about any further delay in sorting the problem with people coming to the UK to study English at such schools. I urge the Home Secretary to agree to meet me, a cross-party delegation of MPs and the Immigration Minister as soon as possible, because many companies and businesses in Eastbourne and throughout the UK are suffering badly. I urge her to grant me that opportunity.
Mrs May
I am well aware that my hon. Friend has made significant representations on that point, as have other Members. Indeed, I believe he has already met the Immigration Minister. I would be happy to meet a group of MPs to discuss the matter, and, as I said in response to the hon. Member for Brighton, Pavilion (Caroline Lucas), we are very well aware of the point, which has been well made by many Members. We are conscious of the economic benefits of English language schools and some of their very specific issues with particular students from particular countries. We are looking at how we can address that issue in our student visa proposals, but I would be happy to meet a group of MPs.
Kerry McCarthy (Bristol East) (Lab)
I agree entirely with the need to take swift removal action against people who overstay their work or student visa entitlement, but this country has a problem with people who have overstayed for many decades and have given birth to children who are now adults. Can anything be done to regularise their situation so that they can go into legitimate employment without having to go through all the same hurdles and costs of applying for citizenship that others do? This represents a real barrier for those people.
Mrs May
We inherited the legacy programme from the last Government and had to deal with a significant backlog of cases, some of which related to people who have lived here for many years. Their cases had simply not been tackled with the right and proper degree of speediness. As the chief executive of the UK Border Agency confirmed to the Home Affairs Select Committee, we aim to finish that legacy programme by next summer. Looking to the future, we need to ensure that we do not get into the situation again of allowing people to come here and making them wait many years for an answer from the Government as to whether or not they can stay.
Stuart Andrew (Pudsey) (Con)
It is a disgrace that last year 1,600 visas were granted to people who wanted to work in care homes when there are 33,000 care workers claiming jobseeker’s allowance. Does my right hon. Friend agree that this is a kick in the teeth for those unemployed care workers, proving that her proposals are exactly the right policy to introduce?
Mrs May
I absolutely agree with my hon. Friend that this is the right policy for us to introduce. Many people, not just care workers, are unemployed, yet they have to see care workers being brought in from overseas. Of the many graduates in the UK, one in 10 are unemployed six months after their graduation. Last year, however, I believe that 38,000 overseas students stayed here after their graduation to work in the UK. We need to deal with that and we also need to ensure that we get the skills training right for people in the UK. The action we have taken on immigration today is not just an indictment of the last Labour Government’s failure to do something about the problem, but is also a very sad commentary on their failure to deliver a proper skills agenda for the UK.
Paul Blomfield (Sheffield Central) (Lab)
May I press the Home Secretary on the issue of language courses? I am thinking particularly of Sheffield International college in my constituency. With its 1,000 students, it plays an important role in the local economy and as a feeder institution helping students to proceed on to our two universities. All that makes an enormous economic contribution.
Mrs May
I thank the hon. Gentleman for echoing the importance of this issue, which was also raised by the hon. Member for Brighton, Pavilion and by my hon. Friend the Member for Eastbourne (Stephen Lloyd). As I said, I am happy to meet a group of MPs to discuss English language schools. We know how important that issue is and we are looking to address it through consultation.
Robert Halfon (Harlow) (Con)
May I congratulate my right hon. Friend on her statement and tell her that my constituents will welcome the move away from expressing rhetoric about British jobs for British workers towards taking substantive action? Nevertheless, many people in Harlow will be concerned that their jobs are being given away, particularly by big companies like the major supermarkets, to temporary migrant workers. Will my right hon. Friend set out how her measures will help this situation?
Mrs May
I believe that our measures will help because they will tighten up the provisions to ensure that the people who come into this country under either tier 1 or tier 2 are the skilled workers that companies need, not those coming here to do low-skill jobs. We will also tighten up on the intra-company transfers route through the salary threshold so that that route is available, as it was always intended to be, for senior managers and people with specialist skills rather than for people doing low-skill jobs.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
May I concur with what has already been said about the position facing English language schools? It is a difficult position and it needs to be addressed urgently. This country is already losing custom as it goes to other countries—we are not the only country where English is spoken—so I urge the Home Secretary to do something about the problem quickly. Otherwise, areas like mine, where English language schools contribute significantly to the local economy, will suffer.
Mrs May
There may be other hon. Members who wish to raise the issue of English language schools from their constituency viewpoint. Let me say to the hon. Gentleman, as I have to others, that we are well aware of this issue and we are looking to address it as we deal with student visas. Although many English language schools offer a very good product and are of significant economic benefit to the UK, I also need to point out that this sector of the economy is not completely free from abuse. Sadly, some schools do damage to others by setting themselves up as English language schools and then not offering the right services.
Sajid Javid (Bromsgrove) (Con)
I welcome my right hon. Friend’s statement, but does she agree that as well as controlling immigration, we should do more to ensure that those who settle here and integrate with us respect our culture, traditions and values, and make greater efforts to learn our language?
Mrs May
I think it is important for people who come to live here in the United Kingdom to be able to participate in society. That is why next week we are introducing an English language test for those who wish to come here to join a spousal partner. I think it only sensible for someone who is coming to live here to be able to speak English, and thence to participate in society.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
I welcome the statement in general terms, but I do not believe that it goes far enough. There is still uncontrolled migration from the European Union, certainly to my constituency, into which have come a substantial number of unskilled and semi-skilled European workers who are undercutting the unemployed work force. What steps will the Home Secretary take to ensure that some curbs are placed on those people?
Mrs May
I hear what the hon. Gentleman says. He has a record of having taken a rather different view from the Front Bench Members of his party when it was in government. As I have made clear and as the figures show, the vast majority of net migration is from outside the European Union. The flows into and out of the country of British and EU citizens balance out, and have done so for the past few years. As for the future, the Government have made it absolutely clear that if there are any new member states, we will exercise transitional controls.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Does my right hon. Friend recognise that many British workers in the IT industry are very concerned about losing their jobs as a result of intra-company transfers? Can she reassure them that she will crack down on the abuse of the system that has been witnessed by some IT companies?
Mrs May
As I said in my statement and have said in response to a number of questions, we are tightening the rules relating to tier 2 entry to the United Kingdom, as well as those relating to intra-company transfers. We will ensure that those who come here really are the skilled and highly skilled workers who are needed. However, my hon. Friend’s point echoes one made by a number of other Members about the need to ensure that businesses in the United Kingdom seek the skills that are available here.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I should hate to misrepresent the Home Secretary. To avoid confusion, will she tell us whether she will reduce net migration to tens of thousands by 2015—or has she just dropped the Government’s specific commitment to that date?
Mr Speaker
I call Paul Uppal. [Interruption.] Order. I am quite worried about Opposition Front Benchers. They are in a state of quite extraordinary excitement, but I want to hear Mr Uppal.
Paul Uppal (Wolverhampton South West) (Con)
Thank you, Mr Speaker.
Immigration cases take up most of the case load at my weekly surgery, particularly during the summer months, when the wedding season and many other family occasions take place. Will the Home Secretary and the Minister for Immigration, my hon. Friend the Member for Ashford (Damian Green), consider pinning down responsibility for sponsorship when people come here to visit their families on such occasions? That would tackle head-on the problem of absconding, fraud and overstaying. The last Labour Government examined the matter when immigration was an issue, but they ducked it and chose not to do anything about it.
Mark Durkan (Foyle) (SDLP)
Will the Home Secretary say more about how she believes that the needs of particular sectors of the economy, and the pressures on them, can be properly respected and responded to within the new annual limits? Is a regional dimension built into any of the Government’s proposals? We know that before the election the Liberal Democrats spoke of huge regional issues relating to immigration. Does the new regime take any account of the needs of, and the pressures on, particular regions?
Mrs May
The proposals I am setting out today apply to immigration policy across the United Kingdom. To respond to the hon. Gentleman’s first point, I am confident that the needs of particular sectors will be met through our changes to tier 1, tier 2 and the intra-company transfer route. We have listened very carefully to business, and the CBI recently said it thought that
“a workable...solution would encompass…protection of sponsored work permit numbers as a priority ahead of those without a job offer”,
which we have done. The CBI also said that by
“prioritising the demand-led part of the system—Tier 2—in this manner the government will be able to deliver on its goal of reducing net migration without damaging business”,
which, again, is exactly what we have done.
Mr Dominic Raab (Esher and Walton) (Con)
I welcome the statement. Does the Home Secretary agree that the UK economy’s dependence on skilled labour from abroad highlights two of the starkest failures under the last Government: the promotion of welfare dependency, and the failure to improve skills and training?
Mrs May
My hon. Friend is absolutely right, and it is important that we see the policies announced in the statement in the context of our welfare reform policy, the Work programme to be brought in next year, and the Business Secretary’s proposed skills agenda, which he introduced in a White Paper last week.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
During last Thursday’s immigration debate, the Home Secretary’s departmental colleague, the Under-Secretary of State, the hon. Member for Old Bexley and Sidcup (James Brokenshire), said:
“We therefore aim to reduce net migration to the levels of the 1990s—tens of thousands, not hundreds of thousands, each year by the end of this Parliament.”—[Official Report, 18 November 2010; Vol. 518, c. 1120.]
The end of this Parliament will, of course, be in 2015. May I offer the Home Secretary another opportunity to confirm categorically that that is still her Government’s policy this week?
Harriett Baldwin (West Worcestershire) (Con)
Returning to the issue of student visas, we have quite a few boarding schools in West Worcestershire, such as Malvern college, St Michael’s college in Tenbury Wells and Malvern St James college, which attract students from all around the world. They are highly trusted sponsors, but they are already finding that the system is slowing them down. Can the Home Secretary reassure these colleges that the process will become faster?
Mrs May
I am happy to give my hon. Friend that reassurance. While we are consulting on focusing the student visa route on universities, further education colleges and degree level courses, highly trusted sponsors will be able to offer courses at below degree level, and I would expect that the schools to which my hon. Friend has referred would be able to continue to offer courses because, as she says, they are highly trusted sponsors.
Mr William Bain (Glasgow North East) (Lab)
Two months ago, UK executives at Toyota told me of the benefits for their company and the wider British economy of the transfer of knowledge and skills through intra-company transfers. Will the Home Secretary publish the economic analysis that I am sure she has performed of the impact on growth and output of restricting intra-company transfers of longer than 12 months to those on salaries of more £40,000?
Andrew Griffiths (Burton) (Con)
I congratulate the Home Secretary on having the grit and determination to introduce this important proposal. She rightly pointed out the kinds of abuse we saw under the previous Government in respect of programmes such as the student visa scheme, which meant that many people were here who should not have been. What measures are her Department taking to ensure that those who are here illegally are removed—and removed quickly?
Mrs May
We are considering the measures that could be taken against those colleges or so-called colleges that just enable students to come here to work and then stay on, rather than be removed. As I said in answer to a number of other hon. Members who raised this or similar issues, this Government are committed to strengthening our borders through the border police command within the national crime agency.
Mark Pritchard (The Wrekin) (Con)
I welcome the Home Secretary’s statement. I just hope that the consultations do not take too long and that the whole House will have an opportunity to debate all these issues in detail, probably with an immigration Bill. Given the rampant abuse of tourist, student, work and family visas, is it not time that an incentive is provided for those tempted to overstay or those who have overstayed by saying that they can return to their country of origin voluntarily or be barred from re-entering this country for at least 20 years? That would be an incentive that would work.
Michael Ellis (Northampton North) (Con)
I congratulate the Home Secretary on this statement. The shadow Home Secretary has apparently admitted in the media that the Labour party, when in government, made a mistake in 2004 by not applying transitional controls to enlargement of the European Union then.
Michael Ellis
I see the right hon. Gentleman nodding. Can my right hon. Friend assure the House that such transitional controls will be applied to any further enlargements of the European Union?
Mrs May
I am very happy to give my hon. Friend that commitment on any future new member states entering the European Union. I am fascinated that the shadow Home Secretary stood up in response to my statement and claimed that the previous Government had introduced all these transitional controls, yet now we hear that he says they made a mistake in not doing this properly.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I warmly welcome my right hon. Friend’s statement, which will go a long way towards assuaging the concerns of my constituents. They are not so worried about business people being here for two or three years; they are worried about the permanent settlement that automatically seems to be granted when someone has lived here for four years. Can she give further assurances about the criminality aspect, because that is another great concern in my constituency?
Mrs May
We are indeed looking at the criminality criteria for entering in order to tighten them up; we want to look at people’s records when considering who can enter the UK. We think that that is an important element that we should be looking at, and I know that the issue has concerned a number of people.
Dr Sarah Wollaston (Totnes) (Con)
Has the Home Secretary made an estimate of the number of sham marriages, particularly those to EU migrants to the UK? What further measures will she take to deter this and punish those responsible?
Mrs May
I do not have an estimate of the number of sham marriages, but I am happy to say to my hon. Friend that the UK Border Agency was very active in stopping sham marriages over the summer; we had a very big crackdown on them. Many people were concerned and surprised to see that a Church of England vicar was caught and arrested for helping sham marriages to take place.
Christopher Pincher (Tamworth) (Con)
Last and most certainly least, I welcome my right hon. Friend’s statement. Does she agree that, although the large-scale import of cheap labour may keep the lid on wage price inflation, it also keeps a lid on productivity because business men who feel that they can import cheap labour are less incentivised to be productive? Does she agree that that is not a competitive model and that the Government should not turn a blind eye to businesses that try to import cheap labour?
Mrs May
I have said in some of my conversations with businesses that it is important that they look to ensure that they encourage and provide the training for skills growth and development here in the UK. That is important, as it is in the UK’s interests, the individual’s interests and the interests of those businesses.
Mr Speaker
I must thank the Home Secretary and colleagues for their co-operation, as a result of which in 40 minutes of Back-Bench time we managed to get through 44 Back-Bench questions and answers. It shows what can be done when we put our minds to it.
Mr Speaker
Well, I am always grateful to the hon. Gentleman for his unfailing support and I heard what he said.
Points of Order
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ed Balls (Morley and Outwood) (Lab/Co-op)
On a point of order, Mr Speaker. Of course, I commend your chairing. Given that we have just witnessed a U-turn on a U-turn, I am tempted to ask whether you might allow the Home Secretary to start again, but I fear that that might be ruled out of order.
On a more serious point, may I ask whether the Home Secretary contacted you today about the leak of her statement to the BBC? Did she explain why the statement was leaked to the BBC, and do you think it would be appropriate for her to explain to the House why the details of her statement were leaked to the BBC this morning?
Mr Speaker
I sometimes wonder whether these generous initial remarks are a ruse by Members to get me on their side, but I am grateful to the right hon. Gentleman. I was not contacted by the Home Secretary about the matter to which the right hon. Gentleman refers, but he makes his point with force and clarity. I am always concerned that the House should hear key announcements first. However, I would say that when different numbers are being bandied around that is sometimes a sign of a matter for debate rather than a point of order. However, I shall keep my eyes and ears focused firmly on these matters because the House must hear first.
The Secretary of State for the Home Department (Mrs Theresa May)
Further to that point of order, Mr Speaker. As you have more or less indicated, I think that the Home Secretary—
Mrs May
After 13 years in opposition, as the right hon. Gentleman will discover, one sometimes makes these mistakes. The information that the BBC had was wrong and I am happy to say to the House that any information on the BBC first thing this morning was nothing to do with the Home Office.
Mr Speaker
I am grateful to the Home Secretary, and I am glad that we are not going to suffer an identity crisis for any length of time. I would simply say to the House that I think we will leave it there. We have had an exchange, concerns have been expressed and the Home Secretary has made her position clear.
Pete Wishart (Perth and North Perthshire) (SNP)
On a point of order, Mr Speaker.
Mr Speaker
If the hon. Gentleman has a totally unrelated point of order, I am happy to hear it.
Pete Wishart
The BBC may or may not have got the Home Secretary’s statement, but the smaller parties most certainly did not get a copy of it in advance. The Government have been pretty good at getting statements to us recently. Will you ensure that the smaller parties, such as the Labour party, get a copy of the statement in advance of its being given?
Mr Speaker
In so far as I could fully hear the hon. Gentleman—I apologise if I failed to hear him, but there was quite a lot of noise in the Chamber—I would simply reiterate that there are certain requirements of courtesy on Ministers. Generally speaking, the requirements are complied with and I know that it is always the intention of Ministers to do so. Generally speaking, that happens and if it did not in this case, that was a mistake.
Mr Speaker
The Home Secretary nods assent to that proposition. I hope that such a mistake will not happen again.
Mr Speaker
The right hon. Member for Morley and Outwood (Ed Balls) is insatiable today.
Ed Balls
Further to that point of order, Mr Speaker. Having heard the Home Secretary’s remarks, I fully accept that it was not her or her Department who made this leak. I hear you saying two things from the Chair: first, that these leaks are undesirable and, secondly, that they are even more undesirable if people get the numbers wrong when they are doing the leaking.
Mr Speaker
The question of whether it was or was not a leak remains undetermined. All I can say is that I am Speaker of the House, but I am not Sherlock Holmes. Moreover, as usual, the right hon. Gentleman has used his ingenuity to put his point firmly on the record. If there are no further points of order, perhaps we can come to the ten-minute rule Bill, for which the promoter and some of his supporters have been eagerly waiting.
Grandparents (Access Rights)
Andrew Percy (Brigg and Goole) (Con)
I beg to move,
That leave be given to bring in a Bill to give grandparents rights of access to their grandchildren in certain circumstances; and for connected purposes.
Although this might be entitled the Grandparents (Access Rights) Bill, it could just as easily be renamed the grandchildren’s rights Bill. If the Bill progresses, it will increase the rights of grandchildren to access their grandparents.
I want to thank many of the campaigners who were involved in this campaign, which has gone on for some time, including my predecessor as MP for Brigg and Goole, Mr Ian Cawsey, who moved a similar Bill a couple of years ago that was sponsored by you, Mr Speaker. A number of organisations are involved, including the Grandparents Association and I also want to draw on some of the work undertaken by the Centre for Social Justice. Above all, I want to pay tribute to my constituent, Dorothy Fagge, who has been a dedicated campaigner on this issue for a number of years, having twice been to court to access two different sets of her grandchildren. I shall talk about Dorothy’s experience in a moment.
Some 1.3 million families in England use grandparents as the primary source of care for about 1.8 million children, offering a saving to the taxpayer of about £4.8 billion a year given the average cost of child care. That would equate to a cost of about £92 million a week to the public purse.
The Grandparents Association estimates that about 1 million children do not see their grandparents because families have separated or lost touch. For me, the role that my grandparents played in my childhood and until they passed away was incredibly significant, and its value cannot be quantified. There is strong evidence regarding the value of grandparental involvement, particularly in the lives of adolescents, in reducing adjustment difficulties when marriages or partnerships fail. That was reported a few years ago in a national study, “Involved Grandparenting and Child Well-being”.
