House of Commons

Wednesday 12th January 2011 Commons Chamber

Wednesday 12 January 2011

The House met at half-past Eleven o’clock

Prayers

Wednesday 12th January 2011 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 12th January 2011 Commons Chamber

The Secretary of State was asked—

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

1. What funding his Department plans to provide for aid to north and south Sudan in 2011-12.

[Sajid Javid (Bromsgrove) (Con)]

5. What funding his Department plans to provide for aid to north and south Sudan in 2011-12.

[The Secretary of State for International Development (Mr Andrew Mitchell)]

Our future support to Sudan will be determined by the bilateral aid review, which is on schedule to report by the end of February. Whatever the outcome of the referendum, there will continue to be significant humanitarian and development needs in both north and south Sudan.

[Stephen Mosley]

According to Transparency International’s measures, Sudan rates as the 176th most corrupt nation in the world. What assistance will the Department be offering to help to establish the rule of law and build democratic structures in Sudan, whatever the results of the current referendum?

[Mr Mitchell]

My hon. Friend is right. Corruption has a devastating impact on the lives of poor people and, indeed, on the confidence of taxpayers in donor countries. It is for that reason that no British taxpayer funds go through the Government of Sudan, but I assure my hon. Friend that we will be working in both north and southern Sudan, whatever the result of the referendum, to increase access to justice and to ensure that in the north, for example, there is much greater transparency in the operation and accountability of local government, and in the south to seek to embed anti-corruption mechanisms from day one, were the referendum to decide that there should be a southern Sudan.

[Sajid Javid]

I welcome my right hon. Friend’s efforts in Sudan. Although attention is rightly focused on the referendum in southern Sudan, the violence in the west means that the situation is still fragile, particularly in the region of Darfur. Can my right hon. Friend reassure the House that his Department is able to help both regions—the south and the west—simultaneously?

[Mr Mitchell]

Again, my hon. Friend is right. Although things are going extremely well so far with regard to the referendum, and people respect the agreements made under the comprehensive peace agreement, affairs in Darfur have deteriorated. Indeed, in the last week we have been told that 40,000 people were displaced as a result of fighting there. The British Government are absolutely committed to our humanitarian work in Darfur as well as in south Sudan, and through the common humanitarian programme we provide that support throughout the whole of Sudan.

[Hugh Bayley (York Central) (Lab)]

Sudan has been beset by conflict for decades, and I pay tribute to the work of DFID officers in bringing about the peace accord. Can the Secretary of State spell out, whatever the outcome of the referendum, how joined up his policy will be with the policies of the Ministry of Defence and the Foreign Office, to make sure that violence does not erupt again in the south?

[Mr Mitchell]

The hon. Gentleman rightly points to the importance of the UK Government platform being seamless. That is why, when I was in Sudan in November, I opened a new British Government office in Juba. Last weekend, it was elevated to a consulate generalship and will provide state-of-the-art support for the work that the British Government are doing in southern Sudan.

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

Can the Secretary of State update the House on the progress of any agreed settlement regarding the distribution of Sudanese oil reserves between north and south Sudan?

[Mr Mitchell]

This is one of the issues that former President Mbeki is particularly addressing in the discussions about Abyei. As the hon. Lady implies, the largest amounts of oil are in southern Sudan but the mechanisms for extracting it and getting it out are pipelines through northern Sudan. The negotiations are continuing and are likely to continue for some time yet.

[Malcolm Bruce (Gordon) (LD)]

The Secretary of State will be aware that oil wealth has not always transformed countries in Africa, or indeed relieved the poverty of those in question. What steps will DFID take to ensure that southern Sudan will have the infrastructure and diversification support it needs so that it does not become another country suffering the Dutch disease because of oil?

[Mr Mitchell]

The Chairman of the Select Committee draws attention to the resource curse that has afflicted so many countries in that part of the world. The point he makes is being directly addressed. I discussed the matter with President Salva Kiir when I was in Sudan in November. Sudan is one of the most underdeveloped countries in the world, with illiteracy of more than 82% and only 24 km of tarmacked road in the entire country. There is a huge development issue to be addressed, but there is also the ability, through oil wealth, to make real progress over the last five years of the millennium development goals until 2015.

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

Last year, almost half the people in southern Sudan needed help just to get enough to eat. Southern Sudan has enormous agricultural potential but, as the Secretary of State has just said, there are scarcely any roads or systems to support food production. We help with emergency food aid, quite rightly, but what more can DFID do to ensure that the people of southern Sudan can get off food aid and develop their own agriculture?

[Mr Mitchell]

The right hon. and learned Lady is right to suggest that 4.5 million people directly benefit from British food aid in southern Sudan, but that is not a long-term solution. As we have learned in eastern Africa, by contrast with western Africa, it is crucial to try to ensure that food is grown as closely as possible to the people it supplies and that local markets are stimulated close to where there is food and security. That will be one of the key objectives that we will pursue in conjunction with the authorities in southern Sudan.

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

2. What recent assessment he has made of the effectiveness of the delivery of humanitarian aid in Afghanistan; and if he will make a statement.

[The Minister of State, Department for International Development (Mr Alan Duncan)]

In 2010, international humanitarian aid to Afghanistan fed 3.5 million people, helped 100,000 refugees and built 22,000 emergency shelters. DFID provides support to the International Committee of the Red Cross, to assist families affected by conflict and to provide medical care. As for potential problems this year, we are closely monitoring rain and snowfall levels and would work with the international community to respond to any problem caused by water shortages.

[Miss McIntosh]

I congratulate the Department on that achievement. Does humanitarian aid extend to the possibility of finding crops to substitute for poppies, to enable Afghanistan to have a proper income and become completely self-sufficient?

[Mr Duncan]

The answer is yes. DFID’s programmes seek to establish sustainable long-term solutions to poppy growing by promoting access to agricultural credit, releasing uncultivated land for productive use and strengthening access to markets for local producers. We are also trying to encourage farmers to grow different crops with a higher market value, including, for instance, pomegranates.

[Anas Sarwar (Glasgow Central) (Lab)]

The Government announced in the strategic defence review and in the comprehensive spending review that 30% of aid will go to fragile states. What proportion of aid will go to Afghanistan?

[Mr Duncan]

The amounts going to Afghanistan will be significantly increased, but the exact amounts will be announced in due course, when we have completed the multilateral and bilateral review process, which should be announced in the next few months.

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

3. What programmes funded by his Department support the education of women in developing countries.

[The Secretary of State for International Development (Mr Andrew Mitchell)]

All my Department’s education programmes will have a focus on girls and young women. We will concentrate on enabling girls to progress through to secondary school, where the largest benefits accrue.

[Chi Onwurah]

I am glad to hear that the Secretary of State is continuing Labour’s excellent work in this area. Education is important for developing economies, as it is for our own, but can he confirm that he will not drop Labour’s pledge to double support for global education?

[Mr Mitchell]

We will set out in due course precisely what the results of taxpayer spending will be in respect of education. I hope that we will carry the whole House in focusing directly on the results that we are achieving and spelling out the commitments that we are making not only to British taxpayers but to those we seek directly to help in poor countries.

[Richard Harrington (Watford) (Con)]

Can the Secretary of State assure the House that aid money transferred via the European development fund for women’s education or any other project will carry the same transparency and accountability as DFID-related projects?

[Mr Mitchell]

As my hon. Friend suggests, the EDF is one of the vehicles for achieving that. Along with other members of the European Union, we are leading a drive to increase transparency in the EDF—so far, that message is being reasonably well received. I must point out that although Britain contributes 17% of the EDF’s funding, 40% of that funding is spent in Commonwealth countries.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

Will the Secretary of State turn his attention to women in Haiti? One year on from the earthquake, people continue to suffer and an alarmingly high number of women and girls are subjected to rape and sexual violence every day: 250 women were raped in just 150 days after the earthquake. What is he doing to ensure that the British Government, the EU, the UN and the Haitian authorities are doing everything possible to bring an end to that appalling violence?

[Mr Mitchell]

The hon. Lady is right to target the current position in Haiti, including the great difficulties that the international community has experienced in making its aid effective and the failures of governance and justice that she graphically identified. Britain is not leading on Haiti—the lead is taken much more by the Americans, Canadians and, indeed, the French, but we were extremely supportive in the initial stages in the aftermath of the earthquake that struck Haiti a year ago, and we continue to help, not least in December, with specific interventions to stop the spread of cholera.

[Richard Ottaway (Croydon South) (Con)]

4. What his Department’s policy is on reducing poverty in Africa.

[The Parliamentary Under-Secretary of State for International Development (Mr Stephen O'Brien)]

DFID’s policy for reducing poverty in Africa focuses, alongside country Governments, on achieving the millennium development goals, including through wealth creation, strengthening governance and security, improving the lives of women and girls, and tackling climate change. We will implement this policy in a cost-effective and transparent way.

[Richard Ottaway]

The Minister and I agree that no country has got itself out of poverty without first addressing population growth, and I congratulate the Department on what it is doing in that area. Does he agree, however, that much aid in Africa comes through non-governmental organisations? To what extent are they taking on the need to address population policies?

[Mr O'Brien]

I thank my hon. Friend for his observations. Last month, my right hon. Friend the Secretary of State launched the framework for results for improving reproductive, maternal and newborn health. It was developed in consultation with NGOs, and it has been widely disseminated and welcomed. Work is under way with NGOs at an international, regional and, indeed, country level to ensure that women have reproductive health choices and to improve the quality and accessibility of services such as those in Malawi, which demonstrates that real progress has been made in ensuring that we tackle the priority of population effects.

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

What assessment have the Minister and the Secretary of State made of the humanitarian situation in Côte d’Ivoire, and what support has his Department provided?

[Mr O'Brien]

We are giving support primarily through the Red Cross, and we support the measures taken by the EU and the African Union to bring about a peaceful transfer of power in Ivory Coast, which will have the greatest effect on humanitarian interests, including the EU visa ban on Laurent Gbagbo and his closest advisers. We certainly support the UN’s position in declaring the presidential election valid, and in insisting that Mr Ouattara is the legitimate winner. The UK stands ready to help through our trusted partners if the humanitarian situation deteriorates.

[Mr Gary Streeter (South West Devon) (Con)]

Access to sanitation is one of the millennium development goals, and will sadly be missed by a mile, but it is hugely relevant to almost every country in Africa. What extra assistance can the Minister’s excellent Department give over the next 12 months to try to improve access to water and sanitation for the people of that continent?

[Mr O'Brien]

My hon. Friend makes an excellent point, and I can certainly assure him that the way in which work will be implemented to achieve access to clean water and better sanitation is central to the programmes developed under the bilateral and multilateral aid reviews, and will be announced in the relatively near future.

[Paul Blomfield (Sheffield Central) (Lab)]

6. If he will bring forward legislative proposals to make binding the 0.7% target for official development assistance as a proportion of gross national income.

[The Secretary of State for International Development (Mr Andrew Mitchell)]

The Government are fully committed to meeting the United Nations target of spending 0.7% of national income on aid from 2013, and will enshrine this commitment in law.

[Paul Blomfield]

I thank the Secretary of State for his reply, but may I ask him whether he intends to change the definition of what the UK reports as official development assistance, and specifically whether the Government intend to include expenditure on overseas students and refugees within that 0.7% target?

[Mr Mitchell]

The Government’s position is absolutely clear. Aid is defined by the OECD development assistance committee, and those rules are very clear indeed and strictly laid down. The Government have made it clear, as previous Governments have done, that our aid spending will be defined in that way, and only in that way.

[Mark Pritchard (The Wrekin) (Con)]

The Secretary of State will know that a significant part of the existing aid budget goes to the Government of Tanzania. Does he share my concern about the recent actions of that Government and President Kikwete, who have arrested Opposition leaders who currently reside in prison? Will he call for their early release?

[Mr Speaker]

Order. It is not entirely clear what that has got to do with the UN 0.7% target for official development assistance, but if the Secretary of State can find a way briefly to demonstrate that, I shall be happy to listen.

[Mr Mitchell]

Well, my hon. Friend, who takes a close interest in these matters, is right to identify the element within the 0.7% that is spent by Britain in Tanzania. We are in close contact with the authorities about the recent events and are of course reinforcing the importance of the rule of law being followed.

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

In maintaining the target of 0.7%, will the Secretary of State ensure that the issue of corruption, which keeps coming to the fore in relation to overseas aid, will be at the forefront of his mind as we go forward?

[Mr Mitchell]

The hon. Gentleman is right to reinforce the point made by my hon. Friend the Member for City of Chester (Stephen Mosley) in the first question today, which was about the importance of bearing down on corruption. Corruption not only deprives poor people of the services to which they should be entitled, but undermines and saps the confidence in donor countries of taxpayers who see their money being wasted.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

Following the two-year freeze in the overseas aid percentage which was announced in the spending review, there will have to be a sharp increase in 2013 to reach the 0.7% target. Can the Secretary of State tell the House what percentage increase in the overseas aid budget in 2013 will be needed to fulfil that commitment?

[Mr Mitchell]

As the hon. Gentleman knows, next year we are spending 0.56% of gross national income on development. Over the four-year spending period the figures will be 0.56, 0.56, 0.7 and 0.7%. Many in the House would wish to advance further on this important cause, but the public finances are inevitably constrained by the appalling economic position that the coalition inherited.

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

7. What discussions he has had with the Secretary of State for Energy and Climate Change on financial contributions to support climate change mitigation for developing countries through the green climate fund.

[The Parliamentary Under-Secretary of State for International Development (Mr Stephen O'Brien)]

My right hon. Friend the Secretary of State regularly discusses international climate issues with the Secretary of State for Energy and Climate Change and his ministerial colleagues. We welcome the agreement at Cancun to establish a green climate fund, but no decisions have yet been taken on a financial contribution. [Interruption.]

[Mr Speaker]

Order. There are far too many noisy private conversations taking place in the Chamber. I want to hear Fiona O’Donnell.

[Fiona O'Donnell]

Thank you, Mr Speaker. I welcome the reaffirmation of the need to support developing countries in responding to climate change, as agreed at Cancun last year, but we still do not have the detail of where the money will come from. Will the Minister reassure the House that money will not be diverted from the aid budget, but that his Government will make additional funds available by doing as we did in government, and setting a cap on the amount of money that can be transferred from the aid budget to respond to climate change?

[Mr O'Brien]

The clear answer is that the £2.9 billion of international climate finance announced in the spending review is being met out of a rising overseas development assistance budget and will continue to account for less than 10% of ODA, as indeed was set by the previous Government.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

Will the Minister join me in congratulating students at St Mary’s college in my constituency who have been campaigning with the Catholic Fund for Overseas Development to lobby for greater Government aid to developing nations to help to mitigate climate change? Will he assure the House, however, that any money that goes to those developing nations will be subject to robust oversight to make sure that it is spent properly and accountably?

[Mr O'Brien]

I am pleased to join in congratulating my hon. Friend’s local college on its efforts and support. I can assure him that at all times the expenditure made in relation to these and other development issues is being subjected to the new transparency and accountability programmes and rules that we are introducing. That is live as we speak, so he can assure his college that that is in place.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

8. What steps his Department is taking to support the work of Governments in developing countries to increase the size of their tax base.

[Julie Hilling (Bolton West) (Lab)]

11. What efforts his Department has made to support good governance in the field of tax collection in developing countries.

[The Minister of State, Department for International Development (Mr Alan Duncan)]

Any country requires some level of taxation to fund the basic services that it needs. DFID advises and assists Governments in the development of fair, equitable and efficient systems of collecting tax.

[Catherine McKinnell]

The Minister will be aware of the Dodd-Frank Act in the United States, which requires companies registered on Wall street to disclose all payments on a country-by-country basis, including tax payments. Will he meet me and representatives of the Publish What You Pay campaign, including NGOs such as CAFOD and Oxfam, to discuss how we can introduce similar legislation in the UK, thereby improving transparency and access to development?

[Mr Duncan]

It will always be a pleasure to meet the hon. Lady, and I am very happy to do so. The Act requires companies to disclose payments to foreign Governments. We should await the outcome of ongoing work, such as the development of rules on how the Act will operate, before deciding whether UK action is needed.

[Julie Hilling]

The OECD recognises that poor countries are likely to lose more money through tax dodging than they gain in aid. The coalition agreement promised to clamp down on tax avoidance, so will the Minister set out today what action his Government have taken to push for the introduction of country-by-country accounting? It will cost the Government nothing but make a huge difference to people in developing countries.

[Mr Duncan]

The OECD and the International Accounting Standards Board are both doing work related to that issue, and we hope that it will help to identify the best way forward. Action to tackle tax evasion through more transparency and the exchange of information, instigated by the G20 and led by the Global Forum on Transparency and Exchange of Information for Tax Purposes, has already produced good results, such as a big increase in the number of bilateral tax information exchange agreements. [Interruption.]

[Mr Speaker]

Order. There is far too much noise in the Chamber. It is very unfair on Members who want to take part in questions to the Secretary of State for International Development. Let us have a bit of order.

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

9. What recent discussions he has had with his international counterparts on the work of the UN Commission on Population and Development on fertility, reproductive health and development in 2011; and if he will make a statement.

[The Parliamentary Under-Secretary of State for International Development (Mr Stephen O'Brien)]

The Government regularly discuss with international counterparts the work of the UN Commission on Population and Development to ensure that sexual and reproductive health and rights are included in international strategies. The commission’s theme for 2011 is fertility, reproductive health and development.

[Katy Clark]

I thank the Minister for that answer. He will be aware that we now have the largest ever number of people—1.2 billion—of reproductive age, but we are not spending the money that we set ourselves internationally as targets on reproductive health and family planning. Does he agree that there needs to be greater emphasis on that area, and will he commit his Government to ensuring that more money is provided for it?

[Mr O'Brien]

I congratulate the hon. Lady on her very accurate observations, which are absolutely fundamental to good development. I assure her that, in the reproductive, maternal health and neo-natal document that we published on 31 December, that is precisely the emphasis on, and increased access to, family planning that is proposed and in which we intend to take a lead, through the design of our programmes, as we roll out their announcement following the bilateral aid reviews.

[John Howell (Henley) (Con)]

10. What recent progress he has made on his review of emergency humanitarian response capability.

[Christopher Pincher (Tamworth) (Con)]

12. What recent progress he has made on his review of emergency humanitarian response capability.

[The Minister of State, Department for International Development (Mr Alan Duncan)]

The humanitarian emergency response review is an independent review of the UK Government’s emergency humanitarian assistance, led by Lord Ashdown. The review team will complete its consultations this month and issue its final report by the end of April.

[John Howell]

Given the significance of the review, will the Minister explain its remit?

[Mr Duncan]

The review has a specific focus on rapid onset humanitarian emergencies, which can either be natural disasters or sudden outbreaks of conflict. The urgent international response to disasters is often confused and unco-ordinated. Today is the first anniversary of the devastating earthquake in Haiti, and what happened there will play an essential part in our review. [Interruption.]

[Mr Speaker]

Order. The House must come to order again.

[Christopher Pincher]

Will my right hon. Friend consider asking the emergency response review team to look at the situation in Tindouf in Algeria, where thousands of Sahrawis have been virtually imprisoned in camps for almost 25 years? Can he raise the profile of that issue?

[Mr Duncan]

As I explained, the humanitarian review is primarily focused on rapid onset emergencies, and it has therefore not looked at a protracted crisis such as that of the Sahrawi refugee camps in Algeria. We support them, however, through our 13% share in the budget of the European Community’s humanitarian aid office, which in this financial year has committed €10 million to support Sahrawi refugees.

[Paul Flynn (Newport West) (Lab)]

What percentage of emergency aid does the Minister believe was included in the £52 million that the Vice-President of Afghanistan, Ahmad Zia Massoud, took from his country to his bolthole in Dubai? Is there any point in pouring money into those funds before we end the corruption that is endemic in the Afghanistan Government?

[Mr Duncan]

We do everything to make sure that such moneys are paid only through a trust fund and paid only after proven action with proper receipts. We do everything possible to overcome the challenges posed by corruption in any such country.

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

The Minister mentioned Haiti. It is clear that some NGOs were not working very effectively together and were actually operating in their own interest. Will the review also consider the better co-ordination of NGOs, both from this country and those under UN supervision?

[Mr Duncan]

Yes, is the answer. However, I repeat that the review’s remit is concentrated and focused on rapid onset humanitarian response—in other words, it is a review of emergency humanitarian response, not of the entire area of all humanitarian action.

The Prime Minister was asked—

[Mr David Hanson (Delyn) (Lab)]

Q1. If he will list his official engagements for Wednesday 12 January.

[The Prime Minister (Mr David Cameron)]

I am sure that the whole House would wish to join me in paying tribute to Corporal Steven Dunn from 216 Parachute Signal Squadron who died on 21 December, to Warrant Officer Class 2 Charles Wood from 23 Pioneer Regiment Royal Logistic Corps who died on 28 December, and to Private Joseva Vatubua from the Argyll and Sutherland Highlanders, 5th Battalion The Royal Regiment of Scotland who died on 1 January. These were courageous and selfless servicemen who have made the ultimate sacrifice in the fight to make our country a safer place. We send our deepest condolences to their families, their friends and their colleagues.

This morning, I spoke to the Australian Prime Minister Julia Gillard to send the condolences of everyone in this House and everyone in the country for the appalling floods and the damage that has been done in Queensland, and to say that we are all thinking of her and the Australian people at this very difficult time.

In addition to my duties in the House, I shall have further such meetings later today.

[Mr Hanson]

I endorse the Prime Minister’s condolences to the families of the troops and the Australian people.

The Prime Minister will recall his solemn pledge at the election not to raise VAT. He will also recall his solemn pledge in the coalition document to take robust action on bankers’ bonuses. Given that he has broken his first promise and is now reneging on his second, why should we trust anything that he says again?

[The Prime Minister]

The reason why we have had to put up value added tax is the complete and utter mess we were left by the Government whom the right hon. Gentleman supported. I know that they are now in denial about this, but the fact is that we had one of the biggest budget deficits in the G8 and one of the worst records on debt anywhere that one could mention. We had to take action. The reason we can now discuss calmly taxes and bankers’ bonuses and we are not queuing up behind Greece and Ireland for a bail-out is the action that this Government took.

[Richard Graham (Gloucester) (Con)]

Q15. The Prime Minister will know of the good progress made in the regeneration of my constituency. The next phase is the regeneration of city centre assets currently owned by the regional development agency. Does the Prime Minister agree that, in line with our localism agenda, the best thing is to transfer those assets as soon as possible to the city council, for development for the benefit of the city, and can I highlight how much support that has within Gloucester?

[The Prime Minister]

I pay tribute to my hon. Friend and what he does to help drive the regeneration agenda in Gloucester. There are real opportunities now that the regional development agencies, which were unloved in so many parts of the country, are going and we are having stronger local enterprise partnerships. There is much more room for good local development, including in Gloucester.

[Edward Miliband (Doncaster North) (Lab)]

I join the Prime Minister in paying tribute to Corporal Steven Dunn from 216 Parachute Signal Squadron, Warrant Officer Class 2 Charles Wood from 23 Pioneer Regiment Royal Logistic Corps and Private Joseva Vatubua from the Argyll and Sutherland Highlanders, 5th Battalion The Royal Regiment of Scotland. We pay tribute to them for their heroism, commitment and dedication, and our hearts go out to their families and friends. I also join the Prime Minister in sending condolences to the Australian people for the floods that are affecting them.

In opposition, the Prime Minister said:

“Where the taxpayer owns a large stake in a bank we are saying that no employee should be paid a bonus of over £2,000”.

Can the Prime Minister update us on the progress in implementing that promise?

[The Prime Minister]

What I would say is this—[Interruption.] It was the last Government who bailed out the banks and asked for nothing in return. That is what happened. The reason we have difficulties with Royal Bank of Scotland this year is the completely inadequate contract that was negotiated by the Government whom the right hon. Gentleman supported. What we all want to see is the banks paying more in tax, and we will see that; we want to see the banks doing more lending, and we will see that; and we want to see bonuses cut, and we will see that. Perhaps he would now make a constructive suggestion.

[Edward Miliband]

The country is getting fed up with the Prime Minister’s pathetic excuses on the banks. He made a clear promise: no bank bonus over £2,000; it is still on the Conservative website. It is a promise broken.

The Prime Minister cannot answer the question on bankers’ bonuses: let us try him on the bankers’ tax. Can he explain to the British people why he thinks it is fair and reasonable, at a time when he is raising taxes on everyone else, to be cutting taxes this year on the banks?

[The Prime Minister]

We are not, is the simple answer. I know that the shadow Chancellor cannot really do the numbers, so there is no point Wallace asking Gromit about that one. Let me give the right hon. Gentleman the figures. Last year, the banks paid £18 billion in tax; this year, they are going to be paying £20 billion in tax. Their taxes are going up.

[Edward Miliband]

The Prime Minister just needs to look at page 91 of the Office for Budget Responsibility book, published in November, to see that Labour’s payroll tax on the banks raised £3.5 billion in addition to the corporation tax that they pay. His banking levy is raising just £1.2 billion. In anyone’s language, that is a tax cut for the banks. Why does the Prime Minister not just admit it?

[The Prime Minister]

I have given the right hon. Gentleman the numbers showing that the taxes are going up from £18 billion to £20 billion—now let me explain the numbers in terms of his bank bonus tax and our bank levy. Obviously he cannot get the numbers from the man sitting next to him, so let me give him the numbers. The bank bonus tax raised a net £2.3 billion, and the author of that tax, the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who is sitting on the Back Benches, says that you cannot go on introducing this tax year after year, and very sensible that is too. The bank levy will raise £2.5 billion each year once it is fully up and running—[Interruption.] Yes, £2.5 billion; even the shadow Chancellor can tell the right hon. Gentleman that £2.5 billion is more than £2.3 billion. And with the magic of addition and a bank levy every year, which we supported and he opposed—they said “Don’t do it”, remember that?—we will raise £9 billion compared with his £2.3 billion. Even the shadow Chancellor can work out that 9 is bigger than 2.3.

[Edward Miliband]

That is as close as we get to an admission from the Prime Minister that he is cutting taxes on the banks this year. The OBR is very clear that Labour’s bank bonus tax raised £3.5 billion; he will be raising £1.2 billion from the bankers’ levy.

The Prime Minister cannot answer on bonuses and he cannot answer on taxes: now let us talk about transparency. On this, I think he should listen to the Business Secretary. We know that the Business Secretary is not a man to mess with; he told his surgery before Christmas that he had a nuclear weapon in his pocket and he was not afraid to use it, so we should listen to him. He said:

“If you keep people in the dark, you grow poisonous fungus.”

On this occasion, he was not talking about the Chancellor of the Exchequer—he was talking about the bankers. Why does the Prime Minister not listen to his Business Secretary and implement our proposal for the disclosure of all bonuses over £1 million? It is on the statute book and ready to go—why does he not just get on with it?

[The Prime Minister]

That was such a long question that I think it is the right hon. Gentleman who should be thinking about the television career, and he should get his brother to run the Labour party—that is probably a better way round. [Interruption.] Look, we want greater transparency, but let me put this to him: he had 13 years to put these rules in place—why did he never get round to it?

[Edward Miliband]

We know that the Prime Minister has no answer when he starts asking me the questions. Why does he not answer the question on transparency? Let me tell the Prime Minister, he is now in the absurd position of being more of a defender of the banks than even the banks themselves. Stephen Hester, the chief executive of the Royal Bank of Scotland, went to the Treasury Select Committee before Christmas and said,

“If the Walker Report”

—a report that the Labour Government commissioned, which made the recommendation—

“were to be implemented for the whole industry, I’m not arguing against it. I have no great problem with the issue of transparency and would have no difficulty.”

The Prime Minister has had eight months to hold the banks to account—[Interruption.] He has had eight months to hold them to account. When is he going to start?

[The Prime Minister]

I will take a lecture from a lot of people on how to regulate banks, but I will not take one from the Opposition, who let them get away with absolute murder. Who set up the bank regulation that completely failed? Who bailed out the banks and got nothing in return? Who agreed a Royal Bank of Scotland contract with nothing in it about bonuses for this year? By the way, the right hon. Gentleman was at the Treasury all the way through that. He was there when the previous Government knighted Fred Goodwin. [Hon. Members: “Ah!”] Yes—wait for it—they knighted him for services to banking and sent him away with a £70 million pay-off. That is why no one will ever trust Labour on banking or on the economy again.

[Edward Miliband]

What was the right hon. Gentleman saying when all that was going on? He was saying, “Deregulate the banks more.” He even put the Vulcan in charge of his policy on the banks—planet Redwood and planet Cameron. That is the truth; there we have it. Life in 2011 on planet Cameron: one rule for the banks, another for everybody else. Is it any wonder, as we now know, what his Ministers say in private? In the privacy of his surgery, his Health Minister said:

“I don’t want you to trust David Cameron…he has values that I don’t share.”

The Health Minister knows that the Prime Minister is out of touch, the House knows that he is out of touch and now, because of his failure on the banks, the whole country knows that he is out of touch.

[The Prime Minister]

I think the right hon. Gentleman knows that this just is not working. We have ended up with a shadow Chancellor who cannot count, and a Labour leader who does not count. When the right hon. Gentleman was in the Treasury, what did he do when the Government set up the regulatory system that failed? He did nothing. What did he do when they paid out £11 billion in bonuses to bankers? He did nothing. What did he do when they said that they had abolished boom and bust? He did nothing. He was the nothing man at the Treasury and he is the nothing man now that he is trying to run the Labour party.

[Dr Sarah Wollaston (Totnes) (Con)]

Brixham coastguard in my constituency has helped more than 2,000 people in the past year. It is earmarked for closure. Will the Prime Minister meet a delegation from Brixham coastguard to hear about the importance of their local knowledge and skills, and to hear how we can avoid a fiasco similar to that of the regionalisation of fire services?

[The Prime Minister]

I am grateful for my hon. Friend’s question. I looked carefully at the time of the announcement at exactly what was proposed for the coastguard. There are proposals to try to put more people on the front line by sharing back-office services and through the way in which the coastguard is co-ordinated. I know that there are very strong local feelings, and I will arrange for her to meet the Transport Secretary to discuss the matter. What is essential is that we have really good coastguard coverage for all of our country.

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

Q2. The Prime Minister has just confirmed to everybody listening that he is not taking any action on bankers’ bonuses, yet at the very same time his Government are removing the mobility element of disability living allowance for thousands of people who live in residential care. Is that the influence of the Liberal Democrats, or the unfinished business of the son of Thatcher?

[The Prime Minister]

First, I actually said no such thing. The hon. Gentleman obviously was not listening to our interesting exchanges. Let us be clear: we want a settlement in which the banks’ taxes go up, their lending goes up and their bonuses come down. Instead of posturing and posing, we are actually doing something about it. Disability living allowance is an important issue, and our intention is very clear: there should be a similar approach for people who are in hospital and for people who are in residential care homes. That is what we intend to do, and I will make sure that it happens.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Please may I ask the Prime Minister to encourage local councils to look favourably and flexibly on community groups that wish to have roads closed to hold street parties to celebrate the forthcoming royal wedding?

[The Prime Minister]

I will certainly do that. I know that, outside some of the large trade unions that fund the Opposition, everyone wants to have a real celebration for the Olympics, the diamond jubilee and the royal wedding, and I think we should certainly make it easier for people to close streets and have street parties.

[Alex Cunningham (Stockton North) (Lab)]

Q3. I also associate myself with the tributes paid to our soldiers who have recently died in the service of our country, including our own Teesside man, Warrant Officer Charlie Wood, a fine soldier and proud Boro football supporter. Our thoughts and prayers are with his family and all the families.The Prime Minister’s Business Secretary compromised himself over the BSkyB takeover bid and his Culture Secretary is a declared admirer of the Murdoch empire. Will the Prime Minister now do the right thing and order the Culture Secretary to refer the takeover bid to the Competition Commission?

[The Prime Minister]

The hon. Gentleman is entirely right to pay tribute to the soldier from Teesside, and he spoke about him very movingly.

On the issue of the responsibility for media mergers, there is a proper process that needs to be followed. Ministers have a quasi-judicial role in doing that, and I am confident that the arrangements that we have put in place will ensure that that happens.

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

As chairman of the all-party homeland security group, may I commend the Prime Minister and the Government for having a proper internal discussion about the future of control orders? Given that President Obama himself has been unable to deliver his pledge to close Guantanamo Bay, would it not be ludicrous to suggest that there is some kind of simple answer to the problem? We look forward to seeing the Prime Minister’s proposals.

[The Prime Minister]

I thank my hon. Friend for what he says. There are no simple answers. We face an enormously dangerous terrorist threat, and it is a threat that the British judicial system has struggled to meet. I think that all parties—including the Labour party, funnily enough—have the same goal. The reason we have all talked about reviewing control orders is that we want to ensure that the answer that we come up with is good for liberty and good for security.

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

indicated assent.

[The Prime Minister]

I can see the shadow Home Secretary nodding, and I hope that we can reach all-party agreement on this important issue.

[Nic Dakin (Scunthorpe) (Lab)]

Q4. Does the Prime Minister think that it is fair or reasonable that a 16-year-old in the first year of their training or course should have their education maintenance allowance support withdrawn for the second year? Is that not a case of breaking our promises to those young people and letting them down?

[The Prime Minister]

The point about EMA is that we will be replacing it, and we want to look carefully at how best to do so, but there are two very important facts that we have to bear in mind. The first is that researchers found that 90% of recipients of EMA would be staying on at school in any event, and the second is that, again with all-party support, we are raising the participation age in education to 18. For those two reasons, I think it is right to look for a replacement that is more tailored and more targeted and that will help to ensure that those children who really need it get that extra money to stay on at school.

[Caroline Dinenage (Gosport) (Con)]

Q5. I know that the Prime Minister understands that there is a huge amount of support for the Arctic convoy veterans of world war two to receive a medal, but does he appreciate that in order for the remaining representatives of that incredibly brave group of men to receive that recognition in their lifetime, the time to act is now?

[The Prime Minister]

I do; I have considerable sympathy with what my hon. Friend says, and I have put a number of questions to the Ministry of Defence and will go on doing that. [Interruption.] Yes, we govern by consent. We have to have proper rules, but it seems to me that the important fact is that people on the Arctic convoys served under incredibly harsh conditions and were not allowed to serve for very long periods, so there is a case for saying that they have missed out. Many of them are coming to the end of their lives, and it would be good if we could do something more to recognise what they have done.

[Angus Robertson (Moray) (SNP)]

Which does the Prime Minister consider to be a worse political betrayal, a Liberal Democrat Deputy Prime Minister who promised not to introduce tuition fees and then did, or a Conservative Prime Minister who promised to introduce a fuel duty stabiliser and did not?

[The Prime Minister]

You can top all those with a Scottish National party that said it was going to have a referendum on independence and never did. As a predecessor of mine once said, “Frit!”

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

Q6. Cheshire West and Chester, my local Conservative-run council, has announced a council tax freeze while protecting essential public services. Many in the country, and indeed some in this Chamber, deny that that is possible. What message would the Prime Minister send to those who deny that it is possible for Government to deliver more for less?

[The Prime Minister]

I absolutely commend what my hon. Friend says. The fact is that of course we are making reductions in local government grant, although when we look at the figures, we see that what local government will get in 2013 is equivalent to what it got in 2007, so we should keep these reductions in perspective. However, I would urge every local council to look at what it can do by sharing services, sharing chief executives and trying to reduce back-office costs, and by taking the extra money that is there for a council tax freeze, so that they can deliver more for less.

[Ian Lucas (Wrexham) (Lab)]

Q7. With the Government cutting 20,000 front-line police officers, will the Prime Minister give me a commitment that recorded crime will not rise on his watch?

[The Prime Minister]

I want to see crime come down, because I want to see us get the police out on the beat. The fact is that only 11% of police officers at any one time are out on the beat. I have the figures for North Wales police, and yes, of course there are some spending reductions being made—[Hon. Members: “Answer the question!”] I am answering it. When it comes to the funding, in 2011-12 it will be the same as the funding that the police had in 2007-08, so it is perfectly possible to have effective crime fighting and to get police out on the streets in north Wales.

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

Q8. Given the rural nature of North Yorkshire and the impact of record prices both at the pumps and for household fuel, will the Prime Minister look again at the Chancellor’s undertaking in June to introduce a fuel stabiliser and, more especially, at a rebate for remote rural areas such as North Yorkshire?

[The Prime Minister]

We have looked at a rebate for rural areas, and some progress was made in the Budget on that issue. On the fair fuel stabiliser, yes, the Treasury is looking at it, because clearly there is a case for saying that if it can be shown that the Treasury benefits from extra revenue as the oil price rises, there should be a way of sharing that with the motorist who is suffering from high prices. [Interruption.] While we hear all the chuntering in the world from the Opposition, the fact is that the last four fuel duty increases were all in their Budgets.

[Paul Flynn (Newport West) (Lab)]

The proposed closure of the Newport passport office will have a devastating effect on the 250 families involved and a crippling effect on the economy of Newport. Can the Prime Minister give me an assurance that no final decision will be taken until the economic assessment is published and considered?

[The Prime Minister]

I know how important the passport office has been to Newport and how many jobs it has provided. Obviously we want to see diverse economies right across our country. That is what the regional growth fund is there to help to achieve in areas that are threatened with public sector job reductions, but I will certainly look at the specific question that the hon. Gentleman asks and ensure that he gets an answer.

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

Q9. The Prime Minister will recall his visit to my constituency hospital, Chase Farm, in support of the campaign to prevent the then forced closure of the A and E and consultant-led maternity services. Does he agree that we should keep to our policy of no forced closures, particularly given the fact that our local GPs—our Enfield GPs—are opposed to them, as indeed are residents to the Barnet, Enfield and Haringey strategy?

[The Prime Minister]

My hon. Friend makes a very good point. Any local changes to the NHS have to meet four tests: they have to have the support of local GPs; they have to have strong public and patient engagement; they have to be backed by sound clinical evidence; and they have to provide support for patient choice. There were no tests like that under the last Government, who had all these top-down reconstructions. There are now tests, and they will be adhered to by this Government.

[Mrs Jenny Chapman (Darlington) (Lab)]

The Business Secretary wants to move jobs in his Department from Darlington down to Whitehall. What will the Prime Minister do to stop it?

[The Prime Minister]

We agree with the programme—which was started not by the last Government, but by several previous Governments—of trying to diversify and spread jobs out of Whitehall and into the regions, and we should continue with that. [Interruption.]

[Mr Speaker]

Order. [Interruption.] The House must come to order. I want to hear Brandon Lewis.

[Brandon Lewis (Great Yarmouth) (Con)]

Q10. Great Yarmouth has been approved as one of the pathfinder schemes for GP practitioners. The local health teams are excited by the prospects that that offers. What support can the Government give to ensure that we deliver successfully on this project?

[The Prime Minister]

I am delighted that my hon. Friend’s constituency is taking part in the pathfinder project. Those people who say that somehow NHS reform is being introduced in one big start are completely wrong: 25% of GPs are going forward to make this work. There is huge enthusiasm among GPs to get this moving, and I think that it will show real benefits in patient choice. What I would say to everyone in this House is this. The idea that somehow there is a choice of a simple life—where we do not reform the NHS, and when we have rising drug and treatment bills and, frankly, a record in this country of not being ahead in Europe on cancer, stroke and heart outcomes—is not sensible. It is right to go ahead with this modernisation. It will be this coalition driving it forward and the Opposition just digging in and defending an unacceptable status quo.

[Jim Shannon (Strangford) (DUP)]

The Prime Minister will be well aware of the proposed changes to the air-sea rescue and coastguard services, particularly of the proposed closure of the coastguard station in Bangor in Northern Ireland and the exchange of responsibilities to Scotland. Will he assure the House today that the coastguard station at Bangor will be retained and that the responsibility for air-sea rescue will remain in Northern Ireland, so that the people of Northern Ireland and those who use the seas around it will be safe and secure?

[The Prime Minister]

I have been lobbied extensively about air-sea rescue, including by people from all walks of life, if I may put it that way. I totally understand the need for good air-sea rescue. I think what matters is not necessarily who carries out the service, but whether they are fully qualified, whether it is a good service and whether it is value for money. That is what we have to make sure happens, as in other areas.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Q11. In reviewing anti-terrorist laws, will my right hon. Friend ensure that there is a balance between the police having the powers of detention and arrest that they need and ensuring that there is a return to the rule of law, as it is understood?

[The Prime Minister]

My hon. Friend is absolutely right that we should not depart from normal procedures and practices in British law and justice unless it is absolutely necessary. Every change has to be defended in that way. As I said earlier, we face a terrorist threat that is materially different from what we faced from the IRA. We face a threat where people are quite prepared to murder themselves and as many as they can on any occasion. It is difficult to meet this point by using all the existing methods. That is why control orders were put in place and that is why their replacement must be good both for our liberty and for our security. I am absolutely convinced that we will do that, and in a way that has the support of the police, the security services and all those to whom I pay tribute from this Dispatch Box today for all their work, including over the Christmas period, in keeping us safe.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

Q12. This House recognises the valuable work of the armed forces in promoting and protecting democracy in some of the most dangerous parts of the world. Yet these same armed forces see that the Prime Minister in their own country is sacrificing democracy to a foreign-based media mogul—hear no evil; see no evil. Will the Prime Minister explain why?

[The Prime Minister]

I am afraid I did not quite get the gist of that question. The point is that media regulation is properly carried out in this country and by this Government, and it will be done in a way that is fair and transparent. That is what needs to happen; that is what will happen.

[Richard Ottaway (Croydon South) (Con)]

Q13. The right to strike is an important one and the hallmark of a free society, but with rights come responsibilities. Does the Prime Minister agree that any union ballot that leads to industrial action should have the majority support of those entitled to vote?

[The Prime Minister]

I know that a strong case is being made, not least by my colleague, the Mayor of London, for this sort of change. I am very happy to look at the arguments for it, because I want to make sure that we have a fair body of union law in this country. I think the laws put in place in the 1980s are working well. We do not currently have proposals to amend them, but I am happy to look at this argument, because I do not want to see a wave of irresponsible strikes, not least when they are not supported by a majority of people taking part.

[Lindsay Roy (Glenrothes) (Lab)]

Q14. Nye Bevan, a man of great vision and remarkable foresight, once said: “The Prime Minister has an absolute genius for putting flamboyant labels on empty luggage.” Is this Prime Minister’s so-called bonfire of the quangos one such example, because it has turned out to be a damp squib?

[The Prime Minister]

I do not accept that for a moment. The bonfire of the quangos is going to make sure that we rationalise all the non-governmental bodies and it will save billions of pounds in the process. It is a very sensible process of asking what should be part of Government, which should be properly accountable to this House, and what does not need to be done and therefore can be taken away. As I say, it will save billions of pounds—and a very good thing, too.

[Henry Smith (Crawley) (Con)]

Will the Prime Minister join me in congratulating the Crawley hospital league of friends on helping to secure a new mammogram machine for that hospital? Can the Prime Minister explain other ways in which we can develop better cancer services in this country?

[The Prime Minister]

I am grateful for my hon. Friend’s question. I know that Members in all parts of the House support the efforts of leagues of friends in their constituencies in raising money for their hospitals and doing extraordinary things in terms of equipment and better services. This is a good moment at which to pay tribute to all who take part.

Today we are announcing a new cancer plan that aims to save another 5,000 lives every year by the end of the current Parliament. This is all about the early diagnosis that we need in the NHS, but I must tell the hon. Gentleman that we would not be able to do it if we had not, as a coalition Government, made the right decision to protect NHS spending—a decision completely opposed by the Labour party.

Points of Order

Wednesday 12th January 2011 Commons Chamber

12:30

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

On a point of order, Mr. Speaker. The House has been waiting for the conclusions of the counter-terrorism review since the end of the summer. It now seems that we will not have a statement this week, and that we may not have one next week either. It appears, however, that the full details of the review were leaked to a BBC television station last night. Is that not a shambolic and contemptuous way in which to treat the House in respect of an issue of such vital national importance when, as the Prime Minister said today, consensus is the right way forward? Have you any information, Mr. Speaker, on when we are likely to have a statement, and should that not happen tomorrow or as soon as possible?

[Mr Speaker]

The short answer to the right hon. Gentleman’s question is that I have no knowledge of when a statement is to be made, and I do not want to become involved in hypothetical questions. I am not aware of the disclosure to which the right hon. Gentleman has referred, but as the whole House—including Ministers—is aware, when decisions have been made they must first be announced to the House.

[Mr Kevin Barron (Rother Valley) (Lab)]

On a point of order, Mr Speaker. You will be aware that there is a huge amount of speculation in the press today following yesterday’s court hearing involving the hon. Member for Barnsley Central (Mr Illsley) and whether he could now be expelled from the House. May I ask you to clarify whether the matter remains sub judice—

[Mr Speaker]

Order. I have got the gist of what the right hon. Gentleman is seeking to raise. I can advise him and the House that the matter in question is sub judice until the point at which the judicial process as a whole has been completed. That is established, and there are precedents for it. I hope that what I have said to the right hon. Gentleman and to the House is helpful.

[Mr Barron]

Further to that point of order, Mr. Speaker—

[Mr Speaker]

Order. There is no “further to that point of order”.

[Mr Barron]

No motion will be accepted—

[Mr Speaker]

Order. There is no further point to be made. The right hon. Gentleman has raised the matter and I make no complaint about that, but I feel that I have given a clear indication to the House of what the position is.

Dairy Farming

Wednesday 12th January 2011 Commons Chamber

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

12:33

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

I beg to move,

That leave be given to bring in a Bill to make provision for the minimum prices payable to dairy farmers for the production of milk; to establish minimum distances between intensive dairy farming operations and the nearest settlements; and for connected purposes.

I am grateful for the opportunity to further the debate on an issue that is fundamental to the way of life of many in my constituency and, indeed, people in rural areas throughout the country. That issue is, of course, the future of the British dairy farming industry, which, as hon. Members in all parts of the House will know, has been in crisis for well over a decade—partly because central Government previously showed no real interest in either the dairy farming industry or the farming industry generally, but also because of the huge power of supermarkets and other bulk purchasers to drive down the prices of not just milk but many of the staples of our diet, a power that they have used vigorously and persistently for far too long without having their wings clipped by the House. The power of the supermarkets and other large purchasers may have been good for consumers in the short term, but it has not been good for farmers, and I suspect that it will be beneficial in the longer term neither for consumers nor for those purchasers themselves. The simple fact of the matter is that what has gone on has driven down the price of milk and other commodities to levels where it has become extremely difficult for British farmers to make an acceptable living.

Dairy farming has been part of this country’s agricultural economy for many hundreds of years, and it is also part of our rural heritage. That is, or at least was, particularly so in rural areas such as the one that I represent, and it is partly why the reduction in the number of British dairy farmers is of such concern to so many of us. I alluded to the numbers in an earlier Westminster Hall debate, and they are alarming. In 2000, there were 23,286 registered dairy production holdings in England and Wales. Today, that number stands at 11,233.

The factors that I have identified have led directly to the other issue with which this Bill seeks to grapple, which is that we are now beginning to see proposals for the sort of dairy farming industry that I know fills many ordinary people in this country and in my constituency—and, indeed, many traditional dairy farmers—with horror. As many hon. Members will be aware, developers in my constituency are currently seeking planning permission for a so-called super-dairy—in reality, an industrialised milk production facility—at Nocton fen, a beautiful site in the heart of a number of long-established rural communities, which, I must inform the House, are almost universally united in their opposition to the development.