That view is shared not only by those who have an interest in this area and have campaigned on it, but by young people. A study that was quoted in the Centre for Social Justice’s family law and children report showed that 75% of young people said that a grandparent was the most important person, or one of the most important people, in their life. A sample of 1,500 young people showed that grandparental involvement in schooling and education is linked to lower maladjustment scores and fewer contact problems and that being able to talk to a grandparent is linked to their having fewer emotional and behavioural problems.
As I have mentioned on numerous occasions, before I came to the House I was a schoolteacher. I taught in a number of very deprived communities in Yorkshire and we sometimes found that grandparents were the sole point of contact in a child’s life, acting as an anchor or rock. Often, when all else around was failing, the grandparents were the only people left standing for that young person. Sadly, grandfathers are sometimes the only male role model many young people encounter.
The value of grandparents can never be underestimated. I cannot put that point better than Pam Wilson of the Grandparents Action Group UK, who has stated:
“Grandparents are a link to the past and a bridge to the future, for family history and medical details. To give a child a sense of belonging from the roots of their family.”
Similarly, Peter Harris who was formerly the Official Solicitor and is now with the Grandparents Association, has said:
“Grandparents are known to provide care for grandchildren more extensively than other relatives, and we believe that this puts them in a special category.”
I believe that grandparents should be placed in that special category.
Grandparents can face a number of legal problems, particularly when they have been denied access to their grandchildren as a result of bereavement or divorce. With bereavement, the surviving parent might find a new partner, which might involve the grandchildren being introduced to a new family. Over time, the family might move and grow ever more distant from the bereaved grandparents. With divorce and separation, the grandparents are often forced to take sides and it is human nature for them to side with their own child. That can lead to children being used as a weapon in particularly acrimonious divorces or separations. Access is often denied or, even worse, traded for financial reasons.
All that places grandparents in an incredibly difficult position. Currently, the law is not necessarily on their side. There is no automatic right for a grandparent to go to court to seek contact with their grandchild. In fact, they must seek the court’s permission to seek access through it. The process can be long winded and very expensive. This morning, I spoke to Lynn Chesterman of the Grandparents Association, who told me that the average cost of such a process is about £20,000. That option might be accessible for better-off grandparents, but there would be no possibility of those from more deprived or poorer backgrounds pursuing it.
My constituent, Dorothy Fagge, whom I mentioned earlier, was able to go to court and use substantial amounts of her own finances to gain access to her grandchildren, which had been denied to her in two different circumstances, one of which was incredibly tragic. Despite all her resources and her ability to pay for legal representation, it took her more than a year to gain access.
This is not an easy situation to address. I understand that, and there will always be cases in which contact with grandparents is not desirable, but the courts must determine that. However, I seek through the Bill some changes to the law to protect grandchildren in gaining access to their grandparents. I would like to see an automatic right for grandparents to seek contact through the courts so that they do not have to go through the double process of having to seek leave first. I hope that, through the review undertaken by the coalition Government, there will be moves to establish some form of early mediation to sort out contact issues, such as happens through the Australian family mediation centres.
It has also been suggested that there should be a presumption in law that children have a right of access to their grandparents, subject to the appropriate protections I mentioned earlier. One recent proposal, which is worthy of further investigation, is that children should have, at the very least, an automatic right to letterbox contact with their grandparents while proceedings in the courts are progressing. In the case of a bereaved grandparent, there is a strong argument that the grandparent, who is often the child’s only link to that side of the family, should inherit the right that previously existed for the parent.
I know that this is not an easy issue, and that the Government are already examining it through the family law review, which is due to report next year. As I said at the beginning of my speech, my grandparents were incredibly important to me. I know that for many people the role that their grandparents play in their lives is one that they value for the rest of their lives. It is appalling when grandchildren are used as a tool in divorce or in separation. That is why I would like to see implemented the changes that I have outlined, so that we can better protect the rights of grandparents and of grandchildren.
Question put and agreed to.
Ordered,
That Andrew Percy, Tracey Crouch, Justin Tomlinson, Tom Blenkinsop, Mr Gregory Campbell, Karen Bradley, James Wharton, Greg Mulholland, Chris Skidmore, Martin Vickers, Mr Brian Binley and Craig Whittaker present the Bill.
Andrew Percy accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 17 June, and to be printed (Bill 110).
National Insurance Contributions Bill
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Madam Deputy Speaker (Dawn Primarolo)
Before I call the Minister, I inform the House that Mr Speaker has not selected the reasoned amendment tabled in the name of the Opposition.
The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
The Bill before us consists of two parts. The first part introduces a 1% increase in the rate of national insurance contributions from April next year, as announced by the previous Government, although let me assure my right hon. and hon. Friends that we will reverse the impact of this jobs tax through an increase in the employer national insurance threshold. We have already announced the increase in the income tax personal allowance.
Mr Andrew Love (Edmonton) (Lab/Co-op)
I thank the Minister for giving way. What is the net impact on employers of the 1% increase offset by the increase in threshold? What is the impact on individual businesses?
Mr Gauke
Compared with the plans that we inherited, the impact of the increase in threshold will be such that employers will pay £3 billion less in employer’s national insurance contributions. The overall reduction of the burden on employment will be £6 billion as a consequence of the overall package.
Mr David Hanson (Delyn) (Lab)
Will the Minister confirm, however, that about £1.4 billion is not being compensated for by the threshold? I want us to be clear. He says that he has offset the threshold, but he has offset only about £3 billion, not the whole amount of the rise.
Mr Gauke
The fact is that the Labour party would have raised the full amount. We are offsetting £3 billion, which will be most helpful for employers whose employees earn under £20,000. The package is good for employment and, given the fiscal mess that we inherited, I am very proud that this Government are able to reform national insurance contributions exactly as we set out in our manifesto at the general election, and in the coalition agreement.
As far as we can deduce it, the Labour party’s position is that it wants to do more to reduce the deficit by raising taxation and it does not believe in increasing VAT, which will bring in £13 billion a year. We can assume only that it would favour greater increases in national insurance contributions than it had already set out.
We are not going to take any lectures; this Government have managed to reverse a very painful and damaging policy that would have meant employers’ contributions rising for every single employee paying national insurance—and in a way that would have damaged jobs in this country.
Mike Gapes (Ilford South) (Lab/Co-op)
Is the Minister aware that the proposals in the Bill discriminate against many areas—in London, in particular—with above-average unemployment? Will he explain to people in my constituency, where according to the Library there is already 6.6% unemployment, why on earth the national insurance contribution holiday does not apply to them?
Stephen Pound
That is extremely generous of the Minister. All I can say is that if he was surprised, imagine how I felt.
The Minister just gave the figure for receipts following on from the increase in VAT. Are his figures based on current patterns of consumption or on an anticipated level of consumption? Most economists would say that the VAT increase will depress demand and reduce consumption.
Mr Gauke
The sums are based on the assessment made by the independent Office for Budget Responsibility at the time of the Budget. I hope that that provides some clarification to the hon. Gentleman.
Part 1 of the Bill provides for changes, which the previous Government announced in two instalments, to national insurance contributions from next April. Initially, a 0.5% increase in rates was announced in the 2008 pre-Budget report. That was then changed to a 1% increase in the pre-Budget report of the following year.
I am sure that Members will remember that reversing the most significant impacts of those rate rises was a key issue at the general election. The Federation of Small Businesses said that the policy would cost 57,000 jobs. Thirty business leaders supported our campaign to reverse the policy. When the letter from those 30 business leaders—many other business leaders followed shortly—was published, Tony Blair apparently considered that for Labour the game was up. Thankfully, he was right, and we now have in place a Government who are determined to bring down the deficit but also to put in place conditions favourable to private sector-led growth.
In June, we announced our plan to reverse the most damaging aspects of Labour’s jobs tax. There was a choice how best to do this—for example, we could have cancelled the rate and threshold rises—but we have chosen the option that best protects low earners. In the emergency Budget, my right hon. Friend the Chancellor confirmed that national insurance contribution rates would rise by 1%, that the personal allowance would increase by £1,000 from next April, and that the employer national insurance contribution threshold would rise by £21 a week plus indexation. The reform of employer national insurance contributions is exactly as set out in the 2010 Conservative party manifesto.
The Bill sets out how these rises will apply to the main rates of class 1 national insurance contributions. The employer rate will rise from 12.8% to 13.8% and the employee main rate will rise from 11% to 12%. The 1% increase will also apply to class 1A and 1B contributions that are paid on benefits in kind and pay-as-you-earn settlement agreements. The same 1% rise will apply to class 4 contributions paid by the self-employed, which will rise from 8% to 9%. Taking into account the increase in the personal allowances and employer threshold, the net effect of these changes will reverse the damaging £6 billion-a-year net increase in the cost of labour planned by Labour Members. Our package of measures entirely reverses this increase.
Compared with the plans that this Government inherited, no changes are being made to the rates. More than £3 billion a year is being returned to employers through the threshold increase, and even more to individuals through the increase in the personal allowance. Our actions will mean that some 880,000 low earners in the UK will be taken out of income tax altogether.
Mr Love
The hon. Gentleman mentions low earners. Of course, the thing that the Conservatives did not put in their manifesto was that they would raise VAT. They talked about national insurance being a tax on jobs, but is it not correct to say that the rise in VAT will destroy more jobs than the national insurance increase would have done?
Mr Gauke
No. We agree with the view of Tony Blair and, apparently, the previous Chancellor of the Exchequer that VAT is the right tax to raise if one wants to get a substantial sum of money. The hon. Gentleman will find that most economists take the view that in terms of the impact on jobs, increasing employers’ national insurance contributions is far more damaging than any increase in VAT.
As a result of the package of measures that we are putting in place, employees earning under £35,000 a year will pay less in income tax and national insurance contributions overall, and employers will pay less national insurance on employees earning under £20,000 a year. As well as the 880,000 low earners taken out of income tax, almost 1 million low earners will no longer pay national insurance contributions, while the number of low earners for whom employers pay no national insurance contributions will rise by about 650,000. It is also worth mentioning that people who will now be exempt from paying national insurance will retain the same entitlement to contributory benefits. However, tackling the deficit remains the priority, and the benefits to low earners could be achieved only through the increase in national insurance contribution rates included in the Bill. This decision is fair and progressive, and it will help to support the poorest and most vulnerable in society.
Let me turn to part 2 of the Bill. In the June Budget, my right hon. Friend the Chancellor announced an employer national insurance contribution holiday for new businesses in countries and regions with a high dependency on the public sector. This holiday will apply across Wales, Scotland and Northern Ireland and many regions of England—the north-east, the north-west, Yorkshire and the Humber, the west midlands and east midlands, and the south-west. Those areas have a higher proportion of jobs in the public sector than the rest of the country, and as we take the much-needed steps to rebalance our economy, it is vital that they benefit from additional support.
Mr John Baron (Basildon and Billericay) (Con)
There is no doubt that one welcomes this package of measures, which will help the lower paid in particular. However, will my hon. Friend revisit the Government’s decision to exclude businesses in the south-east from the national insurance holiday? Otherwise, it could be seen to discriminate against local entrepreneurs there and hit the areas that need higher employment.
Mr Gauke
I understand my hon. Friend’s point, but the fact is that we have limited resources and have inherited a legacy in which the private sector is relatively strong in some areas, such as his constituency and mine, but much weaker in others. At a time when we cannot rely on massive public spending, and when the public sector will have to find economies, it is perfectly reasonable that we have adopted the approach of focusing on areas where there is high dependence on the public sector.
Stewart Hosie (Dundee East) (SNP)
I am very supportive of the proposal in general terms, but when the Government came to their decision on it, did they consider extending it to existing businesses with very small work forces of one or two people as opposed to simply new starts, and did they consider what the cost of that might have been?
Mr Gauke
The focus of the policy has always been on start-up businesses. It is an attempt to encourage new businesses to be set up, given where we are in the economic cycle and the need to encourage private sector growth. That is why the Conservative party’s policy before the general election was focused on start-ups. After the election we considered how best to introduce the policy, and came to the view that we should include the regions where the private sector was at its weakest.
Penny Mordaunt (Portsmouth North) (Con)
If the scheme cannot be extended to an entire region, does the Exchequer Secretary accept that there will be pockets of that region, such as my constituency, that would benefit massively from it? The area has historically had very low new business start-up rates and would benefit from what I think is an excellent scheme. When I asked his Department about the costs of administering the scheme in such areas, it said that they would be prohibitive, but I cannot understand why that would be. Can he elaborate on that?
Mr Gauke
If we were to choose precisely where the policy applied on a much more closely defined geographical basis, we would have difficulties such as distortive behaviour, problems in enforcing the policy, the bureaucracy that may be involved, the need to establish where a company’s principal place of business was, and the difficulty of policing the scheme. Also, labour markets tend to be somewhat larger than constituency or even local authority areas. My hon. Friend is right to highlight the circumstances in Portsmouth, but there are neighbouring seats with a very low level of public sector employment and quite a high level of private sector employment. Such labour market flexibility can exist.
Mr Andrew Tyrie (Chichester) (Con)
I take my hon. Friend’s points about the limited resources, the risk of bureaucracy and the difficulty of policing the scheme, but Robert Chote, while he was still at the Institute for Fiscal Studies, described the regional relief scheme as
“complicated…prone to avoidance and oddly targeted.”
I have had a number of representations to that effect. What assurance can my hon. Friend give that the scheme will not be accompanied by an enormous amount of extra regulation and a much higher compliance burden?
Mr Gauke
My hon. Friend raises a fair point. We are determined that in administering the scheme, Her Majesty’s Revenue and Customs will adopt a light touch as much as possible. The problems of bureaucracy and avoidance would be much greater if we tried to drill down to constituency or local authority level as opposed to regional level. I assure him that our assessment is that gains for participating businesses will greatly outweigh any administrative costs that they may face.
George Hollingbery (Meon Valley) (Con)
It occurs to me that this is a particularly prescribed aspect of the Bill with three particular areas identified. Will the Minister consider taking powers to himself that allowed him not just to exclude areas, but to keep a register of those he felt could be excluded, therefore allowing some flexibility? Should labour markets deteriorate markedly in certain areas, he could then revisit his decision and decide to support certain areas.
Mr Gauke
What we must bear in mind is that we have limited resources. If we were to extend this measure to every part of the country, the cost would increase by around 70%—in other words, £660 million over the course of three years. For the reasons that I set out, it would be difficult to drill this down to very precise areas.
Mr Gauke
I must make some more progress.
If we are to move to a model of economic growth founded on private sector enterprise and investment, it is important that we encourage the formation of new business. For that reason, the holiday applies only to businesses that have been set up since 22 June, the date of the Budget. To ensure affordability, the holiday is limited to the first 10 employees taken on in the first 12 months of business. For each of those workers, the holiday will last for a single year, unless the closing date for the scheme—5 September 2013—is reached before the 12 months is up.
John Cryer (Leyton and Wanstead) (Lab)
I have listened very carefully to the Minister. Some 40% of the people in employment in my constituency work in the public sector. I represent some of the most deprived wards in London, which means some of the most deprived in the country, yet my constituency will be excluded from the holiday, whereas certain leafier parts, outside London and the south-east, will be included.
Charlie Elphicke (Dover) (Con)
I welcome this measure. It is just the thing to spur on the private sector. In evidence to the Treasury Committee, Alan Clarke said that it was a “particularly encouraging measure”. Mr Whiting, of the Chartered Institute of Taxation, said that it was a
“worthwhile experiment for the small, new business with new employees.”
This is just the sort of measure to encourage the private sector that the House should be passing.
Mr Gauke
I am grateful for that intervention. We have to build this private sector recovery. This measure is a useful contribution, particularly to those regions where the private sector is not as strong as elsewhere. It is a transitional measure, scheduled to end in three years. We are committed to monitoring and evaluating its effectiveness over that period to ensure its success.
It is not our intention for this policy disproportionately to benefit businesses that employ highly paid staff. For that reason, the maximum amount that an employer can profit from any single employee is limited to £5,000. That cap ensures that the policy will not distort European Union markets and that it complies with state aid legislation. We do not expect any significant competitive disadvantage to arise either for existing businesses or for new businesses in regions where the holiday does not apply. The Bill also makes provision for the administration of this measure. Businesses benefiting from the holiday can withhold the employer contributions from the monthly payments they make to HMRC. If the payment cannot be withheld, the businesses can apply to HMRC for a refund. That will help to minimise employers’ costs as well as the costs of delivery.
The Government expect that hundreds of thousands of businesses will benefit from the measure over the next three years. In the Budget, we estimated that new businesses would save hundreds of millions of pounds worth of national insurance contributions during the lifetime of the scheme, giving them the ability to hire more staff, expand their business or invest in the recovery.
Jeremy Lefroy (Stafford) (Con)
The Government correctly emphasise the importance of the voluntary sector, and it is likely that there will be a surge in the number of charities that are set up. I declare an interest as a trustee of Stafford Works, which is a new charity. Will the Minister confirm whether charitable trusts and companies are included in the scope of part 2 of the Bill?
Mr Gauke
A charitable entity that is located in one of the relevant regions and that carries on a trade, vocation or business will benefit. That is likely to apply to, for example, shops that are run by charities. Such entities must meet that criterion to benefit, but not all charities will necessarily do so.
Mr Gauke
At this early stage, we have had around 1,000 applications, but we expect more as awareness of the policy becomes greater and as businesses contact their professional advisers. We are keen to publicise the policy, and I encourage hon. Members for any of the relevant regions to notify businesses in their areas. The Government and our policy aim to help businesses and those who want to start a business and get it going. In contrast, the previous Government increased such taxes. Start-up and existing businesses throughout the country faced rising taxes and employers’ national insurance contributions, which was a particularly deeply damaging tax.
The Bill is an important part of the Government’s plan to reduce Labour’s taxation, help those on the lowest incomes, and support private enterprise and employment in the parts of the country that need them most. It is a simple and important Bill, and I commend it to the House.
Mr David Hanson (Delyn) (Lab)
I am grateful to the Minister for his exposition of the Bill. We will test aspects of it in Committee and at other stages in its passage. As he said, it divides effectively into two parts. The first part is the increase in national insurance contributions by 1%, which we will support because we want to ensure that we protect services and support our economy. The second part introduces a three-year regional national insurance holiday for new employers. As the Minister said, many businesses will qualify for their first 10 employees in their first year of business; I shall return later in detail to the question of the regions and areas that will not qualify.
Let us first consider the national insurance contributions. The Minister rightly said that this policy was set out both in the Labour manifesto and elsewhere in the period before the general election in May. My right hon. Friend the Member for Edinburgh South West (Mr Darling), the then Chancellor, announced in the pre-Budget statement on 9 December 2009 that the previous Government would increase national insurance contributions by 1% to protect public services. We had a choice, and we were straight about it both before and during the election. Raising national insurance contributions was a tough decision, but we ensured that we would protect those earning less than £20,000 a year.
The Conservatives condemned that national insurance rise throughout the election, but—surprise, surprise!—they have now decided to go ahead with it. In the Conservative manifesto, which I have come to recognise is not worth the paper it was written on, the party committed itself to raising the thresholds for national insurance by £24 a week, the upper earnings limit by £29 a week, and the secondary threshold at which employers start paying national insurance by £21 a week. I look forward to seeing the details in the secondary legislation.
My intervention on the Exchequer Secretary showed that although the Government are raising the thresholds, there is still a shortfall of about £1.4 billion in employer national insurance contributions. The Labour party was open about that in the run-up to, and during, the general election, but the Conservative party was not. In my view, this is all smoke and mirrors.
Mr Gauke
Page 8 of our manifesto stated that we would
“raise the secondary threshold at which employers start paying National Insurance by £21 a week.”
The secondary legislation will increase the secondary threshold at which employers start paying national insurance by £21 a week, so we are doing exactly what we said in the manifesto.
Mr Hanson
But there were no caveats about a shortfall in the Budget proposals of about £1.4 billion. I think it is smoke and mirrors—and, as my hon. Friend the Member for Edmonton (Mr Love) said, it is coupled with the increase in VAT from next year. The VAT rise will impact more than three times as much as the increase to national insurance contributions would have done, and will affect 250,000 jobs.
Charlie Elphicke
The right hon. Gentleman is right that the national insurance holiday will not apply in my constituency—a matter that I regret. Nevertheless, I welcome the fact that 1,400 of the least well-off people in my constituency will be taken out of tax altogether. It seems that he opposes the increase in the personal allowance and would rather cut national insurance, which we originally planned to do. Instead, we are helping the least well-off. Surely he would welcome that.
Mr Hanson
I look forward to the hon. Gentleman going back to Dover to explain why he is supporting not only a Bill that does not give a national insurance holiday to his constituents, but the VAT rise elsewhere in the Budget proposals—we need to look at that in the round—which will impact on pensioners, the low paid and everybody in his community. This is not a topic for today, but the debate on the national insurance rise was open and honest on our side. During and after the election, the Conservative party argued against the rise, but it is now implementing it. On top of that, it is not meeting the objectives in its manifesto and has increased VAT. I think that a VAT rise is a regressive tax policy that will hit the poorest hardest, but that is the choice that the Conservative party has made.
I want to focus most of my remarks on the second part of the Bill. The decision to introduce a regional employer national insurance holiday is welcome, but it specifically excludes new businesses in Greater London, the south-east and the eastern region. We tabled a reasoned amendment that has not been selected, but which would have declined to give a Second Reading to the Bill because of those exclusions. I sense that the hon. Members for Portsmouth North (Penny Mordaunt), for Meon Valley (George Hollingbery) and for Basildon and Billericay (Mr Baron), who spoke earlier, will have expressed their concerns about how the choices on the national insurance holiday were made. [Interruption.] The Economic Secretary to the Treasury says that we would have increased national insurance contributions across the board.
Madam Deputy Speaker
Order. We cannot have comments shouted across the Floor from a sedentary position. It makes it very difficult for Hansard to record our proceedings, particularly when the comments are then referred to without having been recorded. Will the hon. Lady make her point from the Dispatch Box, so that the right hon. Gentleman can answer it?
The Economic Secretary to the Treasury (Justine Greening)
My point was that the Labour party would have increased NICs for absolutely everybody.
Mr Hanson
The hon. Lady knows that that was a clear and honest policy that we put to the electorate. The Government have now introduced proposals for a national insurance holiday for new businesses in certain regions. I will explore shortly why we think that that choice is unfair in the context of the resources the Government are trying to save.
Justine Greening
Can the right hon. Gentleman tell us whether it is still his party’s policy to go ahead with those NIC rises?
Mr Hanson
I have said what I have said. We were open and honest during the election campaign, and we will support the rise proposed in the Bill, because we expected to do that. During the election campaign, the Economic Secretary and the Exchequer Secretary attacked the NIC rise without proposing the alternative that they have seen through in practice.
Let us put that aside, because the key issue before the House is the payment holiday. We do not believe that it is being proposed fairly, honestly or openly, and we do not believe that it will help the poorest and most deprived areas of the UK, which in great part are excluded from the scheme. Of the top 12 most deprived local authorities on the economic deprivation index, no fewer than seven will be excluded from the payment holiday. The seven boroughs of Hackney, Newham, Tower Hamlets, Islington, Barking and Dagenham, Haringey and Lambeth are excluded from the scheme.
In his written statement on 6 September, the Exchequer Secretary said:
“The Government are determined that all parts of the UK benefit from sustainable economic growth”.—[Official Report, 6 September 2010; Vol. 515, c. 1WS.]
If we are having a holiday from national insurance contributions, I do not understand how excluding those areas from the payment holiday will do that.
I want to challenge the Government’s logic. They claim that the reasoning behind the policy is that areas outside London, the south-east and the east are more reliant on public sector employment. Will the Exchequer Secretary confirm that that is his logic?
Mr Hanson
The Minister has confirmed that. Tomorrow’s business leaders who want to start businesses in the constituencies of Oxford East, of Luton North, of Lewisham East, of Canterbury, of Southampton, Test, of Eltham, of West Ham, of North Thanet, of Hackney North and Stoke Newington, of Tooting, of Islington North, of Dulwich and West Norwood, and of Brighton, Kemptown will miss out. I mention those constituencies specifically because they are in the top 10% in the country with the highest percentage of public sector employment.
As the hon. Gentleman knows, there are 650 constituencies. His policy is supposed to help compensate for possible loss of employment in the public sector. Those concerns have been reflected today, and I pay tribute to the hon. Members for Portsmouth North, for Meon Valley and for Basildon and Billericay, who have defended their constituencies and raised their concerns about how the policy will be applied.
If there is to be a holiday, it can be applied in different ways. It could be applied regionally, as the Minister has done, or on the basis of unemployment levels or regional levels of public sector employment per constituency, instead of the blanket regional approach that the Minister has chosen.
Mel Stride (Central Devon) (Con)
The shadow Minister has heard that rolling the scheme out across the entire country would cost an additional £660 million. Will he explain whether he would propose to raise that by increasing our deficit, by cutting expenditure—in which case what expenditure would he cut—or by raising taxes, in which case what taxes would he raise?
Mr Hanson
That is a fair and valid point. Yesterday, in reply to a parliamentary question, the Minister emphasised the cost of the scheme for the regions covered. My purpose today is to challenge the Minister’s logic for allocating the resources for the payment holiday to the regions that he has selected, because that distribution does not necessarily reflect the level of deprivation or public sector employment. The cake that the Minister has allocated may be sliced in several ways, but he has sliced it to exclude the constituencies represented by my hon. Friends in London and those who represent seats in the south.
Barry Gardiner
Is my right hon. Friend aware that Tottenham, which has the eighth highest number of jobseeker’s allowance claimants in the country, will not benefit, although Tatton, which has the 509th highest number of JSA claimants, will receive the NI break? Is that fair?
Mr Hanson
My hon. Friend makes a very valid point. I do not begrudge the people of Tatton anything, and I will tell him why. I was once a Labour councillor in the Tatton constituency. I represented the ward of Rudheath and Whatcroft, and I was the leader of the Labour council that covered half the constituency at that time. I have absolute faith in those areas, but there is deprivation in Tatton. In fact, Neil Hamilton, a former Member of this House for that area, was my pair when I first came here. Such is life! But that is another story.
Tatton has one of the lowest levels of unemployment in the country. That constituency, which is represented by the Chancellor of the Exchequer, will get the benefit of the national insurance holiday to start 10 employees, but Portsmouth North will not. Neither will Brent North, Edmonton or Lewisham. The constituency of my hon. Friend the Member for Leyton and Wanstead (John Cryer) will not get that benefit either—
Mr Hanson
Indeed, and neither will the constituencies of my hon. Friends the Members for West Ham (Lyn Brown) and for Ilford South (Mike Gapes). We are talking about encouraging growth and promoting job opportunities, and how we split the cake is very important, as the hon. Member for Central Devon (Mel Stride) has pointed out. My hon. Friend the Member for Brent North (Barry Gardiner) mentioned the different figures for jobseeker’s allowance across the country. We need to address those significant differences.
Mr Love
For the record, unemployment in my constituency is about the 50th highest in the country, and my constituents want to know why they will not be getting the benefit of these measures in the Bill. The fallacy behind the Government’s argument is that the affluent part of the region will raise employment in my constituency, but all the evidence shows that there are hard-core pockets of unemployment, and that even during the economic good times over the past 13 years, unemployment there did not come down. The only way to address that fallacy is to apply the provisions of the Bill to all the regions of the country, as my hon. Friend suggests.
Mr Hanson
I am grateful to my hon. Friend. The question that the Minister needs to reflect on, here or in Committee, is how we should split the national insurance holiday cake. There are many ways of doing that, but his way is unfair to the areas of greatest need, to the areas with the highest public sector employment, and to areas that contain seas of prosperity as well as deprivation.
The Minister has mentioned areas of high public sector employment, but I have already shown him the fallacy behind his argument as it affects many of our constituents throughout the country. Figures for jobseeker’s allowance show that the rate of unemployment is currently higher in London than in the south-west, part of which is represented by the hon. Member for Central Devon, in North Wales, where my constituency is, or in Scotland, where it is 3.8%. Unemployment is also higher in London than in the east midlands or the north-west—[Interruption.] The Economic Secretary to the Treasury did not take your strictures to heart, Madam Deputy Speaker. She is continuing to heckle from a sedentary position. I would be happy to give way to her if she wants to intervene.
However we measure unemployment, the levels of jobseeker’s allowance claims in London are higher than in the south-west, Wales, Scotland, the east midlands and the north-west. Indeed, they are above the UK average. That is a key point when we are thinking about how to divide the cake up.
Andrew Bridgen (North West Leicestershire) (Con)
I must say that the enthusiasm being shown by the right hon. Gentleman, and by so many Opposition Members for this fantastic Conservative policy, or coalition policy, on national insurance holidays is absolutely heart-warming.
Mr Hanson
The hon. Gentleman will know that North West Leicestershire will benefit from the scheme, but I hope that he will look slightly beyond the confines of Leicestershire and talk to the hon. Members for Portsmouth North, for Meon Valley and for Basildon and Billericay, who have all expressed concern about the proposals.
Charlie Elphicke
I spoke on the subject of regionalisation in the Finance Bill, and we have to take the rough with the smooth. Does the right hon. Gentleman welcome the fact that in places such as Delyn, 500 new jobs have been created in the past six months? In Dover 500 new jobs have also been created in the past six months. Across the country as a whole, about 300,000 new private sector jobs have been created in the past six months. Does he not welcome that?
Mr Hanson
I think I know Delyn better than the hon. Gentleman. If he would like to come to me to talk to the 320 people who lost their jobs yesterday at Headland Foods in Flint, I should be happy to discuss the issue. That happened only yesterday in my constituency, so I will not take any lessons from him about what happens on my patch in north Wales.
I will tell the hon. Gentleman straight away, however, that West Ham has 6.8% unemployment, Tottenham 7.4% and Camberwell 6%. That is more than three times the level of unemployment in Tatton, in Richmond (Yorks), represented by the Foreign Secretary, and in Derbyshire Dales, represented by the Government Chief Whip. Indeed, it is four times the level in Sheffield Hallam, represented by the Deputy Prime Minister. All those areas will benefit from the scheme, while areas of severe deprivation in London will not.
Let us look at the constituencies of coalition Cabinet members. Berwickshire, Roxburgh and Selkirk has 2.8% unemployment, North East Somerset has 1.6%, Tatton has 2.1%—
Jacob Rees-Mogg (North East Somerset) (Con)
Will the right hon. Gentleman give way?
Mr Hanson
In a moment. [Interruption.] Not North East Somerset. The hon. Gentleman knows that I meant the Defence Secretary’s constituency. I am sure that the hon. Member for North East Somerset (Jacob Rees-Mogg) will eventually make the Cabinet, however, because he is an assiduous attender of the Chamber.
Richmond (Yorks) has 1.8% unemployment, Derbyshire Dales has 1.6%, Rushcliffe has 2%, Sheffield Hallam has 1.8%, Sutton Coldfield has 2.6%, North Shropshire has 2.7%, and Inverness has 2.3%. All the Cabinet members representing those constituencies will benefit from the payment holiday, while colleagues representing seats in Walthamstow, Islington, Mitcham, Luton North, Luton South, Tottenham, Tooting, Dulwich, Streatham, Hampstead, Vauxhall, Hammersmith and the two in Hackney will not.
If we are to make the scheme fair, taking the point that the hon. Member for Central Devon made, we should divvy up the benefits that the Government are bringing forward in a way that tackles the central issues of deprivation and unemployment.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
We as a party welcome the initiative, and I am sure the Government will be happy to hear that. It is an important countervailing measure, and we need further such measures. Have the Opposition assessed how much it would cost to roll out the scheme as they suggest in their amendment, and how that would be funded?
Mr Hanson
If the scheme were applied to Greater London, the east and the south-east, and taken up at the level that the Minister expects, it would—according to figures that he gave me only last night—cost about £660 million. He says that there are about 1,000 interested companies to date, but I do not know what the take-up would be.
The cost could be offset by new employment and new taxes, because let us remember that the scheme under discussion is for new businesses, so the holiday period offset will be a cost to the Treasury, but it could be offset by increased growth, increased taxation paid by individuals who are employed and by the increased growth of businesses. The cost of the scheme downstream, at the end of the three years, is debatable, but, equally, there are ways in which we could divvy up the money that the Minister has allocated to the regions of Wales—one of which the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) represents—and all others. We could think about whether to divvy them up differently, so as to tackle areas of high unemployment in London or—if the Minister’s criterion is high public sector employment—areas with high public sector employment, such as those that I mentioned. They are in the 10% of areas with the highest such employment, and include seats that the current scheme will not cover.
Andrew Bridgen
Will the right hon. Gentleman clarify his statement? Did he just suggest that we cut taxes to increase growth in order to increase the tax take overall? If so, I welcome the right hon. Gentleman as a believer in the Laffer curve.
Mr Hanson
The hon. Gentleman knows that the Opposition have a growth strategy. We had one prior to the election.
The measure under discussion has been proposed to give new businesses a national insurance holiday to help them with their costs for three years. The Minister estimates the costs for the three regions as £650 million to £660 million, based on the scheme’s anticipated roll-out in those regions. My simple point is that these are new employment jobs and new businesses, so they will presumably entail new employment areas and new people employed to fill them, who will pay new taxes. All that is part of the growth strategy, which will be hit hard by VAT increases and public spending cuts. That is a separate issue.
If we are thinking about a payment holiday, the question for me is whether it will achieve its objectives by being available in the areas of the highest public sector employment, or whether it will go to areas such as Tatton, Richmond or other wealthy areas of the north and midlands. In those areas jobs will be created, but the people who most need them will not be able to get them. That is the crucial issue for debate.
Without making a party political point of it, I would argue that Government Members have participated constructively both in previous debates on this subject and in today’s debate. John Walker, the chairman of the Federation of Small Businesses has said:
“With small firms in the South East most likely to be working below capacity, this shows how wrong the Government is to not include this vital region, as well as the East and London, in its proposals for a National Insurance holiday for start-up businesses.”
I have already said that we are not going to vote against the Bill—although if the reasoned amendment had been selected we would have voted for that. However, it is important both to consider the issue in the round and for the Minister to reflect on the concerns expressed, by his hon. Friends as well as by Labour Members, about the application of the national insurance holiday.
At the same time as implementing this Bill, the Minister is scrapping completely the regional growth strategy for different departments, and scrapping the regional development agencies and replacing them with local enterprise partnerships, which in my view will not help with regional development to the extent that we would want. The Under-Secretary of State for Defence, the hon. Member for Mid Worcestershire (Peter Luff) has said that that sends out the wrong message about the work that has been done.
We need to look towards a better application of this policy, and the Minister needs to reflect further on the concerns expressed in our debate. Although we will disagree politically, I am most interested in ensuring that any national insurance holiday is of benefit to the people who most need it. Sadly, the Bill misses the mark in that respect, and fails to address those key issues.
I repeat that we will give the Bill a fair passage and not vote against it this evening. We welcome the rise in national insurance, which we too would have implemented. We welcome the holiday provisions as far as they go, but they need further reflection, so we will take every opportunity in Committee to try to persuade the Minister to look at more imaginative schemes, which might use the same amount of money in different ways, or extend the holiday to areas where it would be a valued resource and help reduce unemployment in the constituencies in the south-east, London and the east that most need that.
I hope that what I have said is helpful to the Minister. I look forward to spending the next few weeks in Committee with him, just as I have spent the last few weeks in Committee with him and his colleagues on various other Bills. To make a wholly non-partisan point, the Treasury appears to be one of the busiest Departments at the moment, and we are all having fun. I am sure that our discussions will shortly continue elsewhere.
Michael Fallon (Sevenoaks) (Con)
I am not alone in finding that a rather disappointing response—an untypically disappointing response. Part 2 of the Bill introduces something that the Labour Government never introduced in their 13 years in power, yet the minute we introduce it, they say: “Well, it doesn’t really go far enough”. We have heard 25 minutes of “We want a better Bill, but we never backed it”. Labour has still not proposed to make this provision part of its own policy, yet it wants it extended to other parts of the country.
Unlike the Labour party I welcome part 2, comprising clauses 4 to 11, just as I welcome any reduction in the burden of taxation on small businesses, even if it is described—rather unfortunately, I think—as a “holiday”. Only in the weird and wonderful world of Her Majesty’s Revenue and Customs could the process of allowing a business to keep more of its own income and turnover be described as some sort of holiday. I rather regret that this phrase has now crept into the legislation. Small businesses pay too much tax, so anything we can do to reduce that burden has to be helpful. Why? Because the bulk of private sector job creation has come, and will continue to come, from small companies. Sadly, it is large companies that continue to reduce their costs, to strip out unnecessary manpower and to outsource various functions, while it is small businesses that have been, and will be, the engine of job creation.
Geraint Davies (Swansea West) (Lab/Co-op)
Is not the main engine for job growth among small and medium-sized enterprises the expansion of existing SMEs rather than the creation of new ones, although of course that is an important engine as well? Does the hon. Gentleman favour the extension of the measure to new employees of existing SMEs? As he may know, and as I know from personal experience, starting a business involves a number of risks, and obviously this is one of the factors. An established SME could probably do much more with the “holiday”.
Michael Fallon
I was about to suggest that the measure might well be extended. It is true that job creation comes from existing small businesses, although it also comes from new ones. I think that we can find some common ground in that regard.