The combination of the downturn in the economy and continued pressure on prices is forcing the farming community to consider intensive production mechanisms like those proposed at Nocton. Those mechanisms give rise to real concerns for animal welfare, and there is real opposition in respect of their effect on local communities and the environment more generally.

It is often said by those who live in towns who have no real knowledge of how we live our lives in rural Britain that farmers do not care about the environment or their animals. That argument is as wrong as it is offensive. In my experience, farmers care more about the environment and their animals than any other section of society, but they also have families for whom they have to provide and whom they need to support, and we therefore need to recognise that, whatever measures are introduced in this House and whatever decisions are taken, farmers have to be paid a proper price for the food they produce. If that were already happening in the dairy industry, I would not be introducing this Bill because there would be no need for it. If consumers paid just a few extra pence for their milk, the British dairy industry would not need to consider undergoing the form of fundamental change that proposals such as those for the super-dairy at Nocton involve. This Bill is not primarily about the specific proposals for Nocton, but one aspect of it does deal with intensive dairy farming, which will always affect local communities in various ways.

As I have implied, the contents of my postbag show me that the ongoing application at Nocton is almost universally opposed by the communities in which the development would be sited, and the opposition comes from those who live in settled farming communities and have done so all their lives. This is not nimbyism, therefore; instead, it is a legitimate and entirely understandable desire to maintain a recognisable rural way of life away from the hurly-burly of the industrial practices that have come to be associated with much of the modern world.

Opposition to these types of super-dairies is grounded on a number of rational bases, and I shall mention just two of them. First, there is the question of slurry. I must inform hon. Members that cows produce slurry, which must then be disposed of. Technology can, of course, provide part of the answer, but significant quantities of dirty water will always remain to be disposed of, either through environmentally unfriendly tankering operations or through discharge, which, unless carefully managed, runs the risk of polluting aquifers. This issue is not just about odour—an odour which many of us who live in the countryside are used to, and, indeed, are rather fond of. The fact of the matter is that effluent contains pathogens and other harmful substances, including residues of pesticides and veterinary medicines. The use of anaerobic digestion to process slurry cannot mitigate the entire problem, particularly when dealing with waste from a large numbers of cows.

A second reason for opposition, and another reason why local communities are right to be concerned about proposals for these large-scale dairy operations, is traffic, which comes with any form of industrialised process, whether in farming or any other industry. Large numbers of cows milked for high yields naturally produce large quantities of milk, which needs to be transported, and they also require deliveries of all manner of feed and other products associated with their maintenance and support. In areas where traffic is already an issue, such as Nocton, the strain placed on the existing infrastructure would be, at best, undesirable. In areas where traffic is sometimes thought not to be an issue, perhaps because of their rural nature, the position is worse. Additional movements of heavy and slow-moving vehicles contribute to accidents. Not only are communities in rural areas not used to this type of traffic, but they lack the infrastructure to deal with it. That is certainly the position at Nocton, where such issues have rightly been raised with me by a large number of local people.

Those issues and the others associated with these super-dairies—if they are indeed the route down which the British dairy industry is to go—can be solved by introducing a required minimum distance between such operations and the nearest settlements, as is already the case in many other jurisdictions, including many states in the United States. For that reason, and for all the others that I have given, I respectfully submit that this Bill is timely and I commend it to the House accordingly.

Question put and agreed to.

Ordered,

That Stephen Phillips, Mr Roger Gale, Martin Horwood and Robert Flello present the Bill.

Stephen Phillips accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 10 June, and to be printed (Bill 131).

Postal Services Bill

Wednesday 12th January 2011 Commons Chamber

[Relevant document: The First Report from the Scottish Affairs Committee, Postal Services in Scotland, HC 669-I and –II.]

Consideration of Bill, as amended in the Public Bill Committee

New Clause 2

Guarantee of inter-business agreement

‘Prior to any sale or transfer of a post office company an agreement must be secured to guarantee the inter-business agreement between Post Office Limited and Royal Mail for a period of at least 10 years.’.—(Bob Russell.)

Brought up, and read the First time.

12:42

[Bob Russell (Colchester) (LD)]

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

When social historians come to study the Post Office/Royal Mail between 1980 and 2010, they will wonder how a great British institution, which was exported around the world and was copied by other nations, was allowed to go downhill so quickly. Successive Governments during those 30 years have to share equal blame. The number of post office closures was considerably greater under the Labour Government than in the years of the previous Conservative Government. In my constituency—I am sure that this was repeated around the country—the number of sub-post offices was almost halved under Labour Government policies that were both deliberate and had unintended consequences. For example, no joined-up government was involved when that Government’s Department for Work and Pensions put the delivery of Government mail out to the private sector. What makes the situation even worse is that the final journey of every privatised letter and package delivered in this country makes the Post Office/Royal Mail a loss; every private package and private letter is subsidised by the public purse.

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

Does my hon. Friend know that when I went to meet postmen, as I always do at Christmas, I found that what bothered them more than anything about the Bill was not so much the privatisation element—although they did not particularly welcome that—but that they were walking up drives, delivering letters at a loss? That suggests that the kind of inter-business agreement that led to that regulatory requirement showed a serious deficiency in Post Office management.

[Bob Russell]

I endorse that. I, too, like many right hon. and hon. Members, visited my local sorting office. It is safe to say, without any contradiction, that morale is not high.

[Mr Mike Weir (Angus) (SNP)]

I have listened carefully to what the hon. Gentleman has said. The inter-business agreement is an agreement between post offices and Royal Mail about the use of post office services. I think the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) was referring to the headroom agreement, which relates to the “last mile”. That is a different thing and is not related to the agreement between the two arms of Post Office Ltd.

[Bob Russell]

The hon. Gentleman has taken a keen interest in this Bill and will know the ins and outs of it far better than I do. I am making the general point that the incompetence of the last Government and of Royal Mail and the Post Office under the jurisdiction of the last Government mean that every time a private package is delivered by the friendly postie, it is at a loss to the public purse. That was my general point. Indeed, I could refer to Postman Pat and his black and white cat. Some hon. Members might have seen the adaptation of Postman Pat by Specsavers, and the agreement that the last Labour Government allowed is like that Specsavers advert—Postman Pat is not on the road, he is driving over the fields and knocking down signposts.

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

I can understand that the hon. Gentleman is unhappy with what happened under the previous Government, but would he care to elaborate on his anxiety and the role of the regulator in constantly squeezing prices, which led to some of the losses?

[Bob Russell]

The hon. Gentleman may well be right. I might come on to the point about pressing down prices in the future.

I am not a fan of privatisation, either of Royal Mail and the Post Office or of any other aspect of a public utility. My record is proof of that. I did not agree with the proposals that came out under the Labour Government to privatise or part-privatise Royal Mail and the Post Office. Although my heart is against the Bill, my head tells me that it will happen. We must be pragmatic and we must accept the inevitable. I am still hoping that a mutualised company will emerge, as many of our sub-post offices are already run by mutuals through the co-operative movement. That is one way. Another way would be if shares were issued to the work force.

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

On the issue of downstream access that my hon. Friend has been addressing, one thing that the Bill does is to give the regulation to a regulator with more robust experience of regulating markets. The most important thing that the regulator will have to do is to ensure that the access arrangements are fair and balanced so that Royal Mail can survive to deliver that crucial universal service.

[Bob Russell]

As ever, my hon. Friend makes an important and valid point. Those who inherit this Bill, when it becomes an Act, will need to take that on board.

I think I am one of the few people in the House who was once employed by the Post Office. I joined the company in 1973, when it was Post Office Telecommunications. It then became British Telecommunications—that was the first significant split—and it was then privatised. The rest is history, as they say. Many people still refer to that great British institution as the General Post Office, even though it must be 40 or 50 years since the GPO ceased to exist—I am not sure exactly when it was—in the same way as they still refer to the boy scouts, even though they have not been boy scouts for decades.

Returning to the point that the hon. Member for Dumfries and Galloway (Mr Brown) made, I am grateful for this trip down memory lane because when the previous Postal Services Bill came before the House, the shadow Chancellor was the responsible Minister and he had some harsh words to say about the previous Administration. He said:

“If I was being kind, I would call their stewardship maladroit. If I was being unkind, I would say that Postman Pat’s black and white cat would have provided better stewardship of the Post Office over the term of the previous Government.”—[Official Report, 15 February 2000; Vol. 344, c. 868.]

It is fair to say that we are now back to the modern Postman Pat and the Specsavers advert.

There are 11,905 post offices in the UK, the vast majority of which are sub-post offices run as franchises by sub-postmasters.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Gentleman agree that a 10-year agreement would be a better system for securing the future of the Post Office, especially given that the future of perhaps as many as 1,500 post offices across the United Kingdom might be in question?

[Bob Russell]

I am grateful for that intervention because the thrust and purpose of my new clause is exactly to enable the new, privatised Royal Mail to ensure that business continues to go to the Post Office and our sub-post offices. There is a general perception of the Post Office and Royal Mail as being one organisation, and I acknowledge that I regard it in that way. I know that they operate as two separate business entities, but just as when British Telecom moved away from the Post Office, it takes time for people to come to terms with the fact that they are two different animals.

[Mr Weir]

Is that not the crux of the problem? The Post Office does a lot more than simply service the mail delivery system, and by privatising Royal Mail the Government are breaking that link. A Royal Mail focused primarily or solely on mail delivery will not need the other services offered by post offices.

[Bob Russell]

The hon. Gentleman makes my point for me, so I hope that if we go to a vote he and his colleagues will join me in the Aye Lobby.

We have the network and the operating company, Post Office Ltd, and post offices provide a vital service to communities around the UK, especially, but not only, in rural areas. As I have said, about 10 neighbourhood, suburban community post offices have already shut in my urban constituency.

[Mr Mike Hancock (Portsmouth South) (LD)]

Unlike my hon. Friend, I am not an enthusiastic supporter of the legislation. What will his position be if his new clause is not passed, because he is saying that the Bill will be effective in protecting the things he is interested in only if his new clause is carried?

[Bob Russell]

I am bound to say that that was not a very helpful intervention from my hon. Friend, particularly as I share a flat with him. At the very least, he could have raised those concerns over the breakfast table.

I think I have made it clear that I am not a fan of the privatisation. I accept the reality of what is going to happen and I am suggesting to the Minister what I think would be in the best interest of our communities. I think that I am making an overwhelming case and it would be great if he accepted my new clause. The previous Government brought in measures on sustainable communities and we are now talking about localism, which is right. To say that the previous Government decimated the system would be wrong: they did more than that because decimation is only 10% and I would have settled for 10%.

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

Would not this measure make the whole transfer or sale deal much more viable and do much more to guarantee the viable retention of a post office network? If it is not accepted, that will all be in danger.

[Bob Russell]

I am grateful to my hon. Friend for that extremely helpful intervention. Regardless of what we think of the Bill, we all want to retain as many of our sub-post offices as we can.

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

Does the hon. Gentleman agree that, for post offices to be sustained, they need regular work? Is he concerned by what postmasters have pointed out—that there has not yet been a guarantee of additional work from the Government? Indeed, post offices might not even win some of the contracts that they have already bid for.

[Bob Russell]

The hon. Lady is correct and it is a pity that she was not here during the terms of previous Labour Governments to argue that case because they withdrew business from our sub-post offices. That is all on the record and there is no point in anyone seeking to deny it. The deliberate policies of the Labour Government are one reason why so many post offices have shut.

[Tony Lloyd (Manchester Central) (Lab)]

The hon. Gentleman is being very generous in giving way. He began to touch on the importance of the post office network in urban as well as rural areas, but was not able to develop the point. I represent a very urban, inner-city area and the post office network is vital to keeping the business community together. Quite simply, other businesses depend on post offices, which are coming under intense pressure from the supermarkets, for example, so we need to build in protection for the urban as well as the rural areas.

[Bob Russell]

I am also grateful for that intervention; every intervention so far, with the possible exception of that by my hon. Friend the Member for Portsmouth South (Mr Hancock), has been helpful to my argument. I referred to the rural post offices and I mentioned urban post offices following a series of interventions. The intervention of the hon. Member for Manchester Central (Tony Lloyd) bears that point out. The difference between rural and urban sub-post offices is that at least in urban areas there is a sporting chance that there might be one two miles or so away, whereas in rural areas one might have to add a zero to that distance.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I do not challenge the hon. Gentleman’s recording of history in that certain Government Departments that tendered their postal arrangements went outside Royal Mail. That is a matter of fact, as he says, but in defence of Labour’s record, my right hon. Friend the Member for Edinburgh South West (Mr Darling) secured £1.7 billion to try to keep the network as large as possible. Has the hon. Gentleman made any estimate of how many post offices and sub-post offices his right hon. and hon. Friends will close if his new clause is unsuccessful?

[Bob Russell]

No, I have not, but I am sure that the Minister, whom I have not yet won over to my argument, will point out that the coalition Government are investing a substantial sum of money in the sub-post office network. That will happen irrespective of what happens to my new clause.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

May I help the hon. Gentleman? Over the weekend, Consumer Focus said that unless there is any progress on this agreement, up to 4,000 post offices could be closed. Does he agree with that assessment?

[Bob Russell]

I am not in a position to challenge research that other organisations have undertaken. If that is the case, based on the number of closures under the previous Government, I would probably lose at least a third of the remaining sub-post offices in my constituency, which I would not welcome. Indeed, I would be distraught if that happened as a result of the Bill, but I hope that the money that the coalition Government are placing into the network will mean that the losses will not be of that magnitude.

12:59

[Mr Russell Brown]

The hon. Gentleman mentioned the amount of Government work that was taken away from post offices by the Labour Government. For the record, would he care to list what Government work was actually taken away? Not just the House, but the wider public would then be able to understand exactly what that means.

[Bob Russell]

The hon. Gentleman tempts me to rush to the Library to see whether that information would fill one or two sides of A4. We are not talking about one or two things; otherwise sub-postmasters would not have been telling me over the years that they lost business because of the actions of the previous Government—for example, on TV licences.

[Mr Brown]

I am sure the hon. Gentleman recognises that TV Licensing is not controlled by Government. The authority made a decision to save £100 million, so I have to say to the hon. Gentleman in good faith that it is wrong to make that statement, because TV Licensing is not Government-controlled.

[Bob Russell]

I am not sure whether I am grateful for that intervention, but if the hon. Gentleman is saying that the previous Government were impotent, I accept his observation.

[Richard Fuller (Bedford) (Con)]

The hon. Gentleman has been so gracious in giving way that I need to go back about four interventions to what he was saying about what the current Government are doing, rather than going into the history. When he acknowledges that the coalition Government have put substantial amounts of money into defending the post office network, does he accept that there really is a commitment behind the Bill to maintain the viability of the post office network, and there must be good reasons why his proposal is not permissible? Would he care to comment on the implications at European Union level?

[Bob Russell]

I suggest that the hon. Gentleman discuss that last point with the hon. Member for Stone (Mr Cash), who can enlighten him far better than I can. I thank him for the intervention, but the short answer is that I do not know what impact my new clause would have on EU legislation. I am sure that if there would be an impact we will hear about it from one of the Front-Bench speakers at some point.

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

If the hon. Gentleman looks at the record, he will see that the amount spent by the previous Government in paying out for closures of post offices—in other words, to people who left their post offices and took the King’s shilling—came to much more than the sum proposed by the current Government over a four-year period. How much impact does the hon. Gentleman think there will be on post offices from losing the arrangement to do business for Royal Mail, in terms of closures, compared with the paltry sum that is being offered? It may in fact be spent on redundancies and closing post offices, as it has been in the past.

[Bob Russell]

I need to move on, as my hon. Friend the Member for Bedford (Richard Fuller) suggested. However, in view of that intervention, I must respond by pointing out that the money the previous Government put in was to pay for closures, whereas the money this Government plan to put in will be to keep sub-post offices open. There is a significant difference between the two.

[Mr Mike Hancock]

Will my hon. Friend give way?

[Bob Russell]

No.

As the interventions have indicated, the post office network is still fragile. Some 9,000 sub-post offices have closed over the past 20 years. I am advised that 900 are for sale at the moment and that more than 150 are designated as “long-term temporarily closed”. That is not a phrase I understand, because I am not sure in which order the words should go.

The sub-postmasters who run those businesses have retired, are about to retire or want to sell their business because it makes no money. That is an important point, because in calculating the number of post offices that are open, Post Office Ltd includes those that are euphemistically described as “temporarily closed”. It is clear that many post offices find it hard to survive and sustain business. I am pleased that the Business Secretary recognises the difficulties that face the network. His announcement of a £1.3 billion subsidy will bring much comfort and will help the network to continue to operate for the next four years.

All of us want post offices to operate without subsidy. It is certainly unique that a high street retailer should be financed by the taxpayer; no other retail outlet would be allowed such support and nor would any Government want to provide it. The subsidy to the post office network reflects the unique nature of the business and the services post offices offer. When the social historians look back, they will acknowledge that just as the telegram has gone, so modern technology means that the business has to adapt. What should have happened in 1997 was a recognition of the potential use of modern technology through that wonderful network of outlets across the country—in towns, cities and villages. The Government should have asked what else that unique network could provide. They did not, and the result was that business continued to go down, which is why we are in the mess we are in now.

The relationship between Royal Mail and Post Office Ltd is governed by the inter-business agreement, or IBA, which sets out in detail the commercial relationship between the two companies. Typically it will include the goods and services that Royal Mail offers exclusively—or not—through the post office network. The IBA is essential to those post offices, as well as their commercial retail activity. I had the privilege of opening a fish and chip shop in a post office so that the owner could, it was hoped, keep the post office going. I believe it was the only fish and chip shop post office in the country. Sadly the post office has gone, but the Myland chippy is still there.

Royal Mail provides the post office business with a significant proportion of its income through transactions in respect of the postage of letters, packets and parcels. As we all know, historically, the combined businesses were known as the General Post Office—the GPO for those of us of a certain age—and then the Post Office. Integrated businesses operated together to handle mail and provide post office services. Over time, the businesses have become increasingly separate and the Bill breaks the company link between Royal Mail and Post Office Ltd entirely—exactly as British Telecom broke away from the Post Office.

There was a time when working for the post office was a family thing; it was generational. There was pride and security of employment, but now, as we have already heard, morale is on the floor. My new clause seeks to ensure that before the sale of Royal Mail, the two businesses have a copper-bottomed inter-business agreement in place and that it stays in place unmolested for 10 years.

Ministers may ask why it is necessary for such an agreement to be in the Bill. No doubt, they will point to the current IBA and, of course, the subsidy the Government, or rather taxpayers, are generously providing. They will point to evidence given in Committee by Royal Mail that it has no intention of breaking its commercial relationship with Post Office Ltd. There should thus be no problem with the new clause, because it will put in writing what the Committee was assured would be the case.

[Jim McGovern (Dundee West) (Lab)]

May I ask the hon. Gentleman about the 10-year period? Why not one year, or an indefinite period? How did he arrive at 10 years?

[Bob Russell]

That is a good question. The number could be nine or 11. Those with whom I have discussed this point—including the Communication Workers Union and others—are of the view that the period cannot be open-ended. There is general acknowledgement that the provision cannot last for ever. The number of years could be five, eight or 10—it is just a figure. I do not think it was scientifically arrived at—if that is what the hon. Gentleman is asking; it was really a question of trying to cement an existing operational mechanism on a formal legal footing for at least 10 years, in the hope that it would continue way beyond that. It would be a guarantee for 10 years, but the hope is that it would continue.

[Mr Mike Hancock]

I will try to be helpful to my hon. Friend. I do not support the Bill, but I support the new clause in trying to bring about a significant improvement. In his discussions with the Government, have they given him any explanation of why they would want to resist such a straightforward and sensible measure as the one he proposes?

[Bob Russell]

If my hon. Friend thinks that I have been spending hours and hours trawling around meeting Ministers—

[Mr Hancock]

You have been getting up early.

[Bob Russell]

I was up early—true—but the new clause stands in my name, and I am sure that the Minister is aware of my thinking. I have not persuaded him so far, although I have been speaking for half an hour. I hoped that he might intervene to say that he accepts the argument and my new clause. Until such time as he does, I will keep going and hope I can win him over.

[Mr Weir]

I thank the hon. Gentleman for giving way; he has been very generous with interventions. He mentioned what the Minister said in Committee, but I can assure him that many of us who served on the Committee were not convinced by the Minister’s argument. It seems to me and to many others that the fundamental difference is that Royal Mail and Post Office Ltd are part of the same group and will obviously stick together, but when Royal Mail is privatised we will have a large Royal Mail company and a relatively small Post Office Ltd negotiating an agreement. Does the hon. Gentleman think that Post Office Ltd will come out well from such an agreement?

[Bob Russell]

I cannot comment on the body language in Committee because I was not there. I tabled the new clause, which, if passed, will deal with the hon. Gentleman’s fears. It is as simple as that.

The new clause would protect the post office network from the IBA’s possible erosion by a privatised Royal Mail. Ministers might feel differently, but we must ask ourselves why Royal Mail is being privatised. Indeed, successive Governments have argued the same points over the past 30 years.

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

Is the hon. Gentleman concerned that, given the nature of change, a 10-year restriction on the inter-business agreement might end up being bad for the Post Office? Under the Bill, new providers may come in, so it might welcome the flexibility to renegotiate the agreement.

[Bob Russell]

That is certainly a valid argument, although I do not agree with it. I understand what the hon. Gentleman is saying: 10 years could be too restrictive and a shorter period—or, indeed, no period at all—might be beneficial.

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

Is my hon. Friend aware that there are many examples of private sector companies splitting to become separate entities and that, in almost every case, a shareholders’ agreement between them has set the terms until they have been able to operate independently? Is that not precisely what the new clause would do, and is it not simply commercial good practice, which should be commended to the Minister?

[Bob Russell]

I am extremely grateful to my hon. Friend. If he is called to speak in the debate, I hope he will elaborate on that important and valuable point, of which I was not aware. I am sure he is correct—he would not have said it otherwise—so if it is acceptable for private sector companies to split but still have a legally binding agreement, why cannot we have that in this case? I thank him for making that point.

Royal Mail needs to be free from Government interference. It must become more dynamic—I think that that reinforces my point—and more competitive, as the market for postal services has liberalised. Mr Richard Hooper, who has reported to this Government and the previous Government, has said that Royal Mail’s profit is considerably lower than that of other national postal authorities and a lot lower than that of the private carriers. Of course, one reason for that is the subsidised delivery of private mail. Whether or not that is an accurate assessment, the argument in favour of privatising Royal Mail has at its core the desire for the business to grow and become more profitable. As with all private businesses that operate in strongly competitive markets, Royal Mail will undoubtedly want to use the new commercial freedoms it has been given. Indeed, a dynamic Canadian business woman was appointed as chief executive precisely to ensure that Royal Mail can get the best of starts as a wholly commercial entity.

13:15

Chief executives of large private companies have a primary goal: to maximise shareholder value by running their businesses as profitably as they can. Of course, that involves driving down cost, ensuring that distribution channels are as efficient as possible and selling products wherever and however possible. What would a dynamic chief executive make of an inter-business agreement that restricts the ability of the principal business to sell its goods or services? What would Sir Terry Leahy say to a supplier who told him, “You cannot negotiate with me on the price of the goods or services I provide for you”? Tesco—I shop at the Co-op—did not become what it is by being anything other than determined to drive down costs.

We may not always feel comfortable with the relationship that supermarkets have with their suppliers, but they will always say that the No. 1 customer motivation is price and that costs must be controlled. If a chief executive of a large company somehow neglected their obligations to cut costs or gave unfair favour to a supplier, they would have a board, including non-executive directors, and shareholders breathing down their necks. In a few years’ time, we face the prospect of a privatised Royal Mail, free from the clutches of my right hon. Friend the Secretary of State for Business, Innovation and Skills, free to innovate and free to do all the things that only privatisation will allow it to do.

[Jim McGovern]

The hon. Gentleman said that the Communication Workers Union supports the 10-year period. I am part of the Select Committee on Scottish Affairs, and when we visited the sorting office in Glasgow the manager told us that he favours privatisation—the very first Royal Mail employee to say so. Is the hon. Gentleman aware that the CWU has made it clear that it is against privatisation? Does he support the CWU’s position?

[Bob Russell]

I am sorry if the hon. Gentleman is not aware of my views on the Bill. I thought that I had made it quite clear that I do not favour privatisation, but I accept the reality that it will happen, and I am trying to make things as good as I can. Of course I know the CWU’s views. I have met CWU people both nationally and locally, and I have told them, “I do not like it, but it’s going happen—accept the reality.” I do not like lots of things, but we have to accept the reality.

The new clause is designed to try to assist the post office network—our neighbourhood post offices. It is also designed to try to ensure that Post Office workers—the people who deliver our mail—have a sustainable business. That is what it is all about. I have encouraged my local CWU people in Colchester to understand that the concept of mutualisation and employees having shares are positive things—they seem to work for John Lewis, as one model, and for the co-operative movement, as another model—and to embrace, not deny what will happen.

[Mr David Anderson (Blaydon) (Lab)]

I thank the hon. Gentleman for giving way; he is being very generous. Does he agree that neither the Co-op nor John Lewis had arrangements foisted on them by a Government against the will of the work force and the British people?

[Bob Russell]

I need to reflect on what the Labour Government, particularly Lord Mandelson, had in mind, and how that may or may not differ from the proposals.

I am critical of the Labour Government, but I am also critical of the Government who preceded them. This is the third time that I am going to say this: for the past 30 years, this great British institution has been run down by successive Governments. It was the envy of the world—it no longer is—and ultimately the blame must rest with Government and, it must be said, the somewhat mediocre management for many of those years.

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

The problem for Labour Members is that when the Government discuss mutuals or co-operatives, we do not know whether they are proposing a workers’ co-operative or a mutual co-operative. We received some indications in Committee, but we do not know for certain what model they are proposing. As has been said, 97% of post offices are independently owned, and we assume that those owners will go into a mutual model.

[Bob Russell]

I thank the hon. Gentleman for his intervention, and in so doing I return to the confusion about post offices and Royal Mail. If we get confused in this debate, we can understand why the general public are confused too. He is absolutely right that 97% of sub-post offices are not owned by the Government. We are not talking about them—we are talking about Royal Mail and how privatisation and whatever measures and aspects of the Bill are introduced will assist post offices and Royal Mail and its workers.

[Ian Murray (Edinburgh South) (Lab)]

The hon. Gentleman has been generous in accepting interventions. You talked in response to my hon. Friend the Member for Blaydon (Mr Anderson) about successive Governments running down Royal Mail, which, to use your words, is a national treasure and national institution. Would you therefore agree that it will be your Government who could put the final nail in the coffin?

[Mr Speaker]

Order. I have not talked about anything and I am not giving any commitments on anything, but Mr Russell might.

[Bob Russell]

Thank you, Mr Speaker. Which Government did what when will be in the history books, so the hon. Gentleman will have his moment of glory and can say, “It was the dastardly Conservatives and Liberal Democrats wot done it.” That is how he would wish to present it, but I am not sure how history would record the demise of Royal Mail and the Post Office if Lord Mandelson’s proposals had been introduced, whatever they may have been.

I want to gaze into the future and imagine the agenda of the first board meeting of the newly privatised Royal Mail plc. After a report from the remuneration committee, perhaps the main item of business will be listed as the sponsorship of Sunderland football club. Afterwards, the agenda will no doubt turn to the issue of cost savings to be achieved. Like any other dynamic FTSE 100 company, which Royal Mail, I understand, will become, the board will want to see how it can reduce the cost of its contracts with suppliers. It happens every day in the world of commerce, notwithstanding the helpful contribution from my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso). In that private world, the agreements that I propose in my new clause exist.

A principal supplier to Royal Mail is Post Office Ltd. The board will confer and I have no doubt it will quickly decide two things: first, the cost of the contractual relationship with Post Office Ltd is too expensive and, secondly, limiting the distribution of products and services to the post office network does not work in the best interests of Royal Mail. That is where the analogy with the supermarkets comes in, because the criticism is that they are all-powerful. They determine the contracts with suppliers, they set the price, and if suppliers do not like it, they know what they can do.

[Damian Collins]

In the scenario that the hon. Gentleman paints, might it not be possible for the Post Office to say to Royal Mail, “Well, if you are going to do this to us, we will look at taking postal services from providers from whom we do not currently accept them, and run them in competition with your service. Would you like us to do that?” It would be an honest negotiation.

[Bob Russell]

Again, that is a good argument, and the hon. Gentleman may be proved right as time moves on. I hope that that will not be the case, but he makes his point.

Why would it be any different with Royal Mail? It may operate an agreement with Post Office Ltd, but there would be nothing on this earth to stop Royal Mail renegotiating it. In fact, Royal Mail would be obliged to change the terms of the inter-business agreement. It would, under any commercial logic, seek a wider set of outlets for a broader range of its services, including supermarkets, petrol stations and retail outlets. That will take vital revenue away from those post offices that currently have exclusive rights. Royal Mail will seek to chip away at the transactional costs that it pays to Post Office Ltd. It will want to revisit the IBA, renegotiate terms, and demand changes. As they say, it is nothing personal, only business, but every little counts.

What can we do to protect the UK’s network of post offices from the predatory actions of a privatised Royal Mail? If we leave the whole issue to be resolved in the commercial arena, there will be only one winner and one big loser. Even more of our neighbourhood and community post offices, both urban and rural, would go.

[Jim McGovern]

May I take the hon. Gentleman back to proposals to reduce costs, and what he said about there being one loser? Does he agree that probably the biggest cost to Royal Mail is paying its work force, and that the way to reduce costs is probably to drive down terms and conditions, so the biggest loser of all will be the work force?

[Bob Russell]

I am sure that the hon. Gentleman is right, which is why the new clause is important, not only for the retention of the sub-post office network but for the interests of employees whose morale, as I have said, is exceptionally low.

The new clause seeks to bring certainty, and ensure that the post office network will not face an immediate onslaught from Royal Mail. It places the IBA in legislation and ensures that it cannot be broken for 10 years. I accept that in order to help the process of privatisation along, Royal Mail managers have pledged undying love for their supplier. However, it could be argued that directors of a dynamic, privatised Royal Mail would be negligent in their duties if they did not try to cut the cost of doing business through Post Office Ltd.

The new clause can absolve them of that responsibility. It would enable all sides to point to the legislation and walk away from having to renegotiate the inter-business agreement. It would manage the expectations of institutional shareholders, who would not be able to exert pressure on Royal Mail to cut those costs. I am sure that my right hon. Friend the Secretary of State for Business, Innovation and Skills will recognise that together we are protecting the post office network. The omission of the inter-business agreement from the Bill can now be rectified.

[Michael Connarty]

Unfortunately, I have to leave the debate early, because I have to attend the European Scrutiny Committee at 2 o’clock.

First, the new clause attempts to ameliorate the impact on Royal Mail and particularly the post office network of what is probably one of the nastiest things that the Government will ever do to the people of the UK. The terrible act of putting up tuition fees up to £9,000 will damage a number of people, and will probably bring about the demise of the Liberal Democrat party, but the Bill attacks the fundamental structures of society, because it will bring about the closure of a vast number of post offices. Strong arguments were made—and I made them—every time that the previous Government went through another retooling of the post office network at huge cost. The hon. Member for Colchester (Bob Russell) tried to say that Government money set aside for the post office network over the next four years will be somehow be used to keep post offices open. If we look at the amount of money spent by the previous Government paying postmasters and paying for redundancies in the Royal Mail and the post office network when post offices closed in many of the communities that I and all of us represent, it is clear that the money will go in that direction. One reason why it will go in that direction is that the inter-business agreement will not be sustained in a privatised environment.

13:30

Let us look at former privatisations and see what happened to those who supplied services to BT. Let us look at what is happening now, when everyone is screaming about the cost of domestic fuel being charged by the six large energy providers—a cartel by any other name, although the providers say that it is just imperfect competition. It is the market. People are told, “Sorry, it is the market that is causing you to be unable to heat your homes.” It is the market that will cause post offices and sub-post offices to close.

It is clear that although Royal Mail management says that it is proud of the present Royal Mail/Post Office arrangement, the market will drive the management to look for cheaper ways of doing things. The example that I always use is what happened in the case of TV licensing. When the television licensing authority wanted to continue to use the post office and sub-post office network to sell its products, the Post Office said, “That’s fine. First, you’ll pay us a million pounds. In addition to that, you will obviously pay for every transaction.” That is what killed the deal—the £1 million that Royal Mail, through Post Office Ltd, wanted to get into its coffers, not the cost of transactions at sub-post offices, and the contract went to PayPoint.

That will happen again and again, because Royal Mail will look at what it gets for its money and will ask whether anyone else will offer the same service. PayPoint is publicly saying that it wants to take over the monopoly of the Post Office for delivering the services that the Post Office delivers now for Royal Mail and for Government Departments, and it will win because it will undercut. It will loss-lead to do so, as it has said so in its business plan. That will threaten what is at present one third of the revenue—£343 million per annum—going to the post office network from Royal Mail. Of that, £240 million is paid to the sub-postmasters. If they are not getting paid their money, they will not run the service.

[Mr Russell Brown]

I support my hon. Friend. There is no doubt that any of us who speak to our local sub-postmasters and postmistresses will be told clearly that private utility companies have over recent years negotiated prices that have driven down incomes for sub-postmasters. If we do not get the new clause written into the Bill, we will see such ongoing negotiation driving prices down. The Government say that they are providing £1.3 billion, with no closure programme in place. We will see sub-post offices withering on the vine as the years roll forward.

[Michael Connarty]

My hon. Friend echoes sentiments that are expressed in every post office and sub-post office when any of us take the trouble to ask.

[Bob Russell]

Will the hon. Gentleman be gracious enough to acknowledge that over the past 13 years his Government’s policies, inactivity and general performance created the situation that we are in today? If he wishes to move on with his argument for the future, he should have the good grace, please, to acknowledge past failings.

[Michael Connarty]

I have no problem doing that. I do not know whether the hon. Gentleman has been in the House when I have spoken about the Post Office in the past. I am the organiser and secretary of the communications workers liaison group in this place. I have opposed every attempt by any Government to bring in schemes to downsize the post office network—every single one of them.

My Government was criticised by me and by the Communication Workers Union. That Government put in a director, Crozier, who walked off with millions of pounds in bonuses for sacking people—for downsizing the number of people at the sharp end and failing entirely to do the one thing that he was tasked to do, which was to bring in the technology to modernise the process of distribution and introduce letter-bundling by street, as is done in any sensible country. He failed and was paid millions of pounds. That sounds like what happened with the banks so it seems as though we did a lot of that under the previous Government.

I am happy to say that the Labour Government got it wrong, because they did get it wrong. I say to the hon. Member for Colchester (Bob Russell) that his party will be judged on how it acts in government, not on how he is acting from the liberal wing of the Liberal Democrats. The orange book Liberals have joined the Tories and will become Tories if they want to stand at the next election. They are sitting opposite me at this moment. They are the people who are destroying the post office network, just as the delusional people in my party cost us millions of votes by doing what is about to be carried to its final conclusion—that is, attacking the structure of our communities.

When a Crown office goes and a sub-post office is put into a sweet shop at the end of the high street, we see the change. We see people queuing outside in the rain because the shop is too small to handle the business. When a sub-post office is put into the back of a small supermarket, as one has in Bathgate, or into a sweet shop, as one has in Linlithgow in my constituency, people in wheelchairs cannot get into the post office when staff create a barrier as they stock the shelves with quick-sale goods. All that happened under our Government, and the measures proposed in the Bill will be worse than any of that.

[Mr Weir]

The hon. Gentleman is making a good point. He speaks of a post office being put into a sweet shop. Does that not underline the need for the agreement? There is much talk about post offices delivering government business. After the closure programme and the relocation to paper shops and sweet shops, how many post offices in his constituency will realistically be able to do such business immediately?

[Michael Connarty]

As I said, the new clause is intended to ameliorate the impact, not to negate it. I would prefer a permanent agreement that the Royal Mail and the Post Office would not be sundered by the Bill. It is an illusion that the market will allow things to become more efficient. I do not believe that.

[David Mowat (Warrington South) (Con)]

Will the hon. Gentleman explain how the Bill, which gives each of the 7,000 currently unviable post offices approximately £200,000 over the next four years to keep going, is an attack on their communities?

[Michael Connarty]

It might be useful to read the Bill. That is not in the Bill. It is an under-the-counter promise by the Government that they have set aside a sum of money. That is no different from the sum set aside in the past by the Government every time they carried out a reorganisation to sustain the unsustainable. It is clear that those post offices are not viable in the market. If those post offices and sub-post offices lose another £343 million, which is the cost per year if the business arrangement is broken, that is where the money will go. It will replace the money that should have come from the agreement. The money will be required to pay the people. At present 900 post offices are up for sale, apart from those that are temporarily closed, as the hon. Member for Colchester said.

It is important that we realise that, in this process, the Conservative-led Government, supported by the Liberals against their pledges in their own manifesto, are trying to move the Post Office and Royal Mail into a market and away from a controlled situation. There is talk now of the inter-business agreement. There will be talk later of the universal service obligation, which will also be destroyed by the Bill. In the USA, the arch-capitalist country, the postal service is permanently in the public sector. It will not be taken out of the public sector because it is seen as a public institution. We will follow a route that will cause us to destroy part of our institutions.

I do not believe that Members are kidding themselves. I am sure they have talked to their communities when a sub-post office has been closed and heard the anger when that happens. I am sure that they have talked to people when they lose their Crown office and get a second-rate service from a post office put into the back of a supermarket. People do not like it because it destroys the structures of their communities.

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

The hon. Gentleman mentions the United States Postal Service. Is he aware that it made an $8 billion loss last year?

[Michael Connarty]

What I am aware of is that the public purse supports an institution in the USA. If the Liberal Democrats in the Government are saying that they believe it best not to subsidise but to let the market rip, why do they talk about subsidising those 700 post offices that do not make any money? Is the Minister arguing for the withdrawal of the subsidy in the USA but not here? It does not make sense, and he knows it.

[Mr Anderson]

Has not the Minister just let the cat out of the bag—that the Liberal Democrats, at least those in the Government, just like the rest of the Government, know the cost of everything but the value of nothing?

[Michael Connarty]

Tomorrow, the Liberal Democrats will find out the value of making various pledges to the public and then breaking them. Even the proposal to privatise 50% of the Post Office, which was very similar to the proposal that a certain Minister in the Lords made on behalf of the previous Government, has been betrayed by the Liberal Democrats. I shall support the new clause, because it is a cross-party proposal that would ameliorate some damage for a short term. The most important thing, however, is to vote against the Bill and to let people know that what is being done is a dirty deal by the Liberals to let the Conservatives privatise and smash the post office network.

[Mr Binley]

I congratulate the hon. Member for Linlithgow and East Falkirk (Michael Connarty)—he must have trouble pronouncing that; I have trouble with Northampton South—on a robust speech, and I pay tribute to his defence of the Post Office over a very long period. His colours have been clearly nailed to the mast, and that we must accept.

I say to the Minister that I support the general thrust of the Bill, with which I have no problems. I have been a critic of Post Office management for a sizeable time and believe that the organisation’s senior staff should be ashamed of the results of their management. It is true that they produced a bottom line that looks slightly healthier, but they left an immensely demoralised work force whom they bullied most unacceptably for years. I might tell those managers that if they had worked for the company of which I am chairman, I would have sought their dismissal.

Let us be absolutely clear that the Post Office and the Royal Mail have not been well served by senior management over recent years, and that makes the difficulty that the Government face even greater. I understand that point, and it is one reason why I have argued consistently for a massive injection of good-quality, creative management in the upper levels of the Post Office’s management structure. We have not seen that; we have seen City hatchet men, just at the time when it was necessary to bring in creative, technological management. But this House shares a sizeable amount of the blame for that outcome. I would have wanted things to be done differently, as indeed would the hon. Member for Linlithgow and East Falkirk. We have argued for that jointly. We might disagree on a number of things, but on that we have been as one.

I genuinely share the Government’s ambition to create in the Post Office a new management structure that can come to terms with a quickly and massively changing technological marketplace. That particular attempt is absolutely vital, and it means a sizeable commercial injection from the private sector. I have no doubt about that, or that the Post Office was one of those organisations that had almost immured itself from the necessary quality of management. I have equally no doubt, however, and I shall say it again, that bringing in City hatchet men was not the way to deal with the problem.

13:45

[Mr Davey]

It is not appropriate for me to comment on the previous management, but I invite my hon. Friend to contact the new chief executive of Royal Mail, Moya Greene, and the new managing director of Post Office Ltd, Paula Vennells. If he seeks to meet them and to listen to them, he will find that the management in Royal Mail and in Post Office Ltd are of the highest calibre.

[Mr Binley]

I, of course, welcome the Minister’s intervention in that respect. I have no wish to vilify the current management; I just make a statement about why we are in our current position with the Post Office. We have to be realistic if this debate is to have any meaning at all. I have outlined an important reason for being in the position we are in, and I have no fear in doing so.

[Michael Connarty]

Will my hon. Friend—on this issue—take from me a factual statement? In front of witnesses, we met the previous Minister with responsibility for the matter, Lord Mandelson, and put it to him that the manager, Crozier, who by the way comes from Falkirk, had been an absolute disaster and failed. One of my party’s Whips asked why he was still in post, and Lord Mandelson’s civil service leader said, “He was the best we could get at the time.”

[Mr Binley]

I am grateful for the interjection. What an awful statement for somebody concerned with a business to make, but then I have never been very keen on the gentleman’s boss: I would not have appointed Lord Mandelson, either.

[Richard Fuller]

To echo the Minister’s comments about the observations on the current management by Members on the Public Bill Committee, I note that there has been a substantial improvement on the legacy management. The current management really shine a torch forward for Royal Mail Group. Does my hon. Friend the Member for Northampton South (Mr Binley) echo my sentiment that, in the sight of ineffective, hostile management over many years, there was an excellent outcome when the Communication Workers Union and other unions put together a modernisation programme and commitment for our postal services, privatised or otherwise, for the long term? That was a substantial triumph by the unions against hostile management.

[Mr Binley]

I accept that interjection and support that point, too, because I was one of those who consistently said that we should be proud of our Royal Mail work force. I am sure that my hon. Friend visits his local sorting offices, as the hon. Member for Linlithgow and East Falkirk and I do. We visit our sorting offices and post offices regularly and we know the quality of people we are dealing with. I would be proud to have them in any organisation with which I was associated, so paying tribute to the work force at this stage has real value. I accept that and thank my hon. Friend for his intervention.

To return to the main thrust of my contribution, I am concerned that, unless we are careful, the separation of Royal Mail and post offices will have a sizeable detrimental effect on the viability of the post office network. The truth is that the network is a diminishing resource even as we speak. My hon. Friend the Member for Colchester (Bob Russell), who moved the new clause, said that some post offices had temporarily closed. Well, if you believe that, you’ll believe anything. In truth, they are closed for business, just as many pubs are, which is another problem in rural areas—but not a part of the Bill.

[Mr Weir]

I have some experience of the Post Office in my constituency, and a long-term temporary closure effectively means that, although the Post Office accepts that there should be a post office in that location, the branch has closed because someone has retired or died and the organisation cannot find anyone willing to take it on. One reason for that is uncertainty about the future.

[Mr Binley]

I am most grateful to the hon. Gentleman, whom I worked with for some time on the Business, Innovation and Skills Committee, for that intervention. He spent many hours with me questioning the management whom I have criticised so heavily. He is absolutely right: temporary closure does not take into account the fact that post offices are private businesses that need to have people to buy them, run them and invest in them. My hon. Friend—I mean the hon. Gentleman, but he is still my friend—makes a valid point. The post offices are for sale, but there are not any buyers for them. The reason is not difficult to work out. I have grave concerns about the viability of the Post Office.

[Jim McGovern]

I am sure that the hon. Gentleman would agree that we—or any new owners—must push business towards the post office network. During the last post office closures in 2007-08, I visited the sub-post offices in my constituency. The sub-postmaster of one of them freely told me that he renewed his TV licence and his road tax online. In addition, seven out of 10 pensioners and nine out of 10 new pensioners get their pension paid into the bank. We need new business for the post offices. That sub-postmaster was willing to bite the Government’s hand off for the compensation he was getting because he just wanted out.

[Mr Binley]

I accept the hon. Gentleman’s comment. The Post Office could have been much more imaginative in supporting sub-post-offices to increase their business. Over the past 10 or 12 years, the lack of that support has been one of the reasons why they are less viable as a business than they should be—even the good ones now are less viable. We must accept that steps have been taken recently and I welcome that. However, the general thrust of his intervention is absolutely right.

Let us consider the post office network. I have already made the point that 150 post offices are closed and will remain closed because there are not the buyers to buy them. Some 900 are up for sale, which supports that point totally. Let us not mess about with stupid phrases such as “temporarily closed.” They are pretty much finished and that is the end of it. We need to be honest.

[Damian Collins]

Does my hon. Friend agree that the problem he describes affects not just post offices, but businesses in neighbourhoods and rural communities in general, and that some of the provisions in the Government’s Localism Bill and in the White Paper, “Local Growth: Realising Every Place’s Potential,” might help to stimulate interest in communities and local government to support those businesses?

[Mr Binley]

I thank my hon. Friend for that intervention. He knows that I agree with that view—in fact, we have talked about it. We fought the 2005 election together. That was a very happy experience for me; I wish it had been slightly happier for him, but it is good to see him in the House now. As we fought that election together this was one of the issues we talked about at some length. I accept his point.

The very fact that more than 1,000 of our post offices are either closed or up for sale shows that there is concern about the viability of the network. It is not in doubt that we have some serious problems. I shall come to the impact that those closures might have on many of my colleagues in rural seats in two or three years’ time. We went through a process of fighting to save post offices and I will describe how I experienced that process and how difficult it was to deal with as a Member of Parliament, even though I was an Opposition Member. It will be much more difficult for many of my colleagues to deal with the matter as members of the Government. The Minister may well take that point into account. However, the separation of Royal Mail will create massively greater pressures on the commercial viability of many of our post offices, unless we give them more time to adjust. That is the point of all this.

[Margaret Curran (Glasgow East) (Lab)]

Will the hon. Gentleman draw parallels between his experience of representing rural areas and my experience of representing very deprived communities that are often isolated, where the post office is a vital lifeline? Perhaps we should support the new clause—although it is proposed by a Member from an opposing party—because the very best thing we can do is to preserve that historic link between Royal Mail and the post office network. We can at least offer people that crumb of comfort from the legislation.

[Mr Binley]

I share that sentiment—in fact, it is the thrust of my contribution. There is no doubt that urban and suburban post offices are as important to their communities as rural post offices. In the main, urban post offices have a bigger market to exploit if they are given the help to do so, but that is all the advantage they have. They are still in difficulty and they still face considerable danger. I totally accept the hon. Lady’s point.

[Damian Collins]

My hon. Friend talked about good and bad management in the past. Does he agree that we should not let Post Office management off the hook and that they should continue to innovate in terms of how they deliver their services, particularly in relation to the roll-out of the post office local service? That service could integrate well into existing businesses, both in villages and urban areas.

[Mr Binley]

I thank my hon. Friend again for his intervention which is, of course, quite supportive of my words; I am grateful.