I have three main reasons for supporting the Bill. First, I believe that it is the right way to help small businesses. It is not the only way, but I do not think that the other ways that have been tried in the past—grants, loans, business link services, and a great deal of bureaucracy—are nearly as effective as allowing small businesses to keep more of their own money, and to employ more people more cheaply. Given that a Government cannot create jobs, this is the easiest, simplest and most effective way of encouraging businesses to take on more people.
My second reason for supporting the Bill, which is directly relevant to the intervention from the hon. Member for Swansea West (Geraint Davies), is that it is clearly future-proof. I note that the Opposition do not oppose it, either in principle or in detail; indeed, they want to extend its provisions throughout the country. If it turned out to be spectacularly successful—and none of us in the House knows yet whether it will—its provisions could be extended. At present, the scheme applies only for the first year of a new business, it is open for only three years, it applies only to the first 10 employees, and it applies only to the regions that we have been discussing.
If we discovered that the Bill really did encourage the creation of more jobs and did not divert employment from existing businesses, it would be perfectly possible—once the economy had recovered, we had closed off the deficit that we inherited, and more money was available—to extend the scheme in different ways. It would be possible, for example, to apply it to the first two years of a business. It can take longer than a year for a very small business to establish itself. It would be possible to keep the scheme open for the whole of the current Parliament, matching the reductions that are sadly necessary in public sector employment to encourage private sector employment alongside it. It would also be possible to apply it not simply to the first 10 employees but to, say, the first 20 or 30. I see nothing particularly magical about the step change involved in employing that 11th person. And yes, if the scheme really was working, it might well prove desirable and cost-effective to start extending it to some of the other regions. I note that the three excluded regions contain the south-east—my own region—East Anglia and London, which currently contain half the number of all our small businesses. If small businesses had already been successful in those regions, perhaps, if costs allowed, it might be possible to extend the scheme in four or five years’ time if it worked particularly well.
Stewart Hosie
The hon. Gentleman said that there was no step change between the 10th and 11th employees, and he was right. However, there is a huge step change for a sole trader taking on his or her first employee. Does the hon. Gentleman think that, if the scheme were rolled out in the way that he suggests, it should be rolled out to existing sole traders taking on their first employee, which involves a huge commitment?
Michael Fallon
I am not sure whether someone would remain a sole trader in those circumstances, but it is true that becoming responsible for someone else’s payroll is often the most difficult step for those who are self-employed or trading on their own account. I certainly think that we should explore that possibility further.
The third, and final, reason why I support the Bill is an entirely different one. The Bill is quite rare in that it recognises the rights of non-workers. I have never forgotten an encounter I had when I was representing a north-east constituency. It occurred at the height of the engineering recession of the early 1980s, when the jobcentre manager in Darlington said to me, “There’s plenty of work about, Mr Fallon, but very few jobs.” What he meant by that was, of course, that the labour market had fossilised. So many restrictions and costs were involved in hiring extra labour that it was too expensive and too risky for firms to take on more staff. Of course, the previous Conservative Government addressed that through a range of liberalisations that tackled areas such as employee rights, access to tribunals and restrictive practices, and I think that a Government need to do that every few years. They need to look again at the balance between those who are fortunate enough to be in the labour market and enjoying the various job protections that this House has given them successively over the years and those who are excluded from the labour market, because those who are excluded have rights too. If we make it increasingly difficult for companies to fire people, then we inevitably make it increasingly difficult for companies to hire people. If we build in unlimited awards for various types of discrimination—sexual discrimination, for example—we discourage firms from employing more women. There is a balance to be struck therefore, and I think that needs to be reassessed every few years.
Small businesses in my constituency tell me that at present they will do almost anything they can to avoid taking on new people, partly because of the difficulty of getting rid of them if they turn out to be unsuitable or unreliable or if they are not prepared to work hard enough, and partly because of the administrative costs piled on them by the last Labour Government through, for instance, needing to check student loan repayments, child care reliefs and immigration status. When we consider measures such as those in this Bill, we need to be thinking all the time about how we can make it easier for businesses to employ people.
This is a short Bill, and it would be wrong to overstate its effects. It must be considered in the context of the other measures to help small businesses, such as the reduction in their corporation tax rate, which I welcome, and the extension of the guarantee scheme. I suspect that the Bill will prove to be successful however, and, if so, I hope that it will be the start of a much wider and deeper process of removing the barriers to growth, such as the thicket of regulation our small businesses have to struggle through and the heavy burden of taxation that still inhibits too many of them. I welcome the Bill.
Mike Gapes (Ilford South) (Lab/Co-op)
I wish to concentrate on the situation facing my constituents and many others in London. The House of Commons Library has published a note that is of great help to all who take an interest in the subject of today’s debate, and it says that, on the basis of International Labour Organisation measures of unemployment, the highest rates are in London, the north-east and Yorkshire and the Humber, where the figure is 9%. However, although the north-east and Yorkshire and the Humber are to benefit from the measures in question, London is entirely excluded.
As has already been made clear, a number of boroughs and constituencies in London have very high levels of deprivation and unemployment. My borough, the London borough of Redbridge, does not feature as one of the most deprived boroughs overall, but there are wards within it, including three in my constituency, that are in the lowest decile for deprivation and need. Therefore, the impact of any changes that discriminate against Londoners, against small businesses in London and against ethnic minority businesses in London—the population distribution in this country means that London has a much greater concentration of people from all ethnic minorities—has to be borne in mind. These proposals are inherently discriminatory; they are discriminatory in their own terms and they therefore need to be seriously questioned.
The Federation of Small Businesses has sent me some information about this matter. It points out how more than half the firms in London, 64% of small businesses in the south-east and 58% of firms in the east of England are likely to operating under capacity. It states that the regional discrimination involved in these proposals is based on
“a crude assessment as it does not account for areas within these regions that would really benefit from policies that would help bolster employment.”
If the FSB opposes the proposals, why on earth are the Government not listening to it, given that they claim always to be listening to small businesses? As I speak, the Essex FSB is having a meeting, which I am obviously not able to attend, and one of the issues it will discuss is precisely this discrimination against the east of England, the south of England and, in particular, London.
Richard Harrington (Watford) (Con)
The point needs to be made that the Minister has explained that a significant extra cost would be involved in making this a national programme. As the Member of Parliament for Watford, an area that faces significant unemployment problems, I would say that it would be very nice to have this programme, but the Minister has explained that the cost involved would be more £660 million. I am pleased to see this principle being used, because I believe that selective regional policy can be used in the future. I hope that the Government’s localisation agenda will mean that holidays and similar tax benefits for rates will be extended to specific areas. But for the moment, because of the mess that the Labour Government left us with—
Madam Deputy Speaker
Order. The hon. Gentleman will resume his seat. Interventions are supposed to be brief.
Mike Gapes
I suggest that the hon. Gentleman should perhaps make his own speech, rather than intervene on mine.
The FSB makes clear its concern about not only the regional variation, but the fact that the proposals do not deal with existing firms. My right hon. Friend the Member for Delyn (Mr Hanson) also made that point from the Front Bench. The FSB says that
“surveys have found that 57% of small businesses without employees would like to employ in the future, which could create…800,000 new jobs”.
It also points out that many small businesses do not survive for more than two or three years, so by discriminating against existing small businesses that have just been established the proposals are another difficulty for that sector. The FSB claims that, on average, its 213,000 members each employ seven members of staff and that most employ five or fewer. It points out that if they were able to get the support that is being made available only to certain businesses in certain regions, there would be the potential for much greater assistance. Therefore, the essence of the proposals is that if the Government are going down this route, they are doing so in a way that discriminates against certain regions and certain communities in the country, and that discriminates between different businesses.
The essence of the proposal, we are told, is that we are all in this together but, sadly, it is yet another example of where we are not. We are all in it together, but we are not all getting the assistance to deal with the problems that the Government will create when they slash the public sector.
Anne Marie Morris (Newton Abbot) (Con)
I am delighted to have the opportunity to contribute to this debate and I offer my wholehearted support to the Government for this excellent Bill.
On part 1 and the increases in rates, a point that has not been made but that is worthy of comment concerns the timing. Opposition Members had considered the increase when we were at a flaky stage in the recovery of the economy and when there was concern that there might be a double-dip recession. To move the timing from June of this year to April of next year is to be commended and it is absolutely the right and responsible thing to do.
My speech will focus principally on part 2 and the so-called “holiday” for new businesses, a provision that I wholeheartedly support. It is absolutely right that new businesses should be given a helping hand, particularly now. I am fortunate that my constituency of Newton Abbot is in Devon and therefore in the south-west, which means that my new businesses will benefit from these new measures. The Government estimate the benefit across the country at £940 million. That is well worth having and I am delighted to see Opposition Members supporting it. The cost in the grand scheme of things is relatively small and the administration costs of £12 million can be set against the overall administrative costs for this tax, which stand at £1.54 billion. The estimated benefit for individual businesses will be £2,000 per business with a rough administration cost of £166. That strikes me as very good value for money.
I want to take up a point that has been made by a number of Members on both sides of the House. In my view and, clearly, that of others, micro-businesses desperately need help. In the south-west, 91% of businesses employ only five people—small businesses that are a large part of the business community. In my part of the world, issues will arise because of the changes to the public sector, so helping micro-businesses will be very important because it is more likely than not that, because of their sheer number, they will take on those who are made redundant and the NEETs, as we call them—those not in employment, education or training—who clearly need a helping hand.
Chris Leslie (Nottingham East) (Lab/Co-op)
Has the hon. Lady realised that the proposed holiday does not apply to existing small businesses?
Anne Marie Morris
I thank the shadow Minister, but that is precisely my point. I would like to ask the Treasury and the Treasury team to extend the provision to those businesses in the fullness of time.
In particular, we should clarify what we mean by a micro-business. The European Union defines it as a business with 10 employees and a turnover of less than £2 million. For my money, that is a very big business. In my part of the world, micro-businesses are really very small. The hon. Member for Dundee East (Stewart Hosie), who is no longer with us, suggested that we might think about a small business of two employees that was considering adding one extra employee. The point was that it is a big step for a sole trader or husband and wife team to take on that extra member of staff, and it is there that we need the help.
I suggest that the Treasury urgently considers extending the provision to micro-businesses, not in this Bill but in a future Budget. I cannot see why micro-businesses should not be covered across the country rather than in regions. My plea is that micro-businesses, which are different to small businesses, should be properly represented and that we should consider what we in this Parliament mean by a micro-business rather than necessarily taking the European definition. We should also consider what help we can give them.
As for the point made by the hon. Member for Ilford South (Mike Gapes), it is not just about tax assistance, but about regulatory assistance. Some very small businesses are drowning in legislation, much of which is simply not appropriate for them.
Justin Tomlinson (North Swindon) (Con)
My hon. Friend is making some excellent points, which, as someone who used to own a small business, I recognise. Micro-businesses also have the opportunity to take on apprentices, and we should encourage small businesses to take advantage of that.
Anne Marie Morris
I thank my hon. Friend for that contribution and I absolutely agree.
I ask the Treasury team and the Minister, after the successful outcome of this measure, urgently to consider extending it in the next Budget to micro-businesses and to introduce a proper definition of a micro-business. I think that they need particular help and support.
Heidi Alexander (Lewisham East) (Lab)
I want to make only a brief speech and, like some other speakers, plan to limit my remarks to part 2 of the Bill, which deals with the national insurance holiday for businesses that start up outside London, the east and the south-east.
A national insurance holiday for some new businesses but not others is misguided. I have two main reasons for believing that. First, there is the basic issue of fairness. Under the Government’s proposals, a new business setting up in Leamington Spa, for example, could benefit from savings of up to £50,000 in its first year of operation, but the very same business starting up in my constituency of Lewisham East would get nothing. The businesses might be exactly the same and they might employ exactly the same number of people and have exactly the same turnover and profit margins, but one stands to get a kick-start of thousands of pounds in its first year and the other does not. I cannot help but think that that is blatantly unfair.
New businesses in Lewisham struggle to survive at the best of times: only 59% are still operating after their first three years as opposed to a UK average of 65%. If we add into the mix the state of the economy in Lewisham, we see that the policy seems even more misguided. The claimant count in my constituency has risen by 2% in the last year, whereas in Leamington Spa it has fallen by 25%.
The shadow Minister, my right hon. Friend the Member for Delyn (Mr Hanson), has already spoken about what the policy is meant to do. The stated aim of the payment holiday is to encourage the creation of private sector jobs in regions that rely on public sector employment. Presumably, that is an attempt to do something to offset the huge job losses that the Government are choosing to inflict on councils, police forces and primary care trusts up and down the country. So, one might be forgiven for thinking that the policy would apply to those areas that have the highest proportions of their work force employed in the public sector. One might think that the holiday would apply to the same areas as those that are eligible to bid for the Government’s new regional growth fund, but, no, that would be a logical step. Instead, the Government have decided to exclude London from their national insurance holiday and thereby exclude many communities that are highly dependent on public sector jobs—the very communities that are grappling with the uncertainty that the Government’s approach to public services has created.
Let us take as an example the area I represent in south-east London. The public sector accounts for 38% of all jobs in Lewisham, a figure that is 11% higher than the national average. If we take the boroughs of Lewisham, Southwark, Lambeth and Croydon together, we realise that the public sector work force amounts to 185,000 people, significantly more than the public sector work force of the whole of Tyne and Wear.
Lewisham also has more people chasing local jobs than almost anywhere else in the country. In October, there were more than 587 vacancies in Lewisham compared with 9,475 jobseeker’s allowance claimants. Let me again compare the situation with that in north Warwickshire, where there were 1,507 vacancies in October and 1,018 people looking for work. I accept that the labour market works very differently in London from elsewhere, and I am all for people getting on their bike, the bus or the train to get a job. Indeed, that is what most of my working constituents do every day. However, the fact that Lewisham has more people chasing local jobs than virtually anywhere else in the country says something very important about people’s experience when they go to the jobcentre in my constituency. For every job in Lewisham there are 16 people claiming JSA. Every week, without fail, I have someone asking me to help them in their search for work. These are not workshy individuals, but people who desperately want to get a job to provide for their family. The jobs are not there at the moment.
By not providing the same concessions to businesses in Lewisham as to new businesses elsewhere in the country, the Government are effectively limiting the prospects for my constituents who want to find work. Let us not forget that even in London it is necessary to stimulate employment in the sub-regional economy. Public sector jobs are often local to where people live, so mums and dads who face being made redundant by local councils will be keen to find local work that will fit around their caring responsibilities. Why are the Government intent on making it harder for them to find work in new private sector enterprises by excluding London start-ups from the national insurance concession?
Lewisham is part of London but its streets are not paved with gold. This is where the Government have gone wrong. Not all London is like Notting Hill. Yes, London has the City and is home to Canary Wharf, but it also has some of the most desperate examples of poverty in the UK. One in five Londoners earns less than a living wage and in inner London 20% of the population has 60% of the total income. The worst-off of the richest 10% of Londoners have wealth 273 times greater than that held by the best-off of the poorest 10%. The fact that London is home to the country’s major financial centres should not mean that my constituents are disadvantaged or that if they want to set up a business, they are treated as second-class entrepreneurs. It should not mean that hundreds of people who are fearful of losing their job in the public sector should have a lesser chance of getting a job in a new business start-up because of where they live.
In London, we know that an axe has been taken to the London Development Agency and that councils across the capital have lost local authority business growth incentives scheme money, which many ploughed back into supporting local businesses. We also know that the VAT increase will hit many small businesses very hard. Now, to add injury to insult, the Government want to support new businesses only in other parts of the country. That is not fair, it is misguided and I urge the Government to think again.
Julian Sturdy (York Outer) (Con)
I am delighted to contribute to this important debate. It is essential to assist economic recovery by incentivising entrepreneurship and private sector-led growth and I make no apologies for supporting the coalition Government’s focus on encouraging our small and medium-sized businesses, which this Bill does in abundance. The Bill’s benefits are threefold. First, it will contribute to the Government’s wider economic recovery programme through a small increase in national insurance contributions. Secondly, it will promote and support small businesses and entrepreneurship. Thirdly, it will fulfil the coalition’s pledge to raise the threshold of income tax personal allowance.
Like other hon. Members, I shall focus my contribution mainly on the second of those benefits—the so-called national insurance holiday for small businesses. First, however, it might be useful to take stock of the history of NICs. This form of taxation was introduced in 1911 before being expanded in 1940 to help fund the national health service. The scheme has always consisted of benefits financed by contributions from earners, employers and others. NICs have always been flexible and responsive to the wider economic situation and thus linked to the ever-changing needs of society. Given the wider economic outlook and the appalling financial legacy that we have inherited, it is absolutely right that we now consider increasing these rates. However, as a low-tax Conservative, I hope that the actions we take to repair our broken economy today will be replaced with lower taxation policies across the board in future.
Turning to the scheme’s main benefits, I am absolutely delighted that the Government have already taken measures to make Britain a more business-friendly country once again. The Bill adds to the welcome return to promoting and encouraging entrepreneurship rather than suffocating businesses with endless regulation and red tape, as sadly occurred too frequently in the previous decade. By raising NICs, we will encourage the creation of private sector jobs in regions that are too reliant on public sector employment by reducing the cost of employing staff in new businesses.
NICs will be abolished for the first 10 jobs created in new start-up enterprises during the first 12 months of the business. As we have heard, the exemption will be available for new businesses within a three-year qualification period. Such measures will save businesses vital cash, thereby encouraging further growth and new employment opportunities, which are vital at this time. Early forecasts suggest that about 400,000 employers will claim the holiday, covering 800,000 employees. The average benefit per business will be about £2,000, as my hon. Friend the Member for Newton Abbot (Anne Marie Morris) has mentioned. The total cost to the Treasury is estimated at about £940 million.
Barry Gardiner
The hon. Gentleman will know that the October 2010 claimant level for JSA in his constituency was 901, but the figure for my constituency was about two and a half times that. Why does he think that his constituency and his benefit claimants should benefit from the holiday period while mine should not?
Julian Sturdy
I think that the hon. Gentleman is talking about the regional aspect of the measures, which is important and has already been raised by some Members. I shall address that issue and if he wants to intervene on me again, I shall be more than happy to take his intervention.
As we appreciate the cost of the scheme to the public purse, it is only right to drill down into the specific details. There are many concerns about the holiday provision not applying to three English regions—Greater London, the south-east region and the eastern region. I accept that this limitation might seem unfair, particularly to those right hon. and hon. Members who represent such areas, but we live in extremely difficult economic times and the woeful financial legacy will limit our ability to extend the holiday relief to every part of the country. That is regrettable, but it is a fair compromise. It is well-known that the gap between the northern and southern economies is widening and has been for the past 13 years, so it is essential that the coalition focus on closing the gap by encouraging new private sector-led growth in the north.
An unhealthy dependence on the public sector has blighted many northern towns and cities for too long. Alongside the creation of local enterprise partnerships and the regional growth fund, it is essential that private enterprise be given a boost in northern cities—such as mine, York, I confess. Economic recovery will take place only if the private sector leads the way. Only private sector expansion in the areas that are most dependent on the public sector will ensure that the recovery leads to sustainable, long-term stability in local economies. Sustainability is key.
I am sure the holiday aspect of the Bill will be welcomed by many small businesses throughout the country. It has already won the backing of the Federation of Small Businesses. I know that Opposition Members say that that is not the case, but I believe it is, although the federation raises concerns about the length of the relief and the number of firms to which it will extend. Although my support for the Bill remains unequivocal, I must confess that I share some of those concerns, while understanding the financial constraints placed on the Government.
I fear that we might be slightly short-sighted in limiting access to expansion to new firms alone, and in allowing new firms to claim it only during the first year of their business operations. I admire the way in which the coalition has governed thus far with a long-term prospect. I ask the Front-Bench team to review through the same visionary lens the time scales and business exemptions from the contributions holiday over the course of the next year or when the financial position allows. My hon. Friend the Member for Newton Abbot raised that point, referring to micro-businesses, and I agree wholeheartedly with her comments.
In conclusion, I strongly believe that the Bill sends out exactly the right message from the Government to budding entrepreneurships. This is positive Government-led action that our small and medium-sized businesses will welcome. More broadly, this action must be supplemented by Britain’s banks. Put bluntly, too few small and medium-sized businesses are receiving flexible finance. Members in all parts of the House should unite in urging the banks to free up vital cash flow. The new emphasis on bank lending, alongside the measures contained in the Bill, will ensure that our private entrepreneurs receive practical assistance in a true time of need.
The Bill will play a vital role in our economic recovery and future growth, and I will strongly support it.
Barry Gardiner (Brent North) (Lab)
The Exchequer Secretary commended the first part of the Bill by saying that it was fair, that it was progressive and that it supported the poorest in society. In so commending the first part of the Bill, he damned the second part, because he could not say that the second part of the Bill was fair, progressive and supported the poorest in society. That is the essence of the Opposition’s argument this evening.
The second part of the Bill is incoherent in principle and in practice and, worse than that, it is ineffective in practice. Let us look at the fundamentals. Who is it that leads us out of recession? I am happy to make common cause with Members on the Government Benches and say that it will be the private sector, in particular small and medium-sized enterprises, that will lead us into the growth that this country badly needs. Why is it, then, that the holiday provision is given precisely in those areas where private sector growth has been proven year after year not to take place?
We know, and it has been a cause of problems to us, that it has been in London and the south-east that small businesses set up and grow. That has been the engine of the private sector in our economy, yet instead of seeking to use that to advantage, the second part of the Bill is incoherent in principle because it denies that region the holiday and because it denies those potential businesses the benefits that will be made available in parts of the country that have been proven not to be able to utilise them, and therefore not to be able to bring us out of the recession and be the engine of growth that we all want.
The hon. Member for Sevenoaks (Michael Fallon) made the point that to extend the holiday to London and the south-east would cost £660 million. Of course, there will be a cost to the scheme, wherever it is put in place, but presumably that cost is seen as an investment to achieve the growth and dynamism in the economy that will return that investment multiplied to the Exchequer. Yet £660 million is not being invested in the very parts of our country where we know from experience that the private sector is most likely to give the maximum returns to the public purse. That is incoherent.
Now let us look at whether the measure is incoherent in practice. The Budget documentation quoted in the explanatory notes to the Bill states:
“The Government’s strategy to support private sector enterprise in all parts of the UK aims…to encourage the creation of private sector jobs in regions reliant on public sector employment, through reducing the cost to new business of employing staff”.
Yet we have heard this evening that that is not the case. There are parts of London and the south-east that are far more reliant on public sector employment than parts of the country that will receive the benefit from the holiday. That is incoherent and wrong.
My hon. Friend the Member for Lewisham East (Heidi Alexander) made the pertinent point that the Bill was unfair in another respect, and one can only marvel at that unfairness coming from the Conservatives. The unfairness is that the Bill is anti-competitive. My hon. Friend presented the straightforward example of two companies alike in all that they do, except that one will get a £50,000 benefit in its first year of operation which is not available to the other—and that from the party which believes in free markets and in abolishing anti-competitive practices? How can those on the Treasury Bench put that forward as a coherent philosophy?
Mel Stride
Does the hon. Gentleman accept that the purpose of the holiday, as we are calling it, is to try to compensate for a reduction in the size of the public sector in certain parts of the country, rather than targeting it specifically, as he and other Opposition Members seem to be suggesting, at areas of higher unemployment?
Barry Gardiner
The hon. Gentleman suggests that what the Government are seeking to do is compensate in some way for the decimation that they believe they will cause to employment in those areas. We share a belief that the Government’s cuts will have that decimating effect on employment in those areas. Where we differ is that the hon. Gentleman believes that the measures will in some way compensate for that, whereas I am pointing out that in other parts of the country, precisely in those areas where they are not to apply, they would have a greater effect in boosting the economy.
The hon. Gentleman may say that the measures will have a marginal effect in mitigating the increases in unemployment which he knows will come from his Government’s policies. I do not believe, and I am confident that he does not believe, that they will totally compensate for those. But the most important thing is to get our economy moving again; after all, that is why we are making those public sector cuts in the first place. If we are focused on economic regeneration, we must seek to make that investment where we know it will achieve the maximum return.
Justine Greening
Can I get this clear? Is the hon. Gentleman saying that Government should not try to help regions that need infrastructure improvement and are currently less productive? Should we simply not invest in them?
Barry Gardiner
I try to keep debate in this Chamber at a rational and reasonable level. I try not to play silly party politics or create a straw man simply so that I can knock it down. If the hon. Lady wishes to play those games, let her intervene on somebody else. It is really puerile to start talking in those terms; she knows that that is absolutely not my purpose at all.
The hon. Lady should consider her policies—not only these, but those that relate to VAT—and the effects that the Chartered Institute of Personnel and Development has said they will have. John Philpott, the chief economic adviser to the CIPD, said just a few days ago that:
“we are looking at something like 900,000 job cuts in the private sector as a result of both spending cuts and the VAT hike.”
That will be the effect of the hon. Lady’s policies. Of course I want that effect to be mitigated as far as possible, and for her to intervene on me in that ridiculous way, asking whether I am suggesting we should not try to mitigate the effect of her own policies—the loss of 900,000 jobs —is ludicrous.
In contrast to the hon. Lady, the hon. Member for York Outer (Julian Sturdy) was extremely reasoned in responding to my intervention on him. He accepted that there was unfairness in the Bill and that that unfairness was “regrettable”. My point is that although it is regrettable, it is not inevitable. We do not have to cut the cake or make the investments in this way.
In a rather partisan speech, the hon. Member for Sevenoaks (Michael Fallon) derided my right hon. Friend the Member for Delyn (Mr Hanson). He said that my right hon. Friend was suggesting that the Government were not going far enough. It is not a matter of not going far enough with the holiday; it is a matter of the Government’s being fair, equitable and effective. The Government cannot and should not take these decisions in an arbitrary fashion; they should take them on the basis of equity and effectiveness. The Bill does not enable that.
Mel Stride (Central Devon) (Con)
The hon. Member for Brent North (Barry Gardiner) referred to the regrettable consequences of Government policy in terms of unemployment. I believe that, in large part, the entire Bill is regrettable because it introduces rises in national insurance for employers and employees, on businesses, at a time when we look to them for growth, as the hon. Gentleman rightly points out. But the reason for that is the policies pursued by the previous Government. Because of the hour, I do not intend to rehearse those this evening, save to point out that we have ended up in a situation where the interest alone on the money that we owe is £43 billion a year—more than we spend on education and defence. That is a national disgrace.
I welcomed my right hon. Friend the Chancellor’s Budget of 22 June, particularly the balance that he struck between seeking reductions in expenditure and accepting that we have to raise certain taxes. He weighted it far more towards the former than the latter, which has to be the right policy. The hon. Member for Brent North is right: the Office for Budget Responsibility itself has said that 500,000 jobs will be shed as a consequence of the fiscal consolidation in the public sector, and PricewaterhouseCoopers has suggested that perhaps another half a million private sector jobs will go as a consequence of that. We need to create jobs in the private sector.
According to the Treasury, in the past six months 300,000 jobs have been created in the private sector, so the capacity is there. It was as inevitable as it was regrettable that national insurance would go up. Labour first started talking about increases in national insurance as far back as the latter part of 2008. Of the three major taxation streams going into the Treasury, national insurance is the second most significant. In fact, in 2009-10 £150 billion was raised from income tax, £96 billion from national insurance and £70 billion from VAT. National insurance is efficient to collect, and in 2011-12 we will raise £9 billion as a consequence of the increases. In my opinion and that of many economists, the rise was totally unavoidable.
I wholly welcome one aspect of the Bill—well, not so much the Bill but the secondary legislation that will be enacted later—and that is the increase in the threshold for employers’ national insurance to £21 per week above indexation. I welcome that because it will take some of the pressure off our employers.
National insurance, however, is not a good tax; as we know, it punishes those who employ people rather than taxing the earnings from straightforward investment, which does not employ people. I urge the Government’s Front Benchers to make sure that, when the recovery gathers pace and we start to get the deficit down, national insurance for employers and employees should be right at the top of the list of taxes that we seek to reduce.
I welcome the national insurance holiday, about which much has been said in this debate, and particularly its targeting of new businesses. It should reach about 400,000 new businesses and about 800,000 new employees. I say that as somebody who set up his own small business, starting from scratch 20-odd years ago, and built a company both here and in the United States. One of the most important and fragile moments of a company’s growth is that very starting point; that is when a company is most vulnerable. The help will be hugely welcome.
To my horror, I have found myself being slightly persuaded by the right hon. Member for Delyn (Mr Hanson), as he started to open up the discussion about whether the holiday should apply across the entire country or whether, as I think he was suggesting, it might be applied in a different way, to pick up areas in the south-east, Greater London or the eastern region that might value the help more than other parts of the country. I would like to think that Government Front Benchers might think about that aspect a little further, although I suspect that when we start to try to cherry-pick small parts of the country, we will end up with a highly complex and potentially very expensive scheme. However, I would like to think that we might consider the matter in Committee.
I also welcome the fact that this is retrospective legislation that applies to companies set up since the emergency Budget in June, and that it is not prescriptive in the sense of requiring a certain type of employment in order for companies to qualify. There was a scheme in the 1990s to get the long-term unemployed back into work that was not nearly as successful as it might have been had it not been so prescriptive.
I am pleased that the Government, in recognising the importance of business, also set out in the Budget reductions in corporation tax in steps from 28% down to 24% over the period of the comprehensive spending review, with the small business rate falling to 20%. That will give us one of the lowest levels of corporation tax in the G20, and the fifth lowest in the G7.
I have some concerns about the national insurance holiday. We must ensure that we avoid so-called recycling whereby, for example, companies set themselves up as apparently a new business although they have been operating before, or come into the market as a new business and then close down and rebrand themselves. I note that clause 5 deals with that issue. My plea is that we do not make the whole operation unduly onerous and complicated for businesses that wish to take advantage of the scheme. My hon. Friend the Member for Chichester (Mr Tyrie) spoke in particular about the importance of keeping complexity down. The tax code in this country now runs to 11,000 pages. We have enough complexity—we do not need more.
The Bill also deals with EU regional funding constraints. Under articles 107 and 108 of the treaty on the functioning of the EU, companies are not permitted to receive more than €200,000 in state aid over a three-year period, given the regionality of the way the scheme works. Clause 8 seeks to handle that. Again, it is imperative that whatever information HMRC requires from those companies is kept to the minimum so that the system is not bogged down in red tape.
Chris Leslie
Has the hon. Gentleman had an opportunity to look at the regulatory impact assessment describing the steps necessary to implement the NI holiday, which is estimated on the Treasury’s own figures to cost £22 million? A lot of companies will have to use manual processes instead of the software that they had used to pay their national insurance, and it will require 240 extra staff at HMRC to administer the scheme.
Mel Stride
The hon. Gentleman adds to my point. Indeed, I believe that the cost to HMRC will be £12 million, and the cost imposed on business is estimated at £75 million. I accept that that is a large amount of money in the context of a scheme that is effectively injecting £940 million. It is therefore most important that we keep complexity and red tape to an absolute minimum.
It is important to ensure that this incentive is well advertised, given that it is permissive in allowing companies to apply for it but is not necessarily automatically granted. The HMRC material refers to advertising it on Business Link websites, and so on. If we are to get up to 400,000 businesses involved—1,000 are involved at the moment—we will have to advertise this nationally with a push to ensure that it is taken up. In particular, we need to ensure that we lower the proportion of so-called dead-weight businesses that are taking it up—in other words, those that would have employed additional people even in the absence of the scheme. It is really important that we give this a wholehearted push.
I welcome the national insurance holiday provisions in the Bill. I agree with my hon. Friend the Member for York Outer (Julian Sturdy) that it is important to consider other aspects such as encouraging lending and getting the Bank of England issuing credit condition surveys in which it talks about the banks lending again. We also need to cut back on red tape. This is a big opportunity to get back to a culture that is positive about new business. I should like us to have the kind of culture that we had in the 1980s, when we were open for business and companies were being set up. That is when I went out there and set up my business and created wealth and employment for people. That is the aspect of the Bill that I wholeheartedly welcome.
Jim Shannon (Strangford) (DUP)
I have always been a very practical person. I ran my own successful business for some 25 years before handing the work over to my son. I am the first to acknowledge that in order to spend money one must have money coming in as well, because if one does not have that, one does not have a business. I live in the real world in the area that I represent, with unemployment and bills, and with families struggling and businesses barely surviving. I fully grasp the very tenuous financial position that we find ourselves in as we try to claw our way out of the deficit. I accept that Government, the coalition, and all of us together have to be involved in that and make a contribution towards it.
I welcome the range of packages that the coalition has brought forward through the Bill, which will directly help the lower paid. That is positive, and I am glad to see it. The national insurance contribution holiday is also a positive move. However, I feel that I have to comment on behalf of people who may not always see the benefit of these measures—those to whom I have spoken over the past week in anticipation of this debate, who have concerns and have asked me to convey them in the House tonight. I understand that this further tax hike is a blow to some of the people I represent—the middle classes and the self-employed. They see it as such, and I have to say so. The rise in national insurance for employers and employees will dissuade some employers from offering additional hours.
A perhaps forgotten and ignored issue is the impact on the morale of people in such businesses who do not see the benefit in the proposals before us. There is no better way of illustrating a case than taking an example from my own constituency. Just in the past few days, I had the opportunity to speak to a young married couple who have two children. They are both working. They are not entitled to housing benefit, so some years ago they bought their own house, and they have a fairly large mortgage. For them, the cost of living has increased dramatically. The husband is self-employed, and he cannot raise his prices in line with the prices coming in, because then he would not have any business. Indirect taxation has risen, and risen again. His business has suffered because people simply do not have the money to decorate their homes, which is what he does. The wife received a rise, with the additional pressure and workload that came with it, yet they find that being on the borderline of the new tax threshold means that they are scarcely better off. They are just on the wrong side of that tax threshold. The frustration they expressed to me demonstrated the sobering reality of how some people see the future of their business.
Mr Gregory Campbell (East Londonderry) (DUP)
People such as my hon. Friend’s constituents are looking forward to the increase in personal allowances to which the Government are now committed, which is a good thing. However, given the increase in national insurance contributions, the anomaly is that such people will find it even more difficult to move out of recession.
Jim Shannon
I thank my hon. Friend for his comments, which are very positive. I think that if everyone sat down for a moment and looked at their own constituency, we could all replicate this situation everywhere across the whole United Kingdom.
The couple who came to see me did not have any help when their boiler broke, their car broke down, or the heating bills came in: they had to manage all that themselves. That puts things into perspective. They did not ask for a handout, or believe that they were entitled to one. They simply asked me whether I could do something, as the Member for Strangford, to represent their viewpoint in this Chamber, and that is what I intend to do. This is an example of the low morale of a hard-working family who feel that they are swimming against the current. I would always caution that we should ensure at all times that people feel that it is better to work, and these people have that work ethic, which is good news.
I know that Government Members will say that this is “only” a 1% increase in national insurance contributions, and that is true. Let us remember, though, that it is to be coupled with an increase in university fees. It must also be coupled with an increase in tax on oil, which results in higher petrol and diesel costs across the whole United Kingdom, particularly in Northern Ireland. We have the highest price for diesel and petrol in the whole UK, and the VAT increase in January will add to the price hikes and the pressure on families.
As a balanced individual who can see the good element in the Bill, I point out that the fact that new businesses will get help with their first 10 employees’ contributions is good news. However, I have to ask: what about the small and medium-sized businesses that are currently struggling, such as the one run by the couple I mentioned? To them, a £2,000 bonus would be the incentive to keep pouring their energy into their business. Many other businesses in my area would love to have that opportunity as well. I ask the Economic Secretary whether there is any scope for businesses that have opened in the past few years to avail themselves of help that could save businesses and jobs, and subsequently ensure that their revenue continues to go into the contributions pot.
The hon. Member for Newton Abbot (Anne Marie Morris) hit upon an issue that other Members have also mentioned, and I agree with her comments. I believe that small and medium-sized businesses need help. I do not believe that that can be done through the Bill, but I would like them to receive some contribution and help as a next stage. Perhaps the Economic Secretary will indicate whether and how that can be done, and on what time scale. It is imperative that we in this House have a full grasp of what is intended in the next period, so that we can go back to our constituents and let them know.
It is not in my nature to oppose anything simply for the sake of it. That is not how I work. However, I honestly believe that many people are on the brink, and I have to say so. Consideration must be given to small and medium-sized businesses and those with a small number of workers. I know that money has to be raised and that someone has to provide it. That is the purpose of the debate. What I do not know is why it has to be the same people who provide it all the time. That is what has happened. The self-employed, the middle class, and small and medium-sized enterprises that exist today must all be part of the equation. On behalf of the people of Northern Ireland, and of my constituency in particular, I ask the Economic Secretary to consider those matters fully.
Stephen Pound (Ealing North) (Lab)
A common theme running through the debate—almost the golden thread of it—has been that of not seeking to oppose for the sake of opposition. Of course, I entirely subscribe to that emotion. However, although I rejoice in seeing a sinner repentant, and the Conservative party being converted once more to the policy of Keynesian fiscal incentives, I feel that the Bill is in many ways a disincentive and, even more seriously, a crude, clumsy and extremely complicated one.