I accept the point made by the hon. Member for Glasgow East (Margaret Curran). The truth is that our local post offices are more than just local small businesses. They are that at their very heart, but they serve a wider purpose in many respects. They are vital to our local community networks, as she said, and they are crucial in urban, suburban or rural areas where they are the only point of contact for perhaps a mile or more.

There is a social networking element to my local post office—I pay tribute to it and I shall name it, as I hope it benefits from my doing so—in my village of Hackleton. I know the quality of service that post offices give. Elderly, vulnerable people go in them and seek help on a range of subjects that are way outside the remit of the post office. That help is given willingly as part of the service that post offices provide. The community networking element of our post offices has a value that we have not priced into this whole exercise, and that needs to be taken into account.

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

I very much want to support the focus on the community role of local post offices. We have focused on the economic role, which is massive, but the community role is so important. Figures provided by Age Concern show that more than 98% of older people say that their local post office is a lifeline. For some people, the issue is almost a matter of life and death, which is why this debate is so important.

[Mr Binley]

I thank the hon. Lady for supporting my point.

In addition to the community networking element, post offices have a social work element as well. I have hinted at that, particularly—as was just said—in relation to the elderly and young mums in our communities. Many of those young mothers, who are building families and creating the generations of tomorrow, have only one car. Many of the elderly do not have a car. If such people are not close to a post office, they are, frankly, even more socially deprived.

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

Does the hon. Gentleman agree that, during the bad weather that we had at the end of last year, the role of local post offices that have been combined with small shops was even more important in constituencies such as mine because people could not travel to large supermarkets?

[Mr Binley]

I am grateful to the hon. Lady for her comments. I think that these interventions are making an impression on the Minister. I am sure that he is well aware from his own experience of the social role that post offices play and that he will have taken that into account. I hope that when I sit down after having made a suggestion to him, he might be able to agree with me, throw me a little red meat, be kind and make all of us feel a bit better as a result of the debate.

I have talked about support for the elderly and young mums—the people without transport. The Government say that there is not a social element to their thinking, but there needs to be, as they will surely find out, as individual Members of Parliament. If people find out some six months or a year before the next general election that that has not been taken into account, those colleagues will be kicked pretty hard, I can assure them, because that happened to many of us in the previous round of closures.

14:00

Many of our post offices are heavily dependent on Royal Mail. A third of our local post offices’ revenue comes from the sale of Royal Mail products and services. When the split happens—I am not arguing against that per se at the moment—it will be possible to withdraw, change and alter pricing for those products and services, and that could impact detrimentally on post offices. The related income to our local post offices is £343 million—not to be sneezed at. More than 30% of the wages of the people who work in our local post offices is paid for via these services—that is, some £250 million. Withdraw that, and we withdraw a whole work force of many tens of thousands of people. There are also the 900 post offices that are mail work sub-post offices, which means that they provide the premises and facilities and supervise the mail delivery—a vital element of the role of our sub-post offices in terms of the larger business of communication and mail. That applies to more than 14% of our rural post offices. Unless there is a pre-arranged business relationship, any organisation coming in will see that as a real opportunity to save costs immediately.

[Ian Murray]

It is not inconceivable that a company such as Deutsche Post could buy Royal Mail. When such a transaction happens in Germany, the post office network is protected by law. As a result of the cost implications, Deutsche Post could run down our post office network to subsidise its post office network in Germany.

[Mr Binley]

I thank the hon. Gentleman for that supportive intervention. That gives us even more reason to ensure that there is a business agreement to tide the post offices over. We need to ensure—not to hope, guess or think—that they have the time, and therein lies the great value of the new clause. We must give them time; otherwise, we cut their legs off almost immediately. If we cut their legs off, many of my colleagues’ legs will go with them. We need to consider this particular aspect very seriously, not because I want to save the future well-being of my colleagues, although I am delighted to do so, but because if their legs get cut off it means that my worst fears have come to fruition and my local communities will suffer immensely. That is where the real concern lies in all this and why it needs consideration and thought.

I fought the closure of two post offices in the previous round. I am delighted that I was successful in one case, although I must say that I was suspicious that the Government had already decided to allow some to be saved merely to give the impression that the consultation had value. Can we really believe that? Well, I did, all the way through—shame on me! I was able to save, in one way or another, one of those post offices, but one of them closed, in a community where the elderly were a sizeable, if not predominant, section of the population. That meant that to get to the nearest post office they either had to hire a taxi or walk a mile and a third uphill. Frankly, the older one gets, it is just as dangerous coming downhill as it is going uphill. A number of those elderly people were distraught, as were some of the young mums with two or three kids, because their husbands needed the car to go to work and they had no other form of transport. They found it immensely difficult—and dangerous too, as the elderly did, particularly in slippery weather such as that which we have just seen.

Those are the sorts of little things that do not impact massively on decision making in this place but impact massively on the lives of individuals in our communities. I therefore implore the Minister to give some thought to the value of post offices as social and local community institutions, and to recognise that many of them will need time to make the adjustment. To cut off the supply of income that Royal Mail provides will be a damaging and, in some cases, a closure-making blow. Does he agree that they are a community network of social value? I am sure he does. I hope he also accepts that I want to see the success of this coalition and to see it returned as the next Government. Unless he takes action, however, he might be cutting off the legs of many of his colleagues—and indeed, for all I know, even his own legs.

I ask the Minister to think about this seriously. Perhaps, as my hon. Friend the Member for Colchester suggested, he would prefer a different time line and might be willing to consider three, four or five years. If so, I beg him to do so. The Minister may need that option to provide more help in his negotiations with potential buyers to ensure that the pill is sweetened a little in recognition of the cost implications. That sort of thinking would be massively valuable to our communities up and down the land. I would argue equally that in the real world of politics it could be massively helpful to many of my colleagues, and the Minister’s, who will be fighting for their political lives at the next general election. That is not the reason for doing it—the reason is to help the community—but I will use any arguments I can to encourage him to think about extending the agreement between Royal Mail and the Post Office, as the new clause suggests. I implore him to do so, for our communities and for our colleagues, but most of all for the well-being of our country.

[Ian Murray]

I support the new clause. I must say at the outset that I do not share a flat with the hon. Member for Colchester (Bob Russell), but it sounds like a fun flat to be in, none the less.

I hope that the Minister is listening to what hon. Members are saying. Prior to any sale or transfer of a post office company, an agreement should be secured between the new owners of Royal Mail and the Post Office for a period of 10 years—that is the suggestion, but it could be any number of years—in order to gain that transfer. Under the Bill, a privatised Royal Mail could break the historic link with the post office network and use another outlet such as Tesco, as the hon. Member for Northampton South (Mr Binley) mentioned. That might force customers to go much further to post offices to register parcels or to use the other services that people enjoy.

The Government have shown ambivalence towards post offices in this process. Everyone has talked of the importance of maintaining the link and the inter-business agreement between Royal Mail and the Post Office in some fashion, to ensure that the post office network is maintained. Although new clause 2 is not perfect, it would oblige a privatised Royal Mail to maintain the inter-business agreement with Post Office Ltd. The Government refused to listen to similar calls from the Opposition in Committee. Indeed, the Opposition spokesmen made those points clearly throughout the 20 sittings. Unless the Government make a strategic decision to put business through the post office network, the future of the network as we know it will be in significant danger.

As we have heard throughout the debate, the post office network has a declining share of the market because of the model in which it operates. The Government have an obligation to donate as many services as it is in their gift to donate to the post office network.

[Fiona O'Donnell]

Given how many post offices are running at a loss and how many are on the market, does my hon. Friend agree that it is important to the future of post offices that they have a period of at least 10 years to plan and recover?

[Ian Murray]

I am grateful to my hon. Friend for that point. The hon. Member for Northampton South was clear about the size of the revenues that go through the post office network, and therefore the survival of many post offices in rural and deprived areas would be in jeopardy. The figure has been mentioned of 900 post offices being temporarily or long-term out of business. It is clear from such figures that the business model for the post office network is unviable at the moment, let alone after taking an additional £343 million out of it.

Tory and Lib Dem MPs were happy to use the Post Office for their own political ends when it suited them in opposition. The post office network was a political hot potato for many years in my constituency of Edinburgh South. It seems shameful that the Liberal Democrat party, which has made a living out of saving post offices—or pretending to save post offices—now sits in judgment on Royal Mail and threatens many thousands of post offices, if not the entire network.

That the Government are not prepared to put a straightforward clause into the Bill to guarantee the future of post offices calls into question the logic of allocating more than £1.3 billion of taxpayers’ money to subsidise and refurbish them. There are still no bankable contracts for additional Government work for post offices, in spite of the warm words, and the requests of the National Federation of SubPostmasters. It is not clear that the Post Office will even win the renewal contract from the Department for Work and Pensions following the benefit changes.

The Government’s failure to take forward Labour’s plans for a people’s bank at the Post Office is yet another Lib Dem manifesto pledge broken. They are turning their backs on the very people out of whom they made political capital for many years.

[Mr Denis MacShane (Rotherham) (Lab)]

That is a fundamental point. In France, Germany, which has been cited, and Switzerland, such banks are viable banks. They are more than just a service for poorer elements of the community, as the hon. Member for Northampton South (Mr Binley) said; they are successful enterprises. I am astonished that the Liberal Democrats, of all parties, do not insist that the bank should be part of the new model.

[Ian Murray]

I decided a long time ago that I would stop being astonished by the Liberal Democrats, and just take it for granted that the things that they say in this Chamber will be astonishing.

[Bob Russell]

The right hon. Member for Rotherham (Mr MacShane) was a former Minister and had 13 years in which he could have promoted the people’s bank proposals. It is up to Parliament to suggest clauses. The hon. Member for Edinburgh South (Ian Murray) could have tabled a new clause on a people’s bank for this legislation. Surely the right time to establish the people’s bank in legislation was when his Government bailed out the banks with billions of pounds of public money, when it could have been imposed on the network of post offices that was left after the huge closure programme?

[Ian Murray]

I am delighted by the hon. Gentleman’s intervention, but I repeat the point that I made in my intervention on him: he has criticised previous Governments going back 20 or 30 years for running down Royal Mail and the post office network, but it will be his Government who put the final nail in the coffin.

14:15

[Malcolm Bruce (Gordon) (LD)]

One problem for the people’s bank, and for using post offices as a branch network for joint-stock banks, was that the Royal Bank of Scotland and the Bank of Scotland refused consistently over the past few years to comply. However, they have now done so and the post office can be used to access cash from pretty much every mainstream bank account. That is a real help to the post office network.

[Ian Murray]

We must leave no stone unturned in looking to provide services through the post office network, so that it can survive this process. The black hole in finance that will appear if the inter-business agreement is removed will make most post offices in this country unviable. We should look at every conceivable option to get as much revenue as possible into the post office network, because, as everyone in this Chamber knows, people love and enjoy the services that it provides.

[Tom Blenkinsop]

On the point made by the right hon. Member for Gordon (Malcolm Bruce), given that banks are closing branches left, right and centre, it suits the banks in the current commercial circumstances to use the post office as an access point.

[Ian Murray]

Absolutely. My hon. Friend makes his point clearly.

[David Mowat]

Will the hon. Gentleman give way?

[Ian Murray]

I will just make a little progress, because many hon. Members want to speak.

The Bill does not safeguard the inter-business agreement through which Royal Mail guarantees the use of the Post Office as its retail arm. When the agreement is renegotiated, a privatised Royal Mail will try to reduce costs by using other outlets such as supermarkets and high street chains instead of the post office network.

In my intervention on the hon. Member for Northampton South, I used the example of Germany, which has privatised, or certainly reformed, its national mail services through Deutsche Post. It has written protection of its post office network and services into legislation. We are giving no such protection. Deutsche Post could happily buy Royal Mail and decimate the unprotected UK post office network to subsidise its network at home, which is guaranteed by legislation.

[Mr Davey]

I am grateful to the hon. Gentleman for mentioning Deutsche Post and its legal protections. He and hon. Members who served on the Postal Services Public Bill Committee will be aware that the protection given to post offices in rural areas of Germany is that there must be a post office every 80 sq km. Is that what he proposes for this country?

[Ian Murray]

We are proposing protection for the post office network in any fashion, which the Minister point blank refuses to give, even though his Back Benchers are asking him to consider it through the new clause.

In Committee, the Minister said:

“No previous Government have thought to put it on any different footing.”

However, no other Government have needed to intervene on the inter-business agreement because no other Government have separated the post office network from Royal Mail, which is what will happen under this full-scale privatisation. He has tried to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. As has been said, the stated aims of the management of Royal Mail and the Post Office are to keep the relationship, but to be frank, management changes rather quickly and regularly. We need more reassurance in the Bill, rather than words from the management of Royal Mail and the Post Office. The Minister went on to argue in his evidence to the Committee:

“If you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that it would be subject to serious legal challenge.”––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 121-123, Q244-245.]

He therefore admitted that there will be no inter-business agreement going forward and that the post office network is essentially being hung out to dry by this legislation, along with the Royal Mail and tens of thousands of workers.

[Lorely Burt (Solihull) (LD)]

My understanding, on which I stand to be corrected, is that the problem is not that the two companies want to have an inter-business agreement—they are free to do that—but that EU rules prohibit Governments from intervening to ensure that an inter-business agreement is prescribed for a specific period. I believe that that is the problem with the new clause.

[Ian Murray]

But as we have already discussed, Germany seems to have found a loophole in that legislation, so I do not see why we should not be able to find a way forward for an inter-business agreement in this country. It would be up to the Minister and the Government to find a way around that problem and ensure that the post office network was maintained for the future.

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

Is this possibly the first time on the record that a Liberal Democrat has blamed the European Union for anything?

[Ian Murray]

As I said in response to my right hon. Friend the Member for Rotherham (Mr MacShane), nothing astonishes me about the Liberal Democrats these days. Indeed, blaming the European Union is one of their latest wheezes as they break their pledges and proposals and change their philosophy.

The National Federation of SubPostmasters believes that a minimum 10-year inter-business agreement is essential, and it knows about the matter having worked with its members, postmasters and postmistresses across the country. That organisation, which is at the coal face, says that such an inter-business agreement would protect its members, and I think it is telling the truth in this particular matter and giving us the evidence that we need that agreement.

Today we are seeing a disgraceful privatisation of one of the country’s, and the world’s, treasures. The Royal Mail is not safe in the hands of this shameful Government, and the Bill in its current form will decimate the post office network in this country.

[Lorely Burt]

I have a great deal of sympathy with my hon. Friend the Member for Colchester (Bob Russell) and with everyone else in the House who wishes to protect the relationship between the Royal Mail and the Post Office. We all want that relationship to continue, but I have severe reservations about whether we can enforce that through Government legislation.

If we examine the situation between the two companies, we will see that they rely on one another. There will continue to be a long-term contract in place between them because there will remain an overwhelming commercial imperative for the two businesses to work together as they do now. The chief executive of Royal Mail, Moya Greene, has said that it is “unthinkable” that there will not always be a very strong relationship between the Post Office and Royal Mail. However, legislation is not the appropriate way for the commercially sensitive terms of a relationship between two independent businesses to be settled.

[Mark Durkan (Foyle) (SDLP)]

The hon. Lady says that legislation is not the appropriate way to make provisions about commercial relationships, but surely it is the appropriate way to make provisions to guarantee public services and public service standards.

[Lorely Burt]

I hope that the hon. Gentleman would agree that there is a guarantee of public services built into the Bill.

The Government are not party to the current arrangements between the two businesses, and they will not be in future. There is no statutory precedent for requiring particular commercial terms between two independent businesses. What the Government can do, however, is help to create the conditions in which both businesses can flourish in partnership with one another. We have heard this afternoon about the £1.3 billion funding package that is being provided to post offices, which will help the Post Office to deliver the best possible service to its new business partner.

The hon. Member for Glasgow South West (Mr Davidson) mentioned the EU, and I will surprise him again by saying that we in this House are to blame for the EU legislation that has come forward. We have gold-plated the EU directive and created an uncompetitive situation by giving private companies compulsory access to Royal Mail and guaranteeing a margin for competitors. My hon. Friend the Member for Colchester mentioned the loss that is made on each competitor’s letter; 2.5p is lost with the delivery of a competitor’s letter.

[Malcolm Bruce]

Most of us have visited post offices in recent weeks. Does my hon. Friend agree that the Royal Mail is delivering a huge amount of mail on behalf of other carriers, and that if it did not provide that service, those carriers could not provide their customer guarantees? It is imperative that they pay a fair price for that service, and the Bill may create the space in which that can happen.

[Lorely Burt]

My right hon. Friend is absolutely right. It is shameful that Royal Mail’s demise has been caused partly by the fact that we have gold-plated the rules that have come down from the EU.

[Tom Blenkinsop]

I think we are getting slightly confused about the matter. There is cherry-picking within Royal Mail, with which I personally do not agree, and the report that members of the Bill Committee considered before our sittings recommended that the practice should be got rid of. However, that should not be a defence for what the Government are doing, which will undermine internal business arrangements. They have created a smokescreen of European legislation for what they are doing, but in fact the Government make 10-year agreements with rail companies, for example.

[Lorely Burt]

I am struggling to answer the hon. Gentleman’s point, because it is a bit technical. I am looking over towards my hon. Friend the Minister, and I am sure that he will make a better fist of giving an answer.

[Mr Russell Brown]

I hear what the hon. Lady is saying about the UK gold-plating EU legislation, but when the liberalisation first started, and in fact beforehand, a number of Labour Members—we were then in government—spoke to Ministers and met the regulator. The liberalisation that the regulator was committed to carrying out in a five-year period was driven through far too quickly, and it actually happened in 18 months. There was great concern, but the problem was that if we had been seen to be interfering with the job of the regulator, we would have been severely criticised.

[Lorely Burt]

I take the hon. Gentleman’s point, and I have a great deal of sympathy with it. It is a great shame that that happened, but now we have to pave the way for a change in how the rules operate, and the Bill will empower Ofcom to examine how the regulations in question apply.

As far as I understand it—I am sure the Minister will comment on this—current EU rules do not allow specific periods to be imposed on inter-business agreements. Donald Brydon pledged in his evidence to the Public Bill Committee that before any privatisation of Royal Mail, a continued long-term commercial contract would be in place between the two businesses for the longest duration that was legally possible. I do not know whether 10 years is the right period, but that decision has to be made between the two organisations. I know that there is a great will in Royal Mail to ensure that there is an inter-business agreement between the two parties that guarantees a safe, secure and productive future together.

[Mr Weir]

Let me remark in passing that I have spent many years standing in this spot defending post offices. It is somewhat disconcerting to find after the general election that, with a few honourable exceptions, everybody else has changed sides, while I am still standing in the same place, making the same point. However, it is good to see the hon. Member for Colchester (Bob Russell) come at least partly back into the light. We shall be supporting his new clause 2 this evening if he pushes it to a vote, which I hope he will.

14:30

The reason for that is that the new clause addresses one of the major issues with the Bill. There are serious concerns in all our constituencies about splitting the Royal Mail delivery system from Post Office Ltd, and about what future awaits our local post offices in the brave new world. Indeed, the National Federation of SubPostmasters made the point that nowhere else in the world have the post office and mail delivery service been split.

There are many issues that give me great concern, but the overall problem seems to be that far too much about the post office network’s future depends on the Government crossing their fingers and leaving things to the good will that exists between the management of Royal Mail and Post Office Ltd. That is far too tenuous a way of guaranteeing the future of our local post offices. We need to be much more proactive. As we have heard from other Members, so much of the business that comes through our local post offices depends on Royal Mail and is governed by the inter-business agreement.

Our position is that which was also articulated by the hon. Member for Linlithgow and East Falkirk (Michael Connarty). We are totally opposed to the privatisation of Royal Mail, and we intend to continue to oppose it. However, if that tragedy comes to pass, we will want as much as possible done to protect our post offices. Throughout our debates in Committee the Minister assured us that he was exploring the greater delivery of Government and local government services through our post offices, which would help them to diversify. That was also touched on by Paula Vennells of Post Office Ltd during our evidence sessions. I would welcome that development, and I genuinely wish the Minister good luck in doing that work.

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

I agree that much more Government and local government work has to go to the Post Office, but can the hon. Gentleman tell us what his Government in Scotland are doing to give more Scottish Government work to the Post Office?

[Mr Weir]

The Government in Scotland will have discussions with the Post Office, in the same way as the Government here, but that will depend on what happens. I was making the point that, although I welcome the development that I have described—I could equally well ask the hon. Gentleman what his colleagues in local government are doing about it—I have concerns about what will be produced, albeit not because I distrust the Government’s intentions. The Minister held a meeting before the Bill came forward and he explained what he was trying to do. I support that, but there are practical difficulties.

I made the point that, in my area of Angus, the local authority has established local access offices in most boroughs to offer a front-office service for all local authority services. In Arbroath, Brechin, Kirriemuir, Forfar and Montrose, those offices are all situated around 100 yards at most from a post office. In the case of Kirriemuir, Forfar and Montrose, those are the only post offices in the borough. However, there are two difficulties with that. It is difficult to see how the local authority will have a greater ability to deliver services through the post offices in those borough areas, especially where there is only one post office. Also, because of what happened in the last round of closures—when many of our stand-alone larger post offices were closed, being moved into sweet shops, paper shops and other premises, as the hon. Member for Linlithgow and East Falkirk said—those post offices do not have the space to deliver greater services and nor, in many cases, do they have the expertise.

In my constituency, there are already problems with some of those post offices because of lengthening queues and an inability to deliver the services already provided by the Post Office. It is difficult to see how those post offices will cope with an influx of other services from the UK Government, the Scottish Government, local authorities or anybody else. That is a practical difficulty, and I have not heard anyone in the Government come up with a solution to it. What is proposed may be a possibility in rural areas, but in their programme for post offices, the Government are talking about 4,000 main post offices that will provide a full range of services—incidentally, that is the number of post offices that are currently viable, which is slightly worrying. However, on top of that is what the Government call the post office local model. The idea of the local model is to put post offices into smaller businesses to deliver—the Government say—longer office hours and greater help for local people.

That is fine in theory, but the post office local model does not provide the full range of post office services. I suggest that the bulk of our post offices will be unable to provide the full range of services in smaller communities if the Government, local government, Scottish Government and whoever else get their act together and produce such services in the first instance. That practical difficulty needs to be tackled before things can proceed. That is another reason why a long-term inter-business agreement is a good idea. We have to look at not only the business, but the structure of the post office network, so that it can deliver the new business that is being promised to it.

However, the most important point is what the relationship will be between a privatised Royal Mail and a Government-owned Post Office Ltd, where the Government are determined to push down the costs to the taxpayer of continuing to support Post Office Ltd. As the hon. Member for Colchester rightly said, Royal Mail will inevitably try to push down its costs in delivering a mail service. When asked about that in the evidence session, Paula Vennells of Post Office Ltd said:

“In terms of what is in the Bill, what is important for Post Office is that we maintain our strong relationship with the Royal Mail Group.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 5, Q6.]

That is fine and well, but we all know that at present Post Office Ltd gets fully one third of its business through the inter-business agreement. The Minister will, I am sure, point to the statement made during the evidence session by Royal Mail. Moya Greene, the chief executive, said:

“For me it is unthinkable that we would not have a very long-term relationship with the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]

Again, that is all very well, but I would suggest that the relationship between a fully privatised Royal Mail and a Government-owned or mutual Post Office Ltd would be very different from that between two companies that are both members of Royal Mail Group, as they are at present. In passing, one might also wonder how long the present management will remain in place, given what has happened with management previously.

[Fiona O'Donnell]

The hon. Gentleman has referred several times to the report of the Public Bill Committee, but I wonder whether he has also seen the excellent report from the Select Committee on Scottish Affairs, in which the Minister is recorded as saying:

“That makes it very clear that there are very limited circumstances in which there could be more than one universal service provider.”

However, if the Government are really committed to the relationship, why leave any gaps in the Bill at all?

[Mr Weir]

The hon. Lady makes a good point. I have read that report, which I found to be an excellent report, hitting on the main points as they affect Scotland.

I was talking about the management at Royal Mail. Ms Greene may have a considerable attachment to Post Office Ltd, but will a new owner of the business necessarily feel the same way? What happens when the commercial profit motive really kicks in? How much will sentimentality govern the actions of Royal Mail? That is especially important given that, as has been said on many occasions in previous debates, including in Committee, the ultimate owner of Royal Mail may turn out to be Deutsche Post or TNT, which I would suggest perhaps do not have the same sentimental attachment that we all have to our Royal Mail. As I understand it, the rationale behind the privatisation is to make the new company look for efficiency savings and cut costs. I agree with the hon. Member for Colchester that it is utterly inconceivable that the new company will not look at how it can do so in its relationship with Post Office Ltd, which will not be exempt from scrutiny under the new arrangement.

In her evidence, Ms Greene said:

“I do not see other retailers as a particularly serious threat, because Post Office has an enormous amount of expertise in this area”.––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 17, Q42.]

The hon. Member for Edinburgh South (Ian Murray) mentioned the situation in Germany, but as the National Federation of SubPostmasters has said, there is no precedent anywhere in the world for splitting the delivery service from the post office. I asked the Minister on Second Reading whether he could come up with one, but none has been forthcoming since.

I spoke at length in Committee about the situation that has developed in New Zealand. I will not go into that again at great length today—interested Members can read the report of the Committee’s proceedings, where it is explained at some length. Suffice it to say that a competitor has set up what amounts to an alternative post office network targeted purely at what it needs to sustain its postal delivery business. That is another point. When Royal Mail is split from the Post Office, it will be in a very different position. Royal Mail will be looking at what it needs to be able to deliver a postal business—not a Government business, a pro-Government business or all the other things that the Post Office might do.

In her evidence to the Committee, the chief executive of Royal Mail said that it would be “inconceivable” that anyone but Post Office Ltd would be used by the Royal Mail. The Minister, if I recall correctly, was very dismissive of the idea that an operator might want to go to, say, a major supermarket and use it for delivery of post office services. Then again, it was not so long ago that it was inconceivable that a supermarket would offer a mobile phone network, for example, be an internet service provider or perhaps offer legal services, which might happen shortly. Who would have bought a television or a hoover from a supermarket 15 years ago? Times change and that applies to the Post Office as well.

In New Zealand, as I say, that has already begun to happen. That does not mean that a provider in the UK would necessarily do the same, but it is certainly a possibility. It might look into it and that provides a danger sign for post offices in the UK. New Zealand Post, of course, fought back—one of its principal weapons being Kiwibank—but this Government have rejected the option of creating a post bank in the UK with which to anchor Post Office Ltd.

No two postal markets are the same and the UK Royal Mail and Post Office Ltd might be able to hold together and provide a seamless and mutually profitable business, but there are lessons from what has happened elsewhere and we simply cannot idly let the future of the post offices in our constituencies rest on the good amicable feelings that currently operate between the two companies, which might not survive the privatisation.

[Damian Collins]

Does the hon. Gentleman not accept that, as discussed in Committee, the Post Office remains the owner of the Post Office brand and the business with the largest retail footprint in the country, which gives it considerable power in negotiating with Royal Mail?

[Mr Weir]

I do not agree with that, as I think Post Office Ltd will be very much the junior partner in the negotiation. I would ask whether Royal Mail rather than the Post Office is the brand for letter delivery, and Royal Mail will focus on how it delivers its mail business through the Royal Mail brand. In an earlier intervention, the hon. Gentleman made the point that an alternative provider could go to Post Office Ltd, but I ask him to consider whether that is realistic, given that only Royal Mail as the statutory provider of the universal service obligation will be required to have a nationwide delivery service. Other companies do not go in for that, and most of the present business for alternative providers relates to bulk mail delivery, not individual delivery. That requires a different business model from the one currently operated by Royal Mail.

[Tom Blenkinsop]

Another point is that there seems to be a massive assumption that these independently-owned post offices will suddenly opt into this mutualised model. A significant number of independent post offices will not want to do that; they enjoy the profits and the livelihoods they earn from their businesses.

[Mr Weir]

The hon. Gentleman makes a reasonable point. The problem is that it is not at all clear what mutuality means. If I understood the Minister correctly in Committee, what is being mutualised is not the post office network, but Post Office Ltd—the management of the Post Office—so the individual post offices would not be in a mutual network, but continue as individual businesses. I struggle to see how that is going to improve the situation.

[Lindsay Roy (Glenrothes) (Lab)]

Is the hon. Gentleman aware that Post Office Ltd is the junior partner in relation to some retail outlets, where it has an upstairs or downstairs location? It has to go through the footprint of the retail store, so it is not able to provide adequate facilities or the same kind of facilities that it did before as the Crown Post Office.

[Mr Weir]

I made that point with respect to my own constituency earlier and the hon. Gentleman is quite right.

14:45

Once Royal Mail is sold to a private operator, that operator will be focused solely on the needs of its enterprise to deliver postal services, not on the various other activities carried out by the Post Office. As I mentioned earlier, we already know that only 4,000 of the current post offices are profitable and that only around 7,500 are required to meet the current terms of the universal service obligation. Is it such a leap of imagination to think that a new owner of Royal Mail might consider whether its needs could be met with a deal with, say, supermarkets, which are increasingly opening for longer hours? I think not—especially now that Tesco Express or Metro are opening everywhere, and although they do not have the 24-hour opening of their hypermarkets, they are still open from 7 am to 10 pm. Even if that did not happen, there would still be two companies of vastly differing sizes and economic muscle negotiating an agreement. It is difficult to see Post Office Ltd not coming out very badly from that.

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

On the hon. Gentleman’s point about doing a deal with a supermarket, does he agree that there is absolutely nothing to prevent Royal Mail from doing a deal with other supermarket chains?

[Mr Weir]

The hon. Gentleman makes a perfectly good point. It does not have to be with Tesco. It could be with Sainsbury or Asda for all we know, and it could cover the whole country.

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

On the point about supermarkets, one key issue coming out of the Scottish Affairs Committee’s report was that the post office network is, in fact, a far better network than any supermarket chain in the UK as a whole. There are huge swathes of Scotland that have no supermarket and no supermarket chain, so this would not be a workable solution for large parts of the landmass.

[Mr Weir]

My hon. Friend makes a very good point. Of the 12,000 current post offices, only 7,500 are needed to meet the universal service obligation. The Minister laughed at the hon. Member for Edinburgh South, I believe, for mentioning the German model and 80 sq km, but one wonders what exactly might happen in large swathes of rural Scotland if this were to come about.

I have spoken longer than I intended, but I end by saying that, while we maintain our position of opposition to the privatisation of the Royal Mail, a 10-year inter-business agreement would give Post Office Ltd the necessary guarantee and stability for a lengthy period after the privatisation. I hope that it would allow the stabilisation of Post Office Ltd, allow a reasonable period to get new Government business, if possible, into post offices, provide some hope for the temporarily closed post offices or others up for sale, and some comfort to those thinking of entering the post office market. That would at least provide them with some confidence that there is a future. Otherwise, they would not go into that market. I urge all Members to support the new clause, which I hope the hon. Member for Colchester will press to the vote in order to show the House’s strength of feeling on the issue.

[Mr Anderson]

I welcome the debate. Like the hon. Member for Colchester (Bob Russell), I do not want to see the privatisation of the Post Office at all, but if it happens the new clause will ameliorate its effects. Does anyone really believe that the Post Office, going out into the world of competition, would be able to survive against some of the competitors it would be up against? The case for going outside has not been made, but if it does go outside, the Post Office should be protected. I am not quite sure where the Liberal Democrats are coming from—there is nothing unusual in that—but they seem to think that European Union law stops us passing this new clause. We have had no evidence to demonstrate that, and I do not believe that any evidence was shown in Committee either.

I hope that the Minister will explain exactly what rule in European legislation prevents an inter-business agreement. Everybody else who appeared before the Committee seemed to think it was a good idea. George Thomson of the National Federation of SubPostmasters said:

“On separating Post Office Ltd from Royal Mail, it is unprecedented and we have to get it right, which is why we need a 10-year inter-business agreement… We need security for sub-postmasters; they have £2 billion of their own money invested in this business. If you were a company investing £2 billion in a PFI…you would get a 21-year contract. I am not asking for a 21-year contract, but…for a 10-year IBA contract.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 29, Q70.]

He was not alone. Paula Vennells, managing director of Post Office Ltd, who ought to know as she was part of the new management, said that

“we have a very strong commercial relationship with Royal Mail and that is something that both businesses would want to continue, so as we transform the post office network we will make it into something that Royal Mail will want to use.”

Moya Greene, the chief executive of Royal Mail, concurred, stating that it was

“unthinkable that we would not have a very long-term relationship with the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 17-18, Q42.]

Even Richard Hooper, who brought forward the original report, said in the updated report that he believed that the

“importance of the inter-business agreement should not be underestimated”.––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 114, Q228.]

It is a shame that those three people did not say that they wanted the IBA to continue in the way the amendment suggests. If we do not have that in black and white, we shall experience a rerun of what we witnessed in the Chamber between 12 and 12.30 pm today, when the Prime Minister repeatedly replied to questions by saying, “We hope that this can happen”, “We wish this to happen”, or “We are looking into ways of making this happen.”

If privatisation takes place in the way that is being proposed, when the contract goes outside people will eat it up. I spent 30 years in the trade union movement trying to unravel agreements and contracts or renegotiate agreements with organisations. I would say, “That must be there in black and white. If it is not in it, you cannot win it.” If we do not provide protection for Royal Mail and the Post Office that works in the way in which the IBA has worked so far, the service will clearly not be saved.

I appreciate that members of the Government are naïve amateurs who are doing their best to make things work, but that is not good enough. We need to ensure that services are supported. We are told that European Union rules are preventing that, and I hope that the Minister, who has now returned to the Chamber, will be able to explain exactly how they are doing so. When Corus was threatened with closure on Teesside, my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) and I were constantly told that EU rules prevented Government intervention. We were told that the Germans and the Dutch used those rules, and that the British must play by the rules. We were losing out. Unless we have real, clear evidence that this cannot be done under law, the Government’s case will not hold water.

[David Mowat]

The hon. Gentleman has talked of the way in which the IBA works, which seems to have resulted in three quarters of the network becoming unsustainable or unviable. How does he think that extending the IBA in its current form will improve the position?

[Mr Anderson]

The hon. Gentleman is clearly under the misapprehension that public service is about nothing more than making money. We must accept that the public sometimes have to pay for the delivery of a public service in a way that does not satisfy accountants. We have a health service that costs £100 billion. No one says that it is in deficit. We have a defence system that effectively requires us to pay out all the money: we are not given any proper help. The postal service is also a quality public service that we should be proud of. The Labour Government invested a large amount of public money in it, but the truth is that we did not succeed. We were maintaining post offices that we had to accept were effectively a drain on public resources. The question that we must ask, and the question that people in the country will ask, is whether this is money well spent, and I would argue that it is.

[David Mowat]

I entirely agree that the sustainability of the post office network is a valuable public service, which is why I am delighted that the Bill will provide £1.3 billion to sustain it over the next four years—an average of £40,000 per post office per year. What I want to understand is how the continuation of an IBA that has apparently caused three quarters of the current network to lose money will help.

[Mr Anderson]

I think that that question should be put to Ministers. Nothing else will change: the need is still there, and the service must still be provided. In the last Parliament we invested £3.9 billion in the network, but that was clearly not sufficient. As was pointed out by the hon. Member for Angus (Mr Weir), we must accept that we are living in a different world now. People are obtaining their television and driving licences on line and using e-mail, but that does not mean that we as a nation should not be prepared to say that the post office network is so important that it should be subsidised by the public purse.

[Mr Russell Brown]

The hon. Member for Warrington South (David Mowat) has mentioned that £1.3 billion twice, but the fact is that money alone is not the answer to the problem affecting our post office network. It also needs the business that comes through the door and is transacted over the counter.

I assure the hon. Member for Warrington South that if there were an easy answer to all this, a Labour Government would have found it. There is no easy answer, which is why the IBA is such an important element. It will deliver more than 30% of the business that is transacted. As I said earlier—and I apologise for repeating myself—if that goes, post offices will wither on the vine.

[Mr Anderson]

We may compare the IBA to a sticking plaster covering a wound, but if it continues following privatisation, it will provide that little bit of additional protection that would not be there otherwise. Otherwise, post offices will be left wide open to businesses that simply want to make money. Why else would they want to take on post offices? Who wants this not to happen? The people who want it not to happen are those who want to buy postal services, who want to compete, and who want to make more and more money.

If we had been sitting here 25 years ago, we would have been debating the privatisation of the utilities. We would have heard all the arguments that we have heard today about how dynamic privatisation is, and about the efficiencies that it produces. E.ON is raising prices by 9% at a time when people are facing pay freezes. That is the truth about privatisation, and that is what will happen in the case of this privatisation.

[Richard Fuller]

I should like some clarification. We are using the phrase “inter-business agreement”, but the hon. Gentleman seems to be describing it as a 10-year continuing subsidy mechanism. Is he saying that he wants an inter-business agreement to be the transport mechanism for a continuing taxpayer subsidy, regardless of whether Royal Mail is privatised?

[Mr Anderson]

I want the IBA to give sub-postmasters the security that they have asked for. They say that it will give them faith in their ability to continue in their business. After all, it is their money. As I said earlier, they will lose £2 billion if the Bill does not work. They would much rather remain in a system enabling post offices to remain in operation and to receive support from the public purse. If we had adopted that attitude, we would not be having this debate.

[Richard Fuller]

I thank the hon. Gentleman for giving way to me again. There is an issue here that specifically concerns subsidy, and we should call it subsidy rather than an inter-business agreement.

The hon. Gentleman has cited the comments of Royal Mail executives as well as those of members of the National Federation of SubPostmasters. They did not ask for a 10-year IBA. Was that because the changes proposed in the Bill will enable managers to manage the operations of the business? Is not one of the problems that we have experienced in the past the fact that Government have shackled management and prevented it from managing effectively? That is the reason for the programme of closures and the inability to modernise effectively.

[Mr Anderson]

That is true, but the managers have not made the best of the deal that they have been given. They have received plenty of public money, but they have not succeeded. There are a number of reasons for that, but in recent months we have seen a break from it. We have seen new management; we have also seen the trade unions presenting a modernisation plan that can and will work. Those developments are being stopped in their tracks by the attitude of the Government, who want privatisation at all costs.

[Richard Graham (Gloucester) (Con)]

Does the hon. Gentleman agree that the other side of the equation, which focuses on the agreement between Royal Mail and the post offices, is the amount of business that post offices can do by other means? That revolves first around their ability to distribute financial services—access to banking and credit union arrangements—and secondly around their role as “front of office” providers of a series of services for customers coming from other Departments. I hope that the Minister will tell us more about that.

[Mr Anderson]

I could not agree more. As was pointed out by the hon. Member for Colchester, the post office network is unique. Over the past few years, however, we have let the country down by allowing it to be weakened. I must admit that I have argued against that in the House: I have argued against my own Government. The network is being offered a huge opportunity, but the security of being in the public sector will make it even more possible for it to succeed. If it is allowed to leave that sector and to face unbridled competition, it will fall apart.

[Lindsay Roy]

Does my hon. Friend agree that subsidy is often viewed in a negative context, and that profit is gauged not in social terms but solely in a financial context? In fact, it is about dividends for communities. That kind of social investment is vital to our nation.

[Mr Anderson]

I could not agree more with my hon. Friend. It is strange to hear Liberal Democrats who, justifiably, used to make that case say that it no longer holds water. The Minister mentioned the cost of the United States social service, but the United States Government obviously decided that the cost of providing a service that they believed to be second to none was money well spent. Perhaps we should take a lesson from them. There are not many lessons that I want to take from the Americans, but that may be one worth considering.

The truth is that we have been here before. There has been compulsory competitive tendering. There has been the privatisation of cleaning services, when we were told, “You’re not allowed to build into contracts clauses that prevent some people from bidding for them.” However, there were discussions between employers and trade unions after both sides found that the cowboy contractors were undercutting the service and not delivering what they were supposed to, and we ended up with an agreement between contractors and the trade union side that there would be a baseline that nobody would be allowed to go below.

We could have a similar agreement. We want protection for people, so they know where they are going and they have the strength of knowing that they have the security of this agreement behind them to make sure that things are right. Otherwise, the only people who will benefit will be those who want to take over the post offices: the international companies who want to come here and make money out of public services. It is a disgrace that the Liberal Democrats have given cover to the Tories to push this through.

15:00

[John Thurso]

First, I apologise to the House for having been absent for two of the contributions to this debate. I had an urgent meeting with a constituent who had come rather a long way, from the far north, to be here.

I want to speak in support of my hon. Friend the Member for Colchester (Bob Russell)—notwithstanding the fact that I am not his flatmate, which might not be the best way to support him judging by what we heard earlier. I will confine my remarks to why I believe it is absolutely crucial that there should be an agreement. However, I should briefly preface those comments by reminding the House that in the previous Parliament I was my party’s Business, Innovation and Skills spokesman. For a considerable time, discussions on the then Government’s privatisation of the Royal Mail were in hand and I had discussions with representatives of the post offices and the unions and the Royal Mail.

One view I came to is slightly different from an opinion that has been expressed by many Members today. I felt that the post offices had been the poor relation inside the Royal Mail Group, and that the fact that they did not have their own board or their own chairman meant that very often got the second-best outcome. I therefore put in my party’s proposals that whatever happened—whether the Royal Mail was privatised, left as a mutual or left as public—the post office group had to be a separate entity with its own chair and board, so that it could argue its case effectively and have a real future.

I always saw a strong future for post offices. Many of the reasons for that have been alluded to today: the opportunity for new financial products; the possibility of a post bank, which I remain convinced is a particularly good way of taking post offices forward; and the ability to develop post offices in a range of areas, and especially for them to be in many instances the first line of contact between the citizen and the state. A numerate, literate, intelligent and articulate person—which is what our postmasters and postmistresses are—can help people at the very start of the process of making a claim and so forth, and can help people avoid many of the problems that are encountered when they can talk only to a call centre.

I always saw a strong possibility of post offices developing, but I felt that that required them to be a separate organisation. However, I also thought that, in order to ensure that there is a reasonable degree of stability in the business, it was essential that there was a business agreement for a suitable time to enable the transformation to take place.

[Dr Whiteford]

I am very sympathetic to the argument for increasing the range of services and products available in post offices, and I think that if that had been done in the past it would have assisted matters greatly, but does the hon. Gentleman share my concern that some of the local post office branches, and in particular the outreach services provided in vans or in mobile facilities, are wholly unsuited to this sort of provision?

[John Thurso]

I share the hon. Lady’s concern, but I do not believe that is insurmountable. In my constituency, I have probably some of the remotest post offices in the United Kingdom. In the villages of Mey and Dunnet we had the first pilot of a van out of Wick, so I have been through all of that. There are problems. There is a post office at Buldoo, which is a mile from Dounreay. Those in charge of the post office are the fourth generation of the family to run it. Happily, they have a croft to sustain them, because they have only 14 customers; there are 14 regular customers and the odd tourist. Clearly, that kind of operation would have a long way to go to be sustainable in the way we are discussing.

A great many products can be delivered online, but often a human interface is required. Given the breadth and depth of the post office network and the number of people involved in it, it can provide that human element that nowadays is so sadly lacking in so much of the interface between Government and the citizen. That is where the opportunity lies.

Let me now explain why I think the new clause of my hon. Friend the Member for Colchester is so necessary. There are many examples in the private sector of businesses that have decided to split, or of joint ventures where those involved have decided to go their own way, or of hotel companies where those in charge have decided to sell the property to a property company but remain the managers. In every one of those examples, there is an agreement. It might be a shareholders’ agreement, or it might be a contract between the two parties, but there is some form of agreement. One aspect of such an agreement that is nearly always in place, and usually for a period of five, seven or sometimes 10 years, is a non-compete clause. If there is not a non-compete clause, it is a fair given that at some point—maybe after one or two years—one side or the other will say, “You know that contract we signed? I reckon we can do a bit better. Let’s have a go at this.”

The Royal Mail needs such a measure just as much as the post offices do. If any body can come anywhere close to challenging the Royal Mail’s universal service obligation last-mileability, it is the post office network. That may be unlikely, but it is a possibility, and why bother with allowing a possibility? It is inconceivable that, in an initial public offering or a trade sale, any investor would make an investment in the Royal Mail if there was not a clear contract. Therefore, I would almost guarantee that there will be a contract, so I do not understand the reticence of the Under-Secretary about giving a few measly guarantees as to length and content. I cannot see how that would be other than simply sound commercial good sense by the Business Department, in order to enable both organisations to operate effectively and have a clear path for the future, and for there to be a clear understanding. It is on that one commercial ground that I think the arguments put forward are compelling, which is why, unless there is an even more compelling argument from the Front Bench, I shall support my hon. Friend the Member for Colchester.

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

I support the new clause. I noticed that the hon. Member for Colchester (Bob Russell) was temporarily sitting on this side of the House a few moments ago. I thought he had crossed the Floor. If he wants to make it a permanent arrangement, I am sure we will find space for him on these Benches.

[Mr Davidson]

We are full up.

[Chris Evans]

Oh, we are full up, are we?

It was John Major who said that in 50 years from now Britain will still be a country of long shadows on cricket grounds, warm beer, dog lovers, invincible garden suburbs and pools-fillers. Well, he was wrong about that; I do not know anybody who plays the pools any more. He was derided at the time for that vision of the future. It was said that it was nostalgic. However, in that nostalgic vision, what he was really describing are the villages throughout Britain where the sub-postmaster and sub-postmistress underpin the community, as they know their customers and will ask, “We haven’t seen Mrs Jones for a couple of days. What’s wrong with her? Perhaps I should go round or give her a call.” We have all seen stories in the press of the times when postmasters or postmistresses have said they have not seen someone collect their pension, and they have gone round to their home and found that they were in trouble and sorted it out. Unless this new clause is passed, the British way of life—the British way of village life—will be at stake.

As we all know, the fact of the matter is that if the Royal Mail is privatised, it will not be working in favour of the community or the customer; it will be working in favour of the shareholder by selling off assets and knocking down costs. The one thing that it will say is, “We will go to the lowest bidder.” I know that Sir Terry Leahy is retiring from Tesco, but if he decides to come up with a white-label Post Office, I am sure that a privatised Royal Mail will go along with that. What will happen then to our village post offices? They will lose more than a third of their business, and that would be terrible.

We already face a problem in getting people to be postmasters. Just this week, I have heard from residents in Crosskeys, in my constituency, where the postmaster has decided to resign. They do not have a post office at the moment and are deeply concerned by the situation. What is the problem? I do not know, so I am talking anecdotally, but it may be that he is making more money from the grocery side of his business or from the national lottery distribution. A lot of people have said to me, “I make more money out of the national lottery than out of the post office.” So here is a quick idea for the Minister: if these people are making so much money from gambling, perhaps he should change the regulations to allow post offices to have one-armed bandits or fruit machines in them. Perhaps that would be one way to raise revenue.

[Richard Graham]

Will the hon. Gentleman clarify where he thinks the risk to our sub-postmasters is coming from? I have a print-out of a Communication Workers Union briefing that arrived this morning. It is claiming to have a list of 900 post offices that are for sale and 160 that are subject to long-term temporary closure. One of those listed in both categories is the post office in Quedgeley, in my constituency. However, it is not for sale and it is not subject to long-term temporary closure, because a new sub-postmaster will be opening it in the next six weeks—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. We are discussing a new clause on inter-company agreements, so the hon. Gentleman’s intervention needs to be relevant to that point, although I am sure that his sub-postmaster will be pleased to hear that they have been cited in the Chamber.