Much has been made of geography and the fact that large parts of the country are excluded from the glorious sunshine of this Bill’s benefits, which will cause flowers to bloom and businesses to leap, as from the brow of Jove, into the marketplace fully formed. The excluded areas are not just the leafy shires where the only concern is getting one’s second au pair, or third Range Rover. They are also places such as Milton Keynes, Medway—Medway!—Portsmouth, Reading, Slough, Southampton, Luton, Peterborough and Thurrock. It is true that the Bill also excludes parts of the south-west London-Surrey border where people are so wealthy that they can afford the luxury of electing Liberal Democrats, but in excluding such a large area the Government are assuming that within the eastern region, the home counties and London there exists a seething tide of entrepreneurial energy, ready to burst forth at any minute, that needs no assistance.
The hon. Member for York Outer (Julian Sturdy) said that there was a message coming from the House tonight. Well, the message is, “London, the home counties, East Anglia: get lost. You can manage on your own, you don’t need any help.” That is desperately crude. In times of tight margins, small incentives make a huge difference. The geography of this country is so tight and small that whereas Hampshire is excluded from the benefits of the Bill, Dorset and Wiltshire are not. One does not have to read one’s Blackmore to know that the boundaries and borders in those areas are very close and tight. Is the coalition Government’s aim to empty out as much of London, the home counties and East Anglia as possible and send everybody flooding to Somerset, Wiltshire and Dorset?
Stephen Pound
We have had some very successful imports from there in the House, particularly from North East Somerset. None the less, I am not entirely convinced that it should be the policy of Her Majesty’s Government of the United Kingdom to act in that crude way.
Talking of crudeness, advancing the idea that we can somehow assume that people will not move into a low-tax zone, like one of those Chinese economic zones, is simply not being serious about the realities of modern business. There are no Liberal Democrats in the House tonight—a happenstance that will doubtless be replicated on a longer-term basis after 2015. One thing that they tried, in one of their strange, clouded pipe dreams during the election campaign, was the suggestion that we could have geographically specific immigration—presumably with border posts on the M1, so that certain parts of the country could benefit from immigration while other parts could not. A quick glance at the map of this country shows that that simply is not possible. We will immediately have the difficulty of disincentivisation occurring in the south-east, while the benefits are transferred to the rest of the country.
The Bill is also ferociously complicated. Everybody thinks they know what a new business is, but nobody can define it. We heard in an intervention by the hon. Member for Newton Abbot (Anne Marie Morris) that apprentices are not covered.
I turn, as ever I do, to the explanatory notes, which have been written in the most extraordinary way. We read about Roy the carpenter; Sam the noble publican wishing to hand his business on to Tom; and Rosie and Jim the plumbers—none of whom is included in the Bill’s provisions. We read of an extraordinary ménage in what I had previously thought was the rather dull world of accountancy, in which Alan, Ben, Charles and David decide to link up with Ellen and Frances. In doing so, they also bring in a mutual friend, George. That is experience beyond that of most Members.
My particular favourite example is almost a Mills and Boon novel: John and Paul the dentists, who have been partners for many years but fall out. One imagines John and Paul, their eyes meeting over the face masks as they attend to a cavity together, their latex-covered digits brushing against each other. Then, one day, they fall out and set up alternative dental practices. John and Paul, once so close, are close no more. The explanatory notes should be published by Mills and Boon, not by the House of Commons.
After all those examples, what do we find? We find that the complicated reality of new businesses is such that the coda to that great, glorious, rather romantic tale is, to quote paragraph 46:
“The intended effect of this provision is that a person will be prevented from enjoying a holiday if, before beginning to carry on a business, the person enters into arrangements that mean that at some point after the person’s business has started he may undertake activities carried on by another business and, had the person been undertaking those activities at the time the business was started, a holiday would not have been allowed.”
That is reductio ad absurdum. How can we possibly even begin to take seriously a Bill that, leaving aside the romantic dentists and Rosie and Jim the entrepreneurial plumbers, creates such an incredibly complicated mechanism? That is not what we should be doing.
The Economic Secretary, as ever, cuts to the heart of the matter. I have great admiration for her. She is no stranger to the streets of Acton, where first we met. She had a reputation then for striking through all the persiflage that normally infests this place like wisteria—if that is not a painful subject for the Conservatives. She asked earlier, “Would it be better for this holiday to be extended across the whole country, or is it better for it to go to two thirds of the country?” I have to say that it should be all or nothing. The minute we try to set up those complicated differentials, there are immense problems. Why could the measure not be applied sectorally? Why could we not choose a particular sector and incentivise it? I am talking about those that employ large numbers and have a proven track record of entrepreneurial success. Why could we not continue with the enlightened work of the previous Labour Administration and provide start-up support for capital equipment and allow deferred VAT payments?
There are so many things that we could have done. What we have before us is probably—I say probably—rooted in decency and good, honest Keynesian politics. However, it has become so complicated that I fear that there will be very few businesses leaping to life in Liverpool, Manchester, Rotherham or wherever. There are some entrepreneurs in London who may say, “Without that additional advantage, why not relocate not only outside London but outside the UK?”
The hon. Member for Central Devon (Mel Stride) said that he was as comfortable operating a company in this country as he was in the United States. People will look at this measure in the context of a global economy. What we have here is crude, complicated and unfocused. I am not entirely sure that it will be the agency that will kill unemployment and bring us all into some glorious new future. I appreciate that hundreds of new civil servants will be employed to make this system work, and I welcome that; we need more work. How tragic is it that this Bill—the Bill to encourage the private sector outside the home counties—will end up employing more civil servants in London and, almost certainly, not providing that great entrepreneurial spark in the rest of the nation?
Gavin Shuker (Luton South) (Lab/Co-op)
As a new Member of this House, I am learning an awful lot of lessons, including the one that says never attempt to follow my hon. Friend the Member for Ealing North (Stephen Pound) at the end of a long debate, so I will keep my remarks characteristically short.
Like many Members, I was surprised to find myself as one of the MPs for the greater south-east—a new region of which we are all delighted to be a part, particularly those of us in the east of England. Joking aside, this Bill will have a serious impact on my constituents in Luton South. Luton is my home town; it is a jewel in the east of England and businesses like it.
A 2010 survey showed that access to a strategic road network, rail networks and Luton airport and its proximity to London are all great for business. None the less, we have problems, too. Even as a jewel in the east, we suffer from unemployment. Jobseekers’ allowance claimants form 7.5% of the population—it has risen over the past couple of years—compared with an average of 4% in the wider east. Median earnings are £350 a week in Luton compared with £410 a week in the rest of the east.
The east is a vastly disparate area. I am reminded of that when it takes me two and a half hours to drive to Norwich and two hours to Cardiff. It is a vast area as well, but it gets the same blanket national insurance conditions under this Bill, which is surely unfair.
Being at the margins of the east is also a problem. Those same road and rail networks that make Luton an attractive place for business can help its creative work force to leave—and to receive a £50,000 golden hello for setting up a business elsewhere. If the purpose is to encourage jobs in the non-excluded areas rather than in the greater south-east, then areas at the margins will be disproportionately affected. For places such as Luton it is a double whammy because there will be public-sector job losses over the coming years and a less competitive environment in which to establish a new business. Indeed, it is a triple whammy because Luton’s great road and rail networks will encourage people to move 15 or 20 minutes away to establish their business, and the area will lose valuable new jobs at a time of rising public sector unemployment. That is why I sponsored early-day motion 537, which said:
“That this House notes that the Government’s decision to introduce a Class 1 Employer National Insurance exemption for new businesses in regions other than the East, South East and London will have a negative effect on growth in those areas collectively termed the Greater South East; further notes that in areas which border, or have good rail and road links with non-Greater South Eastern town and cities, the strategy positively encourages entrepreneurs to start new businesses away from their own communities, breaking community ties and vastly increasing unemployment; and further notes that the same strategy fails to recognise the vast disparity within the Greater South East region, where some towns and cities experience levels of unemployment and deprivation that are equal to or worse than the parts of the country that will benefit from this scheme.”
The disparity within regions is the key point. Luton’s businesses will be hit hard as will others across the south-east. Potential new businesses will be affected. Some 82% of Luton’s businesses employ fewer than 10 members of staff, which are exactly the sort of operations that this policy is meant to help in other parts of the country. Again, more than four-fifths of local businesses do not have sites elsewhere in Luton. These are Luton-based businesses run by Luton people, and they will be hit before they even have the chance to get started.
The Government argue that anything other than the binary distinction between south-east and the “other” would be too difficult a distinction for the boffins at the Treasury to work out. In response to the hon. Member for Gosport (Caroline Dinenage), the Exchequer Secretary said that the measure
“is targeted on countries and regions within the UK where reliance on public sector employment is at its highest. For practical reasons the Government have no plans to introduce national insurance contribution exemptions for smaller geographical units.”—[Official Report, 10 November 2010; Vol. 518, c. 359W.]
I hope that in Committee, the Government will be open to considering different models or different, more graduated distributions of the national insurance holiday schemes. Changing the ratio is the stated ambition of the Bill. The data for it exist for local authority areas, which are explicitly listed by name in the Bill. Will the Government choose to look at that as an option for applying the changes? My constituents in the Luton local authority would be extremely grateful if they did so.
In summary, the Government have chosen to favour some people, some businesses and some communities over others. Although I understand that there are pros and cons to such an approach, to apply that choice as a blanket holiday over vast swathes of the country, meaning a £50,000 golden hello for some businesses just 15 or 20 minutes away from the borders of my constituency, will have a negative effect on Luton South. Such an approach does not fulfil the other part of the Government’s stated bargain, which is that if a business loses out by having higher national insurance rates on new start-ups, that will be offset by living in an area that is already doing better when it comes to higher public sector employment. As we heard from my hon. Friend the Member for Luton North (Kelvin Hopkins), his constituency is in the top 10 seats for public sector employment rates, so his constituents will be affected.
In short, if the Government scheme is to favour some areas over others, and it does not work, it will be a waste of money and parliamentary time. If it does work, it will hit my constituents hard and unfairly—judged by the Government’s own criteria. A reasoned amendment will not be moved tonight, and Opposition Members will not oppose the business as it goes forward. We accept that responsible national insurance increases will be required to address the deficit. None the less, I hope that the Government will have the courage to look at the distribution of this holiday so that the hard-pressed and creative people of Luton are not the victims of a Tory triple whammy.
Chris Leslie (Nottingham East) (Lab/Co-op)
I congratulate my hon. Friend the Member for Luton South (Gavin Shuker) on his comments. In a nutshell, he has summed up many of the problems and inconsistencies in the Bill. It seems that it has something of a split personality, which has been caused by the Government trying to face in two different directions simultaneously. At the election, many people thought that the Conservatives were promising to reverse entirely the national insurance rise. We consistently heard from the Prime Minister and the Chancellor on that issue. Unfortunately, the public did not see the small print that existed at the time.
The Government are merely chipping away at those national insurance changes, and only for employers. That may not actually be a broken promise, but they have rowed back from the impression that they gave to the public. They let everyone think that they were against the change to national insurance, but they never actually intended to reverse it. It is fascinating to see them attempt to cover up that particular shortcoming with the partial increase in the employer national insurance threshold coupled with what most hon. Members, including most Government Members, have described as a complex and insubstantial national insurance tweak that applies to some entrepreneurs in some parts of the country, welcome though it will be to many of them. Political acrobatics have resulted in a contorted Bill, as my hon. Friend the Member for Brent North (Barry Gardiner) argued when highlighting the incoherence of the Bill.
It is true that the previous Labour Administration were prepared to take tough decisions on tax and national insurance, because the banking bail-out required us to raise funds to compensate. The hallmark of political parties is the choices that they make on taxation and expenditure. This Government have chosen to cut severely investment in public services and to raise VAT to 20%. A Labour Government would have chosen a steadier and more sustainable approach to deficit reduction, but national insurance changes would have been part of that.
We chose the national insurance route rather than the VAT route for very good reasons. Slightly contrary to the point made by the hon. Member for Newton Abbot (Anne Marie Morris), the national insurance changes were not going to be made in June; they were always going to come in from next April, by which time we had hoped that the recovery would be well under way. Unfortunately, the Conservatives and Liberal Democrats have chosen to go for the VAT increase. That will hit slightly earlier, albeit by only a few months, but the economy will feel it like a punch in the stomach. Their VAT jobs tax could have a greater impact on employment, which it will hit significantly, than the national insurance changes. The CIPD, to which many hon. Members referred, predicts that around 250,000 private sector jobs will be affected, and possibly lost, by the VAT increase, which is just around the corner.
Barry Gardiner
Will my hon. Friend none the less acknowledge that the hon. Member for Newton Abbot (Anne Marie Morris) made a pertinent suggestion? She identified the phase of business development that could give maximum benefit to the Treasury—when very small businesses are growing into small to medium-sized businesses, rather than when businesses are growing from zero to micro.
Chris Leslie
Perhaps I got the wrong end of the stick from the hon. Member for Newton Abbot when she made that pertinent point about micro-businesses. The Bill perhaps does not capture the benefit to the economy that small businesses have in that phase of their development. I hope that she will be a member of the Public Bill Committee that considers the Bill, although interestingly, as has been pointed out, perhaps some of the questioning from Government Members might prevent them—mysteriously—from being selected for membership of that Committee. We shall see.
The Prime Minister said before the general election that VAT is
“very regressive, it hits the poorest the hardest, it does, I absolutely promise you”.
The Government have chosen a path that will hit employment, jobs and businesses very hard indeed. That should be borne in mind when we consider the Bill. It is odd that this Bill is separate from either of the Finance Bills. I have not quite figured out the Government’s tactics, and perhaps they had not quite worked out what they were going to do. In that wider context, it is necessary to compare their choices in VAT against the national insurance changes.
Hon. Members mostly spoke about part 2 of the Bill, which includes the concept of a national insurance holiday. Such a holiday is, of course, superficially attractive, but there are reasons to be concerned about the poor design of the measure, which applies only to new businesses and not to existing firms. That is important. Many businesses could be under the misapprehension that they will qualify, and a lot of effort and time will go into contacting Business Link and the Treasury to find out whether the measure applies to them, and many will be disappointed.
The proposal is complex because of the limited time and extent of the scheme. It applies only to a small number of employees and there is a convoluted application process. Government Members pointed out that efforts need to made to ensure that the measure is as simple as possible. The Bill will require HMRC to take on 240 extra staff—I am not sure that they will be additional staff, especially given that HMRC is cutting numbers—and we will press the Minister on that extra complement in Committee. Businesses could apply for the national insurance holiday but not get it because they have to swim for hours through treacle to get someone in the Treasury to pick up the phone. That could be a significant problem.
The Minister gave a vague figure when asked how many people had applied since the scheme started in September. Very few people are aware that the scheme exists, and it has hardly been advertised—[Interruption.] I am glad that Liberal Democrat Members have joined us in the Chamber, even if they are just passing through, because they have been conspicuous by their absence. Perhaps that is related to their embarrassment over the VAT comparator.
My hon. Friend the Member for Ilford South (Mike Gapes), who highlighted the discriminatory nature of the national insurance holiday proposal—it affects some parts of the country but not others—and my hon. Friends the Members for Lewisham East (Heidi Alexander) and for Ealing North (Stephen Pound) pointed out the unfairness of a crude system that will exclude the east of England, London and the greater south-east, as my hon. Friend the Member for Luton South called it. That will cause significant disquiet, and many new entrepreneurs in those parts of the country will complain. Legitimately, they will not understand why they are excluded while reasonably affluent areas of the country outside the greater south-east—Chester, Worcester, Harrogate, York Outer, Tatton and Richmond, to name areas at random—will be eligible for the benefits. My hon. Friend put things perfectly when he said that the boffins at the Treasury ought to be capable of understanding the distinction between the greater south-east and other parts of the country. Of course they are capable of that, and we will seek to make amendments to deal with that problem in Committee.
Unfortunately, this small and partial measure—a national insurance holiday for some businesses in some parts of the country—reveals first of all the Government’s complete failure to develop a regional growth strategy, especially for the English regions. They have taken the knife not only to regional development agencies, but more importantly to the budgets at their disposal to help to build SMEs and provide the infrastructure necessary for businesses to survive. We know that for every £1 spent through the auspices of RDAs, £4.50 of benefits accrued to the regional economies. The Government disregarded evidence from the National Audit Office. They have damaged the prospects for growth in our economy, but particularly in those parts of it that have not benefited from the historic engine of growth that has surrounded London and the south-east. The Government’s alternative —these local enterprise partnerships, which are unfunded, and only partially covering the country—is a poor substitute for a proper regional economic strategy. Nearly 21 million people and 780,000 businesses will not be covered by the LEPs, the Business Secretary has described them as “chaotic”, and Richard Lambert of the CBI has called the process a “bit of a shambles”.
That sums up the Government’s lack of a growth strategy. We know that they have pulled the rug from under the growth White Paper that was meant to be forthcoming. They did that because they have no clear idea of how to drive growth: they are fixated on austerity alone and have no solutions for the long-term course of our economy. That is a great pity. The regional growth fund has been hacked down to a pathetic size, with few opportunities for small and medium-sized enterprises to apply for support under it. In many ways, therefore, small firms have been cast to one side, with perhaps a few crumbs from the table made available for them as a result of this Marie-Antoinette strategy of the Ministers—“Let them eat cake” seems to be the approach they are willing to take.
The hon. Member for York Outer (Julian Sturdy) rightly pointed out that the Government should be trying to make the banks lend more and give more support to SMEs, making inroads into that desert of loan and credit available to them. We know from the Chancellor’s statement at Treasury questions last week and from Ministers’ comments that they have gone soft on the banks in a number of ways, particularly on the coalition commitment to restart net lending targets for the banks in which they have a shareholding. They have decided now to row back from their commitment to institute those net lending targets, and I urge hon. Members, particularly Government Members, to ask serious questions of Ministers about why they are not prepared to ensure that the banks play their full part in repairing the economy.
I would not like to think that we cannot trust the Chancellor to fulfil some of the pledges to lessen the impact of these national insurance increases. As we know, the Government have already reneged on the commitment on employee national insurance changes, even though the press reported before the election that the Conservative party would do so. It is true that in many ways the personal allowance changes deal with some of these elements, but only in part—there was a commitment on national insurance as well, but it folded and absorbed it into that change. Again, it raised people’s hopes before the general election, but has not fulfilled them.
In particular, the Government are not fully offsetting these changes for employers, which will be a surprise to many people. Before the election, the Conservative party gave the impression that it was fully against the 1% increase and that it would repeal it entirely. [Interruption.] Ministers seem to think that they were going to repeal it entirely. As I see the measures, the impression they gave—[Interruption.] There was small print, it is true, but that was not the impression given. The £4.5 billion change is offset by the £3.1 billion increase in the threshold for employers on national insurance, so there is a deficit of £1.4 billion in the compensation that the Government will not be giving to employers. This is a question not necessarily of a broken promise, but of an impression that many people had that the Government were going to end the jobs tax, as the Prime Minister and Chancellor characterised it. As ever with this Government, however, when we look at the small print, we see that those changes will not be forthcoming.
We have not seen the secondary legislation yet. I would like to know when the Minister will introduce it. Presumably on Monday—traditionally the time of what was the pre-Budget report—we will hear from the Chancellor about the threshold changes and the indexation elements of these changes. Ministers have said they are going to add £21 to the employer threshold, but what will be the indexation? Will they follow the long-standing traditions of the Rooker-Wise amendment when it comes to allowance and threshold changes and follow the retail prices index option, or will they row back again and go for the cheaper consumer prices index option? In other words, will they be giving with one hand, through the threshold change, but taking with the other, by only opting for CPI?
This debate has revealed significant concerns among Government Members about the crude discrimination shown against London, the south-east and the east of England. The Bill reveals a lack of a proper strategy for growth, especially in the English regions, and the Government have revealed their preference for regressive taxation, particularly VAT, which will harm businesses and raise unemployment. We will certainly need to see serious improvements in these measures in Committee.
The Economic Secretary to the Treasury (Justine Greening)
We have had an interesting debate and I am grateful for hon. Members’ contributions, especially that of the hon. Member for Ealing North (Stephen Pound), who provided the most entertaining canter through an explanatory memorandum I have listened to in years.
At the beginning of the debate, my hon. Friend the Exchequer Secretary explained that the Bill contains two important measures: an increase in national insurance contributions and a regional employer national insurance contributions holiday for new businesses. Both are part of the Government’s plan to reduce the burden of labour taxation, reducing obstacles for those who want to recruit and retain staff. It is worth stressing that the clauses are part of a much wider package of reforms to help businesses and ensure that Britain is again open for business. The reforms are designed to reverse the most damaging aspects of Labour’s ill-conceived jobs tax. I listened with care to the contributions from Labour Members, but members of the public listening will have found it easy to forget that the Labour party left office with unemployment higher than when it entered.
Nevertheless, I am pleased that the debate has led to so many Opposition Members—and, indeed, Government Members—recognising that the best way to kick-start new business, as the hon. Member for Lewisham East (Heidi Alexander) put it, is to ensure that businesses are not over-taxed. In fact, the hon. Member for Ilford South (Mike Gapes) was extolling the virtues of low tax on businesses. That is why the Bill is so important. Were the coalition Government not in power, rather than corporation tax on businesses going down, it would have gone up, and rather than the national insurance burden, particularly on small businesses, being held down, it would have risen remorselessly.
The hon. Member for Nottingham East (Chris Leslie) talked about a split personality, but it is probably fairer to level that charge at the right hon. Member for Delyn (Mr Hanson), who, on the one hand, wanted to raise national insurance for all employers, but, on the other hand, complained that the tax break we wanted to introduce to reduce national insurance was not fair because it did not apply to all regions. He cannot have it both ways.
Mike Gapes
I am glad that the hon. Lady was listening so carefully to what I said. She refers to unemployment, but will she confirm that 3 million more people were in work when the last Government left office than when they entered?
Justine Greening
A lot of people would debate who those jobs were taken by. In reality, unemployment was higher—every Labour Government leaves office with unemployment higher than when they entered.
I want to talk about some of the most important aspects of the Bill. Employers will be £150 better off each year for each employee earning above the threshold. There will be an increase of 650,000 in the number of employees in respect of whom employers pay no national insurance contributions. Compared to this year, employers will pay less national insurance contribution in respect of those employees earning under £20,000. In fact, low-earning employees will also be better off, because the point at which they start to pay national insurance contributions is also going up—by about £23 per week. By reversing the planned employer national insurance increases, this package will help to maintain the UK’s attraction as a place to do business. In doing so, it will support the Government’s aim of creating a fairer and more competitive tax system. The national insurance holiday will help with the transition to a more sustainable model of economic growth, encourage private sector enterprise and investment where it is most needed, create jobs in some of our poorest regions, and encourage people to become business people, entrepreneurs and wealth creators—the very people who will lead the recovery.
Those points were made eloquently by my hon. Friend Member for Sevenoaks (Michael Fallon) and later by my hon. Friend the Member for York Outer (Julian Sturdy), who also talked about the burden of red tape, which is another matter that the Government are keen to reduce for businesses. My hon. Friend the Member for Central Devon (Mel Stride) talked about the need to support business, and to create new jobs and the positive culture that we need to engender throughout the country. That is absolutely what the Government want to do.
The Bill should be seen in the context of wider measures. The Government have taken several steps to support business. In the emergency budget we announced measures to reduce corporation tax, not raise it on large companies year on year. We announced measures to reduce the small companies rate of corporation tax. The hon. Member for Strangford (Jim Shannon) talked about what we can do to help small companies and new companies. He was right, and that is precisely why, instead of increasing corporation tax on those companies, we preferred to try to ensure that they can enjoy a rate decrease.
We have gone further. The regional growth fund will benefit all communities in our country. The capital infrastructure plan was announced as part of the spending review, and more capital will go into supporting our country’s infrastructure than would have happened under the previous Government. We have published the local growth White Paper.
Chris Leslie
In the hon. Lady’s list of Budget changes, what will be the impact of the VAT increase on employment?
Justine Greening
Clearly, that must be seen in the context of our desperate need to tackle the fiscal deficit that the Labour party left us. It is one reason why our overall plan is not just to support business—that is clearly how we will grow our economy back to the healthy state that it needs to get to—but, as the hon. Gentleman pointed out, to make our numbers add up across the board. We must get rid of the structural deficit that his party handed over to us.
We believe that the package of measures is right, the OECD has said that it is moving in the right direction, and it has been welcomed throughout Europe. If the hon. Gentleman is saying that we should not increase VAT, that prompts a question. His right hon. Friend the Member for Edinburgh South West (Mr Darling) was interviewed recently and said that the Labour party would have increased VAT, so we cannot accept the hon. Gentleman’s comments that his party would not have increased it. There is a blank piece of paper, and at the top are the words, “Labour economic strategy”. It is time for the Labour party to start to become credible by trying at least to pull together and to plan for our economy. Most people will put the contributions about jobs and the complaints about reductions in national insurance not going far enough in the context of a party that has absolutely no alternative plan for managing our economy. They will realise that its arguments are not credible.
The regional aspect of national insurance policy must be seen in the context of the broader package to support business. The level of VAT registrations in different parts of our country and the number of jobs created in different parts of our country show that we need to ensure that we can stimulate growth, particularly in the communities that can benefit most from it. The policy should be looked at not in isolation, but in the context of the broader tax reductions on business and the rise in the personal allowance for employees. Nearly 900,000 of the lowest-income workers in our country will be taken out of income tax altogether. The vast majority of people will benefit from our proposals, and under the Bill many of them will be small businesses with a handful of employees.
Barry Gardiner
I do not think I heard a single speech from either side of the Chamber that suggested in any way that those benefits should not flow to certain businesses. The question that was repeatedly asked and that the Economic Secretary and her colleagues failed to answer is why those businesses are favoured, not only when they are specifically not the ones in the areas that will produce the economic growth that she indicates is required from the policy, but because of the manifest unfairness that will result from their distribution.
Justine Greening
I realise that the hon. Gentleman takes a different view about how to target the policy. I happen to believe that he is wrong. We recognise that there needs to be some targeting, but the way in which he would have done that would have been unwieldy and unaffordable. In the context of our broader measures to reduce corporation tax instead of allowing rises, which would have happened under the Labour party, and the measures to take the lowest-income employees in our country—nearly 900,000—out of income tax altogether, we are trying to strike a balance, and I believe that we have struck the right balance.
I have no doubt that we will continue the debate in Committee, but we must be pragmatic. I draw attention to the hon. Gentleman’s attempts to target policies when the Opposition were in government. They faced difficulties with their changes during their final years in office. Under the deprived area fund, and the neighbourhood renewal fund, which became the working neighbourhood fund, some communities that had previously received funding were cut off. We want an overall package that supports business across the board, while retaining an element of support targeted at the regions that we think need to benefit most from the next economic upturn. That is what the Bill is doing.
The package of reforms of which the measures in the Bill are part will benefit individuals and employers throughout the country, and help us to achieve the twin objectives of creating a fair and competitive UK tax system. The burden of labour taxation will be reduced by more than £6 billion a year in a way that will help the lowest earners in Britain and protect lower-paid jobs.
The national insurance holiday provides targeted support to new enterprises, and encourages people to set up their own businesses and to employ new staff. It is an important part of our economic strategy to help the parts of the country that are most reliant on the public sector, and to ensure that we make the transition to a more sustainable model of growth and employment as smooth as possible. The Bill will ensure that as the recovery takes hold, all parts of the country will benefit. It will enable a reduction in taxation on labour nationally, and provide extra support in targeted areas. It will be good for growth, and for jobs. I commend this Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
National Insurance Contributions Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7),
That the following provisions shall apply to the National Insurance Contributions Bill:
Committal
1. The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 9 December 2010.
3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and Third Reading.
Other proceedings
7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Norman Lamb.)
Question agreed to.
Business without Debate
Delegated legislation
Internet Pornography
Claire Perry (Devizes) (Con)
I am grateful for the opportunity to debate this matter tonight. I thank Members on both sides of the House who have either made time to attend the debate or expressed support for my proposal since it was announced yesterday. I am asking for a change in regulation that would require all UK-based internet service providers to restrict universal access to pornographic material by implementing a simple opt-in system based on age verification.
The internet is a phenomenon that has changed our lives. I well remember my new year’s resolution in 1996, which was to get to grips with this thing called the internet. Since then, there has been a massive growth in the size and complexity of the online world. In Britain today, more than 19 million households—73% of the total—have access to the internet, and the speed of access and complexity of content are growing all the time.
Children, with their annoying ability to be early adopters of new technology, are particularly heavy users of the internet, with 99% of 12 to 15-year-olds, 93% of eight to 11-year-olds and 75% of five to seven-year-olds saying that they use it regularly. We know that many obtain access in an unsupervised way, which is not surprising, given that 31% of 12 to 15-year-olds have internet access in their bedrooms. We also know that many children use this either knowingly or unknowingly to access pornography.
Pornography is one of the most widely available forms of content on the internet, representing 12% of the estimated 250 million global websites. Studies suggest, shockingly, that one in three British children aged 10—a third of our British 10-year-olds—have viewed pornography on the internet, while four out of every five children aged 14 to 16 admit to regularly accessing explicit photographs and footage on their home computers. The world has really changed.
Fiona Mactaggart (Slough) (Lab)
I am very glad that the hon. Lady is raising this important issue tonight. Does she see, as I do, a connection between the figures to which she refers and the research by the End Violence Against Women coalition that suggests that a third of young girls experience unwanted sexual contact at school?
Claire Perry
The hon. Lady makes an excellent point, as always. I will speak in a moment about the unpleasant impacts of access to pornography on our young girls and boys.
The numbers that I have just cited are drawn from a relatively small sample, but more extensive studies suggest that almost 60% of children aged nine to 19 had viewed online pornography and that the rate of unwitting or unwanted exposure was increasing sharply. I know that many parents will have had that sickening feeling as their child clicks through, quite innocently, to a website after searching for a particular term. For example, a search for American Girls—a series of wholesome, culturally appropriate dolls—can end up at the American Girls website, which is certainly not a wholesome place to be. It is truly shocking how easy it is to access that kind of information.
These statistics are simply red-lining a problem that every parent recognises—namely, that our children are viewing material that we would never want them to see, especially at such a young age. So what can we do about it? The current way of controlling access to pornographic material on the internet is via safety settings and filtering software, installed and maintained by users—parents, teachers and carers across the country. Unfortunately, however, through technological ignorance, time pressure or inertia or for myriad other reasons, this filtering solution is not working. Even among parents who are regular internet users, only 15% say that they know how to install a filter. It is unfortunately also the case that our children know better than we do how to circumvent the filters, while the constant changes in internet technology and content mean that they can quickly become outdated.
I would like to raise two key issues about the current, unsatisfactory situation. The first, as the hon. Member for Slough (Fiona Mactaggart) has just pointed out, is that access to pornography has a profound and negative effect on our children. Against the backdrop of a drip-feed of sexualisation that promotes pole dancing as healthy exercise for young girls and high-heeled shoes as appropriate footwear for six-month-old babies, the availability of soft-core and hard-core pornography in our homes is damaging our children.
Yesterday I attended a Safermedia conference sponsored by my hon. Friend the Member for Enfield, Southgate (Mr Burrowes), and heard compelling evidence of this damage, including the explosion in the number of children in this country being referred to addiction clinics with a “pornography problem”, and the fact that many studies demonstrate that watching internet pornography contributes to people seeing women as sex objects, increases sexual risk-taking such as having unprotected or anal sex, and relaxes the boundaries of sexual violence in a completely unacceptable way.
It is of course the ease of access to unimaginable acts of sexual violence and depravity on the internet that causes the greatest problems for parents. We all know what happens when a bit of innocent investigative clicking leads us to images that are truly sickening. Phillip Hodson of the British Association of Counselling and Psychotherapy sums this up very appropriately when he says:
“The entire history of human perversion and sexual deviation is there at your fingertips and a great deal of it is free.”
The second problem in the current system of internet provision is the presumption that it is entirely the consumer’s responsibility to safeguard their family from harmful imagery. I am a fervent supporter of personal responsibility and have an innate dislike of Big Brother regulation, but there is a form of content delivery in this country that, in contrast to the internet, is either regulated by the Government or has a successful self-regulation model that does not appear draconian or heavy-handed. Our television viewing is restricted by sensible Ofcom guidelines, including section 1, which says that material equivalent to the British Board of Film Classification’s R18 rating must not be broadcast at any time, and that adult sex material cannot be broadcast at any time other than between 22.00 and 05.30 hours on premium subscription services or on pay-per-view or night services, which have to have mandatory restricted access, including PIN verification systems. We all accept such regulation of our television viewing quite happily.
What we see on our cinema screens is subject to regulation by the British Board of Film Classification, and we have accepted that for years. Our high street hoardings and general advertising are regulated by the Advertising Standards Authority, which displayed its teeth recently by removing posters from the Westfield shopping centre. Government guidelines inform newsagents’ displays of lad magazines and porn magazines. Even the mobile phone industry, which has arguably seen even more change than the internet in the past 10 years and whose products are increasingly used to access the internet, has introduced a reasonably successful self-regulation model that requires an adult verification check before users can access inappropriate material on the internet.
George Hollingbery (Meon Valley) (Con)
Carphone Warehouse is conducting a campaign on this issue, working with Professor Tanya Byron who has been working with the Government in this area for three or four years. A survey conducted by Carphone Warehouse found that 85% of children did not have parental controls activated on their mobile phones, 81% of parents felt that they needed to know more about how to deal with this problem, and 48% of parents wrongly thought that it was impossible for their child to download adult content on their mobile phone. I welcome the efforts being made by the mobile phone companies—there is no doubt that they have tried hard—but does my hon. Friend agree that there is still a great deal more to be done?
Claire Perry
As always, my hon. Friend makes an excellent, fact-filled point. I agree that although the self-regulation model is better than the one that pertains for internet service providers, there is much more to be done.
Why should internet service providers be any different from other content providers? Why is the onus on parents, teachers and carers to act as web guides and policemen? Where is the industry responsibility?
Three objections are usually raised when changes such as I am proposing tonight are discussed. The first is that any restriction on access to pornography on the internet is an infringement of free speech. I hope I am no Mary Whitehouse figure, although she was right about many things, but the nature of the internet has led to a proliferation of imagery and a discussion of sexual practices which is quite mind-boggling in its awfulness. I will not read out some of the information that was provided at the Safer Media conference yesterday, but I, at the age of 46, was introduced to sexual practices—one or two clicks away—that I have never heard of and simply cannot conceive of having my daughters view. It was simply sickening.
It is simply beyond belief that people can find sexual pleasure in viewing images of children, men and women being subject to the worst sexual degradation and violence. If that is our definition of free speech, the definition is wrong. That is not the purpose of tonight’s debate, however. I do not propose to reduce or restrict inappropriate content for adults who access the internet; I would simply like to make it more difficult for our children to access that material.
The second objection to my proposal is that it is too costly and too difficult to implement—that it is a regulatory burden on a struggling industry. That is a red herring. Although the content of the internet is generated out there in the wild west on millions of international websites, access is concentrated in the hands of a small number of companies. The Digital Economy Act 2010 states that there are 450 fixed internet providers in the UK, but that the top six, which include household names such as BT, Virgin, TalkTalk, BSkyB, Orange and O2, have more than 90% of the market share. That is not a large group of companies to deal with and regulate. Notably, the combined revenues of that business model are more than £3 billion a year, so it is a deeply profitable industry in which to engage.
Another concern is the definition of pornography. If we are to have an age-verification system, how do we define pornography? We already have perfectly workable definitions of adult content provided by the Obscene Publications Act 1959, and provided and used by Ofcom in the television industry. The required blocking technology is available in distributed form, with the onus on parents and users to implement it, but one does not need to be Bill Gates to pull the whole thing into a more sensible system of internet regulation.
Interestingly, although the official view of the Internet Service Providers Association—confusingly named ISPA—is that any official restrictions would be hugely expensive, technically difficult and open to circumvention, one provider, TalkTalk, proposes to provide a ratings system in the new year, with an opt-in system including U, 14, 18 or unclassified ratings similar to those of the British Board of Film Classification. Although that is a responsible and welcome step which I commend, it is a voluntary system, again with the onus on parents to sign up. Surely it would be better for TalkTalk to offer a default U setting and then allow an opt-in to more advanced levels.
Nick Boles (Grantham and Stamford) (Con)
Does my hon. Friend agree that this is simply a matter of consistency? We think it perfectly reasonable for Governments to pass laws that prevent young people from accessing damaging things such as cigarettes and alcohol, but pornography is just as damaging, if not worse, because damage to the mind can be permanent, whereas damage to the body can be temporary and recovered from. As a matter of consistency, therefore, Governments should act as she suggests.
Claire Perry
I thank my hon. Friend for making his usual deeply eloquent and relevant points. He is right. We have thrown up our hands, put the issue in the “too hard” basket—forgive the pun—and basically said that this is something Governments should not regulate. I believe it is.
The third objection to such proposals is that if we have age-verification software, children will just lie about their age and access the information anyway. The previous Government sensibly introduced workable age-verification restrictions on online gambling sites in 2005, however—an excellent model that works well and searches financial and electoral databases to verify that users are old enough to enter the site and engage in the gambling within. It is a workable model, the previous Government introduced it, and they are to be commended for doing so.