[Chris Evans]

I know Quedgeley post office, because I was the Labour party candidate in Cheltenham in 2005. I know Gloucester quite well and I know that Quedgeley is a lovely part of the world. If the hon. Gentleman is looking for support to keep its post office open, he should give me a call.

[Jim Shannon]

Be the postmaster.

[Chris Evans]

I will not be the postmaster, as I have enough on my plate as it is.

As I was saying, we seem to have enough of a problem getting people to become postmasters. If postmasters start losing a large amount of their business, how we will recruit people into these positions? Nobody becomes a postmaster in the hope of becoming a millionaire. Perhaps I am naive, but I believe that people become postmasters because they want to serve their community. They want to be part of their community and provide a service, but who in their right mind would want to be a postmaster when they are having their business taken away? That situation is a tragedy.

[Jonathan Edwards]

The hon. Gentleman will be aware that 71.3% of Welsh post offices are in rural areas, which compares with the UK average of 55%. Does he not therefore share my concern that if there is no long-term inter-business agreement, that will have a disproportionate effect on Wales?

[Chris Evans]

Yes, I agree with the hon. Gentleman completely. As a Welsh MP, I know that this Government have certainly hit our country hard. I well remember the posturing of some Members during the Second Reading debate. Many Government Members were boasting, patting themselves on the back and telling us what they had done to keep their post offices open when they were up against the wicked Labour Government. What will they do next time if this Bill goes through? Before they go into the Lobby, they should think hard. If they are faced with a post office closure in five or 10 years’ time, what will they say to their constituents? Are they going to say, “I didn’t think it through,” or “I followed my Government Whips”? That is what they are faced with at the moment. The hon. Member for Northampton South (Mr Binley) talked about people’s legs being cut from under them, and that is what the Bill will do to these Members politically—I am saying that as an Opposition Member.

[Damian Collins]

The existence of business agreements between the Post Office and the Royal Mail has been no guarantee of keeping post offices open. Surely that is the lesson of the past 10 years.

[Chris Evans]

Yes, but my major argument in response to that is that if we are taking business away, we are condemning post offices to closure in any case. We have to give them every chance possible. As has been said, many people see the Royal Mail and the Post Office as the same thing. An elderly person who cannot go to their post office to post a letter yet sees the Royal Mail thriving will wonder what is going on. The Government may say that they are providing support to the Post Office, but if they defeat this new clause, they will be giving about as much support to the Post Office as a scaffold gives to a hanged man.

15:15

[Margaret Curran]

I begin by declaring an interest: I am pleased to be a member of the Communication Workers Union. I was disappointed that I was not more closely involved with the Scottish Affairs Committee and its excellent report on this Bill and with the Public Bill Committee, which I know went into great detail when examining the Bill. I wished to speak this afternoon because I feel obliged to represent the interests of my community and to put on the record the real concerns that exist about the Bill. Like other Members, I wish to reiterate people’s support for, and emphasise the significance of, post offices, but I have to tell the Government that people see this Bill as a real threat to them.

As I said to the hon. Member for Northampton South (Mr Binley), my particular interest relates to the attention that needs to be given to post offices in particularly deprived communities. Such post offices often face different challenges from those in rural communities and from those faced by normal city post offices, because they, too, deal with isolation, represent a lifeline and are vital. Other shops, services and support are often absent in these deprived communities, so post offices take on a particular importance, and we should bear that in mind. I do not doubt that most of us in this House would seek to improve those areas and represent their interests as best we can, despite our different political approaches to doing so. However, rather than improving services, this Bill will move in completely the opposite direction.

I recognise the points made by the hon. Member for Colchester (Bob Russell) and I understand that he has a long history of criticising the records of many Governments on post offices. I understand that he legitimately and respectfully disagreed with the Labour Government, but it is somewhat illogical if the moment people in government, they make the situation even worse and take actions that will make the problems that they are identifying much more grave in communities. None the less, the hon. Gentleman has tabled this new clause, which gives us some means of protecting the interests of the communities that I wish to discuss this afternoon.

I hope that hon. Members will support the new clause and that the Minister will address the many detailed points that have arisen. In particular, I hope that he will deal with the interesting points made by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), who addressed the economic and business arguments and showed that this proposal could easily be supported because it does not run counter to business interests or, presumably, to European Union legislation. I say that given the hon. Gentleman’s knowledge of the subject. If we are seeking to bring stability to post offices’ services and to secure the future viability of the Post Office, the new clause should be supported, because the core of the argument is the fact that we need to oblige Royal Mail to maintain an inter-business agreement with the post office network. We need to do that if we are to safeguard and protect the viability of post offices. If we do not do that and the Government go full steam ahead with their proposals, it is perfectly feasible that the historical link between Royal Mail and the post office network could be broken, with far-reaching implications.

As many Members have said, the implications of that may be felt further down the line, but they will be far- reaching. As the hon. Member for Northampton South put it, they could cut the legs from under people and from Members in here when people realise the consequences of this. So the decision we make this afternoon will have consequences down the line.

[Cathy Jamieson]

Does my hon. Friend agree with me and with the other members of the Scottish Affairs Committee on our recommendation that the Government should take a more proactive approach towards the inter-business agreement, rather than simply setting something up and leaving it to its own devices?

[Margaret Curran]

I strongly agree, because that goes to the heart of the protections that are required and explains why people are deeply worried about this legislation. They see it as a forerunner of many post office closures because we are not taking the necessary steps to protect the service and we are not being proactive. Communities, particularly the ones in greatest need, look to their representatives to protect them and to take action that will look after their best interests. If we do not do this during today’s debate, we are being, at best, neglectful. If we pass the Bill in its entirety, we will be taking negative action in respect of the interests of the post office network and, therefore, of those communities.

[David Mowat]

I have difficulty understanding how the continuation of the IBA can be more powerful than the policy whereby 11,500 post offices are guaranteed to be kept open for four more years. Can the hon. Lady answer that question?

[Margaret Curran]

I have listened to the hon. Gentleman make similar points to a number of Members. I fundamentally disagree with the argument made by Government Members that it is an either/or situation. I am not saying that the IBA is the only thing that will protect post offices, but it is at the core of what needs to be done. If we take it away, we will almost guarantee closures. In itself it is perhaps not enough, but we cannot take it away. To argue the opposite is illogical.

We need to take action now to ensure that we do not end up, as has been said by many Members, in a situation in which a large retailer steps in and takes over the service. In my constituency, Barlanark—a very deprived area—has a post office on the up-for-sale list. That community could end up with no post office in a few years’ time. An elderly person living at the back of a housing scheme would be unable to get to any of the large retailers in the community, a single parent with three children would be unable to get to a post office, and all those who did not have a car would find things very difficult.

We have seen the centralisation of services in the big retailers and, as the hon. Member for Angus (Mr Weir) has said, more and more purchases are being made from them. That has led to the centralisation of many facilities in deprived communities and those who are at the margins of those communities cannot access those facilities. We should not be making the situation worse. We should not be acting against those interests by not protecting the IBA through the opportunity we have before us this afternoon.

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

I totally endorse what the hon. Lady is saying, particularly about post offices in deprived inner-city areas. I represent some of the most deprived wards in Belfast and I recognise what she is saying. We face a similar situation in my constituency at the moment and we need the agreement to provide stability. We cannot get people to take on post offices as it is. If this threat hangs over them, we will have no chance of getting postmasters to take over ailing businesses.

[Margaret Curran]

That is a very good point and I associate myself strongly with it. Things are very difficult as they stand and if the IBA is not strengthened in the proposed way, we will make the situation much worse and make it a much less attractive option for people.

[David Mowat]

I agree with the need to keep the 11,500 post offices open, which is exactly what the Bill is doing, but I have genuine difficulty understanding why the IBA, which has resulted, among other things, in two thirds of the post offices that are open making a loss, is more important than the clear policy commitment to keep 11,500 post offices open.

[Margaret Curran]

I disagree fundamentally with the hon. Gentleman. First, it is not the IBA that has led to post office closures in the past. Many factors led to those closures, but many people would argue that we need to maintain the IBA to continue to protect the service. If we do not take this action today, we could deprive Post Office Ltd of 38% of its income. In whose world does depriving an organisation of 38% of its income protect it and its viability? I ask the hon. Gentleman to think long and hard before he argues in favour of and supports the Bill this afternoon.

Those involved in the regeneration of deprived communities and who have considered the different levers available to Government to keep those communities going know that post offices are a critical part of the process. We should not—particularly not under any Government who would ever try to claim the word “progressive”—be undermining the regeneration of those communities and making the lives of individuals, particularly those in the greatest need, more difficult. I disagree with the Bill fundamentally and think that the privatisation of Royal Mail will critically undermine post office services, but if we do not take the opportunity offered by this new clause, not one of us could ever with any credibility stand outside a post office and campaign to save it.

[Mark Durkan]

Like many others who have spoken in this debate, I completely opposed the direction of travel of the last Government on Royal Mail and post offices. I therefore oppose this Bill. I very much support the new clause tabled by the hon. Member for Colchester (Bob Russell), because it at least seeks to mitigate some of the most likely impacts and effects of the privatisation measures on the post office network.

As legislators, and collectively in this House, we have a duty of intelligent care when it comes to the impact and effects of the legislation that we pass. It is not enough for any of us to say that our judgment of what, as many Members have said, is predictable as regards the future of the post office network—many have recalled the toll of business loss, the loss of Post Office Counters and the loss of post offices in many constituencies in every area—is somehow washed away by the Secretary of State’s telling us that it is unthinkable that there would not be a long-term ongoing relationship. It is not washed away if we are told that that is unthinkable by Richard Hooper or the chief executive of Royal Mail. We all know that it is entirely thinkable— and it is not just thinkable, but predictable.

The truth about why the Government do not want us to legislate against the unthinkable—surely, as legislators, that is the first thing we should be doing—is not because such a change is unthinkable, but because they think that legislation against it is undesirable for the potential investors that they seek for Royal Mail. The Government believe that the sort of measures contained in the new clause would be repellent to potential investors and would-be future buyers of Royal Mail. It has little to do with what the EU will say or anything else. The real business is that such changes are entirely thinkable, which is why it is completely dishonest for people to rely on the claims that a change in the long-term relationship between Royal Mail and the Post Office would be unthinkable.

I was struck by the points made by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). He began by saying that, in his view, the post office side of the business had always suffered from being a bit of a Cinderella and that the driving force was very much on the Royal Mail side of the business. At the end of his interesting and welcome comments, he suggested that he thought that at some point the Government would consider the need for a clearer contract between Royal Mail and the post office counters side, but, again, it was telling that that contract would be revised because of the interests of Royal Mail and the future of that business, not so much because of the post office end of the business. In those circumstances, it is right and proper that this House—now we have been given the opportunity offered by this useful new clause—should make very clear the particular regard that we, collectively and individually, have for the service that post offices provide and could provide in future.

There is a danger, which some of us might have added to in this debate, of creating a sense that the demise of post offices as we know them is inevitable and terminal, but I do not believe it is. As many hon. Members have said, there are services into which post offices could better diversify, such as providing a range of different financial services with other businesses or having a much stronger service portal relationship with government and public services in many ways. The best way of allowing the post office network to reinvent and develop itself over a period of years in the aftermath of this privatisation would be to provide a margin of reliability for post offices in terms of the business from Royal Mail on which they have traditionally depended. A figure oft quoted in this debate is the amount of post office business that involves post offices fronting for Royal Mail services. If we deny them that margin of reliability and say, “It’s up to you to find all sorts of new services and new markets and to reinvent yourself,” we give them an impossible task. It would be an absolute dereliction of our public and legislative duty to do so. I therefore ask all hon. Members to support the new clause.

15:30

What might constitute a long-term agreement? Back in October, the Secretary of State told the House, and we have since heard it from everyone else, that it is unthinkable that there would not be a long-term contract. In Committee, many hon. Members, including Opposition Front Benchers, asked exactly what that meant. If there is to be a long-term contract, the Government should tell us the substance of the contract and how long is meant by long term, but we have not had that information. It is ridiculous for them to ask us to rely on assurances and indications. It would be like pretending that a tyre is flat only at the bottom—that this is just a small issue that we do not have to worry about and that we can go along and make do on that basis. That simply is not true.

What would be a reasonable long-term agreement between these two independent businesses, which are going to be new and separate entities? The Government are made up of two separate and independent entities and they have made a business agreement between them that goes to the maximum it could possibly be—five-year parliamentary terms. They have produced a five-year agreement on the back of which they say that all future Parliaments should be five years rather than the four years that people believe to be reasonable. They have gone to the maximum in that regard, but apparently five years is too long for a business agreement between the Post Office and Royal Mail. They say that would be wrong and undue—apparently it is too long term—but I think it entirely proper that there should be a long-term agreement.

[Jim Shannon]

Does the hon. Gentleman agree that as postmasters and postmistresses retire and opportunities become available for people to take on public post offices, a 10-year, rather than a three-year, agreement would make that more attractive? If he were considering taking over such a business, would a 10-year agreement give him some confidence in the future?

[Mark Durkan]

I fully accept the hon. Gentleman’s point. The proposed agreement would make a difference not just for the individual business people who make a commitment to individual post offices, but collectively for the network and for those who will have responsibility for the broader Post Office enterprise in future. It is meant to give a period of confidence and space, to reduce the unknowns and to give at least some stability and reliability regarding some of the knowns in that context. It would not solve all the other problems—and there are many other issues and challenges—but it would at least give people some measure of assurance.

[Lorely Burt]

I think we are all on the same page in wanting a long agreement. Donald Brydon has said that he would push for the longest agreement possible, so I am not too sure why hon. Members are so worried about the fact that we are trying to impose a 10-year agreement on two businesses for which 10 years may or may not be an optimum time.

[Mark Durkan]

We are not worried about why we should impose an agreement of 10 years; most of us are worried about why the Government would not impose an agreement of 10 years. If someone says they want the maximum agreement possible, it is entirely reasonable for us as a legislative body to say that 10 years is a reasonable period. Given that the legislation is going to construct new realities and impose new conditions on these businesses, we at least have a duty and responsibility to make sure that one of them can have a measure of confidence that it will not have if this new clause is not accepted.

[Gordon Banks]

Does the hon. Gentleman agree that the argument put by the hon. Member for Solihull (Lorely Burt) is not assisted by the fact that people such as Mr Brydon are unable or unwilling to put a figure on what the maximum number of years will be? That undermines her argument.

[Mark Durkan]

I accept fully the point that my hon. Friend on the Front Bench is making. In the absence of other indications, that is why we as legislators have a duty at least to indicate what we think is a reasonable time. It is unreasonable for us to do otherwise in the circumstances.

[Richard Graham]

Does the hon. Gentleman agree that if legal advice to the Minister is that it is not practical to legislate for an agreement between Royal Mail and Post Office Ltd for the IBA, and if we all accept that both companies wish to agree a long IBA, surely that will happen in due course, before there is any IPO—initial public offering—of Royal Mail?

[Mark Durkan]

The hon. Gentleman may be easily reassured on that point, but I certainly would not be and I doubt whether many other Members would be either. Perhaps we should have tested the question more during the debate—the hon. Member for Solihull (Lorely Burt) referred to it—so that we knew exactly why the Minister says that we cannot include the new clause. It seems that there would be a legal challenge on the basis of EU legislation.

[Mr Russell Brown]

I sincerely hope that the Minister responds to my hon. Friend, but I think the answer to the question he is posing is simply that the Government are trying to privatise an asset, but they think it will become a liability as soon as it has the sentence of a 10-year IBA around its neck.

[Mark Durkan]

My hon. Friend is exactly right and he reinforces a point that was made earlier. The real issue is that the Government believe that potential investors will be put off if the agreement is seen to impose restrictions on their options for a period of years.

[Mr Binley]

Whatever happens, the recognition of 900 mail centres means that whoever buys Royal Mail will have to work with those people. They cannot possibly cut off those centres straight away, so an agreement of some kind has to be made for Royal Mail to continue working. Is it not right to say that we want to include the provision so that we know that an agreement will certainly be made?

[Mark Durkan]

I fully take the hon. Gentleman’s welcome point. That is precisely what we as legislators are being asked to do—provide some back-up certainty and reinforcement on such an agreement.

There is a suggestion that the EU would upset an agreement, or frown on it. Let us remember that we are not talking about the House suddenly legislating to impose an agreement on two currently free, private and commercial enterprises; we are talking about a very different starting point. All Members of the House and of the devolved Assemblies have dealt with lots of situations where, through legislation and other means, we provide for various restraints, guarantees, restrictions and obliged agreements in contracts over a period of years. Such provisions could relate to restrictive gas and energy licences over long periods, guaranteed contracts between providers in different markets to create stability, or even to opening and developing markets. Such things are done all the time, and the measures are respected and accepted by the EU.

[Gordon Banks]

Does my hon. Friend agree with the people who believe that it may not be legal pressure that prevents the Minister from making the proposed arrangement possible, but Treasury pressure?

[Mark Durkan]

I join my hon. Friend in that suspicion; no doubt the Treasury is asking where the proposal will go and what would be the margin of attraction if there were changes. Because the Treasury believes that the proposal would make the business less attractive to the market, it has drawn conclusions and made an assessment.

On that point, I shall close to allow other Members to participate. I stress that we cannot hide behind the assumptions and presumptions that have been casually made, either in Committee or in the House, that the new clause is neither necessary nor feasible because other things are unthinkable.

[Mr Davidson]

I rise to speak as the Chair of the Scottish Affairs Committee, rather than as a constituency Member. I will therefore not explain why the construction of two aircraft carriers is absolutely vital to the maintenance of Royal Mail and the postal service.

We decided as a Select Committee that it was not appropriate for us to consider ownership or pension issues, because they were not mainly Scottish issues, but we wanted to consider particularly the future of the universal service obligation and the future of post offices, as they are of greater importance to rural and deprived areas in Scotland than perhaps they are to many other areas of the country.

We took as a given the importance of the role that post offices and Royal Mail play in the community. A number of other Members have already referred to that. Normal procedure does not necessarily mean that we cannot repeat exactly what other Members have said, but I will not do so in these circumstances. I want to move on to our recommendations on these issues.

We met the Minister and had a hearing with him, and it was generally our view that he was not nearly as bad as people led us to believe. He was sincere in his view. We all thought that he wanted to support the maintenance of the post office network and the universal service obligation. There was no doubt in our view that his heart in all this was in the right place. Unfortunately, we did, however, think that his head was a bit muddled.

The Minister and ourselves had identified the fact that the inter-business agreement was absolutely essential for the future of post offices, but we were not convinced that he appreciated the necessity to make it as firm as possible. We took the view that his good intentions, which we accepted, were not sufficient, because events might occur that submerged a host of good intentions. We have already seen the Government use the economic crisis as an excuse to ditch all sorts of commitments that both coalition parties made before the election. We therefore took the view, as Ronald Reagan did with the Russians on missiles, “Trust, but verify.” We accepted his good intentions, but we wanted to ensure that things were pinned down as firmly as possible.

We welcomed the Minister’s statement that he did not intend to put anything in the way of such an agreement. We took the view that there was a hierarchy of ways in which it could be approached. Undertaking to remove obstacles—well, not objecting to doing so in the first place—we took as a given. He indicated that he was keen to see obstacles removed. One of our recommendations is that the Minister take positive steps to facilitate a long and robust IBA and to remove any obstacle, whether practical, legal or otherwise, that may exist. Clarifying whether there are obstacles to a 10-year IBA being signed now would remove a lot of the anxiety about whether the European Union is blocking this or any other agreement.

As the second line of pursuit, we wanted a voluntarily entered into 10-year IBA agreed before any such sale. There seemed no reason from what we heard from the Minister, given that he was willing to overcome any obstacle, why a voluntarily entered into IBA could not be signed before sale took place. We said:

“We understand that this may affect the marketability of Royal Mail, but it is essential to the sustainability of Postal Services in Scotland.”

We appreciated that Royal Mail signing an IBA might affect the price that it achieved, because it might be seen as a less attractive commercial operation than would otherwise be the case. We none the less agreed that we wanted to include that because the preservation of post offices through the construction of an IBA and its implementation before privatisation or a change of ownership was absolutely vital.

[Damian Collins]

Does the hon. Gentleman not think that the case might be argued the other way? In taking Royal Mail to sale, one has to demonstrate that one has a secure agreement with the post office network as a major retail outlet that provides a sound footing for services at the point of sale. It is in the network’s interest in getting the best possible deal for Royal Mail.

15:45

[Mr Davidson]

No, we took exactly the opposite view. We accept that Royal Mail would probably want to have the post office network. That network is important to Royal Mail, but it is not utterly and absolutely essential, whereas the converse is not the case. It is a question of ham and eggs. The pig makes a much greater commitment than the hen, so we took the view that, if there were a privatised Royal Mail or a change of ownership, which is free to negotiate with post offices, it would be likely to drive a much, much harder bargain. It would seek, for entirely understandable commercial reasons, to drive the post office network into the ground as much as possible, to extract the maximum possible advantage from those negotiations, because it would not be directly responsible for the future of the post office network. That is why we took the view that the Post Office’s position was likely to be strongest before any change of ownership, so it was best agreed now, rather than later.

[Richard Graham]

I was not quite sure who the pig and chicken were in the hon. Gentleman’s analogy. However, on the relationship between Royal Mail and Post Office Ltd, and the role of the Treasury and the financial issue, does he not agree—and I am sure that we will all be invited to buy shares in a privatised Royal Mail, and that it will be a flotation in which many people will participate—that we would all want to see that agreement in place, so that provides the best likelihood of its happening?

[Mr Davidson]

No, I do not agree with that at all, because I do not believe that a structure will be established for Royal Mail that necessarily allows all shareholders to come round and cast a collective vote on whether they want to maintain a collective post office network. It will be in the management’s interests to maximise the return for the shareholders, so screwing the post offices into the ground will probably be in their interest. I am sorry if my comparison about ham and eggs, and chicken and bacon was not understood. The concept is that the pig provides the bacon, and the chicken provides the eggs. The chicken can carry on afterwards, but it is not quite as easy for the pig. I am sorry if that is beyond senior members of the Conservative party, but we are prepared to explain these things to them later.

Returning to the question of how we can secure the strongest possible commitment to the IBA, as proposed in the new clause, which the Committee had not seen when it prepared its report, we thought that having that in legislation would be an extremely strong protection. If the Minister can give us an assurance that legislation is not necessary because the same things will be achieved without legislation before there is any question of a sale, then, because we are reasonable, we would be satisfied. However, the House will understand our anxiety, because after the by-election on Thursday, the Minister might not be here any longer. We want to make sure, while he is in a position of authority, that he allows his heart to rule and produces measures that we find acceptable.

I should like to touch on one or two other worrying issues relating to the Post Office. On the size of the network in Scotland, we accept that the Government’s access criteria are helpful in setting out the structure of the network that they want. We welcome, too, the fact that they intend to keep 11,500 post offices. However, it is not the case that the access criteria necessarily mean that the 11,500 will remain, because our understanding is that the access criteria could be met with 7,500 post offices. A commitment to 11,500 is not necessarily a commitment to the 11,500 that are there at the moment. It would be possible in those circumstances for a substantial denuding of the post office service to take place in the highlands, the islands, the borders or Argyll. Rural areas could maintain the present access criteria, and the 11,500 criterion could be met because other post offices might set up elsewhere in urban areas, but the service would undoubtedly be worse than it was before.

The Minister shakes his head. I would welcome a commitment from him that the intention is to maintain the network pretty much as it is. I genuinely understand his difficulty. Individual post offices are controlled by individual private contractors. We cannot legislate to refuse somebody permission to leave. There will always be some degree of coming and going. If it were one in, one out in a particular area, we would not object to that, but there could quite easily be a couple of hundred post offices going out of the rural areas or the poor areas, and a couple of hundred starting up in the richer areas where need is perhaps less. The Minister’s criterion would still be met, but the social objectives that we are pursuing would be lost. I am happy to give way if the Minister wants to solve my problem.

[Mr Davey]

Philately has got me to my feet. I am looking forward to reading the Scottish Affairs Committee’s full report. I thought that I had said to the Committee that the 11,500 commitment is in the contractual agreement between the Government and Post Office Ltd. That is a strong commitment and it is backed up by the access criteria that we inherited from the previous Government, which could be delivered by a network of 7,500 post offices. Obviously, there is a debate about that, but the two together give a strong reassurance to Members and to communities around the country and meet all the concerns that the hon. Gentleman is raising.

[Mr Davidson]

The Committee unanimously welcomed the points that the Minister was making about the access criteria and the fact that he was guaranteeing, as I understood it, 11,500 post offices, but surely he will accept that his guarantee does not guarantee the same 11,500. It does not guarantee them in the same locations. In some areas, particularly rural areas, where there are small post offices, the access criteria are, thankfully, better met. One of those could easily close, one could open somewhere else, such as London, and both sets of criteria would still be met.

If the Minister cannot give us a commitment today, perhaps he will take that away and consider whether something could be done at a later stage in the passage of the Bill. I think that he accepts that this is a genuine anxiety and that we are here to help him. We are identifying gaps in provision and trying to strengthen the Bill.

[Mr Reid]

I share the hon. Gentleman’s anxieties. However, as we discussed in Committee, the problem was framing legislation to cover all eventualities. He correctly pointed out that the previous Government’s access criteria, which continue under the present Government, could be satisfied with 7,500 post offices. The only way to solve the problem would be to pass legislation that no post office could ever close, but it was agreed that that was not a practical solution. No amendment has been tabled today that offers a practical solution. The problem is putting such a solution into legislation. We have to accept the assurances of the Government. That is the only way in which we can proceed, because of the impracticality of legislating.

[Mr Davidson]

The hon. Gentleman serves with me on the Scottish Affairs Committee. As he will remember, we were not recommending that there should be a change to the legislation on this point. Unanimously we agreed that putting it in legislation would be too difficult, and we understood the Minister’s difficulty in identifying a policy that would encompass these points. But we wanted to raise the matter again because it was raised with us on a number of occasions by people who could see how the Government’s commitment could, in effect, continue to be met while there was none the less a deterioration in service.

The Minister has made the point that the contractors are independent. If somebody leaves a post office, somebody else will have to decide whether they want to take that on. After the next election, there may well be a number of Liberal Democrats looking for new jobs, and they may consider whether to become sub-postmasters. So, I am actually thinking of the Minister as much as anything else. He might wish to become a sub-postmaster in those circumstances, and, to return to a previous point, I am sure that he would much prefer a 10-year, or what might then be a five-year, guarantee with Royal Mail to one of only a few weeks. Again, it would be for his own good.

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

I very much agree that the location of post offices is vital. Does the hon. Gentleman agree that responsibility for that could be given to the new regulator? The previous Government took away that responsibility, but there used to be regulation on the consultation and decision-making process that affected the location of post offices, so the Minister might consider that idea when establishing the new regulator.

[Mr Davidson]

That seems like a very constructive way of looking at the issue. I am not sure about the practicalities, and nobody else raised the matter with us during our discussions, so we have not introduced it as a recommendation. We were interested in the outcome, however, and we had sufficient faith in the Minister and his support staff to identify ways in which it could be achieved.

That brings me to the other point about which we had anxieties. It relates to the point about the number of outlets, and it is the issue of wandering vans. The Government have committed to a certain number of outlets, and the Minister has indicated that he wants to have 11,500, but an outlet can be a van that stops for a certain period at a location and then moves on; it does not necessarily have to be a post office.

We have already heard how some sub-post offices and outreach facilities were not considered adequate, and the hon. Member for Banff and Buchan (Dr Whiteford) described how people had to queue outside some of them in the rain and snow. The facilities were not always satisfactory, and we worry that the Government will be able to meet their target of 11,500 by introducing a number of wandering vans that go to five places a day, five days a week, meaning that 25 outlets are covered.

So, 100 peripatetic vans—to use their Sunday name—would cover a substantial number of the 11,500 outlets that the Minister identifies, and that is clearly not what we intended. It would therefore be helpful if he indicated the criteria that will apply when deciding to introduce a wandering van. Is he willing to state that there will be a maximum number? We do not want the commitment to 11,500 outlets undermined and devalued by there being not even full-time vans, but part-time vans that appear for only a limited number of hours per week. That is the final area of the proposed changes on which we want the Minister’s clarification. Again, if he does not feel able to provide it today, I hope that he will find it possible to produce appropriate statements before the legislation is finalised.

[Tom Blenkinsop]

I support new—cross-party—clause 2 as part of a damage limitation exercise in opposition to this Bill to privatise Royal Mail, and in order to protect Royal Mail, which Moya Greene, its new chief executive, says provides one of the most excellent services in the world.

I, like many colleagues, have major concerns that the Bill’s proposal to separate Post Office Ltd and Royal Mail will lead to significant changes in arrangements between the two entities—two that are currently one. My Opposition colleagues and I are not the only ones to have said that; the postmasters, and the Royal Mail workers and managers whom I met in my constituency over Christmas, reiterated it.

There is no known international precedent for separating a national mail operator from its retail arm, and the changes will be detrimental to post offices in my constituency and to my constituents, their customers. The changes are likely to lead to Post Office Ltd no longer being treated as a preferred and reliable in-house provider by Royal Mail. Instead, I fear that the Post Office will be seen no differently from any other supplier, with the long, shared history between the two companies overlooked and the public’s wishes for a good, complementary service disregarded.

As we have heard, post offices—especially small rural post offices in villages across the country and in my constituency—are heavily dependent on Royal Mail business for income and attracting customer visits to their premises. In the same area, our local post offices provide a convenient and trusted location to carry out Royal Mail transactions both for the general public and for our local small businesses. Many of those post offices act as village shops and sell convenience goods, groceries, sweets and newspapers. However, many of those businesses’ activities are unviable on their own without post office activity underpinning them.

16:00

The existence of the business agreement is also important to sub-postmasters when they deal with their banks. The banks view the agreement as a guarantee of income that can be considered as collateral for lending to post offices and sub-postmasters. An unconditional clause must therefore be put in any legislation stating that such a mandatory contract between Post Office Ltd and the Royal Mail must be put in place if there has to be any separation. However, Liberal Democrat and Conservative pleas on that are in opposition to the comments of the Lib Dem Minister, who said in Committee:

“if you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that would be subject to serious legal challenge.”––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 123, Q244.]

To date, the Minister still has not provided any evidence for that position.

I strongly believe that there must be a commitment from Ministers that the full range of Government services that can be delivered via local post offices will be secured. The Government must proactively look at a range of attractive new services and post office business streams. Some post office services have already been outsourced to PayPoint, as was reported in the press recently. In addition, the coalition’s decision not to pursue a post bank is another example of the Government ignoring opportunities for the post office and the public. A mutualised post office with a bank would be an excellent community asset and would provide financial sustainability for post offices. The other arguments we have heard today about commercial necessity and banks withdrawing from localities and using post offices for their financial services tie in with the ongoing arrangements that post offices are developing.

[Mr Robin Walker (Worcester) (Con)]

Does the hon. Gentleman accept that the alternative of bringing credit unions into post offices is very attractive and that the opportunity for credit unions to work with post offices creates a positive alternative to the banking approach?

[Tom Blenkinsop]

It certainly is an alternative and I take it on board as an option. However, in and of itself, the post bank would not necessarily be in conflict with the credit union. Other Government policies have undermined and withdrawn funds from credit unions. That happened recently with the north-east moneylending team, which was within the Minister’s remit.

Many postmasters fear the worst—that the Bill will be passed—and have made a plea to Government to consider at least extending the contract to 10 years. That request has been knocked back by the Government on the basis that it would not be compatible with EU regulations. However, I am assured by postmasters who investigated the matter that that is merely an excuse. The Government’s position regarding BSkyB and the fact that the potential buyer of the Royal Mail could own 90% of the company leads us to ask what the difference is between a state-owned monopoly and a private monopoly.

Postmasters have also referred me to the rail franchise contract as an example of how such things can be and, indeed, have been done. I cannot think of any reason why the Government are willing to grant 10-year rail franchises, but will not do something similar for the Royal Mail. A 10-year agreement would be advantageous for a number of reasons. First, in the German and Dutch models, which have been referred to as examples of best practice by Ministers in Committee and today, legislation stipulates the number of national access points. It appears that the Minister has more of a problem with German geography than with the potential German ownership of the Royal Mail. Without such a clause, a minimum 10-year deal is necessary to reassure those running existing post offices, which are mainly independently owned.

[Neil Carmichael (Stroud) (Con)]

Having seen several post offices close in my constituency before the general election, I welcome the Minister’s commitment to end the closure programmes. The key point is that post offices should be given the flexibility to get in extra services and respond to new developments, and that is the fundamental point of this aspect of the Bill. Does the hon. Gentleman agree?

[Tom Blenkinsop]

No, I do not. The point of the IBA is to allow for an established foundation so that post offices can exploit further services, but we have not seen, to date, what those services will be. We have had promises about potential services, but as in the case of the press stories about PayPoint bidding for benefits contracts, for example, we hear one thing and then there is evidence of something else occurring.

Post offices are, in the main, independently owned, and the mutualised scheme assumes that the vast majority will opt into the mutual model, without providing any details of what that will mean in practice for a particular post office, which mutual model will be adopted, or whether Government will sit on the board of a mutual or a workers’ co-operative or customer-workers’ co-operative. Nor does it say what would happen to a sub-postmaster if they decided not to opt into the model. In any case, a mutual model offers no safety without a long-term guaranteed IBA for business. Royal Mail could, and probably will, seek cheaper access points after the IBA has expired.

How can the Government guarantee fair commercial negotiations between a privatised, large and powerful Royal Mail and a mutualised, smaller Post Office Ltd? Perhaps the two coalition partners, with one obviously being large and the other smaller, can give us some information on how such negotiations go ahead and how such agreements are reached. However, looking at this from the outside, it does not look particularly helpful for any form of Post Office Ltd taking forward any sort of commercial negotiations. If the position cannot be guaranteed, what message does that give to business and to the general public at large, and what chance is there of having an independent Post Office that opts out of a mutualisation scheme and goes into commercial dealings with a larger Royal Mail?

The Government’s proposed pilots have yet to start and to prove how new services in post offices will have worked. That is not to say that they will not, but there is no evidence as yet for us, as legislators, to see that evidence before we carry on.

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

Obviously the details are some way from being decided, and the model for how the Post Office will be organised as a mutual, if that happens, has yet to be chosen. Surely, however, this is something to be welcomed across the House. There may be concerns about the specifics, but does not the hon. Gentleman feel a sense of warmth towards the idea of a mutual Post Office?

[Tom Blenkinsop]

As a member of the Labour and Co-operative party, I always have a sense of warmth towards mutuals and co-operatives. However, I do not yet know what we are being sold, and until I see the details I ain’t signing anything.

Post office and mail services are seen not as mere businesses but as an essential part of our way of life. These are not just romantic notions on my part. I cite the report issued last year by the Business, Innovation and Skills Committee, which says that local post offices provide a focal point for communities. It says that they are

“an instrument of social cohesion”

that

“preserve the fabric of our society”

and are places

“where vulnerable and non-vulnerable people alike share services”.

Every week 20 million people visit a post office. For every £1 transacted in the UK, 14p is handled through the post office network. Post offices are also a lifeline for many of the most vulnerable people in society, including older people, the disabled, people on low incomes and also—this is important to me in my constituency—those living in rural villages and small towns.

Small businesses are also extensive users of the post office network, particularly its mail services. I understand from the Federation of Small Businesses in my region that 20% of its member companies use post offices, while 59% use their local post office at least once a week. The growth of online business transactions has boosted this usage significantly, with Royal Mail parcel delivery posted from local post office branches being the preferred medium.

The inherent strength of the current post office network lies in its depth and its reach. The existence of 11,500 sub-post offices means that the network of post offices remains bigger than all the bank and building society branches put together. This becomes even more important when we note the continued closure of local bank branches.

[Damian Collins]

As we have discussed, that is the inherent attractiveness of the Post Office and one of its great bargaining tools. No retail outlet in this country can offer the breadth and number of locations of the Post Office.

[Tom Blenkinsop]

We have seen recently that Tesco could compete with the Post Office, and have heard in this debate that other commercial ventures could do so.

[Damian Collins]

Even the major supermarkets—and probably all the major bank branches—combined do not reach the scale of the Post Office. I am yet to be convinced that there is a realistic retail alternative whereby the Royal Mail could take its business wholesale out of the Post Office and give it to someone else. That is the picture painted by some Opposition Members.

[Tom Blenkinsop]

No, we are portraying a picture of the future in which that could happen. Royal Mail Group has admitted that nearly two thirds of existing post offices are economically unviable. That does not mean that they are not propped up by the inter-business agreement. That is the difference in how the Opposition and some Government Members view the IBA. Is it simply a system that keeps post offices alive, or is it a redistributive mechanism within Royal Mail Group, alongside other mechanisms, that ensures that there is a service provider across the UK?

[Mr Davidson]

Perhaps it would be helpful if we clarified whether it would be possible, without an IBA, for Royal Mail to do a deal with Tesco, other supermarkets and a number of banks, and to fill in the missing parts of the jigsaw with post offices. Surely that is the alternative that we ought to be worried about. That is the danger of going down the road indicated by the hon. Member for Folkestone and Hythe (Damian Collins). He seems to think that the option is between the Post Office in its entirety and Tesco in its entirety. A predatory Royal Mail could easily decide to pick and mix. The danger is that we would be left with a small number of post offices, with the rest replaced willy-nilly by Tesco and the like.

[Tom Blenkinsop]

There is also the assumption that the Royal Mail will stay at its current size and not contract wholesale to a more commercially viable size in urban areas, and an assumption that it will remain as one national system and not fracture into regional systems with further purchases and sales. It depends who the buyer is, and we have no guarantee on that either.

The importance of the inter-business agreement is demonstrated by the figure from the National Federation of SubPostmasters that income from transactions carried out in post offices on behalf of the Royal Mail accounts for a third of Post Office Ltd’s income—£343 million in 2009-10—and makes up a third of sub-postmasters’ pay and income. It is clear that if the agreement, which has almost four years left to run, is not retained and carried over, more local sub-postmasters will conclude that the game is up and hand in their keys. The arrangements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 are likely to change, and the terms and conditions for sub-postmasters may change substantially. If I was a sub-postmaster in a rural area and wanted my pension or redundancy, I would see this as a dodgy area.

It may be easy for Ministers to ignore such arguments and say that there are always people who are willing to provide post office services, but from my constituency experience, that is far from the truth. When a local urban post office in Coulby Newham closed recently, the response to the advertisement of the new business opportunity was negligible. Luckily, we were able, in partnership with the regional offices of Post Office Ltd to find a business man, Mr Patel, who was willing to take the risk of opening a new outlet in Coulby Newham, but I stress that that was with the benefit of the inter-business agreement. Without it, I do not believe that he would have taken the plunge.

Any changes to Royal Mail and its relationship with Post Office Ltd that adversely impact on the network will unquestionably risk further widespread post office closures. If the Government do not heed that warning, the public and my constituents will know who to blame. Royal Mail is a great example of how the market does not solve everything. It simply does not make economic or business sense for a company to set up to provide a postal service in rural areas. That is why we need Royal Mail, why we have the IBA, and why it must remain.

[Nia Griffith (Llanelli) (Lab)]

To most people in this country, the Royal Mail and the Post Office are synonymous. To them, the matching colours of the Royal Mail vans and the oval sign indicating the presence of a post office are symbolic of an inextricable link between the two. They are the two arms of one and the same service. The post office is the collection or access point—the place where people take the parcel that they want to post or the letter that they want to register—and the Royal Mail van that does the country rounds, or the postman or woman wearing the badge with the red and yellow insignia on it, provides the delivery service.

16:15

To most people, it is unthinkable that the two should be separated, and indeed Moya Greene, the chief executive of Royal Mail, recognises that historical link and has uttered warm words about a privatised Royal Mail continuing to use the Post Office to provide the access counters for its services. However, fine words are not enough. In the tough world of business, in which a profit-hungry, privatised Royal Mail will be looking to drive the hardest bargain possible, neither tradition nor public service is likely to be the foremost consideration. They are likely to be subservient to the profit motive.

One may well think that the motive of profit would also lead to costs being driven down, which would be beneficial to the consumer. However, we all know that cost-effectiveness can mean that services become concentrated in the big centres with high turnovers. Services such as shops or post offices that serve scattered rural communities, or less well-off urban areas where spending levels are low, find it difficult to make ends meet, and that can lead to shop owners or sub-postmasters shutting up shop with little to attract new entrants. The consumer is therefore left with fewer outlets and less choice. Very often, those who are not car owners miss out most. They can no longer look forward to a little walk and a chat in the local shop. We have all seen it happen—the big supermarket arrives in an area and surrounding businesses are put out of business.

Labour’s belief is that a viable, sustainable post office network is a critical part of the social infrastructure of many communities. That belief led us to develop the access criteria for post offices and to set aside the £1.5 million annual subsidy to maintain the current network of some 11,900 post offices. I am pleased to note that the important social role of post offices was recognised in the Government’s recent document accompanying the announcement of the continuation of that subsidy.

We know that Royal Mail business accounts for more than a third of the post office network’s revenue—some £343 million. One third of sub-postmasters’ pay, some £240 million, is also generated from the sale of Royal Mail products and services. Clearly, the loss of one third of the Post Office’s revenue would have catastrophic effects.

That calls into question the logic of allocating £1.34 billion of taxpayers’ money to subsidising and refurbishing post offices, when we could find the business stream that guarantees them a third of their business being taken away. There has been no guarantee that it will stay. Where is the logic in putting taxpayers’ money into the Post Office while doing nothing to secure a third of its revenue? Using taxpayers’ money to refurbish post offices while doing nothing to secure Royal Mail business is like respraying a car before pushing it over the cliff.

The Minister has tried to tell us that he cannot do anything about securing an inter-business agreement between a privatised Royal Mail and the Post Office. He is standing back, wringing his hands and saying, “Oh, I’m so terribly sorry, there’s nothing I can do.” It sounds very much like Pontius Pilate. What advice has he taken? What options has he explored? Does he expect that a privatised Royal Mail would honour the current inter-business agreement? Depending on the time scale of his proposed sell-off of the Royal Mail, that could mean honouring just the last couple of years of the existing agreement.

[Lorely Burt]

My understanding is that the inter-business agreement will come into place before any agreement is signed between Royal Mail and whoever takes over.

[Nia Griffith]

As I understand it, there is an existing IBA. The question is: what is the timetable for the privatisation of the Royal Mail? How much of the existing IBA will be left? If we are arguing that an existing IBA can be carried over, surely an existing IBA of a different length could also be carried over. Although we currently have one that is worth probably a couple of years at most, by the time the privatisation procedure has gone through, there could be a new and different IBA. Indeed, there could be a 10-year IBA. We have already heard from the Minister that it is possible to have all sorts of businesses entering into agreements. We know that there are 10-year rail franchises, for example. There are all sorts of different takeover bids—when companies take over other companies, they have all sorts of contractors working for them—so there can clearly also be a takeover of an inter-business agreement. We are asking the Minister for a guarantee that it will be a 10-year agreement. What we are asking for is not rocket science; it is something that I am sure he will want to do. Indeed, if we can be persuasive enough, I am sure that he might even consider it, but we shall see.

If that can be done and a privatised Royal Mail can be expected to honour the existing agreement, what has the Minister done to explore the option of putting in place a longer-lasting inter-business agreement, such as a 10-year agreement? Perhaps he will be able to tell us later what he has done. What will he do to put that in place before privatising the Royal Mail? Has he looked at examples of business takeovers where the buyer has taken over the existing commitments of the company that it has acquired? Simply telling the Committee and now the House that it cannot be done, without even exploring the options, suggests a fundamental unwillingness to take every possible step to secure the future of the post office network.

The Minister seems to think that it would be good enough to rely on the good will of those concerned. Indeed, he tried to assure the Committee by saying:

“I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement”.––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 121-22, Q244.]

However, what has the Minister done to turn that good will into practical action? Has he had talks with the chief executive and chairman of Royal Mail about securing a longer inter-business agreement between Royal Mail and Post Office Ltd before privatisation? What mechanisms has he explored for doing that? It also has to be said that Moya Greene may not be there for ever. What happens if we have a new chief executive or chairman? I have every belief in the sincerity of their words, but we all know that words are not enough. What we need in business are agreements in writing, so that we know what we are talking about.

The Minister also said that consideration had not been given to the matter before. No, it has not, quite simply because when we were in government, we always intended to keep Royal Mail in majority public ownership, so it would not have been separated from the post office network in the way that it will be if the Government privatise it. Therefore, there was simply no need to consider the future of the IBA in that way.

The National Federation of SubPostmasters is clear that it needs a 10-year IBA as an absolute minimum. That will be fundamental to providing security, so that business will be viable for the 97% of post offices that are owned by a sub-postmaster or sub-postmistress. They are the people who have taken on post offices, investing considerable amounts of their own money to set them up at a time when the inter-business agreement between Royal Mail and Post Office Ltd was taken for granted. They would never have dreamt that post offices could face losing Royal Mail business and, with it, the money that accounts for a third of their revenue.

Sub-postmasters and sub-postmistresses will have welcomed the Government announcement to continue the subsidy of the post office network. Indeed, they may be hoping to benefit from some of the money that is being put aside for the refurbishment of post offices. However, they will also be scrutinising the BIS document “Securing the Future of the Post Office in the Digital Age” to see whether they can find anything that guarantees more Government business to post offices, when we have PayPoint challenging the Post Office for the Department for Work and Pensions contract for benefit checks. Sub-postmasters and sub-postmistresses will also be looking carefully to see whether there are any strategies for channelling new types of business through the Post Office, now that the Government have abandoned Labour’s plans for a people’s bank at the Post Office—yet another Lib-Dem manifesto promise broken.

Most of all, however, sub-postmasters and sub-postmistresses will be worried about the future of the IBA, because they know how much the future viability of their business depends on their continuing to provide services for Royal Mail. Indeed, the IBA covers more than just the counter services. As the hon. Member for Northampton South (Mr Binley) pointed out, it deals with sorting facilities in shared premises in some areas. Specific guarantees that business with the Royal Mail will continue are wanted. If someone has invested considerable amounts of money in a business that included Royal Mail services, they would be concerned about whether they could sell their business as a going concern when they decided to retire or move on. They would be very worried about the price they might get if there were no IBA with the Royal Mail, and there would be a real problem in attracting new entrants.

Even without considering the potential loss of the IBA, the Rural Shops Alliance, in the winter edition of its journal Rural Retailer, expresses this view of Government plans to convert post offices to the Post Office local model:

“The logic of this is obvious, but it will involve a reduction in product ranges, longer PO opening hours and a reduction in income—not a model that will encourage subpostmasters to remain as part of the network. It is great that the Government is promising a no closure programme—it cannot however promise that it will be financially worthwhile for anybody to provide PO services.”

That is the case even without considering the catastrophic effect that the loss of the IBA would have on the prospects of post offices and the chances of attracting new entrants.

George Thomson of the National Federation of SubPostmasters told us that there are currently 900 vacancies where Post Office Ltd is struggling to find someone to take on a local post office. It is no good dismissing this as just the regular turnover. I know for a fact from my own constituency—I am sure that other hon. Members do, too—just how long some of those vacancies have been there and how depressing it is for those local communities without their post offices, with some pensioners having to face very awkward and time-consuming bus journeys to access their pensions.

With the prospect that the Post Office could lose the IBA, how on earth is Post Office Ltd going to attract new entrants? Why would anybody want to undertake the not inconsiderable task of establishing themselves as a sub-postmaster, with all the training and investment involved, with the prospect of the Post Office losing the IBA hanging over them?

Consumer Focus has also raised concerns about the impact of the loss of the IBA. It said in written evidence to the Public Bill Committee that

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

It continued by pointing out that

“for the foreseeable future, the loss of the mail’s contract, even on a partial basis, would significantly undermine the integrity of the post office network. Even if the Royal Mail continued to use the PO in rural areas only, the ability of the network to cross-subsidise from its profitable urban branches would be lost. The future of many post offices, particularly the 6,515 post offices in rural areas, would therefore be in doubt. This would not only threaten access to mail services, but also to the range of services of economic and social interest available through the PO network.”

That is the viewpoint of Consumer Focus, and I am sure we would all agree that it should be listened to.

Many hon. Members have made some good and useful points today. My hon. Friends the Members for Linlithgow and East Falkirk (Michael Connarty) and for Blaydon (Mr Anderson), who both have an excellent track record in standing up for post offices, each made a vigorous and impassioned defence of the post office network.

The hon. Member for Northampton South mentioned the importance of the social role of the Post Office—how people get help from it and how community networking and social work take place. He also mentioned that it is not only older citizens, but young mums who can benefit from the community and help that can be found through the post office. The hon. Gentleman said, “Woe betide any elected Member who ignores the importance of the local post office to the fabric of the community.” He also mentioned the role of the additional 900 post offices that act as mail sorting areas and the problem of post office vacancies and the difficulty of finding new entrants to take on post offices.

My hon. Friend the Member for Edinburgh South (Ian Murray) reminded us that there are other countries where the Post Office is protected in law. The hon. Member for Solihull (Lorely Burt) raised the issue of the need for regulatory reform—something on which we would all agree. The hon. Member for Angus (Mr Weir) said that everything simply cannot be left to warm words. He pointed out that we simply do not know how long the current managers will remain in their posts. He also drew attention to the staggering range of products and services that are now available through supermarkets, which would not have been dreamt of only a few years ago.

16:30

The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), supporting his hon. Friend the Member for Colchester (Bob Russell), explained very clearly why he considered it necessary for the Bill to provide for a guaranteed IBA. He cited many examples of agreements, including non-compete clauses, which it was not impossible to provide and to carry over.

My hon. Friend the Member for Islwyn (Chris Evans) emphasised the importance of post offices to the community, and the extra mile that so many sub-postmasters and sub-postmistresses are prepared to go to help to look after members of their own communities. My hon. Friend the Member for Glasgow East (Margaret Curran) spoke of the hardship that would be caused by mass closures of post offices in deprived urban areas. The hon. Member for Foyle (Mark Durkan) challenged the idea that it was “unthinkable” that Royal Mail would abandon the Post Office. He said that, far from being unthinkable, it was quite predictable, and that it was all about pleasing potential purchasers.

My hon. Friend the Member for Glasgow South West (Mr Davidson), the Chair of the Scottish Affairs Committee, reminded us of the recommendation in his Committee’s report that the Government should take a more proactive approach to facilitating a long and robust IBA by removing any obstacles—practical, legal or otherwise—that might exist. My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) made a comparison with the 10-year rail franchises. The hon. Member for Folkestone and Hythe (Damian Collins) stressed the unique reach of the post office network, as well as the importance of the certainty represented by the IBA.

Last but not least, let me refer to the hon. Member for Colchester, who tabled the new clause and who spoke so eloquently in moving it. I take issue with him on only one point: I think that he needs to challenge his own Government about what additional Government business they intend to put through the post offices. We have seen fine words in the document produced recently by the Department for Business, Innovation and Skills entitled “Securing the Post Office network in the digital age”, and we have also seen a copy of the letter sent by the sub-postmasters to the Department for Work and Pensions. However, we have not heard about any additional business so far, and I think that the hon. Gentleman would do well to pursue that. Nevertheless, I thank him for tabling the new clause, which we shall be pleased to support.

Many Members have presented compelling arguments for the inclusion of a guarantee of an inter-business agreement between Post Office Ltd and Royal Mail for at least 10 years. They have pointed out to the Minister that the obstacles are not insurmountable, and that if he has the will to include an IBA in the legislation, he should be able to find a way of doing so. They have said that he really must do that, or he will be remembered as the Minister who refused to take the opportunity to safeguard the post office network, and who left the way open for Royal Mail to abandon it.

We will support the new clause, and I hope very much that the Government will do so as well.

[Mr Davey]

I thank my hon. Friend the Member for Colchester (Bob Russell) for sparking the debate, and particularly for the way in which he introduced it, in his unique style. I thank him for his practical approach to the issue, and for his support for the mutualisation and employee share ownership provisions. I hope I shall be able to reassure him that new clause 2 is not needed, and that our policies for the Post Office will ensure that some of the more scaremongering predictions that we have heard will not come to fruition.

Members who have spoken in support of the new clause have expressed the fear, which has been debated at length in Committee and in other forums, that taking Post Office Ltd out of the Royal Mail Group of companies will put the commercial relationship between Royal Mail and Post Office Ltd at risk, and thence pose a risk to the post office network. I share my hon. Friend’s laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd. However, the approach taken in this new clause, of legislating a contract of a certain length, is not the way to achieve our shared objective.

In the evidence given to the Public Bill Committee, we heard strong backing for the separation of Royal Mail and Post Office Ltd. These are different businesses, which will benefit from focusing on the different challenges they face. It is worth keeping in mind that postal services account for only about a third of Post Office total revenue, as post offices undertake many other activities. Evidence to the Committee from Richard Hooper—the last Government commissioned him to report on Royal Mail, and this Government asked him to refresh his report—and from Consumer Focus and Postcomm all supported the separation of ownership of the two businesses. I was grateful for the support for this from my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso).

Let me reassure Members, however, that the separation of Post Office Ltd and Royal Mail will not lead to the dangers for the post office network that people have talked about. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners, because there will remain an overwhelming commercial imperative for the two businesses to work together.

Let me expand on that a little further. In evidence to the Bill Committee, the chief executive of Royal Mail, Moya Greene, called the post office network

“the best and strongest network in the country, by any yardstick”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]

Yesterday, she reaffirmed her commitment to that relationship, saying:

“There is already a very strong and enduring commercial relationship between the Post Office and Royal Mail. It is clearly in the interests of us all that this strong relationship is maintained in the future. We are committed to securing as long an agreement with the Post Office as we are legally able to.”

That confirms what Donald Brydon, the Royal Mail chairman, said in his evidence to the Committee. These are very strong pledges, and both Moya Greene and Donald Brydon make them not for sentimental reasons, but because they are business people and they know this relationship makes commercial sense.

[Nia Griffith]

If this makes such good commercial sense, what is the problem with putting it in the Bill? Royal Mail will still be an attractive proposition to any prospective purchaser.

[Mr Davey]

I will, of course, address that in detail, if the hon. Lady will let me. However, I first want to stress that it is the commercial incentive in the relationship that is so important. The Labour party forgets that commercial rationale is what makes people work together and what makes partnerships successful, not regulation.

I invite Members to consider the counterfactual of why Royal Mail would end its relationship with the post office network. Many of us fought the previous Government’s post office closure programmes precisely because the public value their local post offices so highly and see them as the natural place for high-quality postal services. As I asked on Second Reading, why would Royal Mail walk away from the Post Office, leaving a vacuum which its competitors would willingly fill? That would be commercial nonsense, and it will not do it.

The new clause would put the contract between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 10 years. Let me explain why I am opposed to this suggestion. I do not believe that legislation is appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. I am unaware of any statutory precedent for the Government requiring particular commercial terms between two independent businesses. When we debated this in Committee, I appealed to Committee members to tell me whether they could find such a precedent. None has appeared, and for good reason. These negotiations are best left to the businesses themselves, who know far better than we in this House their customers, the markets they serve, the products and the services they require of one another.

[Mr Binley]

I noted that the Minister said, “I do not believe,” and not, “It is a fact.” His not wishing to include this provision in the Bill is a matter of judgment, not a matter of law. May I add something on the idea of there being two independent businesses? In reality, the nation has a sizeable holding in them, so we are not quite talking about two businesses that are quoted on the open market. Would he therefore confirm that there is no legal reason why this arrangement cannot happen, even though it might be breaking new ground?

[Mr Davey]

I reassure my hon. Friend that I will be coming to this legal point and that I wish to address the remarks made by the hon. Member for Llanelli (Nia Griffith), but I stress that we were not given any statutory precedent for this arrangement. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volumes, service levels and duration. If we adopted the new clause, there is a real danger that we could end up with an IBA that would damage the post office network. That has not been discussed at length and we should concern ourselves with it. The new clause focuses on the duration of the contract and, thus, would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts—the businesses and their advisers—should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us here in Parliament.

On the key issue, Donald Brydon made it clear in his evidence to the Public Bill Committee that Post Office Ltd and Royal Mail would sign an agreement for the longest legally permissible period before a future separation. As shareholder, the Government will ensure that that commitment is met before any separation. I hope that the House will welcome this new commitment; we are making it very clear that we will ensure that Royal Mail delivers on the commitment that it has given, repeated and outlined to the Committee.

[Mr Binley]

May I press the Minister further? Will he now confirm that there is no legal or statutory reason why the new clause cannot be included in the Bill?

[Mr Davey]

I was coming to that, so I am delighted that my hon. Friend intervened just then. There is a legal barrier—

[Mr Anderson]

Will the Minister give way?

[Mr Davey]

Let me just finish the point, because there is a legal barrier. This also addresses the point made by the hon. Member for Blaydon (Mr Anderson), who asked whether the European Union was involved in creating problems for legislating in the way proposed in the new clause. The legal barrier to legislation requiring an IBA is the EU’s competition framework. Legislation providing an exclusive arrangement between Royal Mail and Post Office Ltd would face a significant risk of legal challenge as being incompatible with competition law. Article 101 of the treaty on the functioning of the European Union contains rules prohibiting anti-competitive agreements between undertakings. Article 4(3) of the treaty on European Union obliges member states not to jeopardise the attainments of the objectives of the treaty. The effect of those provisions, together with article 102 of the treaty on the functioning of the European Union, is that member states cannot introduce measures that would render the competition rules ineffective—that is clear. In addition, legislating for Post Office Ltd to have a guaranteed income stream would risk a successful state aid challenge being mounted. There are real barriers to doing what new clause 2 seeks to do.

However, I can assure the House, as I have done previously, that we, as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled.

[Mr Weir]

I understand that after the Bill is passed, if that indeed happens, one company—and only one—that has a statutory universal service obligation will be entering into a contract with Post Office Ltd. I fail to see where the competition problem lies, because nobody else is offering a universal service obligation to challenge that.

16:44

[Mr Davey]

Let us be clear that the commitment that Royal Mail has made is that the refreshed or new IBA would be entered into before separation. We, and the EU legislation that I mentioned, say that there is a problem if the Government legislate for such a long contractual arrangement. The hon. Gentleman is not paying attention to the constraint on the Government.

[Malcolm Wicks (Croydon North) (Lab)]

Let us put to one side the earlier amusing moment when a radical said that he needed a precedent before acting—fortunately, that did not stop Lloyd George in 1906 with old-age pensions. The Minister has read the careful legal advice from departmental lawyers. Are they saying that it would be difficult to accept the new clause, or have they ruled it out entirely as clearly illegal? Will he tell us what the advice is?

[Mr Davey]

I have made it very clear that it would be open to serious legal challenge and I believe that we must take that into consideration. Let us remember that this agreement is not negotiated by the Government, as some hon. Members seem to think. It is negotiated by two independent bodies. The right hon. Gentleman, as a former Minister, ought to realise that for a Government to intervene in negotiations that involve commercially sensitive terms and to follow that by putting it in the Bill is completely the wrong way of going about things.

[Malcolm Wicks]

As a former Minister in the Minister’s Department, although not one with responsibility for this area, I can recall many occasions on which one was given legal advice and difficulties were presented. Unless a provision is 100% ruled out as clearly illegal, Governments must govern, at the end of the day, and Ministers must act in the interests of the democracy.

[Mr Davey]

This Government are governing. It was the previous Government who moved away from taking action on Royal Mail, who closed post offices and who did not take action. The right hon. Gentleman is absolutely right that we must make judgments, and we are making judgments. I can tell him the judgment that we will not make: the judgment that the previous Government made, which was that the way to sort out the post office network was to close thousands of post offices. We will not do that. The Government can and will help to create the conditions in which both businesses can flourish in partnership with one another.

One thing is certain. A struggling Royal Mail will lead to problems for the Post Office. The Bill introduces the ability to bring in much needed private capital for Royal Mail to invest in its transformation, so that it can offer the best service to its customers. It is important, too, that the Post Office continues to offer the best possible service to Royal Mail as well as to other current and potential clients. I am sure that hon. Members are well aware following the debate that we have committed funding of £1.34 billion, so that Post Office Ltd can invest in its network to ensure that that happens. For example, Post Office—

[Mr Binley]

Will my hon. Friend give way?

[Mr Davey]

In a second.

[Mr Binley]

We are moving on; will he give way?

[Mr Davey]

No, not yet.

For example, Post Office Ltd is piloting branches that offer greater flexibility and convenience in customer services, such as longer opening hours. The Committee heard evidence from Paula Vennells, the Post Office’s managing director, that those branches offer customers opening hours that are between 40% and 60% longer than current opening hours. That is the real change that the post office network needs. That is the change that will attract more customers and will mean that we do not repeat the appalling closure programmes that we saw under the previous Government.

[Mr Binley]

I want to pin the Minister down, because it is vital that we do. He said that there was a “significant risk” that we might be challenged by the European Courts on competition matters. Yet the two organisations have agreed that it is vital that they have an agreement. How can the EU challenge the Government on that matter when there is an open statement to the effect that it is what is needed and what is good?

[Mr Davey]

Let me take my hon. Friend back to the point I was making about articles 101, 4(3) and 102. The point I was making was not that the two businesses cannot have an IBA. That is clear—they have one now, and they have committed to refreshing it or to creating a new one. I gave the commitment to the House today that we, as shareholder, will ensure that that happens before there is a separation. I hope that my hon. Friend will welcome that. The risk is about legislation and I hope he understands that point.

[Sir Alan Beith]

The more I read the new clause, the objective of which I fully support, the more concerned I am that if it were in the Bill the Minister would be open to judicial review from an aggrieved party who made an unsuccessful bid to buy Royal Mail and wanted to judicially review the Minister’s unreasonableness in going ahead with a sale on the basis of an agreement between Royal Mail and the Post Office.

[Mr Davey]

My right hon. Friend is absolutely right. Let us be absolutely clear: the problem with Royal Mail has been the inaction, particularly from the previous Government, that has led to its parlous state. We do not want to create significant risks of legal challenge that would undermine the modernisation and investment process that Royal Mail needs to deliver on the universal postal service and that we need to ensure that the post office network does not have to face the closure programmes we saw under the previous Government.

[Mr Davidson]

Could we possibly agree, first, that the EU is a bad thing? Secondly, is the Minister telling us that he does not wish to have the new clause in the Bill in case the EU steps in, while also promising us that he is going to do all this anyway?

[Mr Davey]

The commitment that I have given today is what the hon. Gentleman and his Select Committee were seeking. That is what I understood from his very well-informed remarks earlier. Now that he has intervened, let me tell him that his point about mobile vans is dealt with in Government amendment 5, which I hope we will get to. There are currently 39 such vans serving 240 communities, and Post Office Ltd has no plans to increase its fleet of vans. I hope that gives him some reassurance on his very detailed point.

[Anas Sarwar (Glasgow Central) (Lab)]

Following on from the hon. Member for Northampton South (Mr Binley) in wanting to pin you down—the Minister that is, not you, Mr Evans—if the legal advice from civil servants is so clear, will the Minister publish it?

[Mr Davey]

The hon. Gentleman is a new Member of the House and he might know that there are various protocols on publishing legal advice.

Our policies on post offices will ensure that people will continue to see their local post office as the natural and convenient place to access Royal Mail products, and Royal Mail’s management continues to see the Post Office as its retail partner of choice. It is by attracting customers for all types of services that the Post Office will ensure its future success. With this Government’s funding and support, as laid out in our policy document, which sets out a whole range of ideas for new Government services, we will be able to achieve those objectives.

The new clause tabled by my hon. Friend the Member for Colchester is well intentioned and I have always been impressed by how he, the voice of Colchester, campaigns for his constituents, not least for important services such as local post offices. I hope that I have reassured him that his new clause is not needed to support our precious post office network.

[Nia Griffith]

It still is not at all clear what the Minister is giving away. We have absolutely no idea what agreement he is planning and he has given absolutely no indication that he has had any talks with Royal Mail. He is talking about some sort of negotiation that might take place, but he is not telling us why he cannot explain what the legal problem is. We are not the slightest bit convinced, so will he explain exactly what he is doing to secure the Royal Mail business that provides a third of the post office network’s income? No organisation can survive without a third of its income, so what is he doing to ensure that it does not lose it?

[Mr Davey]

The hon. Lady cannot have been listening. What I have said today is absolutely clear: a commitment has been made to the Committee on which she served by the chairman and the chief executive of Royal Mail that they will refresh the IBA or have a new one before the separation. I am saying that the Government, as the shareholder, will make that happen, and she ought to welcome that.

[Sarah Newton]

I am very much reassured by the clear commitment we have heard today that it is the Government’s intention to support the post office network. To convince our colleagues on the Opposition Benches, would the Minister be kind enough to share with us the conversations he has held with the chief executive about what she thinks is the longest legally possible period for the new agreement?

[Mr Davey]

I think I should definitely be advised to share neither those private conversations nor the legal advice that may or may not have been given to Moya Greene and that she may or may not have shared with me.

The wider policies of the Government for the post office network will prevent major closure programmes. We have heard no apology today for all the closures of post offices under the previous Government. We saw 7,000 post offices close under the Labour Government. This Government have policies to make sure that that will not happen again, and I urge my hon. Friend the Member for Colchester to withdraw the new clause.

[Bob Russell]

When we read Hansard tomorrow, we shall see that there was at least one commitment—if not more—in the Minister’s response. Whatever the outcome of the vote, the fact that we have held the debate is worth while.

To be told four hours into the debate that my new clause may not be lawful was a little strong. I am pretty sure that, if the proposal were not lawful, somebody, somewhere, would have drawn it to my attention, if not when I tabled it, certainly in the few weeks since the Christmas and new year period. When I am told that there could be a serious legal challenge, all I can say is that nobody has challenged me as to the legality or otherwise of new clause 2.

Although I am grateful for all the contributions to the debate, I am disappointed. Had this been a boxing tournament, the ref would have ended the bout at least two hours ago. If this were an Oxford Union debate, the vote in favour of new clause 2 would have been overwhelming, because the case against the new clause is not very strong. It may be that all the Members who oppose new clause 2 are not present, and only the minority who support it have come to the Chamber to speak, but I am grateful to Members on both sides of the House. I think that we all agree that our sub-post office network is a vital part of our communities. Whether it is sustainable communities or localism, all Governments come up with such ideas and then promptly do things that do not appear to be community oriented.

It is on record that I am opposed to the privatisation of Royal Mail, but I accept that it will happen, so this is a question of what is best. I genuinely feel that new clause 2 is a way of taking things forward.

It is less than nine months since the utopian era of 13 years of new Labour came to an end; of course, it was a golden era for Royal Mail and the Post Office, so although I welcome the support that has been given we need to put it in historical context. The closures under the previous Government were the greatest of any time in the history of the Post Office and Royal Mail. I believe that the coalition Government have proposals—

[Nia Griffith]

Will the hon. Gentleman give way?

[Bob Russell]

By all means, if the hon. Lady wants to apologise.

[Nia Griffith]

The hon. Gentleman needs to remember that when we debated how to support the post office network and how to put in the extra subsidy that enabled us to keep open 11,900 post offices, the Minister of State, Department for International Development, who was then the shadow Minister speaking for the official Opposition, made it absolutely clear that the Conservative party would not have put in the amount of money that we were prepared to put in. Of course, the Liberal Democrats were not then promising anything because they never thought that they would have to deliver.

[Bob Russell]

I provided the hon. Lady with an opportunity to apologise for Labour’s mistakes, but an apology was not forthcoming.

I am disappointed that the Minister has not accepted new clause 2. After all, over Christmas, the Government accepted another of my proposals—that a picture of the Queen’s head must remain on stamps—although if we reach that amendment later on, it refers only to Her Majesty, and we need to tighten up the wording because the monarch may not always be female. I wish to press new clause 2 to a Division.

Question put, That the clause be read a Second time.

17:00

Division 163

Ayes: 250

---

Labour: 228
Democratic Unionist Party: 6
Scottish National Party: 5
Conservative: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Independent: 2
Green Party: 1
Liberal Democrat: 1

Noes: 308

---

Conservative: 268
Liberal Democrat: 39

New Clause 4

Restriction on universal service provider disposals

‘Any company providing a universal postal service must, prior to selling any part of its business to another entity, first report its intention to Ofcom who must certify the sale does not in any way reduce the company’s ability to deliver its universal service.’.—(Mr Weir.)

Brought up, and read the First time.

[Mr Weir]

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

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

Amendment 11, page 15, line 17, clause 28, at end add—

‘(c) the needs of small business users in rural and remote areas’.

Amendment 12, page 16, line 16, clause 30, leave out ‘Friday’ and insert ‘Saturday’.

Amendment 13, page 16, line 28, leave out ‘Friday’ and insert ‘Saturday’.

Amendment 14, page 18, line 17, leave out paragraph (b).

Amendment 23, line 25, after second ‘time’, insert

‘but not before the date five years after this Part comes into force’.

Amendment 24, line 33, clause 33, after ‘time’, insert

‘but not before the date five years after this Part comes into force’.

Amendment 25,  line 36, clause 33, leave out

‘may by order amend section 30’

and insert

‘shall as soon as reasonably practicable after the review of minimum requirements of the Universal Postal Service under subsection (1) has been carried out lay before Parliament a report which shall include a copy of the review.’.

Amendment 26, line 37, clause 33, leave out subsections (6) and (7).

Amendment 29, page 21, line 40, clause 37, after ‘unless’, insert

‘it has been commercially negotiated and’.

Amendment 30, page 22, line 1, leave out lines 1 to 18.

17:15

[Mr Weir]

New clause 4 and amendments 11 and 14, standing in my name, relate to concerns about the universal service obligation. My concern throughout the Bill’s passage has been that there are insufficient safeguards to ensure that, in the event of the Royal Mail’s privatisation, the universal service obligation, which is so important to my constituents, is maintained.

Throughout Committee, the Minister insisted that the purpose behind the Bill was to secure the universal service obligation, but I made the point on several occasions, as I did earlier today, that far too much has been left to trust and hope—a point, indeed, that was made in our previous debate this afternoon. In many other areas, the Government are very fond of triple locks, yet on something as important as the universal service obligation, they have not put sufficient safeguards in place.

The new clause is an attempt—perhaps not a triple lock, but at least a lock—to provide some assurance that a privatised company will maintain the universal obligation and not seek to get around its provisions. In the event of privatisation, the privatised company will be given the obligation to provide the universal service, but it concerns me greatly that our only sanction to ensure that it does so is through the regulator, Ofcom. There is nothing specific in the Bill to prevent, for example, a privatised company from hiving off the profitable parts of the organisation, although if recent press reports are true perhaps the European Commission will have done so before the company reaches privatisation. That could leave only a shell company obliged to provide the universal service.

What would happen if the privatised company went to the Government, saying that it could no longer afford to run the service and seeking either a public subsidy or to abandon the service? We would be thrown back on the regulator alone or have to utilise the compensation fund that we debated at some length in Committee, with the other operators having to contribute and the consumer, as the Minister confirmed, perhaps having to pay substantially higher costs for the service.

I am sure that the Minister, in his usual inimitable fashion, will say that my argument is a flight of fancy, but in recent years we have seen how many large companies operate, moving, for instance, their head offices to avoid UK corporation tax, the latest example being Cadbury, after its takeover by Kraft, which is reportedly moving its head office to Switzerland. UK Uncut has staged demonstrations throughout the UK against other companies, as diverse as Vodafone and Topshop, which seem to have indulged in practices to avoid taxation.

The universal service obligation is far too important to be left to the good will of a privatised mail carrier. Far too much stock has been placed on the name and reputation of Royal Mail, but the situation after privatisation will be far different. The organisation will no longer be a state monopoly but a private company—albeit one that, admittedly under the Bill, has a high social obligation. In my experience, and as our bankers have eloquently shown in recent weeks, however, there is very little sentimentality in big business.

I raised the matter during the Committee’s eighth sitting, when I asked the Minister whether there was anything in the Bill to prevent asset stripping. He said:

“The hon. Gentleman has anticipated where I was going, because a number of protections in the Bill will give reassurance to hon. Members who are worried about that. For example, under clause 35, Ofcom has the power to impose designated USP conditions akin to condition 16 of Royal Mail’s existing licence. Condition 16 does not allow Royal Mail to pursue things, such as an asset disposal or dividend payment, if doing so would create ‘any significant risk that the necessary resources will not be available’ to enable it to continue its business.”––[Official Report, Postal Services Public Bill Committee, 18 November 2010; c. 289.]

The Minister went on to explain that Ofcom can impose that condition, and that Royal Mail could face a very large fine for breaches of its regulatory obligations.

I am not particularly reassured, and I tabled the new clause because it seems that Ofcom has the power to react only once something has happened, when it is far too late to do very much about it. Condition 16 does not give any real protection because a gradual sell-off of assets would not necessarily mean that Royal Mail was unable to continue in business, although it might undermine its ability to continue parts of its business, which is completely different.

[Mr Davey]

The hon. Gentleman will know from the debate in Committee that there is the potential for Ofcom to impose a fine on the universal service provider of up to 10% of its turnover. At the moment, that would be a fine of £650 million. Does he not think that that is a disincentive?

[Mr Weir]

The Minister is forgetting my point. If a privatised operator has got rid of many of the profitable parts to simply leave a shell, what is £650 million to a company that effectively does not exist other than as a nameplate? That could happen. This new clause is designed to stop such things happening.

[Tony Lloyd]

As the hon. Gentleman is helping the House, will he help me by saying whether there is a duty on Ofcom to insist on the universal service provision? If not, it makes no real difference whether there is the capacity to levy a fine or not.

[Mr Weir]

There is a duty on Ofcom to ensure the universal service. However, as I was trying to explain, the problem is that Ofcom’s only sanction is to act after something has happened. If the conditions have been breached, Ofcom can take action—it can fine the company a very substantial amount or it can impose other conditions. That is very much a reactive rather than a proactive sanction. If there is nothing there to fine or there is nothing left, it makes no difference whether the fine is £650 million or £20 trillion.

[Tony Lloyd]

What the hon. Gentleman is confirming is that there is, in fact, no duty on Ofcom other than a retrospective duty. That is not a duty, is it?

[Mr Weir]

Indeed. I would put it a different way. There is no effective sanction available to Ofcom to deal with something after it has happened to the detriment of the USO. It is only able to impose conditions or a fine, and fining a shell company is no good. Ofcom cannot prevent the sale; it can react only if what is happening turns out to undermine the ability to provide the USO. As I said, if the company has already sold off all its profitable parts leaving only a shell, what is the point of a large fine that it is not in a position to pay?

The Bill must provide the power to allow Ofcom to take action before a sale is proceeded with and to ensure that the privatised company cannot dispose of all profitable assets to avoid the duty of the USO. I am sure that the Minister will say that that is a burdensome hurdle, but it is not. It is not the first sale that would be required to clear a regulatory hurdle before going ahead—indeed, many deals are done subject to regulatory approval. I am sure that the Secretary of State for Business, Innovation and Skills is only too well aware that the BSkyB case had to go to the European Commission to determine whether it would be blocked at that level before the remaining shares could be put forward.

If the new clause was passed, Ofcom could look at the proposal and ensure that the assets of the company remained sufficient to meet the needs of its social obligation. In most cases, that would be a relatively quick process. However, it would give the reassurance that once there is a privatisation—if that disaster should happen—there would at least be something in place to ensure that the universal service continues in all circumstances. I ask hon. Members to support the new clause to give that extra protection.

Time is short, but I would like to mention briefly the other amendments in my name. Amendment 11 would add to the Bill a reference to

“the needs of small business users in rural and remote areas”

and make it a specific matter to which Ofcom must give concern in considering the USO. The reason is simple. We need to ensure that the universal service obligation is secured for small businesses in rural areas if we are to have any chance of creating new employment opportunities in our rural communities. On Second Reading, Scottish National party Members tabled an amendment supported by Plaid Cymru and all the parties of Northern Ireland because of our huge concern that the Bill would have profound implications for that ability to continue the USO.

It is vital to bear in mind that not only residential but small business customers rely on Royal Mail. They do not have any real options and cannot access the deals that may be on offer from alternative carriers. In the parcels market, if one can get anyone to deliver to large parts of Scotland at all, it is only at a vastly increased price. Not so long ago, the then management of Royal Mail proposed a zonal pricing structure that would have created different prices for different areas of the United Kingdom. In the recent spate of bad weather in Scotland, many of the alternative carriers simply gave up, and several publicly stated that they would not attempt deliveries in Scotland at all.

Throughout this time, Royal Mail did its best to ensure that the mail got through, with postal workers struggling in very difficult conditions to ensure that the mail was delivered. Although there were delays and although, for obvious reasons, some areas could not get mail, most of the mail got through. We should congratulate Royal Mail and its workers on doing that. It shows the difference between a dedicated public company service and the privatised services that operate elsewhere. Amendment 11, allied with the others in the group, is simply an attempt to ensure that if the disaster of privatisation befalls Royal Mail, as much as possible is done to ensure that the USO is watertight and that the interests of all users are adequately protected.

Amendments 12 and 13 are linked, in that the purpose of both is to ensure that the universal service obligation for postal packets is a six-day service.

[Mr Reid]

The hon. Gentleman has a point. Although the USO for parcels is currently only five days, and the Bill does not change that, I hope that the Minister will consider increasing the USO to six days for parcels. He has improved the USO in many ways in the Bill, but I ask him to take this away and look at it again, because I am concerned that if we do not have a six-days-a-week USO for parcels, Saturday parcel deliveries in the highlands and islands will end.

[Mr Weir]

The hon. Gentleman is perfectly right. I hope that he will follow up that strong support for the proposal by coming through the Lobby and voting for it in order to send an additional message to his Minister.

As the Bill stands, we have a six-day service for letters but only a five-day service for postal packets. I am at a complete loss as to the logic behind the differences between the two. One thing that came through loud and clear from Richard Hooper’s report, on which the Government have relied, is that the market for letters is declining substantially. The bulk of private letters are now being sent around Christmas, and they will mostly be Christmas cards. I suspect that I am not the only one who has noticed that the rise of the e-card is biting even into this market, with fewer cards being sent through the post, or perhaps it is just that I have fewer friends this year—I do not know. In any event, the one area where there is real scope for building the business is what we are now told we should call e-fulfilment—in effect, the delivery of orders made over the internet. This is a two-way process. In my constituency, for example, there are businesses in rural areas who sell over the internet and send out packages on a regular basis. They rely on the universal service obligation to ensure that they have access to the postal service at a reasonable cost and that allows them to operate at a reasonable cost.

Interestingly, in research on the business market carried out by Postcomm, more than half the businesses surveyed were of the opinion that they will use the internet more in future, but the vast majority—93%—believe that they will always need to send some things by post. Half of businesses expect more customers to order products online in future, indicating a belief that the market will grow further. Digging down into the figures, it appears that of those who spend between £100 and £500 a month on mail—basically small businesses—72% have either stayed at the same level of usage of Royal Mail or have increased it in the past year.

That is the one growth area within Royal Mail, and not having the universal service obligation cover it in the same way as in the letters market does not appear to make any great sense. Again, I point out that if we are to grow private businesses in rural areas, we need to have the infrastructure to allow them to flourish, and that includes a reliable six-days-a-week postal service.

[Mr Reid]

I am grateful to the hon. Gentleman for giving way again. I reinforce my earlier point that I am concerned that if the USO for parcels is not extended to six days a week, parcels will not be delivered in the highlands and islands on Saturdays. As he said, the delivery of parcels in response to internet selling is such an important growth area that the highlands and islands would miss out if parcels were not delivered on Saturdays.

17:30

[Mr Weir]

I reiterate that the hon. Gentleman may have a chance to vote for that later and to help the Minister make up his mind.

Goods not only go out by post, but are received by post. Raw materials may come in by post. For many constituents, no one is at home during the day from Monday to Friday. I am sure that such people would like packages to be delivered on a Saturday, when they actually might be in and would not have to travel to collect them at the nearest sorting office, wherever that may be after privatisation. If we are serious about increasing business and ensuring that every area of the country has access to a reliable, reasonably priced postal service, it would be daft to exclude from the universal service the one area that has potential for substantial growth.

Finally, amendment 14 would remove Ofcom’s ability to use geographical criteria to suspend the universal service. That has long been a contentious issue, even under the current framework. Households that are difficult to reach can have delivery suspended. The condition in the Bill is far too wide and could result in whole isolated mainland or remote island communities being removed from the universal service. That would be a travesty and lead to a huge increase in costs for such communities. There may always be some individual dwellings where the mail simply cannot be delivered, but those should be looked at on an individual level.

I urge all hon. Members to support the proposals, which all attempt to strengthen the USO and to recognise that the highest priority for the Royal Mail, whether it continues as a publicly owned company, as I hope, or becomes a privatised company, is to deliver to all our citizens.

[Mr Reid]

As I said in my interventions on the hon. Member for Angus (Mr Weir), I hope that the Minister takes away the proposal in amendments 12 and 13 to extend the universal service obligation for parcels to six days a week. As I said, I am concerned that parcels will not be delivered on Saturdays in the highlands and islands without such an extension. Apart from that one remaining concern, I think that the Minister has done a great job in the Bill to strengthen the USO in many ways, which is so important for the highlands and islands.

Amendment 14 deals with the hon. Gentleman’s concern that the geographical exceptions clause will be used to remove large parts of the highlands and islands from the universal service obligation. I do not share that concern. The wording is the same as that in the Postal Services Act 2000. The regulator, Postcomm, has used that exception only in a small number of cases, such as for islands that do not have a daily ferry service. Obviously, it would be nonsense for Royal Mail to charter a boat to an island to which Caledonian MacBrayne does not have a daily ferry service. The solution is for Caledonian MacBrayne to improve the service so that islands such as Tiree, Coll and Colonsay have a daily ferry service, but it is not for Royal Mail to charter special boats. Postcomm has also introduced exceptions on health and safety grounds, such as dangerous dogs. Under amendment 14, Royal Mail would have to deliver to houses with a dangerous path or animal. The wording in the Bill, which is taken from the 2000 Act, is satisfactory. I questioned Postcomm and Ofcom in the Scottish Affairs Committee and Ofcom gave an assurance that it will maintain Postcomm’s regulatory regime for geographical exceptions. Given those assurances, amendment 14 is not necessary.

[Gordon Banks]

I wish to speak to amendments 23 to 26, which we have tabled. Amendments 23 and 24 are similar to those tabled in Committee and are intended to ensure that no review of the universal service obligation can take place for at least five years after clause 33 is enacted. I note that the hon. Member for Northampton South (Mr Binley) tabled a similar amendment that was not selected, and I commend him for doing so. I trust that he will be able to support us in our aspirations tonight.

The minimum service requirements laid out in clause 30 are exactly the same as those set out in the Postal Services Act 2000. However, as my hon. Friend the Member for Llanelli (Nia Griffith) said in Committee, clause 33 will allow them to be eroded. The Bill sets in train a range of processes to reduce the universal service obligation, and I imagine that many Members fear that we cannot even be sure to which Secretary of State the powers in clause 33 will fall. Perhaps it will not be the Secretary of State for Business, Innovation and Skills, and who knows, it may even be the Secretary of State for Culture, Media and Sport. Perhaps, if time allows, the Minister will be able to tell us which Secretary of State will inherit those powers if the Bill is passed, and then I will leave it to my hon. Friends to determine whether that is a good thing.

[Mr Reid]

I point out to the hon. Gentleman that clause 33(7)(a) states that the review of the minimum requirements would be subject to the affirmative procedure, so it would require a vote of both Houses of Parliament. The Secretary of State could not take the decision on his own. Is that not adequate security?

[Gordon Banks]

No, it is not, and I will come to that if I have time. The Minister will be aware of my office’s deliberations with him on parliamentary scrutiny when the Bill was in Committee, and I will deal with that matter if I can.

We believe that it would be better to relieve both potential contenders of the powers to be granted under clause 33(5). At least the current Secretary of State for Business, Innovation and Skills would then know about that change in advance, and it would have been made through the democracy of Parliament and not by the Prime Minister as punishment.

In a letter to the Public Bill Committee, the Minister mentioned the failsafe of clause 29(5), which is relevant to clause 33. However, that failsafe could work only if one had faith in the actions and intentions of the relevant Secretary of State, and we do not.

Restrictions to ensure that there could not be a review before five years had passed would provide important stability to both the business and customers following privatisation. The universal service obligation is of such immense importance that it will need that period to bed down under a new, private provider. I am afraid that throughout the Committee stage, the Minister was unable to convince my hon. Friends and myself why a review should take place after 18 months. We want a statutory period of five years, during which everyone would know that today’s universal service obligation was in place. We want the consumer to be protected. As it stands, the inter-business agreement could be subject to review after 18 months, when an Ofcom review of the USO could also be ongoing. That would mean turmoil. As the Minister heard in Committee and from some of my hon. Friends today, we have only his best interests at heart. I am trying to save him from that turmoil, and that caused by the Secretary of State.

The Secretary of State told Members on 27 October last year:

“The Bill will maintain the universal postal service at its current levels…I have no intention of downgrading this service.”—[Official Report, 27 October 2010; Vol. 517, c. 360-361.]

That does not square with the Bill’s contents, and the Secretary of State needs to come clean. If he has no intention of downgrading the service, why does he need a review within 18 months? In fact, the Bill is riddled with review opportunities. There are three—in clauses 29, 33 and 42. It is obvious that the Secretary of State’s actions in promoting the Bill do not live up to his words. Maybe, in line with other matters that he has promoted, he does not really support the Bill anyway.

We would argue that the modernisation programme under way in Royal Mail needs to be completed and bedded down before any review of the USO takes place. It is only a few months since Postcomm and Consumer Focus completed a review of customers’ universal service needs, and it is against that backdrop that the Government are proposing the minimum service levels in the Bill. There is therefore no good reason to recommence the review process within 18 months of the Bill being passed.

We do not believe that such a review at this time would be in anyone’s interests other than those of the provider, who may want to downgrade the service for a bigger shareholder return. More than anything, we want to protect the interests of the consumer. I believe that, in principle, the amendments have cross-party support. Whereas our appeals to the Minister and his colleagues in Committee fell on deaf ears, I am a little more hopeful today. Indeed, in accepting our amendments 23 and 24 today, the Minister would be committing himself to recognising the value of the current USO, while also alerting potential bidders to his clarity on the matter—after all, we are always told that that is what business wants these days. Our amendments will offer that.

It would be wrong for a business to purchase Royal Mail with the intention—or should we say the hope?—that a quick review by Ofcom and a stroke of the pen by the Secretary of State, or perhaps by some other Secretary of State, would lead to a better deal. Why do we have such fears? It is because we can see how committed the private sector is to the universal service obligation.

The Minister regaled the Committee on more than one occasion with his international understanding of postal services. I would therefore like to refer him to an article in Holland’s De Telegraaf on 9 June last year, so that he can test his Dutch reading skills, as opposed to his usual double-Dutch Government jargon. In that article, Pieter Kunz—I do hope that I have pronounced that gentleman’s name accurately—who is the managing director of TNT’s European mail networks, said that his company planned to cut 11,000 employees from its Dutch mail operations and wanted to move to a three-day-a-week delivery service. Mr Kunz went on to say that collection and delivery services would be outsourced, and that TNT would become managers of mail. However, the worrying bit about how the private sector sees the USO in the round came when Mr Kunz stated that the universal service obligation was

“a kind of Jurassic Park and we should get rid of it”.

The worry is accentuated by the possibility that TNT could be the successful bidder for a privatised Royal Mail.

Although Mr Kunz might think of the USO in such terms, my constituents and the businesses in my constituency see it as a valued, necessary and fundamental service. We want to prevent any such erosion wherever possible. I wish that we had an opportunity to guarantee the current service levels indefinitely, but I recognise that this is not the Government’s will. However, we want the minimum five-year period to be included in the Bill, I suppose for the very same reasons that Mr Kunz, and perhaps the Minister, do not.

Amendments 23 and 24 would allow the newly privatised Royal Mail to be secure in the current service delivery levels for the next five years without change. As the Bill stands, the first review could come along at any time and have far-reaching effects. I referred earlier to our time in Committee, where my hon. Friend the Member for Kingston upon Hull East (Karl Turner) said that a similar amendment was

“a reasoned amendment that turns on the issue of speed versus proper consideration.”––[Official Report, Postal Services Public Bill Committee, 7 December 2010; c. 592.]

He recognised that such a safeguard would prevent Royal Mail’s new owner or owners from exerting any pressure on Ofcom to re-examine the minimum requirements straight after a sale, as a way of trying to secure bigger returns for shareholders. However, he and other members of the Committee recognised too—I hope that other Members will recognise this today as well—that such a safeguard would also prevent Ofcom from undertaking a hasty review before the full effects of privatisation and modernisation were understood and their impact on the service evaluated.

It is not just those on this side of the House who want to protect the USO in the long term. The Federation of Small Businesses also believes that the USO

“must be protected and services must not diminish”,

stating:

“Any change to the scope of the USO could have a negative impact on small businesses.”

Indeed, FSB members have shown their further concern, in that 82% of small businesses want to keep the single UK-wide pricing structure. Then we have the National Federation of SubPostmasters, which has said that

“communities across the UK depend”—

that is the key word—

“on the six-days-a-week collection and delivery at a uniform and affordable price”.

Indeed, in their recent report, that august group of cross-party and pan-UK parliamentarians known as the Scottish Affairs Committee also expressed alarm about

“the Bill’s requirement for Ofcom to review the minimum requirements for the USO within 18 months. We fear this may be seen as an opportunity to decrease the requirements of the USO.”

Many Opposition Members get fed up with listening to the Government telling the country what they are doing to help small business, when there is precious little sign of such help in the real world. Here is an opportunity for the Government to do just that—help small business, support these amendments and support the Federation of Small Businesses.

17:45

The Minister’s previous argument that clause 30 enshrines the minimum requirement and clause 33 enhances the safeguards against changes to those minimum requirements is, quite frankly and at best, smoke and mirrors. He said in Committee that under the European Communities Act 1972, the Government already have the power to change the minimum requirements of the universal service to the level required by the directive, which is five days a week, by way of negative resolution. Of course, he is correct, but he went on to say that that was not acceptable. Quite frankly, the change he proposes in the Bill is little better.

We believe that our amendment 25 is just, as it prevents the Secretary of State from moving changes through this Bill as a result of Ofcom’s reviews. It would empower the Secretary of State only to lay the report before Parliament, whereas amendment 26 would remove the need for any approval process as the power to amend section 30 through this Bill would be removed by amendment 25. This would, we calculate, lead to the need for new primary legislation, with all the necessary parliamentary scrutiny that accompanies it, before any Ofcom-proposed service reductions could be instigated.

The Minister will remember that I tried on numerous, if not dozens, of occasions in Committee to enhance parliamentary scrutiny of these proposals, but he chose to ignore my good and kind offers. He has another opportunity here tonight to add parliamentary scrutiny to the Bill, and he should do so by accepting amendments 25 and 26.

Other hon. Members are waiting to speak on these and other amendments, so I would like to speak very briefly about amendment 29, particularly about what we call the final mile. We moved a similar amendment in Committee and we will support this amendment tonight.

The hon. Member for Angus (Mr Weir) has regaled us with the reasons behind new clause 4. I am glad that he has had that opportunity, which he did not have in Committee, as his was the only new clause that we were unable to discuss because we ran out of time on the final day. The proposal is of merit; it provides another opportunity to protect the universal service obligation. The hon. Gentleman put forward a strong argument. Anything that protects the USO can only be a positive proposition.

To conclude, amendments 23 and 24 would provide a five-year buffer before any Ofcom USO review, and amendments 25 and 26 would remove the Secretary of State’s ability to alter the USO through the powers in this Bill. If the Minister believes the words of his Secretary of State that he has

“no intention of downgrading this service”—[Official Report, 27 October 2010; Vol. 517, c. 360.],

he must accept these amendments. He will have an opportunity to vote for amendment 23, which we intend to press to a Division if he does not accept it. If he does not accept and support these amendments, he will be saying that one of two things will apply. Either the Minister does not believe the Secretary of State or the Secretary of State’s words are an empty promise. Which is it?

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. There are just a couple of minutes before I will invite the Minister to speak. I am sorry that there is not much time left for Katy Clark to speak, but I must bring the Minister in at 5.50 pm.

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

Thank you, Mr Deputy Speaker, for giving me the opportunity to speak to amendments 29 and 30. I fully appreciate the time constraints, given that the Minister must be brought into the debate.

The amendments are designed to look at the issues surrounding regulation, particularly at the legal requirements that oblige Royal Mail to process and deliver its competitors’ mail. Many hon. Members will be fully aware of this problem as whenever they attend a postal delivery depot, postal workers will advise them forcefully about it. At the moment, the reality is that on average every letter that Royal Mail delivers for its competitors leads to a loss of 2.5p to Royal Mail. Amendment 29, which was tabled with the support of communication workers and which I would like to put to the vote if given the opportunity, is designed to address that issue.

Briefly, we have a fully liberalised market, but the way the current system operates goes way beyond that required by the European directive. It requires compulsory access by competitors to every point of the Royal Mail’s network and it provides a guaranteed margin for them. Amendment 29 would ensure that the regulator no longer had the power to set that price. There would be a commercial negotiation, and the price established would mean that it was in Royal Mail’s interest to deliver the correspondence.

At present, a competitor will collect letters from customers who make bulk postings. Those letters will be part-sorted, and branded with the competitor’s stamp. The competitor will then drive the letters to a Royal Mail sorting office, where Royal Mail will sort them and deliver them at a loss.

I know that we have a problem with time, so I shall end my speech now. I ask the House to support the amendment, which seeks to ensure that Royal Mail is able to negotiate freely and deliver letters at a profit.

[Mr Davey]

Because of the shortage of time, I shall begin with a brief overview of our reaction to the new clause and amendments.

The Government have introduced more protections for the universal service than currently exist, and more than the last Government proposed in their 2009 Postal Services Bill. We have strengthened the existing protections. The amendments tabled by the hon. Members for North Ayrshire and Arran (Katy Clark), for Ochil and South Perthshire (Gordon Banks) and, indeed, for Angus (Mr Weir) would weaken those protections, and would serve the consumer very poorly.