Britain has taken steps towards internet safety before. The industry acted independently and responsibly on child abuse imagery by setting up the Internet Watch Foundation, which finds sites displaying abuse that the industry then works to block. We have led the world in introducing that technology, and the people and organisations involved are to be strongly commended. It has been a huge success: the amount of child sex abuse content reported or found to be hosted in the UK has dropped from 18% to less than 1%; and 95% of our broadband services use that blocking technology. It can be done.
The right hon. Member for Blackburn (Mr Straw) is also to be commended for introducing the Criminal Justice and Immigration Act 2008, which brought in a ban on the possession of extreme pornographic material. That is highly commendable, but of course the content is there on the internet and available for viewing by us and our children with one or two clicks of a mouse.
All that progress has been made, but regulating internet access to inappropriate content continues to stump successive Governments and, in my view, the industry. I believe the time has come to stop ducking an issue of enormous concern to parents, teachers and carers throughout the country. We are often ridiculed for raising it, barraged with information on why the internet should be treated differently, bamboozled with the problem of international co-operation and told that it is our responsibility and no one else’s to keep our children safe,
I beg to differ. It is time for Britain to take a lead on the matter and for the Government, with their commitment to family-friendly policies, to act. Without action, and with technological convergence, we will increasingly be able to access internet pornography and all internet content via television, raising the prospect of this damaging and degrading material, which is shocking enough when viewed as thumbnails or on an A4-sized computer screen, being piped into our homes and displayed in high-definition glory on 4-foot-wide television screens.
The arguments for passive acceptance and self-regulation are past their sell-by date, and it is time to regulate the provision of internet services in this country. We already successfully regulate British television channels, cinema screens, high street hoardings and newspaper shelves to stop our children seeing inappropriate images, and mobile phone companies have come together to restrict access to adult material, so why should the internet be any different?
British internet service providers should share the responsibility for keeping our children safe, and there should be an opt-in system that uses age verification for access to such material. I urge the Minister to engage with the internet service providers to set a timeline for those changes and, if they will not act, to move to regulate an industry that is doing so much damage to our children.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
May I say how grateful I am to my hon. Friend the Member for Devizes (Claire Perry) for raising this important subject and giving the House the opportunity to debate it? She put her case incredibly forcefully. We are used to saying that we are middle-aged when policemen start to look younger. Perhaps we can add a new phrase to the lexicon: when we start saying Mary Whitehouse was right, we might be approaching middle age. My hon. Friend’s points were very well made, and chime very much with my thinking.
The subject of this debate has been misleadingly referred to as the regulation of access to pornography on the internet; what we are really talking about is ensuring that we can protect not only children from accessing unsuitable adult material, but adults from the extreme versions of pornography—to which, I am glad to say, my hon. Friend only alluded. As she said in her opening remarks, the internet is fast becoming the dominant medium not just in this country but all over the world. Moreover, as she noted at the end of her speech, when it converges with television it will become all pervasive. The struggle to deal with what one might loosely call internet regulation is something that we are having to come to grips with very rapidly as the internet advances so speedily.
I found out to my cost only last week, after making a speech on net neutrality, that anyone who ventures into the vexed subject of internet regulation, in the broadest sense, can set a number of hares running. There are many people who believe that the internet should not be regulated at all. This Government’s position is that the internet should be lightly regulated, so that we benefit from many of the advances that have come about from a lightly regulated internet. Although we are focusing in this debate on the internet’s negative aspects, it is important to remember that a lightly regulated internet has brought transformative companies to the web. As we learned from a piece of research published a couple of weeks ago, in just 15 to 20 years, internet commerce has come to represent something in the order of 9% to 10% of our economy.
This remains a very serious subject, which deserves very serious consideration. As with any area of life, it is vital that children and the vulnerable be protected. Where there is harm and safeguards are not heeded, we need effective sanctions to prosecute illegal acts.
Before addressing my hon. Friend’s specific points, it might be helpful to set out the issue in the broader context of the Government’s approach to the regulation of adult material in general. It is important to remember that we regulate adult material, regardless of the medium through which it is transmitted or published. The Government’s policy is that controls on published material, including material published online, should strike a balance between freedom of expression and protection of the public. It should also be proportionate to the potential harm caused.
Clearly, there is material that should not be published at all. This is covered by the criminal law. All material published or broadcast in the UK is subject to the Obscene Publications Act 1959, under which it is a criminal offence to publish any article or image considered to be obscene. The Act also applies to the distribution of material on the internet or by mobile phone. It is important to note the general principle that an action that is illegal if committed offline is also illegal if committed online. Just because it is on the web does not make it all right. This applies both to the distribution of illegal material and to harmful behaviour.
Claire Perry
I am grateful to the Minister for launching into what sounds as if it will be a full and reasoned argument, but is it not the case that there have been almost no successful prosecutions of British companies within our criminal jurisdiction domain—I am thinking particularly of the Perrin case, but also subsequent cases—and that it is almost impossible to apply international law to shut down what we know to be blatant breaches of the regulation governing “appropriate adult material”?
Mr Vaizey
I shall come to the point that the web is global, so there is an international aspect to these issues. On the specific question of whether there have been prosecutions, it is not necessarily the case that the number of prosecutions reveals the effectiveness of an Act. The existence of an Act might often be enough to keep people within the relevant boundaries. As my hon. Friend says, the internet is a global phenomenon and people can access content from other jurisdictions. I will address that point in a few moments. As she rightly points out, I am trying to build a reasoned argument.
Jim Shannon (Strangford) (DUP)
Does the Minister agree that this is a worldwide phenomenon, not just a United Kingdom matter? It is often other countries in the world that originate those websites, and then they are broadcast in the UK. What steps does the hon. Gentleman envisage us taking with other countries, whether those be Brazil, Spain or elsewhere, to ensure that we do not allow access to such material in the UK?
Mr Vaizey
I am coming to self-regulation, which is what I understand my hon. Friend to be calling for on the part of our internet service providers, to prevent access to inappropriate content. It is obviously not for this country to change the obscenity or pornographic laws in other jurisdictions, but it is important to recognise that we are dealing with content from beyond our own jurisdiction. Let me press on. I shall make my argument before accepting further interventions, so that hon. Members will be in a position to see the argument in the round.
On 26 January last year, Parliament further strengthened controls in the UK by making unlawful extreme pornographic material, including pornographic material containing explicit sexual violence that is life-threatening or likely to result in serious injury or bestiality. The Government also increased the maximum penalty for offences under the Obscene Publications Act from three to five years’ imprisonment. Under the Protection of Children Act 1978, as amended, the UK has an absolute prohibition on the taking, making, circulation and possession with a view to distribution of any indecent photograph of a child under 18. Such offences carry a maximum sentence of 10 years’ imprisonment.
There is also a law against the distribution of indecent images of children. Section 160 of the Criminal Justice Act 1988 makes the simple possession of indecent photographs of children an offence, and it carries a maximum sentence of five years’ imprisonment. In this context I am delighted to be able to welcome the appointment of Peter Davies, the new chief executive of CEOP—the Child Exploitation and Online Protection Centre. I want to pay tribute to the work of his predecessor, Jim Gamble, as well as to the outstanding work of CEOP in tackling the sexual exploitation of children.
My hon. Friend also referred to the work of the Internet Watch Foundation, which I am due to meet shortly to discuss self-regulation of the internet. As she pointed out, the IWF was set up in 1996 by UK ISPs to enable members of the public to report child abuse content in newsgroups or websites hosted anywhere in the world, as well as obscene content hosted in the UK. If that content is considered potentially illegal, the IWF passes the details to the UK police to start action against the originators, and will seek to get the material taken down at source or ask ISPs to deny access to the websites concerned.
I am very interested in the work of the Internet Watch Foundation, because I believe that it provides a model that is now well established and working effectively. The issue I particularly want to discuss with the IWF is whether its work, which has hitherto focused on child abuse content, can be widened to cover some of the other issues that my hon. Friend has raised this evening.
As the hon. Member for Strangford (Jim Shannon) pointed out, access to online pornography is not a problem for the UK alone. We have to recognise that the internet is a global network. This brings with it real challenges to the effective regulation of access to pornography. The overwhelming bulk of obscene material published on the internet originates abroad, sometimes in countries that do not share our approach to such material. It is simply the case, and has been for many years, that much pornographic material that it would be illegal to publish in the UK remains legal to publish in many other European countries, and even in the United States.
The UK ISPs take a responsible approach to the content that they host, both of their own volition and in co-operation with law enforcement and Government agencies. Where they are advised that content that they host in the UK contravenes UK legislation, they will readily remove it.
My hon. Friend talked about an age-verified opt-in procedure for internet access to pornography hosted in the UK. This is already the case, although my hon. Friend made her own forceful argument that it might not be effective enough. The managers of websites featuring mature content have a legal responsibility to indicate clearly on their front page that those sites are unsuitable for anybody under the age of 18. Additionally, when websites charge for access, they must place their adult content behind a credit card barrier, to reduce further the risk of children and young people accessing it. We will continue to consider how that protection might be made more effective.
Ms Louise Bagshawe (Corby) (Con)
Is the Minister aware of the private Member’s Bill proposed by the hon. Member for Swansea West (Geraint Davies), which is designed to remove the anonymity of prepaid credit cards for purchases under £100, whereby such material can be anonymously purchased by under-age people—or by anybody else? That is important, because it is what drives the child pornography industry.
Mr Vaizey
That is a very interesting point, and I suspect that the consumer credit Minister is aware of it. I will certainly sit down with him and discuss whether there is a read-across into the issue we are discussing this evening.
As I said earlier, a UK-based website was recently forced to take down its front page because it hosted adult content that was accessed by under-18s. That shows that there are some examples where this is working.
Claire Perry
I am sorry to be constantly interrupting the Minister, because I know that he has a great deal of material to get through, but I think that he is going down the dead end of focusing on content. As he said, much of the content is provided and hosted by websites that are outside the United Kingdom’s jurisdiction. We all know that the age 18 verification is simply a figment, and that there is almost no way of enforcing it.
The Minister has cited one website, but there are more than a quarter of a billion websites in the world, of which more than 10% are pornographic. I firmly believe that the onus of responsibility lies with the six British companies that are piping 90% of the content into our homes to provide some sort of opt-in software, so that we need not chase the red herrings of random porn websites in jurisdictions over which we have no control.
Mr Vaizey
I hear what my hon. Friend says, and I will address it in a moment, but first I want to talk about the UK Council for Child Internet Safety. I do not think that this is a dead end, because UKCCIS does incredibly important work. It focuses on content, self-regulation and joined-up government. Although, as I have said, we have a legal framework, that framework alone will not keep our children safe online. Real, effective protection for children can be achieved through parents, charities, industry, law enforcement authorities and Government working together. That is why Professor Tanya Byron—to whom my hon. Friend referred—was asked to take charge of an independent review on child internet safety, which led directly to the launch of UKCCIS.
UKCCIS is chaired by Ministers from the Department for Education and the Home Office, and Ministers from other Departments, including mine, attend its meetings regularly. It brings together more than 170 organisations from across industry, including internet service providers, the third sector, law enforcement authorities and the devolved Administrations, so that they can take positive steps to help children to stay safe online.
I assure my hon. Friend that the Government are working with the internet industry, through UKCCIS, to create an online environment in which children are protected from potentially harmful or inappropriate content. We want our young people to develop the knowledge, skills and resilience that will enable them to avoid accessing such content, and, if they do come across it, to avoid it in future and report it to the appropriate authorities when it causes major concern. UKCCIS is also working to encourage parents to take responsibility for what their children see online. I hear what my hon. Friend says about the need for ISPs to block this content, but I think it important for parents to take responsibility, and to use the filters and parental controls that are available in current technology to prevent their children from accessing harmful material.
My hon. Friend pointed out that people access pornography not just through their computers, but through their mobile phones. That is another issue to which I am hugely sympathetic, and it has been raised with me in my capacity as a constituency Member of Parliament. As my hon. Friend said, all UK operators operate a parental control regime on mobile phones that should prevent access to over-18 sites. It is set as a default on all phones when they are purchased, and it is for the consumer to request its removal, subject to proof of age. Ofcom provides detailed information on parental controls and access to adult content on its website. However, that goes only some way to protecting young mobile users from harmful content. Unfortunately, it is not possible to tackle content that is shared via bluetooth, for example, on a phone-to-phone basis. That is why the work of organisations such as UKCCIS is so important
What causes me to have a huge amount of sympathy with what my hon. Friend has said is the fact that I do not subscribe to the view that internet service providers are simply dumb pipes. In opposition and now in government, I have waged something of a campaign to that effect. According to one school of thought, ISPs are there simply to channel the content to homes, and should not interfere with what goes down their pipes. It is often said that asking them to do so would be the equivalent of asking Royal Mail to open every envelope and parcel and have a look at the contents. In that context, the hon. Lady rightly identified a red herring in relation to both expense and the idea of regulation. I also believe that we should not over-regulate the internet, and that self-regulation should be the first stop before we consider Government regulation or legislation. However, I think it should be put on the record that ISPs can play a role, and, indeed, have played a very effective role in combating child abuse content online.
Matthew Hancock (West Suffolk) (Con)
I commend my hon. Friend the Member for Devizes (Claire Perry) on initiating such an important debate so early in the evening. I am glad that the Minister has enunciated the principle that ISPs are not merely a pipe through which information flows, but he has not taken the opportunity to point out that they could do more. Will he take that opportunity now?
Mr Vaizey
Now I understand why my hon. Friend is regarded as a rising star. I was about to say that ISPs could do more. My hon. Friend’s anticipation of my next sentence was almost uncanny, especially as I am now speaking off the cuff rather than from a prepared text.
We have seen that ISPs can do very effective work in removing child abuse websites. We also know—and I mentioned this during my speech on net neutrality last week—that they can manage the traffic that crosses their network in order to give their consumers a good service. A couple of weeks ago, I held a round table with ISPs and rights holders from the music and film industries and from sport to discuss what measures we could take to provide more legal content as the Digital Economy Act 2010 comes down the line. It seems to me that, given that rights holders are fully aware of the websites that are distributing their content illegally, ISPs could do more in that regard. However, what I learned from the meeting was that it is important to arrange for people to sit around a table, discuss the issues, and seek ways in which we can work together to make the system operate effectively.
After that meeting, which was productive—I felt that in two hours we had made substantial progress—I made it absolutely clear that I would follow it up. It would not be a one-off meeting that we would forget about, perhaps returning to it in a year’s time. I should like to offer the same opportunity to my hon. Friend the Member for Devizes, and perhaps to my hon. Friend the Member for Enfield, Southgate (Mr Burrowes) and other interested Members, as well as to charities and other organisations that are involved in the debate.
If we do have such a meeting, it must not interfere with, or cut across, the important work that UKCCIS is doing. However, I think it important for the side that is concerned about the issue—which consists of most of us, especially those of us who are parents—to sit around a table with ISPs, air their concerns, ask questions, and establish what further action they can take, and for the ISPs to respond. I assure my hon. Friend the Member for Devizes that if we have such a meeting, I will not leave it there. We will see what progress we make, and we will follow it up.
Claire Perry
It is uncanny how the Minister is anticipating my questions. I can see why he is a risen star.
I should welcome the opportunity to participate in such a round table, and I know that many other Members would as well, but does the Minister agree that it must not be simply more jaw, jaw? What we need is a time frame for improvement. I think that there is now almost universal acceptance that we have a huge problem. The fire is burning out of control, and we need to be specific. We need to say, “Clean up your house within a certain time, or we will come and clean it for you”.
Mr Vaizey
The House will unite in describing me as a risen star. It would probably be accurate to say that I have risen as far as I am going to rise.
I certainly agree with my hon. Friend that it should not be just jaw, jaw. I do not want to set any hares running, which is what I seem to do every time I talk about anything to do with the internet, but I think that the meeting with the rights holders and internet service providers was productive both because it was probably the first time they had sat around a table with an honest broker—me, representing the Government—sitting between them, and because we have the Digital Economy Act 2010 on the statute book, controversial though it is. If anyone ever wants to start a Twitter storm, they should write something about net neutrality or the Digital Economy Act. Especially if they write that they are in favour of that Act, they will then see what comes.
It is important that we impress upon ISPs that we take this issue very seriously. Trite though it may sound, it is also important for people to know that sitting around a table and exchanging views can be an effective means of getting across both the views of the ISPs and the huge concern expressed by my hon. Friend the Member for Devizes on behalf of her constituents and the country at large. She has made this an important issue and raised it in Parliament. It is perfectly legitimate for the ISPs to raise issues such as costs and regulation because although, as my hon. Friend pointed out, they make £3 billion in profit, it is important also to remember that we, as users of the internet, rely on them to make those profits so that they can invest in the broadband infrastructure and we can have the best superfast broadband in 2015.
Peter Bottomley (Worthing West) (Con)
The debate is concentrating on the issue that matters most, which is extreme pornography. We are not concerned about nudity or ordinary sex. Most of us have a naked body, and very few of us inherited celibacy from our parents. The Minister mentioned the Royal Mail. Sending pornography through the mail is illegal. Can the Minister say whether the six ISPs who are currently providing the channels in question are the organisations who came to his meeting, and if they were not, will he have them in as well please?
Mr Vaizey
We had four of the main internet service providers, I think. I do not want to get too carried away and go to the other extreme. The ISPs in the UK do act to take down illegal content where it is pointed out to them, and they do hugely important work in taking down child abuse images. With the greatest of respect to my hon. Friend, who has inadvertently signed an early-day motion put forward by a Labour MP calling for an open internet—a slight distortion of my speech on net neutrality—we are, to a certain extent, talking about ordinary sex. We are talking about preventing children from having access to inappropriate content, and how we can work with ISPs to make it that little bit more difficult for them to do so.
My free-wheeling conclusion to this speech has probably not been helpful, so it might be helpful if I pull together a coherent final few remarks. We believe in an open lightly regulated internet. The internet is, by and large, a force for good. It is central to our lives and our economy, and a Government have to be wary about regulating or passing legislation. Nevertheless, the advent of the internet has brought a number of problems. One of them is the proliferation of images of child abuse, which I believe is being dealt with extremely effectively through the Child Exploitation and Online Protection Centre and UKCCIS, with the co-operation of ISPs. ISPs remain under an obligation to take down illegal pornographic content, which can extend beyond child abuse images, but there remain, from my position as a Minister, two issues. One of them is access to illegal content in terms of music, film and the creative industries, on which I am working with ISPs and rights holders. I take the second issue very seriously as a constituency MP alone: how we can work harder to ensure that it is more difficult for our children to come across inappropriate adult content? I firmly believe we can make progress, in co-operation with the ISPs, and that we can proceed on the basis of self-regulation. As I have said, I think it is important that we meet and sit around a table to exchange views, and I look forward to brokering such a meeting with my hon. Friend the Member for Devizes and a number of organisations she deems to be appropriate.
Question put and agreed to.