I entirely see what the hon. Member for Angus is getting at in new clause 4. As he said, we discussed it in Committee. As I told him then, however, I believe that the Bill provides the protection that is needed. I told him that the Bill gives Ofcom the power to impose a designated universal service provider condition similar to the condition 16 requirement in Royal Mail’s existing licence. That prevents Royal Mail from doing anything—such as transferring assets or paying out dividends—that

“creates any significant risk that the necessary resources will not be available”

to carry on its business.

If the universal service provider put itself in breach of its obligations through, for example, the sale of part or all of the business in a way that no longer enabled it to fulfil the universal service requirement, Ofcom could take enforcement action. As I said in my intervention on the hon. Gentleman’s speech, it could fine the universal service provider up to 10% of the turnover of its postal business in the relevant year. On the basis of Royal Mail’s current turnover, that would be more than £650 million. He seems to think that it is an insignificant return, but I disagree. Moreover, he did not mention—although I had told him in Committee—that there are additional protections in company law relating to what the pensions regulator can do.

In my view, new clause 4 is not needed. We already have the necessary protections, and I hope that the hon. Gentleman will at last be reassured and will withdraw the new clause.

In amendment 11, the hon. Gentleman seeks to ensure that the needs of small businesses in rural and remote areas continue to be met, and are taken into account in all of Ofcom’s actions relating to postal services. I agree that both those protections are vital, but again he need not worry, as there is already ample provision in the Bill. Section 3(4)(l) of the Communications Act 2003 requires Ofcom to take into account the needs of

“the different interests of persons in the different parts of the United Kingdom...and of persons living in rural and in urban areas”.

We are extending those duties to Ofcom’s functions in respect of post: “communications matters” in section 3(1)(a) of the 2003 Act will now include postal matters.

[Mr Weir]

The Act refers to

“persons living in rural…areas”,

but my amendment refers to businesses. That is the important point in this context.

[Mr Davey]

It has been well established that, in the Act, “persons” also means businesses.

On amendments 12 and 13, Members will be aware that the market is undergoing big structural changes. Volumes have declined by 15% in the last five years, and Richard Hooper predicted declines of up to 40% in the next few years. Surely we all agree that action must be taken to protect the universal postal service. Clause 30 sets out the minimum requirements of that service, which are identical to those set out in the Postal Services Act 2000. They are also identical to the minimum requirements proposed by the Opposition in their 2009 Bill. They gold-plate the minimum requirements of the European postal services directive. The amendments would impose additional regulation on top of that gold-plating, and thus risk undermining the provision of the very universal service that we are trying to save. In its evidence to the Public Bill Committee, Royal Mail spoke of the need for deregulation in competitive parts of the market if it is to survive. The most competitive part of the market is packets and parcels. I am afraid that the hon. Gentleman is not looking at what is happening. Royal Mail is competitive, and despite there being no requirement, it is delivering six days a week. The 2000 Act does not require that, nor does the European postal service directive. The last Government did not seek to require it either, and Postcomm does not require it in its licence. Yet Royal Mail provides a six-day-a-week parcel service. Why does it do that? The simple answer is because it makes commercial sense. That is the best incentive for any business.

This Government are committed to reducing regulatory burdens. We do not wish to impose regulation where it is not necessary. It is vital that businesses can operate free from the spectre of excessive bureaucracy that serves no purpose.

[Susan Elan Jones (Clwyd South) (Lab)]

Will the Minister give way?

[Mr Davey]

I want to make some progress, as I have a lot of amendments to deal with.

I was grateful to my hon. Friend the Member for Argyll and Bute (Mr Reid) for his welcome for most of the aspects of regulation in the Bill and for how we have sought to ensure that remote rural areas, particularly in Scotland, have the protections they need. However, I gently say to him that there is the requirement for letters to be delivered six days a week. If a parcel is ready to be delivered on a Saturday, Royal Mail will deliver it because a postman or postwoman would be going to that address anyway to deliver letters. I ask him to think about the practicalities of that. Where they are delivering in remote places to remote addresses, they deliver letters in vans. Where they are delivering in towns, increasingly in future, because of the roll-out of this programme, posties will use delivery trolleys. Those are being introduced as a deliberate reform in the way that letters and parcels are delivered. They are being brought in partly to ensure that posties can deliver parcels as well as letters. Given that there is already the minimum service requirement of six days a week for letters, I think my hon. Friend will be reassured on this point.

Amendment 14 to clause 32 is unworkable. It would add disproportionately to the burdens on the universal service provider and it would put at risk the health and safety of hard-working postmen and women. I am surprised the hon. Member for Angus wishes to do that. The exception in clause 32 has been in place for many years. It is in the European postal service directive. Removing it would put at risk the health and safety of Royal Mail men and women. I think he should think very seriously about that.

On amendments 23 to 26 to clause 33, the Bill is about protecting the universal service. Clause 30 enshrines the same minimum requirements in this Bill as are in the current legislation. The power in clause 33 to review the minimum requirements enhances the safeguards against changes to those minimum requirements. As the hon. Member for Ochil and South Perthshire (Gordon Banks) had to admit, at the moment—his Government failed to acknowledge this—there are powers for the Government in this regard. We could, by negative procedure, move the current minimum service requirements down to the level of those in the European postal service directive. I think that is unacceptable, however, which is why we have added extra safeguards to the Bill. They include the requirement that should Ofcom make a judgment that it is in the consumer’s interests for there to be changes, and should the Secretary of State accept that, there would have to be votes in both Houses of Parliament. That is a very strong protection, and he ought to welcome it. Is he going to welcome it?

[Gordon Banks]

No, but what I am going to do is ask the Minister whether he agrees with the Secretary of State that he has no intention of reducing the level of service. If that is the case, the Minister should support our amendments, not talk about what he has put in the Bill.

[Mr Davey]

The problem with the hon. Gentleman’s amendments is that they are very confused. For example, in proposing a review after five years in respect of Ofcom, rather than 18 months, he does not seem to understand how the universal service regulations work. We have the minimum service requirements in clause 30, but there is also clause 29, and the reason why there is an 18-month review is to allow the universal postal service order to be brought in so that the sorts of requirements and the level of universal service that exist at present can be introduced quickly. I would have thought that the hon. Gentleman would welcome that. The fact that he does not shows that, despite all our work together, he still does not understand the Bill.

Amendments 29 and 30 are very important, but I am not going to be able to give them the time that they deserve. I simply say to the hon. Member for North Ayrshire and Arran (Katy Clark) that if we were to accept them, they would remove important safeguards for competitors and consumers, and that would not be welcomed by people at large. It would undermine competition and the incentives for efficiency. Our Bill, unlike the one in 2009, seeks to change the regulatory system—

18:00

Debate interrupted (Programme Order, 27 October).

The Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the clause be read a Second time.

18:00

Division 164

Ayes: 240

---

Labour: 222
Democratic Unionist Party: 5
Scottish National Party: 5
Conservative: 2
Social Democratic & Labour Party: 2
Independent: 2
Plaid Cymru: 2
Green Party: 1

Noes: 315

---

Conservative: 273
Liberal Democrat: 41

The Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

Clause 11

Annual report on post office network

Amendments made: 3, page 6, line 24, after ‘offices’, insert ‘in England, Wales, Scotland and Northern Ireland’.

Amendment 4, page 6, line 40, at end insert—

‘(6) The Secretary of State must give a copy of the report to—

(a) the Scottish Ministers,

(b) the Welsh Ministers, and

(c) the Office of the First Minister and deputy First Minister in Northern Ireland.’.—(Mr Davey.)

Clause 14

Part 1: general interpretation

Amendment made: 5, page 7, line 34, leave out ‘premises’ and insert ‘any premises or vehicle’.—(Mr Davey.)

Clause 33

Review of minimum requirements

Amendment proposed: 23, page 18, line 25, after second ‘time’, insert ‘but not before the date five years after this Part comes into force’.—(Gordon Banks.)

Question put, That the amendment be made.

18:15

Division 165

Ayes: 239

---

Labour: 221
Scottish National Party: 6
Democratic Unionist Party: 5
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Independent: 2
Green Party: 1

Noes: 317

---

Conservative: 274
Liberal Democrat: 42

Clause 60

UK postage stamps bearing the image of her majesty

Amendments made: 17, page 37, line 21, leave out subsection (1) and insert—

‘(1) The Secretary of State may give a direction to a universal service provider requiring the provider to do either or both of the following—

(a) to issue United Kingdom postage stamps bearing the image of Her Majesty (“relevant stamps”) in cases specified in the direction, and

(b) to comply with provision specified in the direction in relation to any relevant stamps that the provider is required or proposes to issue.’.

Amendment 18, page 37, line 24, leave out ‘this section’ and insert ‘subsection (1)(b)’.

Amendment 19, page 37, line 24, leave out ‘the’ and insert ‘relevant’.

Amendment 20, page 37, line 26, leave out ‘this section’ and insert ‘subsection (1)(b)’.

Amendment 21, page 37, line 28, leave out second ‘the’ and insert ‘relevant’.—(Mr Davey.)

Clause 78

Indemnities

Amendments made: 6, page 47, line 12, at end insert—

‘(3A) As soon as practicable after agreeing to indemnify persons under this section, the Secretary of State must lay a statement of the agreement before Parliament.’.

Amendment 7, page 47, line 23, at end insert—

‘(6A) If a sum has been paid out in consequence of an indemnity agreed to under this section, the Secretary of State must lay a statement relating to that sum before Parliament—

(a) as soon as practicable after the end of the financial year in which the sum is paid out, and

(b) if subsection (4) applies to the sum, as soon as practicable after the end of each subsequent financial year in relation to which the repayment condition has not been met.

(6B) The repayment condition is met in relation to a financial year if—

(a) the whole of the sum has been repaid to the Secretary of State before the beginning of the year, and

(b) the company was not at any time during the year liable to pay interest on amounts that became due in respect of the sum.’.—(Mr Davey.)

Clause 79

Guarantees where postal administration order is made

Amendment made: 8, page 48, line 20, leave out ‘thinks fit’ and insert ‘considers appropriate’.—(Mr Davey.)

Third Reading

Queen’s consent signified.

18:28

[Mr Davey]

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

We have had an excellent debate on the Bill, not just today but throughout its passage through the House. Hon. Members have rightly spent a lot of time scrutinising the detail of our proposals, but I would ask all of them to stand back and remember what we are trying to achieve. We are trying to preserve two great British institutions—the Royal Mail and the Post Office. As we heard from Richard Hooper in his reports, both to the previous Government and to this one, unless we take urgent action, the future of the universal postal service is at severe risk.

Letter volumes are declining faster than anyone predicted—15% in the past five years alone—and some estimates suggest that they could decline by up to another 40% over the next five years. Is Royal Mail yet ready for this most challenging of business trends? Without the Bill, I believe not, for despite some progress on modernisation, Royal Mail has not adapted sufficiently to that market decline. Unless we take action, that will only worsen and Royal Mail’s position will become even more precarious. Let all hon. Members be in no doubt: doing nothing is not an option.

The previous Government recognised that, for in many ways the Bill is similar to that which was put before the other place by the previous Government in 2009. The previous Business Secretary was aware of the need for urgency. He said:

“We cannot simply ignore these facts, or put our plans in a bottom drawer”.—[Official Report, House of Lords, 10 March 2009; Vol. 708, c. 1068.]

Unfortunately, the previous Government ended up ignoring the facts. As they oppose the Bill, I suggest that the Opposition ought to go back to that bottom drawer. If they look hard enough, they might find the bottle that they lost in 2009.

The present Government are aware of the urgency. That is why we have pressed ahead with the Bill so early in the Parliament. We will send to the other place a Bill that is significantly better than the previous Government’s 2009 Bill. It is better for employees of Royal Mail, with employee shares to give them a genuine stake in the future of the business. It is better for the Post Office, setting it free and creating the possibility for a mutual ownership model in the future. Above all, it is better for the universal postal service and Royal Mail, as our Bill takes a more flexible approach to regulation and is much better structured to attract the private investment that this business desperately needs.

The House should have no doubt about the overriding aim of the Bill. It is to protect the universal postal service. I do not believe it is possible to protect that in the public sector any longer—at least, not without ever-increasing levels of taxpayer subsidy, which even Lord Mandelson, as he doled out largesse in the run-up to the last election, would have baulked at.

Royal Mail needs to modernise. Its business is changing with the impact of the digital world. I am sure that I was not alone among hon. Members in paying a Christmas visit to local delivery offices in my constituency. Not only was I impressed by the hard work of Royal Mail employees, dealing with some of the worst weather conditions in living memory, but I was staggered by the huge increase in the volume and size of parcels. No one, none of the posties there, had seen anything like it.

In recent years, the volume of internet shopping has been increasing, especially items such as books and CDs, but now it seems that the British consumer’s confidence in internet shopping has grown dramatically. That is good news for the longer-term future of Royal Mail. Although the increase in parcels will not offset the decline in letter mail, and the parcels sector is intensively competitive, there is a chance—an opportunity —for Royal Mail to grow.

The other dramatic impression that one has after visiting Royal Mail sorting and delivery offices and then visiting similar sites elsewhere—as I did in Berlin, visiting a Deutsche Post sorting office—is the lack of capital investment in Royal Mail so that it can make the best of this opportunity. Since Deutsche Post shares were first sold in 2000, it has invested the equivalent of £11.7 billion and about half of that investment has gone on modernising its parcels and express business because it knows that that is the future for its organisation.

We need to give Royal Mail that sort of freedom to invest in the delivery businesses of the future. We need to ensure that it can access capital, not just for its immediate modernisation plans, but well into the future. I do not believe that if it remains constrained by Treasury borrowing, it could ever access the right amount of cash, with the commercial speed needed.

As we privatise, we are ensuring that the employees get a good deal. Our pension plans and our employee share plans must represent the best deal on offer to any large group of employees in the UK today. I am immensely proud that Liberal Democrats in government with our coalition partners are delivering the deal on pensions that Labour failed to deliver, and I am immensely proud of the strongest legislative commitment to employee shares in any major privatisation.

Given the time, although I want to say something about post offices, before doing so I shall comment on stamp design. The amendments passed by the House will ensure that Her Majesty’s head will appear on stamps in the future.

[Jonathan Edwards]

rose—

[Mr Davey]

Let me anticipate the hon. Gentleman, because the concerns that the nationalist parties expressed in their amendments are unfounded. The Bill will ensure that nationalist emblems can be placed, and be required to be placed, on stamps in future. I hope that he is reassured by that.

[Mr Davidson]

Surely the Minister does not mean “nationalist emblems” can be placed; can he assure us that Alex Salmond’s head will not appear on any stamps provided in Scotland?

[Mr Davey]

I cannot tell the hon. Gentleman how delighted I am to be able to give him that reassurance. It was a slip of the tongue.

Some people have concerns about the wording of our amendments, which ensure that Her Majesty’s head will be on our stamps in future. I can assure hon. Members that, under section 10 of the Interpretation Act 1978, “Her Majesty” can be taken as

“a reference to the Sovereign reigning at the time of the passing of the Act”

and construed as applying to any future Sovereign, so people should not worry about that.

May I turn to the Post Office? There has rightly been a lot of debate about the impact of the Government’s proposals on the network of post offices. First, I want to be absolutely clear that we are talking about a sale of shares in Royal Mail, not in the Post Office. They are both cornerstones of British life, but they are different businesses facing different problems, and that is why separation has been so widely supported by the experts. Of course, their futures are closely linked, and we expect that they will always have a strong commercial relationship, but securing the future of Royal Mail will of course help to secure the future of the Post Office as the natural outlet for purchasing Royal Mail services.

I shall say again something that I have said many times before. There will be no programme of post office closures under this Government. I have been very clear on that, as has my right hon. Friend the Business Secretary. That is why we have pledged £1.34 billion of funding to support the post office network, funding that will ensure the continuation of at least 11,500 post office branches throughout the United Kingdom.

[Ian Murray]

The debate about new clause 2 was certainly robust. Can the Minister give the House a cast-iron guarantee that, as a result of the decisions he is just about to take, no post offices will close?

[Mr Davey]

If the hon. Gentleman had been present for our debates in Committee, he would have found that his Opposition colleagues understand that it is impossible for any Minister in this or previous Governments to say that no individual post office will ever close. Why? Because in large part they are private businesses, and individuals can retire, decide to close their business or, of course, die. So, it is impossible to give him that reassurance. The reassurance I can give him, which his colleagues could not during the previous Parliament, is that no programme of closures will be driven by this Government. That is why we have secured the money, and the deal—the contract signed by the Government with Post Office Ltd—ensures that there will be a network of at least 11,500 post office branches throughout the United Kingdom.

When the Opposition scaremonger on that issue, we simply need to remind ourselves of their record on post offices. When urgency was needed to invest in Royal Mail, the only urgency the previous Government demonstrated was an urgency to close post offices. The numbers do not lie. The number of days the previous Government were in office: 4,753. The number of post offices closed in their two major closure programmes: 4,854. That is a strike rate worthy of an English batsman, not of a Government seeking to protect communities, small businesses and the most vulnerable throughout our country, yet we have had no apology for that appalling record.

Through this Bill, the Post Office also has the opportunity to move to a mutual ownership model, which would give employees, sub-postmasters and communities a real stake in their post office network. With our work to pilot more and more new Government services, both national and local, through the post office network, such new ideas will give local post offices a fighting chance.

Let me end by returning to the universal postal service. I reiterate that this Government are fully committed to that service: six-days-a-week collection and delivery to the UK’s 28 million addresses at uniform and affordable prices. This Bill gives Ofcom an overriding duty to secure the provision of the universal service, and the tools that it will need to do so. It gives greater safeguards to the minimum service levels for the universal service, with parliamentary protections, and it creates a new regulatory regime that can bring rapid deregulation for the universal service provider where there is effective competition in the market. Ofcom has a statutory duty to deregulate where it can, and we are giving Ofcom the tools to do so for the postal sector.

I would like to thank all those who have been engaged in the Bill’s passage through the House, particularly Bill Committee members for their work over the past couple of months. We have certainly had some lively discussions. I would also like to thank the hon. Members for Llanelli (Nia Griffith), for Ochil and South Perthshire (Gordon Banks) and for Angus (Mr Weir). Although we may not have always agreed, I am grateful to all of them for the detailed scrutiny that they have given the Bill.

The coalition Government have not shied away from grappling with this issue, which has defeated two one-party Governments. This shows the Government at their strongest and most radical. This Government are taking decisive action to tackle the problems that the previous Government ducked. I commend the Bill to the House.

18:40

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

I shall make a few remarks on Third Reading to summarise where we are as a result of the discussions of the past few months. The House may be aware that in what I can only describe as a spirit of total selflessness and altruism, I allowed my hon. Friends the Members for Llanelli (Nia Griffith) and for Ochil and South Perthshire (Gordon Banks) to lead for the Opposition in Committee. I thank them for doing so and for the excellent way in which they helped to scrutinise the Bill. I also thank the other Committee members and, indeed, the Minister, who I can see from looking at the Committee records and my colleagues’ reports was open and helpful in responding throughout its 20 sittings. There is no doubt that, including the evidence sessions, there was a great deal of opportunity to consider many parts of the Bill in detail.

The problem is that the Bill comes to Third Reading with many of the fundamental issues and concerns that were raised on Second Reading and that have been raised outside the House still unresolved. The earlier debates, including that on the new clause tabled by the hon. Member for Colchester (Bob Russell), show that concerns are not by any means limited to the official Opposition. This might not have been or have become an issue on which a head of steam builds up into a full- blown parliamentary revolt, but it is clear that the Government have by no means persuaded all their supporters of the wisdom of their policies and approach.

The Bill will now go to another place and no doubt the same issues will be discussed there. Those on the Labour Benches in another place will make every effort to make the progress that we have not made in the House of Commons. The central part of the Bill is, of course, enabling legislation. It enables the Government to privatise Royal Mail and to transfer this vital part of our national infrastructure to a foreign buyer. The Bill does not require the Government to do so and therefore today’s debate is not the end of the story. As I shall set out, too many uncertainties still exist to proceed just on the basis of where we are today. That is not just the view of the Labour Opposition; that is the view of Consumer Focus, which has looked at the matter from a customer point of view. As I shall show, that is also the view of the National Federation of SubPostmasters—the people who in many ways are meant to be at the heart of the Bill.

The House did not agree to secure a 10-year inter-business agreement today, but that does not mean that the campaign to get one will go away. If we have not so far explained to all the constituents of hon. Members who support the Bill why their post offices are under threat, we have plenty of time yet to do so and to push for a change in Government policy. The basic problem is that the Government have still not made the fundamental case for the full-scale privatisation that they have proposed, nor have they addressed the concerns that exist. It is very interesting and, of course, welcome that a new clause has been introduced that is designed to ensure that the Queen’s head remains on postal stamps. That is interesting because it has been made necessary solely as a result of the desire to privatise Royal Mail.

As long as the Post Office and Royal Mail remained in public ownership, as they would have done under the Bill introduced by the Labour Government, no one thought for a moment that it would be necessary to introduce legislative protection to retain the sovereign’s head on our stamps. It is only because privatisation is being brought in that that is at risk. The problem is that the Government, by conceding on this point, have accepted that full-scale privatisation opens up all sorts of possibilities and dangers that simply do not exist if the Post Office remains in public service.

[Mr Davey]

The right hon. Gentleman is incorrect on this point. It was a Labour Minister in the 1960s—Tony Wedgwood Benn—who tried to remove the Queen’s head from the stamp. I hope that he will correct the record.

[Mr Denham]

But the evidence remains, some 50 years later, that that did not happen. My point remains—public ownership, and the debates around it, protected that position.

Before Christmas, when the Minister was challenged on this issue, his response was, “Don’t worry. No sensible private buyer would dream of removing the monarch’s head.” He has now conceded that that response is not enough. Yet when Members asked him today about a private buyer’s relationship with the post office network, the same argument came into play: “Don’t worry. No sane private buyer would take the business away from the post office network.” If the guarantee is necessary for the sovereign’s head, it is necessary for the inter-business agreement with post offices. It will not do to ask the House to accept this on trust, because thousands of post offices are at risk. That is, and has been from the outset, the fundamental argument against a majority privatisation of the Post Office. Although Royal Mail must be run as a commercial enterprise, majority shareholding for the public gives an ultimate protection that privatisation will not provide. If the Bill is flawed, as it is, then that protection will not exist.

The case has not been made in other areas, because, in contrast with the situation just a few years ago, transformation and modernisation are under way. The challenge of bringing in capable, senior management has been met, as I am sure all Members who have met the chief executive will confirm. Investment funds are currently available, and there are mechanisms well short of majority privatisation or a minority shareholding that could be used to raise equity in future.

[Damian Collins]

Moya Greene, the chief executive of Royal Mail, said to the Bill Committee:

“I think that if the Bill does not go through, you will see a continuation of what have been chronic problems for Royal Mail.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 4, Q3.]

She was very clear with us that this is a path that Royal Mail has to go down.

[Mr Denham]

I understand those remarks, but I believe that it would be possible for a Government who wished to do so to resolve the need to bring in additional investment in future through measures that fall short of selling a majority shareholding in Royal Mail. Some of those measures have been proposed by my party in the past, while other mechanisms have been proposed from outside. The truth is that the Government are driven by the desire to raise the albeit relatively paltry funds that they will get from selling as quickly as possible. That is fundamentally why they have refused to provide the safeguards on future business that many Members have been seeking. The highest price will come from giving the buyer the greatest freedom to make money through eroding the quality of service by closing post offices and transferring functions elsewhere.

If the Bill goes through this House today, and if it succeeds in another place, that is not the end of the story, because uncertainties still exist. First, there are the state aid discussions that will have to take place with the European Union. That arises from the need to deal with the Post Office deficit, and it will arise, if not in exactly the same form, if Royal Mail remains in public hands. We do not yet know whether any restructuring of Royal Mail will be required or whether profitable subsidiaries will need to be sold off, as the press have speculated, so we do not know what would be available for sale.

Secondly, there is still uncertainty about the regulatory regime. There is agreement about the transfer to Ofcom, but there is a crucial question about whether it will review the regulatory relationship between Royal Mail and its private sector competitors. Royal Mail has argued, most recently in a letter from the chief executive this week, that the current arrangements are commercially unfair, and that many of the letters that we all saw being delivered on our Christmas visits to post offices were, in effect, costing Royal Mail money because of the terms of the agreement. The crucial question on the proposed privatisation is whether Ofcom will review that relationship and, if so, when. Clearly, any change, particularly if it conceded Royal Mail’s argument, would make a very big difference to the future financing of a publicly owned Royal Mail and a huge difference to the price that could be obtained from a privately owned Royal Mail. We must begin to say that a final decision on whether to sell can be made only once it is clear whether Ofcom will investigate this issue, what the time scale of such an investigation will be, and after there is an indication of the likely outcome. That is the second reason to say that there is great uncertainty.

The universal obligation has been debated this afternoon, and I will not take it further.

The final area of uncertainty is the future of the post office network. The major argument today has been about the inter-business agreement, but there are other questions about the amount of business that will go to local post offices. I welcome the Government’s promise of substantial investment in the network. In some ways, that is a bold decision, because if they are wrong about the future business that goes to local post offices, that will be public money not well spent. Capital investment cannot of itself secure revenue from the Royal Mail. Promises of other work are slim and not tied down. Our plans for a Post Office bank have been dropped, and the promises from other Departments are vague.

The National Federation of SubPostmasters has supported the principle of the Bill, but the briefing it has circulated to right hon. and hon. Members for today’s debate could not be more explicit. It states that

“ministers must recognise that their plans will only succeed if they deliver on access to government and Royal Mail work at post offices. If they fail on this, not only will plans to mutualise the Post Office be doomed to failure; there will be no way back for the network and our post offices will face even greater jeopardy.”

It goes further and states that if adequate levels of new Government work at post offices are not secured, it believes that the separation of Post Office Ltd and Royal Mail, and the sale of Royal Mail, must be “indefinitely delayed”.

The House has rejected the first thing that the federation asks for, which is a long term deal. The Government have failed, as yet, to deliver the second thing that it asks for, which is a clear commitment for future levels of other Government work. The argument over indefinite delay is, I think, the battleground on which the forthcoming campaign to save our postal services will be fought.

18:53

[Richard Fuller]

Royal Mail is, first and foremost, a people business. It is a people business, or it is no business at all. We know that not only because of the campaigns that hon. Members from all parts of the House have conducted to save post offices in their constituencies, but because of the hard work undertaken by Royal Mail workers throughout the year, particularly in the run-up to Christmas. We also know it because of the hard and vigilant work that the Communication Workers Union has put in to help us understand the issues involved in the Bill, as I experienced when Paul Moffat, the CWU representative for my region, came to see me. We also know it because of the groundbreaking modernisation agreement that the CWU made with Royal Mail. That is a signal triumph about which Mr Hayes and his colleagues can rightly be proud. It is that people aspect of the Bill on which I shall focus my brief comments.

[Fiona O'Donnell]

Does the hon. Gentleman agree that part of the reason workers go the extra distance is that they are public servants, and that the Bill will destroy that ethos?

[Richard Fuller]

No, I do not agree. I believe that they do so because they have in their hearts a sense of public service, and the Bill offers a much better, more secure way for them to fulfil their sense of public service obligation by securing a stronger foundation for the Royal Mail Group. In addition, it contains groundbreaking provisions that extend the principles of employee participation and employee ownership, which are most welcome.

I know that I disagree with the CWU about Government ownership, and in its most recent note it listed some of the things that could happen under continued Government ownership. It stated that the Post Office could move to be more profitable, raise commercial loans or enable the relaxation of competition. Those things could happen, but they could have happened in the past and did not.

What is the legacy of Government ownership of the institution of the Royal Mail Group? It is a revolving door of, let us face it, not particularly competent management until the recent past; a crippling burden of unfunded pension liabilities; and a delay of more than 18 months in giving management access to capital. Those things have held back the Royal Mail Group, so Government ownership is not the answer. The right hon. Member for Southampton, Itchen (Mr Denham) made the assertion, with which I do not agree, that the case for private ownership has not been made. I would say that the case for ending Government ownership has truly been made.

I believe that the CWU and workers now need to look forward at how we can use the Bill to extend further the principle of employee participation, and how we can continue to make it the groundbreaking legislation that many Members of all parties would like it to become. Let us ensure that employee ownership, which the Minister rightly said can be at a minimum of 10%, can truly be a model for how that principle should continue. The mutualisation of the Post Office should be thought through so that long-term business interests are secured when people put their own capital into a business to fulfil a service obligation to the people of this country.

Most importantly, as the Minister goes through the process of looking for the future owners of the business, with the participation of the CWU and the workers’ representatives, it is crucial that he stresses that the management, with the unions, must secure another groundbreaking modernisation programme. That is an absolute prerequisite if any future owner is to secure a bright future for the Royal Mail Group as it goes forward and meets the challenges of the years ahead.

18:58

[Fiona O'Donnell]

Thank you, Mr Speaker, for this short but sweet opportunity to speak on Third Reading.

I am sure that no one in the Chamber would accuse us Scots of being parochial, but I wish to take a moment to thank the posties of East Lothian, who delivered the Christmas mail in the most difficult of circumstances. Even more locally, I thank my own postie, who delivered my Scottish Affairs Committee papers and, I am sure, would have been pleased with the report contained in his delivery.

It is sad that this place has made one so young so cynical so quickly. I have had to learn a whole new language, because this Government speak in code. I could almost hear the theme tune from “Born Free” as the Minister spoke about setting free the Royal Mail.

This is a Government who do not believe in public service. When my hon. Friend the Member for Edinburgh South (Ian Murray) asked the Minister to provide assurances that no post offices would close as a result of the measures in the Bill, I once again learned that Ministers often do not answer the questions put to them. This is an issue of genuine concern to my constituents, but there is nothing in the Bill to reassure them. This is shotgun legislation from an adulterous coalition. There may be no programme of post office closures, but I am sure that post offices will close. I am sure that the Minister must have a trumpeter’s lip by now, because he has been blowing his own trumpet all day, talking about “post office local” and how he has no plans for vans, but there were no plans to raise VAT, so I am not going to take that as a promise.

19:00

Debate interrupted (Programme Order, 27 October)

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

19:00

Division 166

Ayes: 319

---

Conservative: 278
Liberal Democrat: 40

Noes: 238

---

Labour: 219
Scottish National Party: 6
Democratic Unionist Party: 4
Plaid Cymru: 3
Independent: 2
Social Democratic & Labour Party: 1
Liberal Democrat: 1
Green Party: 1
Conservative: 1

Bill read the Third time and passed.

Education Maintenance Allowance (Walsall North)

Wednesday 12th January 2011 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Dunne.)

19:15

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

Much has been said, and rightly so, about the Government’s decision to end the education maintenance allowance. This debate relates purely and simply to my constituency, however; it addresses the impact that the abolition of EMA will have on Walsall North.

We should be quite clear that those 16 to 19-year-olds who are eligible for the allowance come from households that would certainly be considered to have low and, at most, medium incomes. The full benefit is £30 a week, which is not a very large sum, but it is very useful for those who take it up. In order to receive that full benefit, the person concerned would need to come from a household whose gross income is under £21,000. To receive £20 weekly, they would need to come from a household whose income is between £20,818 and £25,521. To receive £10 a week, the household income—gross, I again emphasise—would need to be between £25,522 and £30,810. Since EMA was introduced, there has never been any allowance for those from families whose income is above £30,810. We know the sorts of households that will be affected, therefore. The pupils involved would, understandably, be under some financial pressure. In some instances, they could well be under pressure to leave school at the first opportunity.

EMA was introduced by the Labour Government to encourage such pupils to stay on at school beyond the compulsory school leaving age. We should bear it in mind that it is almost taken for granted that the sons and daughters of MPs and other people earning a reasonable sum will carry on their schooling beyond 16. There are exceptions, but they are very much the exception. We should therefore be clear about the people we are talking about in this debate.

The purpose of EMA is not only to encourage pupils to stay on at school beyond 16; it is also to give them some financial assistance. Although £30 a week may not seem much, it is certainly a help. It helps pay for fares, food and other costs, and it comes in very handy.

I decided to write to the heads of the secondary schools in my constituency and Walsall college to find out the proportion of their students who are in receipt of EMA. Let me give some of the figures from the replies I received. The head of Willenhall school sports college stated in her reply to me that 63% of those in the sixth form received EMA. The figure for Pool Hayes arts and community school is 57%; for Frank F. Harrison engineering college, it is higher, at 75%; and for Walsall academy it is 51%.

[Valerie Vaz (Walsall South) (Lab)]

I congratulate my hon. Friend on securing this debate on what is such an important issue for Walsall. Does he agree that while cuts to EMA affect all communities, they hit the Asian community hardest, because the Pakistani community has a take-up of 77%, and the Bangladeshi community has a take-up of 88%?

[Mr Winnick]

My hon. Friend, who has made a very useful contribution since her election last May as the Member for Walsall South, makes a very important and valid point.

I have mentioned Walsall academy, so I move on to Walsall college. Its principal states:

“Walsall College provides education and training for the largest number of young people in the…borough”.

The college has 2,136 pupils—slightly more than 58%—in receipt of EMA. I said that these figures and percentages are not surprising because the annual income in my borough is about £21,000. Obviously I am pleased that these pupils are staying on, and I am sure that my hon. Friend would say the same about the pupils in her constituency. Many of them are likely to be the first generation in their family to continue in education beyond the school leaving age. I would have thought that we should use every means to try to persuade youngsters, particularly those to whom I have just referred, who might leave school at the first opportunity, to stay on. I would have thought that we should also give them some financial support. That is why I, like my hon. and right hon. Friends, think that the introduction of EMA was a welcome step.

What will be the position of those currently in receipt of EMA who will not have completed their course and will not be at the maximum age of 19 by the end of this academic year? They had no warning that EMA was coming to an end; they were certainly given none by the Conservative party when it was in opposition. The Prime Minister denied that EMA was going to go when he was Leader of the Opposition. What will happen to these students at the college and at secondary schools in my constituency and elsewhere? They will certainly feel that they have been left in the lurch.

All those who replied to me—the heads of the schools and the college principal—expressed much concern about what will follow the abolition of EMA. The Minister is almost certainly going to emphasise that a substitute is being put forward: the enhanced discretionary learner support fund. However, there is not much doubt that all the evidence indicates that the total amount of central Government money—the only money involved is central Government EMA and what I have just mentioned—will be much more limited than under EMA. That is the justification for getting rid of EMA.

[Gavin Williamson (South Staffordshire) (Con)]

Will the hon. Gentleman give way?

[Mr Winnick]

One does not normally give way, given the very limited time available and the fact that the Minister should have adequate time to reply. That is the normal parliamentary procedure, but if the hon. Gentleman is so desperate, so be it.

[Gavin Williamson]

I greatly thank the hon. Gentleman, my constituency neighbour, for giving way. Does he not accept that EMA is a very flawed system and does not take into account families’ current needs because it actually looks at the last tax year? It never dealt with a lot of people—for example, families where the main income earner had lost their job. It is a truly flawed system.

[Mr Winnick]

The figures on household gross income show that, without any doubt, those who receive EMA come from households with a much more limited income than us and than those who earn much more than Members of Parliament and so on. I have given all the reasons why EMA was justified and why I would like it to continue.

What the heads particularly emphasised in their replies to me, apart from their concern about the abolition of EMA, was that there is a possibility—perhaps it is more than that—that under the substitute they will be in the rather invidious position of deciding which of the pupils staying on beyond 16 should receive the financial help, limited is it will be. At the moment, of course, the school is not involved. The school or college is only involved over attendance, ensuring that those who receive EMA attend. If they do not, they lose the allowance, and rightly so.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on securing the debate tonight. It is a very important issue for a great many of us. The situation in Walsall is replicated in other constituencies, including Strangford. There are more students than ever in this financial year, more courses than ever and a greater demand for EMA. I support the point that he is making, but does he agree that the largest number of people who will be affected will be those who can least afford it?

[Mr Winnick]

Indeed, and I hope that the Minister has taken on that point. I have been emphasising all along the sort of people and the households affected.

The principal of Walsall college—perhaps the hon. Member for South Staffordshire (Gavin Williamson) will listen to this with particular attention—writes that the students in receipt of EMA

“are primarily drawn from the poorest parts of the Borough. This financial support has enabled parents to encourage their children to stay on in education and training, where previously they would have encouraged them to take low paid employment rather than fund their studies.”

In conclusion, he writes:

“Unless we see a significant rise in our DLSF to offset the reduction in EMA, we will undoubtedly see a reduction in enrolments from learners from the poorest families.”

He adds:

“If we do not support our young residents to become skilled, professional and enterprising by supporting them to access and remain in high quality post 16 education and training,”

the borough

“will never achieve its ambitions for regeneration and sustainable prosperity.”

I endorse everything that he says.

I hope—although it is rather optimistic for me to do so—that even at this late stage, Ministers will reconsider the position and recognise that there is a great deal of justification for continuing with EMA. The argument has been paraded before and will be again—I understand that there is a debate on this subject of a national character next week—that, in the main, those who are eligible for EMA would stay on all the same. I question that, but again I come back to the point that I made earlier. Even if that were so—I do not accept it for one moment—is it not right to give a modest sum, and this is a pretty modest sum, of £30 weekly to those who come from low-income households? Is it not right to give some help to those who would otherwise be short of financial assistance in carrying on their education? Is it wrong? Is it some sort of crime to give this sum—£30 a week? I find that difficult to believe.

I do not want to make too much of it, but if we look at the Cabinet and at where they were educated and where it is quite likely that their children will be educated, we know that those children will not receive EMA. If someone comes from a prosperous household, they know full well that there will not be any financial difficulties in their staying on in education right up past university. I am dealing with constituents, and their children, from a very different background. I, like my hon. Friend the Member for Walsall South (Valerie Vaz), want to do everything in my power to encourage the 16 to 19-year-olds who would otherwise leave school at the first opportunity to continue in education for all the reasons that we know are so important: for their future and for the future of our country.

19:29

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

I congratulate the hon. Member for Walsall North (Mr Winnick) on securing the debate. I know that he cares passionately about supporting young people in continuing their education, as he said in his closing remarks, and we on the Government side share that passion, as do I personally.

The context to this debate is the state of the public finances, with spending outstripping income to the tune of £156 billion a year. Capital markets no longer regard sovereign debt as being risk-free, particularly for countries such as Ireland and Greece that have huge structural deficits. It is to avoid that fate that the Government have had to take difficult decisions to tackle our structural deficit, which is the highest in the G20. We pay £120 million in interest charges and the independent Office for Budget Responsibility reports that if no further action to tackle the deficit were taken, interest payments would rise to a staggering £67 billion a year by 2014-15. That is almost two years’ worth of the total spending on all the schools in England—twice what we spend on the salaries of all the teachers in England and twice what we spend on running all the state schools in the country—just to pay interest on the debt.

That is all assuming that the capital markets would be willing to lend us those huge sums, but the experience of Greece and Ireland demonstrates that they might not, and that if they did it would be at significant cost.

[Mr Winnick]

Am I to take it that our economic survival depends on the abolition of EMA?

[Mr Gibb]

I shall explain how it fits in with tackling the deficit. The longer our economy languishes in crisis, the later the economic recovery and the later we have the jobs that are so desperately needed, particularly for young people, including the young people about whom the hon. Gentleman is concerned in his constituency. It is young people who bear the brunt of a stagnant economy as companies freeze recruitment. We do not want to be in the position of the economies of Ireland and Greece, which stumble and teeter from crisis to crisis, so that their economies are not revived and their young people bear the brunt of their economic crises.

Our starting point was that this £560 million spending programme had to be in the scope of spending review decisions. The research of the National Foundation for Educational Research that was commissioned and published by the Labour Administration showed that about 90% of EMA recipients would have stayed on after the age of 16 even if they had not received EMA. In making changes to EMA, we were determined that the 10% or 12% of students who might be prevented from staying on in education because of financial difficulties should be helped.

I understand the concerns of the hon. Gentleman and the college principals whom he quoted. He mentioned Walsall college, at which 2,136 students receive EMA—58% of the students there. That percentage is significantly above the national figure for EMA recipients, which is 45% of the national cohort. In Walsall as a whole, 4,182 students are receiving EMA in this academic year. We share his concern about those students, which is why we have decided to use a portion of the EMA budget to increase funding to the discretionary learner support fund, which is used to support those who have financial difficulties. Final decisions about the quantum of that extra funding have still to be taken, but we have spoken of a value of up to three times the current value of the fund, which is now at £25.4 million.

[Mr Winnick]

Let me ask two questions. First, what will be the position of those who continue to receive EMA who have not finished their studies and who would have continued to receive it as their studies continued? Secondly, will schools be involved in deciding who should receive the funding the Minister just mentioned?

[Mr Gibb]

EMA will end at the end of this academic year and we will make a decision about the size of the fund.

[Mr Winnick]

Is there to be no decision now?

[Mr Gibb]

The decision is being consulted on right now—I shall come to that in a moment. This will be decided before the end of the academic year; indeed, before the end of this financial year.

A fund of the size I was talking about would enable 100,000 young people to receive £760 a year—about 15% of the number of students currently receiving EMA. That £760 is more than the average annual EMA paid in 2009-10 of £730, and only slightly less than the £813 paid to 16-year-olds receiving the full £30 a week or the £796 paid to 17-year-olds receiving the full £30 a week.

The Government will not set expectations for how much young people should receive from the enhanced discretionary fund. It will be up to schools and colleges themselves to determine which young people will receive support under the new arrangements, and what form that support should take. We are currently consulting on how the fund will be administered and disbursed, with the National Union of Students, the Association of Colleges, students from Northamptonshire college and a whole range of other stakeholders—head teachers and colleges involved with the original trial areas for raising the participation age in education or training. We are working with my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) in his role as advocate for access to education for the most disadvantaged young people.

We shall not dictate to schools and colleges how they should use the fund. It is discretionary, and schools and colleges will have the flexibility to allocate it in ways that best meet the needs of their students—for example, on how much young people will receive. [Interruption.] I do not think that is invidious.

[Mr Winnick]

It is invidious to the extent that schools do not decide about EMA, but now they will apparently need to make a judgment. As one of the heads replied to me, it is not the role of heads to decide whether A, B, C or D or X, Y or Z should receive financial support. I am sure my hon. Friend the Member for Walsall South (Valerie Vaz) agrees. That should be outside the professional role of a teacher or head teacher. The way that the whole scheme is being planned is unfortunate, to say the least.

[Mr Gibb]

We are consulting on the issues right now. At present, a £25 million discretionary support fund is being distributed by college principals and head teachers with sixth forms. Principals who do that work do not regard it as invidious.

The enhanced discretionary funding will not be an EMA and it will not necessarily be paid in the form of a weekly allowance. Current discretionary support is often provided in the form of books or equipment, or payment for field trips. We know that discretionary support works because discretionary learner support funds are already used very successfully in schools and colleges. They allow the professionals who actually work with students to decide what type of support the young person needs to stay in education. Colleges value the fund because they can provide support to the young people they consider to be most in need.

The hon. Gentleman did not mention transport, but it is a concern of students in many areas. I emphasise that local authorities have a statutory duty to ensure that no young person in their area is prevented from attending education post-16 because of a lack of transport or support for it. If that duty is not being met, young people and families should raise that matter with local authorities, but they were never expected to use a significant proportion of their EMA to pay for transport costs. Under the current arrangements for discretionary support funding, EMA cannot be used routinely for transport to and from college, because local authorities have that responsibility, but we will consider flexibility in that restriction as we develop the arrangements for the enhanced discretionary learner support fund.

In today’s economic climate, we have a duty to ensure that we continue to invest where investment is needed and to get the best possible value for taxpayers’ money. We cannot justify spending more than £560 million a year on an allowance when 90% of its recipients would have stayed on in education even if they did not receive it. Of course, we want all young people to benefit from post-16 education. We are committed to full participation for all young people up to the age of 18 by 2015, but a payment designed as an incentive to participate is no longer the right way to ensure that those who face real financial hardship and barriers to participation get the support that they need. That is why we have looked again at the most effective way to support the most vulnerable young people to stay on in education.

Question put and agreed to.

19:39

House adjourned.

Ministerial Corrections

Wednesday 12th January 2011 Ministerial Corrections

Wednesday 12 January 2011

International Development

Wednesday 12th January 2011 Ministerial Corrections

Yemen: Overseas Aid

[Jim Shannon]

To ask the Secretary of State for International Development what (a) funds and (b) other resources his Department has allocated to Yemen in the last 12 months.

[Official Report, 15 December 2010, Vol. 520, c. 776W.]

Letter of correction from Mr Alan Duncan:

An error has been identified in the written answer given to the hon. Member for Strangford (Jim Shannon) on 15 December 2010. The full answer given was as follows:

[Mr Duncan]

The Department for International Development has allocated £50 million of programme funding for development projects in Yemen for this financial year 2010-11. In financial year 2009-10 a total of £27 million was disbursed, as reported in “Statistics for International Development”, available on DFID's website.

There are ten international staff and six local staff working full-time on the Yemen programme.

The correct answer should have been:

[Mr Duncan]

The Department for International Development has allocated £50 million of programme funding for development projects in Yemen for this financial year 2010-11. In financial year 2009-10 a total of £29.8 million was disbursed, as reported in “Statistics for International Development”, available on DFID's website.

There are 10 international staff and six local staff working full-time on the Yemen programme.

Work and Pensions

Wednesday 12th January 2011 Ministerial Corrections

Jobseekers Allowance

The following is the answer given by the Secretary of State for Work and Pensions (Mr Duncan Smith) relating to a question from the hon. Member for Westminster North (Ms Buck) during Work and Pensions Question Time on 10 January 2011.

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

Does the Secretary of State accept the Office for Budget Responsibility figures, revealed to my right hon. Friend the Member for Paisley and Renfrewshire South (Mr Alexander), that an extra two thirds of a billion pounds will be spent on housing benefit as a result of rising unemployment over the next four years?

[Mr Duncan Smith]

The OBR is independent and the Government of course accept what it publishes as independent figures. We go by what the OBR’s figures say. As the hon. Lady knows, we inherited a financial mess left by the previous Government. What we are doing is to make sure that we reduce the ballooning cost of, for example, housing benefit that she left behind—a bill that doubled in the past five years.

[Official Report, 10 January 2011, Vol. 521, c. 9.]

Letter of correction from Mr Iain Duncan Smith:

An error has been identified in the oral answer given on 10 January 2011.

The correct answer should have been:

[Mr Duncan Smith]

The OBR is independent and the Government of course accept what it publishes as independent figures. We go by what the OBR's figures say. As the hon. Lady knows, we inherited a financial mess left by the previous Government. What we are doing is to make sure that we reduce the ballooning cost of, for example, housing benefit that she left behind—a bill that doubled in the past ten years.

Westminster Hall

Wednesday 12th January 2011 Westminster Hall

Wednesday 12 January 2011

[Mr Gary Streeter in the Chair]

Biotechnology and Food Security

Wednesday 12th January 2011 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Goodwill.)

09:30

[Mr Mark Spencer (Sherwood) (Con)]

I am grateful for the opportunity to debate this important issue. I want the debate to be fact-based and to be about the science. I want it to be an unemotional and genuinely open debate about the future of this country’s food security and how we ensure that the people of the United Kingdom are well fed into the next generation. I acknowledge that this issue is not the responsibility of the UK Government or the Minister, but a European Union issue. It is for the EU to decide whether it uses genetic modification and biotechnology to solve such problems. This debate is an appeal to the Minister to push for and facilitate discussion, so that others can join in and we can have an open discussion about how to ensure that this great nation of ours is fed.

I am no historian, but following the second world war Winston Churchill said that this country should never again allow itself to be exposed to the food security issues we faced during that war. We have had two or three generations of consumers who have no concept of what food security is, or what it is like to go to the supermarket and find that a product is not on the shelf. My wife will go to the shop and if the product she requires is not on the shelf, she will storm down to customer services, bang on the desk and say, “What do you mean you haven’t got any paprika?”—or some other wonderful product. My grandmother, however, would go to the butchers and say, “I’d like lamb chops” and the butcher would say, “You can’t have lamb chops. You can have beef dripping because that’s all I’ve got”, and she would have to take it. Consumers now have no concept of what food security is, and it will be a big shock if we find ourselves in those circumstances again.

I turn to where we as a country have come to. My right hon. Friend the Member for Arundel and South Downs (Nick Herbert) said last year that since 1997, the UK dairy herd is down by 22%, which is 500,000 fewer dairy cows. Fresh vegetable production is down by 36,000 hectares; the pig herd is down by 40%, which is 3 million fewer pigs; fresh fruit is down by 9,000 hectares; and the lamb flock is down by 25%, which is 10 million fewer lambs. Despite the fact that self-sufficiency in food production had dropped from 72% in 1996 to 60% in 2008, the Labour Government said in that year that the

“UK currently enjoys a high level of national food security”.

It is true that this country is still able to source and import food very easily, and nobody would stand here today and say that we will ever be 100% efficient in producing our own food. I, like many hon. Members, enjoy bananas, oranges and fruit from all over the world. However, the figures paint the picture of our diminishing ability to feed ourselves, and if that pipeline—the amount of food flowing into the country—were cut for any reason, it would have dramatic effects on our ability to do so.

There are four factors in the world today that will have enormous consequences for this country’s ability to feed ourselves: climate change, the global population, the global economy, and energy prices and our ability to supply energy to the world. I shall take them separately.

There is little debate over whether the climate is changing, and frankly, it is irrelevant whether we agree that that change is man-made or carbon-based. There is extreme weather: we need only look at Russia, which has suffered drought, and at Australia, which is suffering terrible floods at the moment, or at the terrible snow and frost in our country this year and the impact that had on vegetable producers. Trying to harvest carrots and parsnips from frozen ground was an enormous challenge for British farmers, who were trying to put those vegetables on to our plates for Christmas. Extreme weather brings huge challenges and will have a big impact on the cost of food.

Hon. Members who are familiar with commodity prices will know what this summer’s drought in Russia did to the value of wheat. Almost overnight, the value went from £90 a tonne to £160 a tonne for next September’s wheat, simply because the Russian Government said that they will not export any wheat but will retain it within Russia. That pushed world commodity prices up dramatically, which has affected general consumers. When they go to the supermarket to buy a loaf of bread, they find that quite a cost has been added to it.

In 2003 Europe experienced a long, hot summer, which reduced the EU’s agricultural output in that year by 20%. There is a fine line between over-supply and under-supply. We need only be 2% under-supplied for the market to react and push up prices; we will feel that more in future. Farmers need to find new technologies to assist them, so they can cope with the changes in climate.

Secondly, global population will impact dramatically on our ability to feed ourselves. It is predicted that there will be 9 billion people on the planet by 2050. Where is the food to feed that number of people going to come from?

[Julian Sturdy (York Outer) (Con)]

I thank my hon. Friend for giving way and congratulate him on securing the debate. He is right about the huge increase in world population and its impact on food security for the UK and Europe. Does he agree that the only way to tackle this is through new technology and science—for example, research to improve disease resistance and drought tolerance of staple crops, not only in the UK but across the world? We must not close the door on science and new technology.

[Mr Spencer]

I thank my hon. Friend for that intervention. He is correct, in that we need to harness new technologies if we are to solve the problem. I will talk about that a little more later.

We have clearly been effective since the second world war in harnessing such technologies and in scientific advancement. The common agricultural policy, which came out of the post-war period, is often ridiculed as an enormous monster of a policy, but it was probably the most single most effective policy ever devised by politicians. It was designed to feed Europe and was enormously successful—so successful that by the 1980s, we had grain mountains and milk lakes. We all remember those stories in the media.

We have an enormous and growing world population, and we will have to try to feed all those people. It is important to recognise that the amount of land on the earth is not expanding, and we are using land for other things, not only food production. “They have stopped making land,” as they say.

At the same time, the issue is absolutely linked to the global economy. There have always been hungry people on this earth, but all of a sudden, we have countries with people who are not only hungry, but wealthy. On the other side of the globe, the economies of countries such as India and China are expanding, and diets are becoming western. The impact on the European Union will be enormous. In 1985, the average Chinese consumer ate 20 kg of meat a year, but it is now said that they eat 50 kg a year. Across the globe, economies are expanding—in India, the far east, south America and many African countries. Countries are moving in a similar direction to China, which will have a really large effect on our ability to keep ourselves fed.

The third relevant issue is world energy prices and our ability to ensure that we have enough energy. As economies expand, so, too, does their desire to consume energy—a country’s GDP is almost directly linked to the amount of energy it consumes. How will we produce enough energy and how will we do that sustainably? Sustainability is the key. It is all very well saying that we have enough gas and coal to keep ourselves going, but the impact of that carbon will be quite dramatic.

[Jim Shannon (Strangford) (DUP)]

Obviously, the hon. Gentleman’s discussions with constituents will, like mine, have indicated that there is particular concern about the price of fuel—the fuel prices that the farmer pays to run his tractors in the fields. Those prices have also affected the price of fertiliser, which has risen from £100 to £300 a tonne. Does the hon. Gentleman feel, as many of us do, that concern about food prices will rise and that the days of cheap food are perhaps disappearing? We once sourced cheap food from south America, but demand from China, India and elsewhere may mean that our markets for cheap food will disappear. Does the hon. Gentleman share those concerns?

[Mr Spencer]

I thank you for that intervention. Those are exactly the concerns that I am expressing. You sum up very neatly what will happen to global markets. We have been importing from south America, Africa and many other places. When the almighty dollar takes hold, and China tells countries, “Don’t export your meat products to the United Kingdom. Export them to China and we’ll pay you a dollar a kilo more,” producers will naturally say, “Thank you very much, United Kingdom, but we’ll sell to China. We’ll export to you if you pay £1.50 a kilo extra.” That is exactly where the problem materialises.

Energy is very much linked to this issue. As you indicated, the cost of agricultural fertiliser—

[Mr Gary Streeter (in the Chair)]

Order. I am sorry to interrupt the hon. Gentleman, who is making an impressive speech, but there are too many references to “you”. Members should always refer to each other as hon. Members or hon. Friends.

[Mr Spencer]

I am grateful to you for your intervention, Mr Streeter.

World energy prices are very much linked to the issues that we face. The simple fact is that the price of petroleum directly affects the price of agricultural fertilisers and pesticides and has a knock-on effect on them.

Energy production itself requires land usage. Erecting a wind turbine takes out land that could be used for agricultural food production. The erection of a refinery takes land out of agricultural food production and uses it for industrial purposes. More importantly, as we move towards sustainable energy sources, such as bioethanol and biodiesel produced from rape seed, we will be using agricultural crops to produce those biofuels, taking land out of food production and putting it into energy production. That might seem like a wonderful, modern technology and a wonderful, modern thing to do, but when my grandfather started farming in the 1930s, 30% of his land was used to produce oats, which were the energy source for the horses that he used to pull the ploughs. There is, therefore, nothing new in farmers using land for energy production. What has changed, however, is the number of people we have to feed and produce for. The changes will be quite dramatic, and we need to make sure that we have technologies available to assist us.

The Government’s chief scientific adviser, Sir John Beddington, said:

“by 2030 we need to be producing 50% more food. At the same time, we will need 50% more energy, and 30% more fresh water.”

Those are dramatic statistics. If we are to solve such problems, we really will have to set our stall out and meet those challenges. I hope that we all recognise that there are enormous challenges out there.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

I, too, congratulate my hon. Friend on the way in which he is putting the case. One area of influence that has not been touched on is the UK media’s attitude to some of the topics he has discussed. Does he have a view on whether their attitude, particularly to developing technologies, has been a hindrance and has impacted negatively on our farmers’ ability to meet the challenges he has set out?

[Mr Spencer]

I thank my hon. Friend for that intervention. What he says is true, and the purpose of today’s debate is to have a much more mature, science-based, focused discussion, which looks at the facts rather than the hysteria. My hon. Friend will recall headlines such as “Frankenstein foods”, which do nothing to inform people, and only make them scared of new technologies. To a certain extent, that is human nature. I stand here today unsure myself as to whether these new technologies will assist us. My point, however, is that we need to have the debate, to look at the facts and to explore the opportunities to see whether they offer a solution to the problems we face.

The human race has always been scared of new technologies. If we went back in history to the first time a surgeon suggested doing a heart transplant, we would see the furore that that caused. It was very dramatic to take a heart from one human being and transplant it into another human being. That was quite scary at the time, but it is now run of the mill. As a Member of Parliament, I am lobbied by people who say that we need to improve organ donation and to make sure that we are all informed about it. The technology is accepted and warmly embraced.

To an extent, we are going through the same debate with stem cells, because people are concerned about them and about whether they can assist us. Of course the human race is sometimes scared of change, but we have always been quite adaptable. In the end, we get there, we embrace technologies and we make use of them. That is why we have been so successful as a species at looking after ourselves.

I want to draw attention to Sir Norman Borlaug, who won a Nobel peace prize for his work in changing wheat varieties and improving the way in which we feed ourselves. Many Members have mentioned the fact that we have been able to feed ourselves since the second world war, and we have done a very good job of that. Sir Norman Borlaug was the lead figure in the field. After the second world war, wheat yields were very low. As part of a long and painful process, Sir Norman used a paintbrush to cross-pollinate different varieties of wheat. He was able to take the correct strains from one variety and put them into another. That made the wheat yield vastly more per acre. It also made varieties shorter so that they did not fall over. As I said, we were able to feed Europe; we were able to keep what is now the European Union well fed. That process took a long time. We are talking about tens of years to make advancements in the science.

I am led to believe that genetic modification can speed up that process of genetic change. We have been doing such things for a long time. We have been changing the genetic make-up of those varieties through the long and laborious process of cross-pollination. Genetic modification can speed up that process and lead to advances that will reduce the disease susceptibility of those varieties and make them easier to grow and more drought-resistant. That has to be a good thing. At this stage, it is worth recognising that the genie is out of the bottle. Countries such as the USA, Canada and Brazil are using these technologies. Those crops are being grown in other parts of the world, where technological advancement is starting to move faster than it is here.

It is suggested that yields could increase between 6% and 30% using the same amount of land. If we were able to harness that technology, we could increase yields by 30%. Given the figures and the global changes that we are experiencing, even that degree of advancement might not be enough to keep us all fed to our accustomed level. The hon. Member for Strangford (Jim Shannon) mentioned fertilisers, a subject that will prove important as we move forward. Imagine a technology able to produce a wheat variety that had the same root structure as lucerne, which is nitrogen-fixing. Lucerne—and clover, which is very similar—takes nitrogen from the atmosphere, absorbs it into its leaves and produces nitrates in its root structure.

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

I congratulate the hon. Gentleman on securing the debate. It is fitting that a debate on food security should be initiated by a Member with the name Mark Spencer. He stresses the importance of new technologies. Does he agree that is fundamentally important that the Government invest in them, to ensure that the farming community can avail itself of the technologies so that the prospect of feeding the population is more easily achieved?

[Mr Spencer]

The hon. Gentleman is correct that we need to invest. We are actually reducing the amount that we are putting into research and development in the industry. We have not been very good at that. This Government are assisting a little bit, but it is a small step back in the right direction. We have not put enough into research and development. The amount that we spend is dwarfed by the amount being spent by other countries around the globe. We are going to lose our reputation and position at the forefront, the cutting edge of those developments and technologies. This country has always succeeded by leading the way. We were the leaders during the industrial revolution, which gave this small nation a global position, making it the Great Britain that it is.

Globally, farmers have earned an extra €34 billion since the introduction of biotechnologies, 44% of which resulted from yield gains and 56% from the reduction of production costs. I mentioned the benefits of nitrogen-fixing wheat. Improving the root structure of wheat would enable it to be grown in other countries, such as central and northern Africa—places where at the moment it is too dry. The benefits would include not only the ability of this country to feed itself, but the chance for African countries to feed their populations and improve their lifestyle. It could also have massive implications for the environment. The amount of nitrates we use could be dramatically reduced, which would assist in the management and protection of the environment. The amount of pesticides that we use could be reduced. I have never met a farmer who likes using pesticides—they are very expensive. Finding a technology that would enable us to spray fewer pesticides on to crops—which themselves could be more disease-resistant—would benefit farmers and consumers.

In the UK, yields of oilseed rape since 1995 have risen approximately 0.5% year on year. In Canada, they are rising 3% year on year, simply because it is making use of those new technologies. Its farmers' ability to produce more from the same amount will make them more competitive than ours.

It is exciting to see technologies open up. Imagine producing an apple that reduced cholesterol or a tomato that prevented bowel or breast cancer. All of a sudden the media perception of “Frankenstein foods” as something to be feared and avoided would be turned on its head. Consumers would be clamouring to make the most of the new technologies and these “wonder foods” that were cures and were helpful. There is a lot of work to be done and there is a lot of speculation; I acknowledge that, but the technologies are there to be explored and could be of great benefit.

There are clearly concerns. The consumer is concerned about these products. We referred to the fact that people worry about change. We need to recognise that and ensure that we take people along with us in an open debate. It is also worth recognising that technologies used in the past have occasionally broken down. There have been mistakes. Those involved in agricultural industries will remember a wheat variety called “Moulin”, which was marketed, but when it came to the point where it should pollinate it did not work. That was disastrous: farmers had zero yields, having grown the crop for a year. We need to ensure that we do this properly, that the scientific evidence is correct and that we explore the technologies in the right manner. The only way to do that is to do the research and the trials. I ask the Minister to assist in facilitating those trials in the UK, so that we can test the water and try out some of the technologies under controlled circumstances, to see if they have anything to offer to solve the problems that we shall face globally.

The organic sector often expresses concern that there will be cross-contamination—that bees will fly from GM crops to organic crops. In the US there is a thriving organic movement and both systems sit side by side. Consumers have the choice of new technology, traditional or organic food, and it seems to work well.

Who is leading the way? I have mentioned the US and Canada, but China is doubling the amount it is spending on agricultural biotech research and development in the next five years. It is currently spending $400 million on research and development—20% of world investment. The European Union will be left behind if we do not step up to the mark, get stuck in and try to keep pace. Genetic modification technology is currently being used by more than 14 million farmers around the world. That is a landmass equivalent to the whole of France, Germany, the United Kingdom and Ireland. It is no small trial. It is happening on the other side of the globe as we speak. More than 2 trillion meals containing GM ingredients have been consumed over the past 13 years without a single substantiated case of ill health.

Given the fuss that we make about peanuts because every now and again someone has an allergic reaction to them, it seems unbelievable that we are not out there in white suits and little masks tearing up peanut fields because of the impact that peanuts have on people’s diets. However, whenever somebody mentions new technology people with placards want to wreck the trials and research.

I appeal to those who feel the need to wreck those trials not to do so, because we need to find evidence that they work and to establish the technology. If those people are correct in thinking that the technology will not work, we need to do the trials to establish the fact so that the technology can be stopped. My appeal to all involved is to engage in the debate; supermarkets, growers, retailers and producers should come to the table to talk it through, to do the research and development and to settle the argument once and for all. If the technology is available to assist us, we need to enhance it.

What is the implication for UK producers and consumers? Clearly, GM is in production and in circulation. Soya, maize and tomatoes are intrinsic to our diet. I put it to Members that at some point we will all have consumed a GM product without realising it—probably as a soya-based product, perhaps in a pizza or in processed food. The country has a choice. Should we go down the same route as the Austrians and be completely GM-free, not having GM and labelling all our food to ensure that we protect ourselves from the perceived problem; or do we embrace GM and label our food so that people can make a clear choice?

If we go down the GM-free route, our farmers and producers may be able to attract a small premium. However, I believe that commodity prices will continue to rise, and that the global economy and the increase in the global population will have an impact.

[Jim Shannon]

Is the hon. Gentleman aware of the work that has been done by universities across the United Kingdom on GM foods, particularly by Queen’s university? They have been in contact with companies and businesses to perfect GM foods and move forward. The advantage that Queen’s university has for those businesses is that everyone gains. Is he aware of that, and if so will he comment on it?

[Mr Spencer]

I am aware that a number of universities are participating in research, and I appeal to those institutions to give the universities the support that they require to continue with it. It emphasises the fact that the United Kingdom has the scientific brains to do this. We have the willingness and the intellectual power. What we need now is a fair crack of the whip—a bit of financial support and some understanding among the population of the technology. We need to debate the matter so that people can understand it and embrace it—or, if it is not the correct route, to say that it has been considered but that it is not the direction to go. The only way to achieve that is through good scientific research, and I am grateful that Queen’s university is involved in that great work.

I return to my scenario. We have a choice. We either go down the GM-free route or we embrace the technology. If we choose to go down the non-GM route, however, it will be difficult to ensure that our borders are GM-free. For example, meat products will be important but we will have no means of testing whether those animals have been fed on a diet of genetically modified feed. UK producers will be producing free-range chickens for the supermarkets, but those birds could be sat on the shelf next to Brazilian chickens that had been fed on cheaper GM wheat and were being sold for £2 less. Will the British consumer know why the Brazilian chicken is £2 cheaper, or be aware that the other chicken is more expensive because it is GM-free? It will be almost impossible to police. As commodity prices start to increase, the consumer’s unwillingness to tolerate or accept new technologies that give them good, healthy, quality food at the right price will diminish over time. That is why we need to push forward and ensure that we are competitive.

Enormous global changes are afoot that are out of our control. The United Kingdom has no control over global population. We have no control over world energy prices. We have no control over the climate; we should acknowledge that the human race cannot control what happens to the weather. However, we are in control of our ability to use the available technologies. We should embrace those technologies, consider them, discuss them and ensure that we are at the cutting edge as we move forward. If we are going to be sustainable, and if we are going to keep ourselves fed, we need to use all the tools that are available to us. I believe that we should explore the prospect of biotechnology being one of the tools that we should be using.

10:07

[George Freeman (Mid Norfolk) (Con)]

I apologise for being a few moments late, Mr Streeter, and I thank you for calling me to speak and giving me the chance to contribute to this important debate. I congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on securing the debate. Like my hon. Friend and others here today, I believe that the subject is rather more important than is suggested by the coverage that it receives in the Chamber. Perhaps this debate is a precursor to a bigger one on the Floor of the House.

I speak as a new Member who had a career in biotechnology. I dealt mainly in biomedical technology venture capital, but come from a farming background and once, many years ago, worked for the National Farmers Union in policy development. I have long taken an interest in the subject, and I believe that there would be substantial public interest in it if enough of us were prepared to talk about it in the right way, as my hon. Friend did so eloquently this morning.

To that end, Mr Streeter, I declare an interest. I worked in biotechnology for 14 years, and I have a number of small shareholdings in small companies which are all declared in the Register of Members’ Financial Interests. I serve as a non-executive adviser to Elsoms seeds, Britain’s last independent family-owned seeds business, and to the Norwich research park where some of our leading agricultural science is being carried out.

My hon. Friend the Member for Sherwood spoke eloquently about the huge opportunities of biotechnology and the huge challenges faced by the Government, Parliament and the country in the years ahead, given the pace of globalisation and population growth and the enormous pressure on farmers around the world to grow more from less. He mentioned projections for explosive population growth and the huge pressure to reduce inputs, particularly energy and water that will result—and, I might add, the potential for those problems to lead to serious geopolitical tensions. If we look around the world today, we see that underlying some of the most acute regional conflicts are issues to do with poverty and with tensions around resources. Therefore, this is about not just science and agriculture but geopolitics and major issues around international security.

Like my hon. Friend, I feel strongly that agricultural biotechnology holds enormous potential to help us solve some of the biggest issues that face our generation. Moreover, it is a matter that transcends party boundaries, and I suspect that we shall hear much of that from the Opposition Benches this morning.

Let me highlight three personal experiences that endorse my hon. Friend’s comments. I have recently had the great privilege to visit the John Innes centre and to see the work that is going on to develop a blight-resistant potato. If we were to explain properly that stunning piece of technology to the public and to the people who do their weekly shop in the supermarkets, they would quickly understand the benefits. The technology would enable us to grow blight-resistant potatoes without having to use the 14 different applications of pesticide that are currently required. There would be huge environmental benefits with massive reductions in energy input into agriculture in the field. That is British technology, developed in this country, and it has enormous global potential. We should be proud of it; we should be talking more about it and celebrating it.

I also had a chance last summer to see another wonderful piece of work at the John Innes centre. Scientists are looking back through historical wheat varieties and cross-breeding varieties of wheat from different parts of the world. In one case, they have taken traditional Afghan breeds with short stems that are well adapted to grow in the Afghan climate and genetically manipulated them—others would describe it as cross-breeding them, which is what people have been doing in agriculture for thousands of years. They have been trying to produce a short-stemmed wheat crop that is well adapted to grow in Afghan conditions but with a much higher yield. Imagine the geopolitical implication that that would have for helping our development and military objectives in Afghanistan. Such a project provides a very good example of the technologies that we are developing in this country.

In my capacity as chairman of the all-party parliamentary group on science and technology in agriculture, I met two delegations from Brazil and Uganda. The Ugandan delegation was led by a gentleman who is pioneering the use of biotechnology in the banana industry in Uganda. In Brazil, the delegation comprised a huge consortium of soya bean farmers. It was pioneering not just the application but the science and research of genetic technology in the soya bean sector, with huge environmental and economic advantages. I confess to having been taken aback by the scale, professionalism and the commercial application of these technologies in countries that we sometimes refer to in this House as the developing world. Such countries are more than developing, they are very developed, and they are trading with each other very fast and growing into a position of global leadership. Although we should be proud of the science that we have in this country, we are in danger of lagging behind in the application, commercialisation and international roll-out of such technologies. I know that the Minister feels strongly, and has talked eloquently, about that.

Biotechnology sits right at the heart of this coalition Government’s programme in so many ways. First, on the environmental agenda, the Prime Minister has spoken eloquently about this Government being the greenest Government ever, and agriculture biotechnology sits at the heart of that. Secondly, the Government have set out a radical programme for growth, rebalancing the economy and reducing our dependence on financial arbitrage in the City. I argue that investing in and backing British science and technology companies would give our City financiers more substantial things to invest in and to back and it would do wonders for our growth potential.

Biotechnology sits at the heart of the health agenda. If we are to develop the healthy society that we all crave and to get into health prevention, we need to explore some of the enormous benefits and economic opportunities that come from functional foods and nutraceuticals. If we put our traditional strength in food—retailing, manufacturing and processing—and combine it with our science, this country could lead the world in what I believe is a coming revolution in functional foods and nutraceuticals.

The Government have, rightly, put overseas development at the heart of their programme. Biotechnology can help the developing world to move away from its dependence on aid and to strengthen its development through trade. This is a vital agenda that sits right at the heart of the coalition Government’s programme in so many ways.

Given the economic potential and the political and international importance of biotechnology, it is odd that the debate in this country is so skewed by a very noisy, cynical and, at times, hysterical anti-science lobby that is given too much air time. All of us who understand the power of this technology need to speak up, as we are today, and explain the benefits. There has been quite a lot of public concern about some of these technologies—my hon. Friend referred to stem cells, with which I am familiar. My own experience in biomedical science is that once the benefits are clear—and nothing focuses the mind like the prospect of having one’s life doubled in length by heart surgery—and, crucially, the public are satisfied that an appropriate regulatory framework is in place, which means trust in this House and trust in the process and regulation of science, there is the potential to unlock public support for this revolution. We must concentrate on the benefits of such technologies and have a cross-party commitment to transparent regulation. It is crucial that we are science led and evidence based. We must take scientific evidence properly and create a framework for policy making that is science led, on which, I know, the Minister is strong.

I enjoy knocking on doors and saying to voters in my constituency, “Aren’t you excited by the technology that is being developed just across the boundary in Norwich at the research park? Imagine, madam, what a blight-free potato would do for the environment, the bird life in our hedgerows in Norfolk, productivity, Norfolk’s farmers, the quality of the food you eat and for the world potential for trade and development.” Unless we say such things, the consumers are not aware of the benefits. If we speak up, we will find that there is huge popular support and that the sometimes hysterical media coverage does not adequately or correctly reflect public opinion.

I will finish there because I know that Members are waiting for the Minister’s comments.

10:17

[Mr William Bain (Glasgow North East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate the hon. Member for Sherwood (Mr Spencer) on securing this debate. He made an extremely wide-ranging, comprehensive and thoughtful speech. I also commend the remarks made by the hon. Member for Mid Norfolk (George Freeman), who gave the House the benefit of his expertise in this area.

This debate is particularly timely because of the recent spike in global food prices. Yesterday, the Financial Times reported:

“Global food prices have reached a nominal all-time high, surpassing even the peak seen in 2007-08—when bread riots rocked poorer countries.”

Although rising food prices may be a great inconvenience for consumers in the United Kingdom, they are particularly worrying for the poorer economies, such as Brazil and India. In India and China, food costs account for almost 50% of household outgoings, so the impact of rising global food prices will be particularly badly felt in those countries.

I commend the remarks made by Professor John Beddington about 18 months ago at the sustainable development conference. He said that if we do not take much more intensive action to increase global food production, we face “a perfect storm” of problems by 2030. He said:

“Our food reserves are at a 50-year low, but by 2030 we need to be producing 50% more food. At the same time, we will need 50% more energy, and 30% more fresh water.”

It seems clear that the use of biotechnology and policy across the EU and G20 must focus on producing more hardy crops, less wastage in terms of crop yields and better use of existing water supplies.

In responding to the debate, there are three areas that I want to touch on. The first is biofuels, which the hon. Member for Sherwood referred to. Through my role in a previous life—my first Front-Bench responsibility, as shadow Minister for Transport—I know that the Minister’s colleagues in the Department for Transport are engaged in a consultation on the renewable transport fuels obligation. There is no question but that sustainable biofuel production has a great deal to offer, both to our economic output and to reducing CO₂ emissions. However, we must be careful about which biofuels we support and invest in. The Government have already taken very welcome action on palm oil; however, there are concerns about some biofuel production, including some bioethanol production, which the Institute for European Environmental Policy has expressed. The IEEP has calculated that the indirect effect of the switch from food production to biofuel production could be to take between 4.1 million and 6.9 million hectares out of food production across the EU. As a result, that could lead to between 26 million and 56 million tonnes of CO₂ emissions being put into the atmosphere.

When the Minister responds, it would be useful if he told us what efforts the Government are making to shift investment and support in research and development and other incentives away from first-generation biofuels and into second-generation biofuels, such as cellulosic ethanol, the use of biofuels from algae and the use of woodchip, all of which are much more sustainable means of biofuel production than simple bioethanol production. It is clear that we must do nothing to put small-scale bioethanol producers in difficulty, but we need a real analysis of what large-scale bioethanol production is going to contribute, in order to establish whether it might be damaging overall in our fight against CO₂ emissions. I hope the Government will be able to conduct that analysis in the next few months.

The second crucial point is the importance of increasing investment in agricultural research and development. Work has recently been done by the academic community on this subject. The two authors, one of whom is based at the university of Bournemouth, of a paper I have been reviewing this morning entitled “Agricultural R&D, technology and productivity” make an excellent point about the benefits—in a sense, the disproportionate benefits—that accrue from investing in agricultural research and development by boosting both global food production and the overall investment in science. Since the second world war, increasing agricultural productivity has allowed food output to keep pace with demand, but that link will perhaps not be evident in the next few years.

It would therefore be useful if the Minister told us today what representations the Government have made at EU level about how the EU can boost R and D investment. Such investment must be boosted in the public sector. It is an aim shared absolutely by Members across the House that we want the EU to spend less on direct subsidies and more on investment in science and agricultural R and D. However, the Government must also consider how to improve the levels of private R and D. For example, what discussions is the Minister having with his Treasury colleagues ahead of the Budget to develop new initiatives that will strengthen private companies’ ability to invest in R and D, building on measures such as the R and D tax credit that the previous Government introduced? Also, can he give the House an assurance that levels of agricultural R and D will be higher at the end of this period of government than when the coalition took office?

The scale of the investment that will be needed is staggering. The paper that I referred to says clearly:

“By 2050, the world population is expected to grow…to 9.1 billion…and allowing for increased incomes and changes in diet”—

the hon. Member for Sherwood referred to those changes, including the immense growth in meat consumption in China—

“global demand for food…to grow by 50 per cent by 2030 and 70 per cent by 2050…The estimate”—

for the increase in agricultural R and D investment—

“is 1.34 per cent…per annum.”

That would be a massive step change in the magnitude of investment from current levels.

The Government must address this issue here in Westminster, but frankly, they must also address it at EU level and at the G20. Has the Minister discussed with the Prime Minister the latter’s raising the issue of biotechnology in discussions at the G20 this year? It is clear that if we do not start to increase the levels of agricultural R and D spend now, it will be very hard to meet the targets for increased food production and innovation that will be required by 2050.

The third area that it is important to address is, of course, genetic modification. The hon. Member for Mid Norfolk was absolutely right that the debate about genetic modification must be rational and based on science. However, I depart slightly from the hon. Member for Sherwood’s analysis, in that my understanding is that last year, the EU decided to devolve down to member states the issue of determining whether genetically modified technology should be used. Therefore, GM technology will be an issue for the UK Government to decide on by assessing the best available science, the level of commitment to such technology, and whether they will permit its large-scale roll-out.

Clearly, there is an important national debate that we need to have. Many people in the food production industry and many academics who have looked at the problems we will face have said that there are clear benefits from investing in GM technology, for precisely the reasons, including innovation, that we heard about from the hon. Members for Sherwood and for Mid Norfolk. However, there are also concerns—very reasonable ones—that we must all address about the potential health issues that may arise decades down the line. It is important that we continue to invest in the science in order to gather the best possible data we can get, so can the Minister tell us what levels of investment in research in GM technology the Government will provide by the end of this Parliament?

The title of this debate is “Biotechnology and Food Security”, and it is clear that conventional biotechnologies such as breeding techniques, use of tissue culture, cultivation practices and fermentation have been readily used and accepted. Between 1950 and 1980, before the development of genetically modified organisms, modern varieties of wheat increased yields by up to 33%, even in the absence of fertiliser. Modern biotechnologies used in containment have been widely adopted. For example, the industrial enzyme market in the US reached $1.5 billion in 2000.

However, we now need a step change if we are to produce higher crop yields, make better use of water and increase sustainable food production—without increasing our overall emissions of CO₂ or other greenhouse gases—such that we can meet the competing but necessary objectives of reducing and alleviating climate change, and achieving greater levels of food production.

I hope the Minister can address those points. There is a consensus on the Front Benches about the need to increase food production. I hope the Minister can reassure us that the Government are committed to increasing R and D levels, particularly agricultural R and D, in both the public and private sectors, and that we can move forward together to tackle this issue, which is of enormous interest to our constituents and to people in many other countries across the world.

10:29

[The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)]

Good morning, Mr Streeter. It is good to serve under your chairmanship. I welcome this debate and congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on securing it and raising the issue of food security. He highlighted, as did my hon. Friend the Member for Mid Norfolk (George Freeman) and the hon. Member for Glasgow North East (Mr Bain), the challenges that the world will face during the next few decades.

I was going to refer to Professor Beddington’s comments about the perfect storm, but as the hon. Member for Glasgow North East has already done so, I will not repeat them. It is clear from this debate and many others that there is a growing recognition that many issues are coming together: climate change, population increase, population prosperity, and the consequent demand for more and better-quality food and the problem that due to climate change, some arable land may cease to be suitable for arable production. The coming together of those issues creates a huge challenge that affects many areas: the European situation, the single market, the competitiveness of our production and the interface between food science and our approach to innovation and technology, on which much of this debate has focused.

This is an important debate. I was impressed by the opening comments of my hon. Friend the Member for Sherwood about the desire to have a serious debate that eliminates much of the emotion, and indeed the emotional nonsense, that we sometimes hear, avoids the over-generalisation and simplification incorporated in many comments and addresses the issue seriously. The Government’s overall policy is to enhance the competitiveness and resilience of our food chain and, as I have said repeatedly, to reverse the decline in UK production.

However, we seem to be in an invidious position. The hon. Member for Glasgow North East referred to global food prices, specifically the spike of two years ago and the current all-time high. Obviously, one concern is the impact that that is having on the ability of consumers, particularly poorer consumers, to sustain a reasonable diet. Back home, Finance Ministers and Chancellors around the world are concerned about its inflationary impact. Yet at the same time, the rise in global food prices is in many ways a direct consequence of moving agricultural policy, not just in Europe but elsewhere, closer to the world market situation rather than maintaining the sorts of protectionist arrangement used in the past. Many have always argued that consumers overpay for food under the common agricultural policy, but now that we are not subsidising food production, they pay even more. Some of the simplistic arguments used in the past are not very accurate.

Some people argue that what we do in the UK is of little consequence as agriculture is not a big industry, and that in global terms we do not need to worry very much about it. I emphasise that that is not the Government’s view. The whole food chain contributes some £85 billion per annum to our economy, or 7% of gross domestic product, as well as 3 million jobs. Food manufacturing is the biggest individual manufacturing sector. It plays a major role in delivering our economic growth and, obviously, in the environmental impact of our food industry, so we want to support it in any way we can.

The long-term challenges that we have been discussing also offer great market and productivity opportunities for our agriculture. Achieving our food security objectives sustainably is also important to achieving the biodiversity outcomes that we all want to achieve, such as the convention on biological diversity to which we signed up in Nagoya a few weeks ago and, closer to home, our climate change objectives and millennium development goals.

As most Members have said, there is obviously a great EU angle on the issue, and I will return to that in a few moments in the context of genetically modified foods. As my hon. Friends have said, we have already achieved a tremendous amount in the 50 or 60 years since the second world war and the food shortages that caused countries in different parts of the world to develop their own forms of policy. Our guaranteed price system was introduced in 1947, and the EU intervention system was introduced when the common market was first formed.

The varieties of our major crop plants have improved massively. Initially, they improved predominantly in yield, then in disease resistance and, as my hon. Friend the Member for Mid Norfolk said, in suitability for different climates, pest resistance and other aspects. That has all been achieved, but biotechnology opens up a whole new range of possibilities. The term “biotechnology”, as he also said, covers a multiplicity of different techniques. GM is often described, but biotechnology also includes genomics, cloning, the use of enzymes, marker-assisted selection and gene sequencing. As with all science, it is moving faster and faster. In the 1990s, the characterisation of the human genome took 10 years; our current technology could do it in two days. That is the rate of acceleration in scientific development.

There is no doubt that biotechnology has huge potential to provide quicker and more efficient developments in plant breeding. Biochemical or DNA testing can identify specific genes responsible for different traits, and biotechnologies such as marker-assisted selection or genetic modification offer further tools for ensuring that such genes can be used. However, it is important to emphasise that whatever aspect of biotechnology we consider, Government policy must be science-led and science-based. There should be no other basis for it.

The different technologies that I have listed pose different challenges. Some, like marker-assisted selection, do not seem to pose any risks and create little public concern. Others, such as GM, have raised concerns. Obviously, health and environmental safety must be absolute priorities when we consider GM technology. I believe that the combination of EU and UK risk assessment and regulatory regimes demonstrate that, and that we will proceed on that basis using the latest available evidence.

Much of this debate and many of the understandable challenges posed to me by the hon. Member for Glasgow North East relate to research. He knows full well the answers to some of the questions that he has asked me. I do not criticise him for that; it is a traditional form of opposition, as he knows that I cannot answer some of them. However, I will try to respond to all the points made.

I emphasise that the Government are spending about £400 million a year on agriculture and food research and are working directly with industry to support competitiveness and innovation in food through the Technology Strategy Board’s sustainable agriculture and food innovation platform, which the Labour Government introduced. That was a good idea and a good innovation. Funded jointly by the Department for Environment, Food and Rural Affairs and the Biotechnology and Biological Sciences Research Council, the Technology Strategy Board is investing up to £90 million over five years to provide match funding to industry for technological research and development. I cannot narrow down precisely how much of that is spent on GM, but it is part of the totality of spending.

On the wider issue of research spending, as the hon. Gentleman knows, clearly research could not be immune to the pressures of reducing the public deficit, but the fact that the Government have maintained spending in cash terms over the whole spending review demonstrates the importance that we attach to it commensurate with all the other demands for public spending.

The hon. Gentleman rightly referred to the private sector. Obviously, what the TSB is doing with match funding is important, but the role of the private sector must continue to increase. In fact, a large proportion of the development of GM technology has occurred in the private sector. That is the reality of where it has come from. We can be pretty critical of how at least one major plant breeder has handled the public relations aspect, which has caused some of the problems with public opinion on GM.

My hon. Friend the Member for Mid Norfolk mentioned the John Innes centre in Norwich, and the National Institute of Agricultural Botany is based in my constituency. Both are freestanding research organisations that are doing a tremendous amount of work. Some of their project work is funded by the Government, but much of it is funded by outside organisations.

[George Freeman]

On the question of funding for science, I endorse the Minister’s point about the relative protection for science funding provided in the recent settlement. My experience of talking with science research institutes is that they recognise that in a time when Government funding is severely constrained, the Government have done as much as could be expected to protect the core research budget. The point I want to make relates to the technology innovation centres, which are part of the Government’s policy for promoting integration between research and the private sector. Does the Minister agree that there might be a case for having a food science-related TIC to try to pull together our strengths in places such as Norwich, Reading, Liverpool and other centres that might otherwise fall between the stools?

[Mr Paice]

My hon. Friend puts his finger on an important point. As he knows well, there is already a huge amount of collaboration between the organisations I have mentioned and other important plant science centres, but it is an area where one can never do too much. I entirely share his overall approach, which is that we need to do all we can to ensure that we deliver the maximum benefit and that there is no risk of duplication.

Before speaking specifically on GM, I wish to pick up on a couple of points that the hon. Member for Glasgow North East made on bioethanol, biofuels and their sustainability. I appreciate his point about the measures that we have already taken on palm oil. I am afraid that I cannot give him a figure off the top of my head for research into second generation ethanol and biofuels, but I will be happy to write to him on that, and on EU spend, with all the information I can give.

That obviously leads to the question of CAP reform and where we go from here. I entirely share the hon. Gentleman’s view that we must concentrate CAP resources on moving agriculture forward, rather than on our current direct payment system—there is a degree of unanimity across the Benches on that—although in no way do we propose that the direct payment system should go in the short term, as that would destroy agriculture as we know it in this country. Clearly, however, we want to see a gradual shift away from that to more clearly identifiable public benefits, and in our view R and D is a key part of that. We definitely want to see more CAP expenditure spent on R and D, and I can assure him that that is part of our approach to reform, although it is terribly early days—we probably have a two or three-year programme of debate and discussion.

I will now turn specifically to genetic modification, an area of huge emotion and oversimplification. GM involves the insertion of foreign genes carrying a specific trait into an existing plant. It is the only technique—I differ slightly with my hon. Friend the Member for Sherwood on his description of this point—that allows one to cross-breed genetic material from unrelated organisms, which means overcoming a specific barrier. It is not just a case of speeding up what would happen anyway, but involves doing things that could happen in nature only by a completely unpredictable mutation. The insect resistance that has been bred into maize, which has been of huge economic value to the industry, was achieved by taking a gene from a completely unrelated plant. The same was the case with the early work that made oilseed rape and soya resistant to the chemical glyphosate, thus allowing the overall crop to be sprayed. That required a gene from a plant that was resistant to be inserted into a plant that was not, so that it became resistant.

There is a great risk of over-generalising, and those who call for a moratorium or freeze on all GM work are missing the point. Every individual trait must be separately assessed and tested, and my hon. Friend the Member for Sherwood is right about the importance of field testing before deciding whether to allow commercial production to proceed, because each is a unique development and one cannot make those generalisations.

I am afraid, Mr Streeter, that I am taking advantage of the fact that I have a little more time than is normally available, but I think that these are key issues. It is important to recognise that the traits that are the subject of GM are moving themselves. Critics saw the early tests as a way of simply putting more money into the hands of chemical companies or farmers, but we are now beginning to see traits in GM that are more relevant to the consumer and the wider community, such as the work on genes that encourage high omega fats in oilseed rape and other plants. Drought resistance and the ability of plants to grow with much less water have been referred to. That will be of huge benefit to the developing world in the short term, but because of climate change it could also become far more relevant in this country. As my hon. Friend the Member for Sherwood suggested, the holy grail in such research is to breed a grain that is leguminous. That brings us back to sustainability, which must be a cornerstone of agricultural development in coming years.

The Government are close to finalising our overall policy on GM. It is a sensitive issue and obviously there are many views. We want to get it right, so the debate and the speeches that have been made this morning are timely. It is not desperately urgent, although we need to move on quickly. No commercial GM crops are being grown in this country at present. We had two research trials last year, one by the Sainsbury laboratory on blight-resistant potatoes and one by Leeds university on nematode-resistant potatoes. The issue of vandalism was raised in the debate, and I am pleased to say that those trials were not attacked—security for them was paid by BBSRC, and a little was paid by DEFRA. I share my hon. Friend’s view that if we want to know whether there is a risk with those crops we need to test them, rather than rip them up in the first place. I want to assure the House that if we decide to approve the planting of GM crops, it will be based not only on science, but on strict criteria for crop segregation, both in the field and post-harvest, together with effective rules and protocols on the liability that comes from that, and my hon. Friend referred rightly to organic farm production in that context.

One issue is particularly topical—imported animal feed. The world price of grain and soya has rocketed in recent months, meaning that our livestock producers are facing immense problems in obtaining sufficient volumes of GM-free soya, which is what they have to use. That is partly because the current EU rules for the import of soya do not allow for any contamination by an unapproved GM product, which means that most shippers are unwilling to take the risk because the detection of even the slightest amount of GM product would mean that the whole consignment was rejected. The EU has tabled a proposal that would effectively set a 0.1% tolerance level in grain imports for certain GM materials that were not yet approved in the EU, but that were in the approval process. That seems to be a common-sense way of proceeding that would reduce the risks posed to grain imports by the present rules. No decision has been made and we are looking at the detail of the proposal before the vote in February. As I have said, we think it is eminently sensible.

Insect-resistant maize and starch potatoes are being grown commercially elsewhere and other crops are in the regulatory pipeline. Overall, as my hon. Friend the Member for Sherwood said, Europe grows far fewer GM crops than most of the rest of the world. Those crops now cover more than 9% of the world’s arable land—an area five times the size of the UK—and involve 25 countries. We cannot ignore those facts. That has all happened in about 10 years, and production is rocketing year on year.

It is clear that many farmers see the advantages of using GM, and many experts such as those at the Royal Society believe that it could provide benefits if it is used safely and responsibly. However, it is not a panacea. We should not kid ourselves that GM will be the answer to all our problems—the answer to Professor Beddington’s perfect storm—but it could well be one of the tools that we need to address the longer-term challenges of global food security, climate change and making agriculture more sustainable.

That is why the Government are determined to move forward with these issues. We do not believe that we can put our hand up and say “stop” to science at any point. We have to see what scientific development is producing, and ensure that it is safe for humans and the environment and that we have the necessary robust evidence on which to make decisions. We believe that GM has a potential benefit in the context of food security, and we are looking hard at developing a final policy to enable it to be realised.

Few people have referred to the role of the consumer, which is critical in all of this. The law already states that any foodstuff that contains genetically modified material has to declare it if the GM in a particular ingredient exceeds 0.9%. My hon. Friend the Member for Sherwood mentioned pizza. If more than 0.9% of the soya—not the pizza but the soya in the pizza—is GM, it has to be declared.

Consumers have information with which to make their choices. Sadly, as my hon. Friend and others have said, those choices are often influenced by emotion based on some rather hysterical press notices. I hope that this fairly short but important discussion will enable us to move the debate on. It is more the format in which it ought to be carried on, and I hope that the more serious parts of our media will engage in genuine discussion and debate about the benefits of using and potential concerns about GM products.

Sir John Beddington will be publishing the foresight study, “Global Food and Farming Futures”, in two or three weeks’ time. I cannot say much about it as I do not want to pre-empt what he will say, but I know that the report will have a great deal to say about the role of GM in future food production.

Mr Streeter, I am sorry for usurping the opportunity to speak longer than is normal in these debates, but this is an important issue. GM has an important role to play in our future food security, for all the reasons that colleagues on both sides of the Chamber have given, but we have to take precautions. We must ensure that individual elements are properly assessed and measured before we take risks with either our food safety or our environment. As I said, my Government hope to introduce our own overall proposals in the near future. I am grateful to you for chairing this debate and to my hon. Friend the Member for Sherwood for raising it.

10:53

Sitting suspended.

Flooding (Steart)

Wednesday 12th January 2011 Westminster Hall

11:00

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

I am very grateful that I have the chance to debate the issue of flooding on the Steart peninsula in the Bridgwater and West Somerset constituency. If hon. Members fail to recognise the name, they should fear not: Steart is a small, flat place at the mouth of the River Parrett, where the river trickles into the Bristol channel. They should remember the name; I promise that at the close of this short debate, Steart will be engraved indelibly on all our hearts.

We are talking about 1,000 hectares of land, much of which is below high-water level at spring tide. That is, and always has been, the nature of this extreme corner of the Somerset levels. The village of Steart is near the tip of the peninsula, less than a mile and a half east of the villages of Stockland Bristol, Combwich and Otterhampton. The seaward fringe is generally higher than it is inland, and has a gravel and sand formation, which is possibly the old barrier beach. The Romans, believe it or not, did a pretty good job of preventing the sea from stealing the land.

Records show that the Steart coastline and the River Parrett have often changed position. Nature has been playing a muddy game of musical chairs for hundreds of years, and in the 1700s the Steart peninsula was cut off from the mainland altogether. Even today, the Parrett’s low water channel regularly shifts. Steart’s defences now rely on what was built back in the 1950s. A lot of money was spent and the system creaks, but it works. The defences still, of course, need maintaining, and this is where the story comes of age.

The people now paid to maintain flood defences for Steart are in that all-singing, all-dancing quango the Environment Agency. Hon. Members will gather that I am not a great fan of the body. It employs thoroughly decent and talented people locally, with whom I believe I have a good relationship, but the top tiers at head office have begun to believe their own glowing publicity, and all too often come across as a bunch of cocksure know-it-alls.

With permission, I shall read the opening statement of a consultation document on the Steart peninsula that the agency published last year. I am sure that the Minister would like to hear this—it sounds like a glossy TV advert. It ought to be read by an oily voiced actor, with uplifting music in the background, but I am afraid that hon. Members will just have to use their imagination:

“We are The Environment Agency.”—

pause for a drum roll, followed by close-up shots of smiling families gazing up at the agency’s queasy green logo—

“It’s our job to look after your environment and make it a better place—for you, and for future generations.”

In case this is all too emotional, I shall of course pass tissues around to the ladies.

“Your environment is the air you breathe, the water you drink and the ground you walk on.”

Someone must have been paid to write this patronising drivel—I do not know who.

“Working with business, Government and society as a whole, we are making your environment cleaner and healthier…The Environment Agency. Out there, making your environment a better place.”

Terrifying. They could have fooled the people of Steart, and me!

The Environment Agency’s name is, literally, mud in my neck of the woods. Just before Christmas, it bunged in a planning application to build an experimental flood bank on the Steart peninsula. Putting in a planning application just before Christmas is rather reminiscent of a Chancellor publishing his Budget by means of a written question on a Friday afternoon—we have had experience of that. The Environment Agency was trying to slip something nasty under the radar. Apparently, it wants to test a long-term idea for a huge permanent structure to see if it would work. One would think that, with all its boasts of making the world a better place, it would have actually done some scientific work, and at least calculated the risks in a laboratory. Bridge builders do not build experimental bridges across rivers just to see if they will work. But, we should never forget that the Environment Agency loves spending money—our money.

The agency’s long-term dream is to spend £28 million of taxpayers’ money, sinking it all into a scheme that will not protect Steart from the sea at all. That amount would buy the new hospital that we desperately need, and have been waiting for, in Bridgwater, or it could be used to complete the two schools in my constituency on which the Government have pulled the plug. But the Environment Agency wants us to earmark that sort of big money to sink the Steart peninsula for ever, and for an extravagant, cockeyed reason it now wants to indulge in a trial run.

I must quote what the agency wrote in support of its application—it is absolutely marvellous:

“We have carried out an initial site investigation,”—

Hallelujah!—

“which has shown that the foundation soils are weak and highly compressible, making ground conditions less than ideal for a simple embankment construction. In order to progress the design, it is necessary to obtain more information”.

It has been looking at this for only 20 years. It wants to build an embankment 150 metres long, four metres high and 53 metres wide, just to check whether it works. Either that is lunacy, or those responsible come from Essex. Hon. Members will appreciate my constituents’ fury. My constituents know the place and actually live there, unlike most of those in the Environment Agency. They understand the challenge of farming the land and, I am afraid, the real hazards of the incoming sea. This so-called temporary embankment will actually increase the risk of flooding, but I reckon that that is what the Environment Agency wants anyway. The truth about the agency’s real ambition is buried in its consultation document, some sickly bits of which I have quoted. Wading through the twaddle, we get to the nub:

“There is a significant need for additional intertidal habitat on the Severn Estuary to meet the Environment Agency's international obligations and offset losses due to coastal squeeze.”

“Coastal squeeze” is a great phrase—it sounds like a dodgy woman.

A bit of the document is not in plain English, so I will try to make it easier for everyone to understand—my apologies, of course, to hon. Members. The Environment Agency is running scared of Europe; I hope that the Minister is not. One does not have to be a geographer to know that Brussels is a long way from the briny. But, surprise surprise, the busy bureaucrats have come up with a plan to interfere with everyone who lives by the sea. The Commissioners are also extremely partial to sea birds. They have invented a policy that basically says, “Let nature do its worst. It doesn’t matter. Come on, Noah—where are you? Every flood is good news for the buff-breasted sandpiper.” I have severe doubts about the sanity of this so-called European obligation. I am also slightly dubious about this love affair with sea birds. It is extremely rare to see any sort of bird in Europe. Europeans tend to shoot everything that flies, and then eat it. It is much better for them if a long-billed dowitcher turns up in a pâté served in Brussels at €150 a plate. However, these days even the most craven Eurocrat bird-killer has to pretend that they love birds, and to watch them fly.

So, we have now been lumbered with a law, and the Minister will, no doubt, have carefully worded responses that say what a good thing it is—that the law is marvellous and right. Given, dare I say it, the Minister’s Eurosceptic credentials—I know him well—I will raise my eyebrows in disbelief if that is what happens during his speech, as, I suspect, might his colleagues. The wretched rules make it almost impossible for the Environment Agency to defend our country from floods—so what is the point of it? If the agency decides to build new defences in one part of the country, it has to take them away from another. Guess what? The agency has identified the Steart peninsula as just the sort of place where no one will notice. Well, they might have not noticed so far, but they jolly well will now.

The whole proposal is complete nonsense. The agency is trying to convince us that spending £28 million on a bird sanctuary will be cheaper and more effective than maintaining the existing flood defences. It did not do economics. That fatuous argument is plain wrong and totally dishonest. The agency’s consultation document offers three alternatives: first, do nothing and wait for the tide to come in—like a civil servant; secondly, do the bare minimum and hope that the tide does not come in; and thirdly, do something drastic and flood the whole place deliberately. The agency really gets excited when it comes to “drastic” action—it loves that word. There are pages and pages in its consultation document about the alleged advantages of letting the sea take over:

“Creating wetland habitats will provide benefits, not only for people who live on the peninsula and visitors but also for birds, fish and other wildlife. The natural, open landscape will be very different to the present farmland and will reflect the peninsula's character before it was reclaimed during historic times.”

Those who wrote those last words obviously went to a very dodgy secondary school. We do not have to read between the lines to be sure of one thing: the Environment Agency is absolutely determined to flood Steart and, disgracefully, it has held that view for years. It conducted costly consultation back in 2002, before the Minister was even elected to Parliament. Guess what, it came up with a scheme to create an elaborate wetland habitat. Does that ring any bells? I am sure it does. But one thing stood in its way—it could not raise the readies.

Six years later the pathetic plan was back on the agenda, this time because the Bristol Port Company—this gets better—wanted to extend the Avonmouth container terminal so that even bigger ships can crash into it. One might think that that had nothing to do with Steart down the road, except for those inflexible European rules, which put birds above people. Suddenly, abracadabra, the Bristol Port Company remembered its mates at the Environment Agency, and settled on Steart.

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

I thank my hon. Friend for bringing this matter to the Chamber on behalf of his constituents and the habitat. He has concerns about the plans for Steart, but does he appreciate that Bristol Port Company’s plans for deep sea containers will provide 500 direct jobs and over 1,000 indirect jobs in transport and logistics, and will put the UK on a completely different footing when it comes to imports and exports? The port has said that it will work specifically with local people, and that its plans are separate from those of the Environment Agency.

[Mr Liddell-Grainger]

That is the most weaselly thing I have ever heard from a port company—not from my hon. Friend who speaks with the best direction from her constituents. Fine. I am speaking for mine. Why do I care if a company claims a benefit for Bristol? What difference does that make to me? Some weaselly woman turned up to tell me what is happening, saying, “Don’t worry. Your little people will be okay. We are going to flood your area. We won’t give you anything for it, but it will be good, although we won’t allow visitors.” Come on. Bristol Port Company is dodgy. It is much better at complaining about pylons in front of the chief executive’s house than about container ports. I do not need a lecture.

We all thought that we had got rid of it, but next week it will be back in earnest. The Bristol Port Company will roll into the village of Otterhampton a week today with the first of a series of public meetings to tell the locals about its exciting plans or—dare I say it?—push them to accept its exciting plans, whatever form they may take. It is in league with the Royal Society for the Protection of Birds and, guess what, another totally useless quango, Natural England, our friends. I am delighted to say—I thank the Minister for this—that the Government will clip its ridiculous wings as soon as possible.

Unfortunately, wing clipping may be too late for Steart. The Environment Agency has submitted its planning application for that huge tidal flood bank. The Bristol Port Company intends to apply for planning permission to flood an enormous chunk of land on the other side of the road near Steart later this year. All that Steart will get out of that is a pile of bird droppings and an invasion of twitchers.

[Anne Marie Morris (Newton Abbot) (Con)]

I am listening to my hon. Friend with interest. Across the south-west we have huge problems. I have a similar issue with coastal erosion in Dawlish, and I share my hon. Friend’s concern that we need some conclusion on what is right and what is not. I agree that people are certainly more important than birds. Above all, we need some certainty, and I hope that my hon. Friend agrees that we need the Minister to agree what plans will be approved and what will not, particularly in Teignmouth where we want a flood defence scheme, which we really need, as opposed to the scheme in my hon. Friend’s constituency which sounds as though it is not needed.

[Mr Liddell-Grainger]

My hon. Friend has encompassed the problem in a nutshell. The organisation is out of control, and does not care about people or anything, except its little friends who live in Essex and who will do whatever they want to do. It is up to people like us to stop that, and to make companies such as the Bristol Port Company realise that we are not a load of hicks who live in the country. I totally agree with my hon. Friend, who does her constituents a great service in bringing the matter to the attention of the House.

It is about time the Minister and Bristol Port Company considered compensation. A big infrastructure plan such as this requires a generous kick-back for those on the ground. How about some planning gain? Even Bristol Port Company is not talking about that. Unfortunately there are not enough people on the Steart peninsula to kick up sufficient fuss, but a fuss really needs to be made, and I am sorry to say to the Minister and my hon. Friend the Member for Bristol North West (Charlotte Leslie) that I am going to put my boots on and start kicking.

The Environment Agency's latest consultation exercise has burned about £60,000 of public money. The Minister may be about to tell us how popular the scheme is, but I warn him to consider his words carefully—I know that they have been drafted for him. Bodies such as the Environment Agency are, of course, obliged by law to consult, and rightly so, but the fact that few people respond to a consultation does not mean that the plans are popular. We all know how that has been got round in the past. Perhaps the Minister would like to know how many people answered the Environment Agency’s consultation questionnaire. This is important stuff, even for Bristol Port Company. Five thousand consultees would have cost a tenner a head. A bargain. But if there were only 500 responses, the cost would have been about £150. But there were not 500, 50 or even five replies. The Environment Agency had replies from—wait for it—three people. Why? People do not trust the Environment Agency and, as my hon. Friend the Member for Newton Abbot (Anne Marie Morris) said, they do not think it worth the effort to reply as the proposal will be steamrollered through by Europe.

The cost works out at £20,000 per respondent—£20,000. It is cheaper having the Bristol ports up the road. Why do people not bother to participate? I have an idea—they do not trust those involved. They see an overgrown jungle of interfering regulators who have been trying to do this for 10 years, who squander their money, and who do not listen. Everyone knows—this is not rocket science—that these are hard times for Great Britain plc. Around the country, we are bracing ourselves for cutbacks, job losses and austerity. They have started. We are supposed to be in this together, not individually, but the Environment Agency seems to assume that it has some special exemption. It has come to believe in fairy gold. The estimated cost of its plan to flood a corner of my constituency is £28 million of our money, and that is a disgrace, never mind what Bristol Port Company will spend. Our nation cannot afford that. There are more important priorities, and the Minister—he really needs to listen—should stop the project dead in its tracks before we have a real disaster.

11:16

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger) on securing this debate, and other hon. Friends who have contributed. I will try to address their points also.

My hon. Friend the Member for Bridgwater and West Somerset spoke with passion on behalf of his constituency, but I must consider the wider issues, not just the national budgets that we provide to the Environment Agency and other organisations, but also the Severn estuary. The scheme has many positive points. It is the only viable way that the Government can continue to provide defences and secure access to the village of Steart while meeting our environmental objective for the estuary.

The Severn estuary is one of our most important wildlife areas, as well as a great economic asset. It has more than 200 km of coastal defences, which will provide in excess of £5 billion of benefits over time to more than 100,000 residential and commercial properties. The shoreline management plan highlights the need to maintain and improve most of those defences. However, a consequence is that there will be a substantial loss of internationally designated intertidal habitat. Our investment prioritisation process is focused principally on protecting people and property and that is where the vast majority of our money is spent. However, we must acknowledge that what we do to protect people and property has an impact on the natural environment, and that must be taken into account.

My hon. Friend keeps referring to £28 million, but the figure I have is £20 million. That may have an element of semantics, but it is a considerable sum. I assure him that I do not easily agree to spending £20 million in this or any climate. Every penny should count, and I have looked carefully into the matter. We will continue to invest in defence in the Severn estuary, despite the impact on the natural environment, because of the imperative reasons for doing so. That is permitted under the EC habitats directive as long as appropriate compensatory habitat is secured. Our plans to manage and improve the defences therefore depend on sufficient compensatory habitat being secured before the protected habitat is lost due to the flood defence construction work.

There has already been a loss in the Severn estuary, and without the Steart scheme we would fail to maintain the integrity of that protected Natura 2000 site. My hon. Friend may rail against Europe, but frankly, whether we are in Europe or not, I and the Government value what is set out in the Natura 2000 directive, and my hon. Friend should value it if he minds about the valuable asset that is the natural environment in the Severn estuary.

The EU habitats directive, together with the birds directive, forms the cornerstone of Europe’s nature conservation policy to maintain or restore natural habitats and the population of species of wild fauna and flora at a favourable conservation status, and is a key element in the EU’s commitment to halt the loss of biodiversity within the EU by 2020. That is also a firm priority of the Government. With that in mind, I now turn to the Steart scheme. Steart village and peninsula are currently protected by more than 12 km of flood defences. Beyond the short term it will not be economically viable or sustainable to maintain existing defences. To do so would cost in the region of £1 million per property.

The issue has been considered in the shoreline management plan, which highlighted the peninsula as a place where the managed realignment of the defence provides the best option for continuing to protect the village and its access as well as creating habitat to offset the impact of crucial work elsewhere in the area. Indeed, Steart has been identified as the most cost-effective place in the estuary for habitat creation without geomorphic side effects such as adjacent erosion. The twin objectives of the project are therefore to create the habitat we need and protect the village and its access. It forms a vital part of an integrated and sustainable coastal management solution for the Severn estuary. It will provide the only foreseeable opportunity to improve flood protection to Steart drove, the only access route to Steart village. It will help to maintain the existing standard of protection and the new defences can be expected to last longer than the current defences. If my hon. Friend claims that what is happening is just about the habitats directive and just about providing wetland for birds, that is not correct. It is about providing flood protection for his constituents and access to a community that would otherwise be cut off at high tides, or because of further erosion.

As my hon. Friend said, the Environment Agency has carried out extensive consultations, and I understand that the majority of the local residents strongly support the proposals and recognise the flood risk management benefits that the scheme would bring. I hear what my hon. Friend says about the response to the Environment Agency consultation, and I am always happy to consider how consultations are carried out and why there is such a low response rate. One reason could be that people are quite in favour of the scheme. I received a copy of a letter to my hon. Friend from the parish council, which seems to be very supportive of the scheme. There is an organisation called the Steart residents group, headed by Dr Phillip Edwards, who wrote a letter to the local paper. He said that

“while the SRG may not have always seen eye-to-eye with the Environment Agency over all aspects of the scheme, the EA’s staff have demonstrated throughout the last three years of work and consultations the highest levels of professional integrity and technical proficiency”.

He goes on to talk about the value of the scheme, and the group’s opposition to my hon. Friend’s opposition.

I cannot second-guess the exact level of support or otherwise for the scheme, but I assure my hon. Friend that we do not feel that we are trampling on the views of local people. I understand that a number of people want it.

[Mr Liddell-Grainger]

I want to suggest that the Minister’s Department should let me have the information about who has replied. Secondly, the gentleman that he mentioned—I was going to mention this myself—spends most of the year with the UN; and he is one person, who has set something up with no one else. I must gently tell the Minister that what he read out is not the case. If he would let me have the relevant information, I am more than happy to discuss it with him, and with the people concerned.

[Richard Benyon]

One of the two references I made was to the local paper, so presumably the hon. Gentleman can get access to that: I am happy to give him the copy I received. The second reference was to a letter to my hon. Friend from the parish council, which was copied to Otterhampton parish council. I cannot second-guess how many members the Steart residents group has, but the fact is I get a different impression of opinion from the hon. Gentleman’s.

Perhaps I may touch on points made by other hon. Members. My hon. Friend the Member for Newton Abbot (Anne Marie Morris) is a redoubtable campaigner on behalf of her constituents for flood alleviation in her constituency. I can barely move in this building without having my collar felt by her, in her determination to raise that issue. I can only assure her that we shall make available all the information about what schemes will go ahead in the near future and, under the payment for outcomes scheme, what options are left to her constituents to gear in other funding if theirs is not in the top flight of schemes. That will give clarity to her constituents about what is required for the schemes to go ahead. I cannot give her any information, because I do not have any about that scheme.

I have considerable sympathy with my hon. Friend the Member for Bristol North West (Charlotte Leslie), because I recognise the importance of Bristol docks. I do not dismiss them, as they are an important local employer and a major hub of activity that is vital to us as an importing and exporting country and to the wider benefit of the Bristol area. I recognise that we are dealing with something that relates to the Severn estuary, its entire ecosystem and habitats and, importantly, the people and jobs that come from that part of the country.

In conclusion, the proposed scheme is not only the most cost-effective habitat compensation to enable the Severn estuary flood risk management strategy to move forward; it also offers improved flood protection to the local area. I thank my hon. Friend the Member for Bridgwater and West Somerset for raising the matter. He has made me much better educated about it because I have spent a considerable time preparing for the debate, and I listened with interest to his enjoyable remarks.

I hope that what I have said has helped to highlight to my hon. Friend the need to manage flood risk in ways that protect people and property and deliver good value for money to the taxpayer, but also meet our environmental obligations. If we do not do that, we cannot legally improve flood protection elsewhere in the estuary. If we did it without compensatory works, that would leave the taxpayer liable to fines from Europe. That is not something that I have the power to avoid, and no hon. Member should be happy for it to happen, because we are in strapped financial circumstances. If we did nothing we would also lose valuable habitat and all that that offers to us as a society. Our emphasis is always on working with nature, wherever possible, to reduce the risks to people while also meeting social and environmental objectives.

11:27

Sitting suspended.

Local Government Budgets

Wednesday 12th January 2011 Westminster Hall

[Annette Brooke in the Chair]

14:30

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

May I take this opportunity to thank Mr Speaker for granting this debate on an important subject? I notice that the Minister is looking serious, to say the least. I want to start by mentioning the world economic situation that existed before the current Government came to power. It is worth reminding people that the economic difficulties were worldwide and started in America with Lehman Brothers. As hon. Members will recall, the then American President could have taken action to bail out Lehman Brothers, but chose not to. That obviously had a knock-on effect on the banking system, particularly in this country.

Hon. Members will also remember looking at news bulletins that showed people queuing up to withdraw money from banks such as Northern Rock. Had the then Government not taken action across the whole economic fabric of this country, that bank may well have collapsed. Despite all their faults, the previous Government introduced a number of measures to address the situation, such as the car scrappage scheme. Last week’s figures from the motor car industry show that sales have gone up by 2 million this year, which demonstrates that the measures taken by the previous Government to address the problem have paid off. It is worth reminding ourselves that in 1997 when Labour took office, 50p from every £1 of taxpayers’ money was used to pay off the national debt. During their first two years, the previous Government spent a lot of time doing exactly that—paying off the national debt.

Measures implemented by the present Government will certainly have an effect on places such as Coventry, and on a number of local authorities up and down the country. A number of west midlands MPs are present in the Chamber, and they will want to talk about how the Government’s policies for local government will affect their particular situations. The details in the provisional local government settlement have created a lot of problems for many local authorities, and brought further bad news as far as Coventry is concerned. The £19 million cut in the formula grant is most worrying, as are cuts to other specific grants of £17 million. Incredibly, at this late stage we still await the details of some grant funding streams from the Government that have not yet been clarified.

At present, Coventry city council is trying to manage the massive and inequitable reduction in resources announced on 13 December. In fairness, it has tried to take sensible steps to anticipate part of that reduction, and to its credit it has redesigned its services and introduced modern procurement practices. The Minister has praised Coventry for its efforts to look for value for money; nevertheless, I want to highlight the scale of the grant reductions facing the city. Because of the cuts, the council has been forced by the Tory-led Government possibly to cut more than 500 posts over the next 18 months. The amount of money the council spends on the local economy will also reduce dramatically, and if we add to that the capital proposals for the Building Schools for the Future programme, that is another £300 million that could leave Coventry’s economy. We are not yet clear what the capital allocation will be for repairs to school buildings and the rebuilding of schools. We should have received information on that this month, but we are still waiting for the Secretary of State for Education to provide it. That has an impact on staff in Coventry city council. The front-loading of cuts means that staff losses will be required at an early stage of the spending cuts, which will affect not only staff but families across Coventry. The overall impact of the measures means that Coventry council is expected to lose about £45 million.

Let me turn to the impact on the west midlands economy. The cuts will have a significant knock-on effect on local businesses and employment in the region, and we can see what is happening in other sectors as cuts and reforms begin to bite. In the health sector, for example, possible cuts were announced last Monday in the local press—in Coventry and Warwickshire, some 450 jobs could go in the national health service. Cuts of over 20% are projected for the West Midlands police force, which will have an impact on the fight against crime. As I have indicated, we do not know what will happen with the Building Schools for the Future programme.

The public and private sectors will not be able to invest in the regeneration and infrastructure of the region. We are still awaiting a decision on the Knuckle project, which could help the employment situation in Coventry. Over the years, Coventry MPs have lobbied various Governments in order to get that project off the ground. I will not go into great detail about that, but I hope the Minister will tell his colleagues that we need a decision that can help to mitigate unemployment in Coventry.

The abolition of funding from regional development agencies has meant that there is little funding to lever in private sector investment for large-scale redevelopment projects. There are two parts to local government cuts for Coventry city council. First, the formula grant will lose in excess of £19 million, and secondly, specific grants will lose in excess of £17 million. There will be a 27% cut to local government funding over four years, which in real terms equates to a cut of 8% per annum to the formula grant.

As I said earlier, there will be further cuts to specific grants, but—unbelievably—we will not know the final grant settlement until the end of January 2011. That puts Coventry city council under further financial pressure and it will not be able to continue providing services at the same level. There will be far fewer grants and they will have a lower overall value. It is a great concern that many grant streams will end. That will have a significant impact on Coventry—some 58% of the council’s gross expenditure for 2010-11 is resourced through specific grants, and £19 million of grant funding is likely to fall out, including a large number of former area-based grants such as local enterprise growth initiatives and a number of children-related grants. The future is unclear for Connexions and adult education.

Some grants that will end immediately include various education grants aimed at raising school standards; employment activities that help people back to work and, as a consequence, strengthen the local economy; community services; one-off grants to the homeless; sporting futures and football foundations; youth crime action; dealing with fly-tipping; and environmental grants for safer communities. We must consider other measures that will affect the disadvantaged. The front-loaded cuts proposed by the Government, combined with the impact of the VAT increase, will mean fewer services, of a lower quality, although people will be expected to pay more for them. That will be this Government’s legacy.

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

I could not agree more with my hon. Friend that it is the poorest who will be hit hardest. In Wolverhampton, the 28th most deprived local authority in the country, we are expecting cuts to the city council budget of 24%. Does my hon. Friend agree that such cuts are too fast and too deep and will hit the poorest hardest?

[Mr Cunningham]

Obviously, I have to agree with my hon. Friend. As she will know, the Building Schools for the Future programme certainly affects her constituency, and there will be an economic impact on it in that regard. The Government, although there was an economic problem, have gone over the top in addressing it. That has become apparent as they have rushed into all these local government cuts.

Capital funding has all but dried up. We are seeing the abolition of Building Schools for the Future where money has been lost, there is no replacement work and schools are in desperate need of repair. Notwithstanding the cuts to housing benefit and council tax administration costs, in real terms central Government will be cutting 5% of support at the time when administration is most needed. There are more claimants than ever before. The unavoidable conclusion of those actions is that many of the poorest will be affected disproportionately. That includes the proposals relating to legal aid, which is not part of this debate.

We were preparing a four-year plan to deal with the situation, and obviously there would have been a certain amount of rationalisation as far as we were concerned, but we certainly would not have been rushing in all directions, as the present Government have been doing over the past seven or eight months, to inflict cuts on people.

There is a new word for cuts these days: I am talking about the thing called “damping”. No doubt the Minister will enlighten us on that one. The coalition’s damping methodology throws up a number of concerns for the people of Coventry, which I shall briefly discuss. Once again, Coventry has lost resources. We did so in the 1980s under the previous Conservative Government. Our capital programmes were capped in those days. People have short memories. What the present Government are doing is not new; the then Government were doing it way back in the ’80s. For the period of 2011-12, Coventry is set to lose £8 million through that process alone. That leaves the authority with a reduction in resources of 6%, which is 1% worse than the national average. The coalition has tried to defend the damping process by saying that the money is being given to the more needy authorities. However, that is simply not happening in many instances.

Let us consider the main problems with damping as many authorities see it. On closer inspection of the actual effects, the damping in the provisional settlement considers only authorities’ formula grant; it does not consider the authorities’ change in overall resources. Relative spending power combines the impacts of formula grant, council tax and other revenue grants.

Although the average is a 5% reduction, there is wide variation in the outcomes for individuals. The Government have tried to disguise how deep the cuts are by including in their calculations money that councils raise themselves. Their own statistics reveal that councils will lose on average 12.1% of their core central Government funding this year. Perversely, six of the most affluent local authorities will gain a joint total of £130 million from the damping process. For example, West Sussex gains £6 million, with a reduction of less than 1%. Richmond upon Thames gains £15 million, with a reduction of less than 1%. Alarmingly, Surrey will gain £62 million from the damping process. Clearly, this damping is not fit for purpose—to coin a phrase from a former Home Secretary and colleague of ours—and should not be used to allocate formula grant.

We suggest a change to the damping system. Many councils raise far more from council tax than they receive from the Government. Therefore, a comprehensive assessment of each authority’s overall resource position should be examined. The current unfairness is taking money and jobs out of Coventry and 77 other authorities across the country. I urge the Minister to consider changing over to that approach, which, as I understand it, has been suggested to civil servants by officers from Coventry city council.

There is an overwhelming lack of clarity from the coalition Government about the time frame. Councils across the west midlands and beyond are being forced to make rushed decisions, with no time to plan for the consequences. That could end up costing more than it saves. There is a lack of information. Councillors and officers are in no way information-rich as they go into this unfamiliar process. There is little guidance from the Department and there is great uncertainty. The Secretary of State for Education’s capital spending review is not expected until later this year. We thought that it would be January and, as I have said, I am not clear now on when we shall know what the settlement will be.

For all the coalition’s talk of localism, it has dumped its cuts on local councils. The coalition’s plans for local government do not include growth or jobs: it is merely a deficit reduction policy. The coalition must make up its mind. Is it dealing with a new economic situation, which was the original argument, or is it rebalancing the economy, which is the new one? The solution is the same, but the approach and the reasons are different.

14:45

[Mr Marcus Jones (Nuneaton) (Con)]

Thank you for allowing me to speak today, Mrs Brooke. I congratulate the hon. Member for Coventry South (Mr Cunningham) on securing this important debate, although some of his opinions on the overall situation in local government in Coventry and the west midlands may well differ from mine. Despite what the hon. Gentleman said and the synthetic rage from Opposition Members, local government had known for some time that whichever party formed a Government following the last general election, budgets for councils in the west midlands and for most councils across the country would reduce dramatically. That is not a hidden fact and not something that we should forget. Nor should we forget that the public know that the country has a massive deficit. We can talk about how that was caused. Obviously, the bankers are very much at fault, but the previous Government were also very much at fault for not having a proper system of regulation in place for the banks. The banks failed on their watch. They cannot get away from that point.

[Mr Cunningham]

Obviously, the hon. Gentleman is entitled to his point of view, but he certainly was not in the House, although I and my colleagues were, when the issue of Northern Rock arose. The then Opposition—the hon. Gentleman’s party—had no solution to that. In fairness, the Liberal Democrats said that we should nationalise Northern Rock. We said that we would have a look at that. Equally, if we look at the record of the last Parliament, we see that the hon. Gentleman’s colleagues always argued against regulation. Whether we were talking about banks or the private sector, they argued against regulation, and the only regulations that they are talking about abolishing now are those on health and safety.

[Mr Jones]

I thank the hon. Gentleman for his comments, but we cannot get away from the fact that his party were in government; the banks failed on his party’s watch. We saw the first run on a bank for more than 100 years. That happened on his party’s watch. His party, not my party, was responsible for regulating the banks and it failed. The public know that and know that we must deal with the deficit. It is running at such a level that we are paying £120 million a day in debt interest alone. If we do not deal with that, not only will public services and the amount of money that we have for public services be vastly reduced, but the point also needs to be made that we risk putting this country in a situation like that which we have seen in Ireland, Greece, Spain and, probably, Portugal.

Let me return to the Government settlement in relation to councils. The better councils, including those across the west midlands, have been planning for several years for how they would deal with the inevitable cuts in local government funding. We should acknowledge that there have been reductions in formula grants for many councils over a number of years. The public have been looking to councils to show some leadership and show how they can deal with the very difficult situation that we all know we are in.

The previous Conservative administration at one of my local councils, Nuneaton and Bedworth borough council, did an enormous amount of work before the elections in May with Rugby borough council. That was about saving money through merging back-office functions, reducing the amount of management and sharing management. They were on course to save in excess of £2 million to £3 million. Unfortunately, the current—now Labour—administration in Nuneaton and Bedworth has politically abandoned that work and decided not to pursue saving money by reducing back-office functions. I am surprised by that because the previous Labour Government advocated it as a way for councils to save money in what they knew would be difficult times, and the current Government also advocate it.

I fear that Nuneaton and Bedworth council will look to make up its budget through massive rises in parking charges, as it has already shown by implementing a 25% rise in charges in the past couple of weeks. Inevitably, it will also make large increases in fees and charges elsewhere and, I am sure, huge cuts to front-line services through lack of foresight and forward planning.

On the grant settlement and the formula grant, I would like to discuss the disparity in settlements across the country that the hon. Member for Coventry South mentioned. Disparity is nothing unusual, because under the Labour Government, Warwickshire county council, for example, was particularly disadvantaged by its grant settlement year after year when compared with councils in areas such as the north-east. They received huge increases in grant funding while Warwickshire’s funding decreased and was continually behind the curve.

Looking beyond the grant settlements, we have seen some positives from the Government recently, which I welcome, such as allowing councils more freedom to deal with the issues that they face. Performance indicators have been the bane of many councils over a number of years—the comprehensive area assessment and the local area agreement. In reality, performance indicators have done very little either to improve the quality of local services to the people or to increase and improve outcomes, and particularly to reduce the gap between rich and poor. We now know that during the Labour Government, inequalities between rich and poor increased—they got worse, not better. Millions of pounds, even in very small authorities, have been wasted. Hopefully, authorities can put that into front-line services, rather than into writing a ridiculous number of plans or strategies, which have little or no effect.

The formula grant is a complex animal. It offers no transparency to local people over how local services are provided. People in local government, and possibly people in the Department, do not have a great understanding of the formula grant and how it is arrived at. What can be done to simplify the minefield of local government finance to make things more transparent for local people, so that they understand fully how taxes are raised to pay for local government and how its finance is allocated?

One area of concern within the current grant settlement is the transfer of concessionary travel from borough and district councils to county councils. That affects us in the west midlands in two-tier authorities, and particularly affects the two local councils in my constituency—Nuneaton and Bedworth and North Warwickshire borough councils—which is obviously of great concern to my constituents. With the recalculation of the grant, Nuneaton and Bedworth is likely to be disadvantaged by the loss of about £200,000 and North Warwickshire by about £300,000. I would like to know what the Minister can do to mitigate the effect that the transfer of the responsibility will, potentially, have on local services in Nuneaton.

I conclude by reiterating that this is a tough settlement. We all know that we have a tough settlement and it is incumbent on local authorities to work with local people and to ensure that they deliver on the priorities for those people. There are also certain anomalies that the Government need to mitigate, particularly the transfer of responsibility for concessionary travel. I look forward to hearing the Minister’s response.

14:55

[Richard Burden (Birmingham, Northfield) (Lab)]

It is a pleasure to follow the hon. Member for Nuneaton (Mr Jones). I could, perhaps, characterise his speech as a bit of an each-way bet, but he will have to answer to his constituents over how he actually feels about large amounts of cash being trimmed off the local budget.

I congratulate my hon. Friend the Member for Coventry South (Mr Cunningham) on securing this debate and a number of debates since the election on matters pertinent to the west midlands. Understandably, he has majored on the situation in Coventry, although the title of today’s debate covers the broader west midlands, which we heard about in the hon. Member for Nuneaton’s speech.

The previous debate that my hon. Friend secured on this matter was on 16 November 2009 on cuts to the police service. Those cuts had a serious impact in all parts of country, but in the debate a succession of hon. Members from the west midlands drew Ministers’ attention to the disproportionate effect of the police cuts on our region due to how Government grants interrelate with the precept. In that debate, we were told that Ministers were listening, but when the announcement came just before Christmas of the settlement for police authorities, we found out that listening had not been matched by action. As a result, a number running into the hundreds of experienced officers will lose their jobs and the back-up support that is vital. In that debate, I said that not only were the cuts to the police service serious, but that we will only see their impact in the round if we relate them to cuts taking place to other public services and, most particularly, to local government.

On 13 December, we heard what the provisional local government settlement would be, and it confirmed all our worst fears. I asked the Secretary of State for Communities and Local Government about Birmingham when he made his statement in the House. His response was significant:

“I am delighted to tell the hon. Gentleman that Birmingham faces a cut in its spending of 8.3%, and 4.3% for next year.”—[Official Report, 13 December 2009; Vol. 520, c. 692.

I think he meant 8.3% next year and 4.3% the year after, but we will allow him that slip of the tongue—I know that Government Members are fond of quoting slips of the tongue at the moment, which can happen from various quarters. The Secretary of State said that he was “delighted” that there would be an 8.3% cut in spending in Birmingham, but there is no delight in Birmingham about an 8.3% cut in spending. According to figures from Core Cities Group, the cuts required to balance the budget in Birmingham in the 2011-12 financial year will be £139 million, with a further £53 million the year after. As with the police cuts, the impact will be much greater in Birmingham, and in other core cities and urban areas, than—surprise, surprise—in more affluent areas, particularly the south-east.

According to the Core Cities Group, Wokingham faces a loss in formula grant of 14.3%, which is a higher percentage than Birmingham. The real impact on real people on the ground in Wokingham is a cut per person of £20.83. In Birmingham that is a cut per person of £75.19. We can then transfer that figure to the spending power per person, which my hon. Friend the Member for Coventry South mentioned. In Wokingham the cut is £4.46 and in Birmingham it is £101. That £101 equates to 8.3%, the precise figure about which the Secretary of State expressed delight in his 13 December statement.

[Emma Reynolds]

Does my hon. Friend feel that the delight in the quote from the Secretary of State for Local Government is due to an ideological commitment to make the state at both central and local government level smaller, because that is what Conservatives have always believed and continue to do so? If they were frank and open about that, we would obviously still have a problem with it, but why should they not come out and say so?

[Richard Burden]

My hon. Friend makes a valid point. I also think we need to question when they talk about making the state smaller. What they really want to make smaller is the benefit that the state can provide to the citizen; the support the state provides; and the way the state can enable the citizen to improve his or her quality of life. I do not get the impression either from this or the previous Conservative Government—if we go back that far—that there was actually much of an attempt to shrink the state in terms of central control. An interesting thing about what they are doing in practice—not the rhetoric—is the increase in central control, not only over local government but also over local communities. I will give a couple of examples of that in a minute.

I chaired the West Midlands Regional Committee before it was scrapped by the Government. Clearly, they found it uncomfortable to have a Committee of this House focusing on our region. That is something that in due course they will have to answer: why they thought it was so much of a problem to have a Committee looking at the strategic issues of our region. The reports we produced on that Committee looked at the impact of the recession on the region and the fragility of the recovery in the west midlands. When cuts come in local government and in other areas of the public services, that is serious. It is really serious for the west midlands, so serious that it makes it even more important that the targeted funds that the previous Labour Government made available to our region are employed effectively.

Birmingham city council’s ruling Conservative-Liberal Democrat coalition was criticised before the election about its use of targeted funding, in particular the working neighbourhoods fund. With the needs of a city such as Birmingham, it was surprising that the Conservative-Liberal Democrat coalition managed to underspend in the 2009-10 financial year to the tune of £28 million on its working neighbourhoods fund spending. It has a lot of questions to answer about that. The council still received from the Labour Government an additional allocation of £41 million under the working neighbourhoods fund for the 2010-11 financial year. It could use the underspend from the year before and the extra £41 million provided by the Labour Government to help those affected by the cuts that the current Government are implementing. It could be doing that, using it to tackle worklessness and to ensure that the resilience of the region is maximised after the recession. That is not happening. In July, the city council froze initiatives for using that underspend from 2009-10, and it cut £7 million from the 2010-11 budget.

I raised that with Ministers at the time and I was told that it was a good thing, because there was now a new-found freedom for local government, ring-fencing was going and local authorities were free to use area-based grants according to local circumstances. The result in Birmingham has been this. In the week before the Localism Bill receives its Second Reading and at a time when the Government talks about the big society—we may hear of it from the Minister—and empowering local communities and giving them a say, on Friday in Birmingham city council, neighbourhood managers and neighbourhood co-ordinators throughout the city, including my Northfield constituency, were issued with redundancy notices and will no longer have jobs from April.

One of the most positive and creative responses to the MG Rover crisis of six years ago was the setting up of a one-stop advice shop in Northfield town centre. That not only provided much-needed advice for local people but brought together in a real partnership, local businesses, residents and the local authority, to improve the suburban shopping centre of Northfield. Key to that, the glue that held it together, was a town centre manager, initially funded by Advantage West Midlands, which is also being scrapped. Now that town centre manager post is being scrapped under the cuts brought in by Birmingham city council. Those neighbourhood managers and neighbourhood co-ordinators were engaged in incredibly creative work in building local resilience and community self-reliance. Getting those redundancy notices on Friday was a slap in the face for them. It undermines the resilience and self-confidence in communities that—if the verbiage of the big society is to be believed—we should be trying to build.

It will also sap confidence in that local suburban shopping centre at the very time we should be trying to attract investment to it, trying to build confidence, and trying to cut crime and the fear of crime. When I say it is a slap in the face for those local neighbourhood managers and co-ordinators and the town centre manager, it is not just a slap in the face for them. It is a slap in the face for the people of Northfield and Birmingham. It is also a slap in the face for the ideology of the big society.

It will be said—as it was by the hon. Member for Nuneaton—that the cuts are inevitable and that savings would have had to be made anyway. To some extent, that is true: some savings would have had to be made. He says it is all Labour’s fault. Maybe he should listen not just to what comes out of central office but to what Conservative councillors say. At the start of last year, when Labour was in power in central Government, Birmingham city council, despite having had year-on-year increases in grant, was already facing a massive overspend, even though the Conservatives and Liberal Democrats had been in power there since 2004.

When a number of people questioned the council with some force about whether that said something about its financial management, it said, “Absolutely not. The trouble is we do not get enough money from the Government. Labour starves us of money.” It is time for the Government to ask whether it was right or wrong to say that. If those Tory councillors were right that Labour was starving them of money, despite the year-on-year increases, how can the Government justify the extra swingeing cuts to financing Birmingham city council? If they are wrong about that, are they saying that Birmingham city council, run by their friends —a Conservative-Liberal Democrat coalition—was mismanaging the finances of the council? They cannot have it both ways. They have to say in fairness to the people of Birmingham which of those positions is right. The people of Birmingham need to know these things if their neighbourhood co-ordinators are to be cut and when they see rubbish piling up in the streets of Birmingham because the city council is trying to cut the pay of refuse collectors by between £4,000 and £6,000. They need answers from the Government about what they are going to do about listening to the real concerns of real people in Birmingham.

There are things that the Government could do to make matters a little better. They could structure the transitional grant to local authorities differently. They could ensure that transitional grant is available to local authorities that face a cut in their revenue spending power of 7.5%, rather than the 8.9%, which is proposed in the provisional settlement. They could change the resource equalisation formula, so that it does not take money away from poorer areas and give it to richer ones, as is happening at the moment. A number of other suggestions have been made by the Core Cities Group.

When the Minister responds, will he say whether he is considering what Core Cities is saying and, if so, what the response will be? Could he give me a bit more comfort than I received in the debate about police cuts, when I was told that the Government are listening, only to find that listening led to absolutely no action in the final announcement? Will the Government listen this time and match their listening with action when we have their final figures?

One thing is clear. Whatever the Government do, is it not true that people in Birmingham and the west midlands as a whole, including Coventry, deserve just a little better from the Secretary of State for Communities and Local Government than a pat, off-the-cuff remark expressing delight at the fact that spending power in their area will be cut by more than £100 for every citizen or by 8.3%?

15:10

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

May I, through you, Mrs Brooke, thank Mr Speaker for selecting this subject for debate? I congratulate my hon. Friend the Member for Coventry South (Mr Cunningham) on securing the debate, which gives us an opportunity to discuss these issues, albeit a sad one, given the continued relative decline of the west midlands, which was once the industrial powerhouse of the whole country but has been badly affected by successive Governments’ progressive neglect of the manufacturing sector. Now, the Government are making specific attempts to cut local and regional expenditure in all its forms, and we must, sadly, discuss the impact that that is having on the west midlands as a whole and on Coventry and my constituency in particular.

I am sure that all Members have, rightly, been lobbied by their local authorities. I am pleased that all three Coventry MPs are here—I hope all three of us will have caught your eye by the end of the debate, Mrs Brooke—and our authority has been no exception, because it has given us a very full briefing for the debate. I would like to ask the Minister about one point in particular; indeed, if he has time, he could even tell us during the debate whether anything has come of it. The damping process is having a deleterious effect on relatively less well-off councils, to the benefit of those that are manifestly much better off. We have written to the Minister on that, and some officials from the authority in Coventry who have written to me have been to see officials at the Department for Communities and Local Government. They have put forward an alternative, much fairer proposal for the Department’s serious consideration, and I believe that the Department’s officials have promised to give it such consideration. If we are indeed all in this together, and fairness is the essence of what the so-called coalition—it is really a Tory-led Government—is out to achieve, the damping methodology could be simply changed in a way that made it evidently much fairer. I will come to that in a moment, because I do not want to anticipate too much of what I have to say, but I would like to hear whether the Minister and officials at the Department have had time to consider the objective, fair criteria that Coventry local government officers have put forward in good faith.

Even at this late stage, as we consider the cuts in Coventry, we do not know some of the details of the grant funding streams from the Government. The provisional settlement was sent out on 13 December, and two months have gone by but we still do not know the details. However, it is pretty clear that Coventry will face a massive reduction, and so, too, will Birmingham, as my hon. Friend the Member for Birmingham, Northfield (Richard Burden) made clear a moment ago. Over the next year or so, it seems inevitable that we will have to make 500 compulsory redundancies in Coventry. That might seem like a small proportion of the tens, and perhaps hundreds, of thousands of dedicated civil servants in local government who will be made redundant in the next couple of years, but for us in Coventry, those redundancies will follow hard on the cuts we have already felt in the manufacturing sector. More specifically, since the coalition came into being, Ministers have culled two distinguished Government organisations in Coventry in the most abusive and disdainful manner. The Qualifications and Curriculum Authority and the body concerned with purchasing computers were cut—just like that, without any discussion or reason. Now, of course, we will have the overall impact of the local government cuts announced in the provisional settlement.

That will all have a significant knock-on impact on local businesses and employment. It is also being mirrored in the health centre and NHS reforms in the west midlands and in Coventry in particular. Above all, the police will feel a terrible impact. The figure mooted for job losses in the police is much higher than my hon. Friend the Member for Birmingham, Northfield indicated—as many as 1,000 police officers could be made redundant in the west midlands. That, of course, is why the Prime Minister, when challenged at Question Time earlier today, could not give a commitment that there will be no increase in the overall level of crime. We are clearly running a very big risk in making these cuts to the police force. It is all right to talk about back offices and the rest of it, but the simple fact is that these cuts are bound to have a significant and direct impact on policemen in the front line. The Government are preparing to cut—or to redesign, as it is called—control orders, and I hope they have reserve powers and are planning to use them in the event that the new version of control orders does not work. I also hope they have plans to rectify the cuts to the police force in the sad event—we all hope this will not happen—that those cuts lead to an upsurge in crime.

The detail of the local government settlement makes it clear that Coventry will lose £8 million in 2011-12, just as a result of the Government’s damping methodology. The Government’s justification for that loss is that the money will be given to other, more needy authorities, which would otherwise suffer too badly. Taken at face value, that sounds reasonable, but the authority in Coventry has written to me to say that closer inspection shows that the damping proposed in the provisional settlement is simply not having that effect in many instances. There are many examples where damping leads to perverse outcomes. The central problem with the damping procedure and the methodology that determines its outcome is that they consider only an authority’s formula grant position and not the change in their overall resources.

As a result of damping alone, Coventry faces a 5% reduction in funding. It is worth mentioning other authorities, as my hon. Friend the Member for Coventry South has, in all fairness, already done. Some £130 million is being reallocated through the damping process to such needy authorities as Wokingham, Richmond upon Thames, Buckinghamshire, Hampshire and West Sussex. They are all fine authorities and belong to the great body of English local authorities, but it is perverse to pretend that they need money while Coventry, the west midlands, Northfield and all the other areas represented on the Opposition Benches in the debate today do not. It is perverse to concede money to them.

I can scarcely imagine that the Minister will seek to defend that arrangement, when he has such an easy, fair and more objective alternative that he could follow. That alternative has been explained to him by officials from Coventry—in all fairness, it is not difficult to understand. I do not know why Ministers do not seize it with both hands. Actually, I do know why: it would mean that they would have to go to their friends in the counties of the south-east to ask them to contribute. Those counties constitute the most successful part of the whole English—indeed, British—economy, and we should welcome that, because they are better able to contribute to the whole. If the idea of contributing was put to them reasonably, in terms of fairness and of those with the broadest shoulders bearing the biggest burdens, I am sure they would contribute. However, we do not do that; instead, we seek to compensate them further and allow them, under the Government’s formula, to take more from less well-off constituencies.

Very simply, we are saying that the unfairness that has been built into the system as a result of the application and methodology of the damping procedure is taking money and jobs out of Coventry and 77 other authorities throughout the country. A damping approach based on overall resources would be far simpler and fairer than the approach proposed in the provisional settlement. That is the essential point that I want to keep repeating to the Minister. It has been put to him, but can we have a reply today? If not, does he intend that the Department will reply to our proposals? Our approach would avoid any of the perverse outcomes that have been illustrated. To repeat, the local authorities getting the additional £130 million, as well as hardly any cut at all in their funds, include West Sussex, Wokingham, Richmond, Buckinghamshire, Hampshire and Surrey. Indeed, Surrey is benefiting more than any other authority. I think Surrey was recently considered the most affluent of all areas in the UK—and one of the most affluent, thank goodness, in the whole of Europe.

Officers at Coventry city council carried out an analysis of such an alternative damping methodology, whereby the total funds available would be taken into account. I understand that that has recently been shared with civil servants. We recommend that they strongly consider changing over to that; and if they do not, we should like to know why they will not accept it.

15:20

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

I thank my hon. Friend the Member for Coventry South (Mr Cunningham) for getting the debate and for allowing me to speak. I want to talk about two issues—localism and fairness. I have been most struck by one phrase so far in the debate: the one used by the hon. Member for Nuneaton (Mr Jones) when he accused my hon. Friend of synthetic rage. I am certain that there are huge differences in political outlook between the hon. Gentleman and my hon. Friend, but I will tell the hon. Gentleman one thing: he will find out in time that there is little that is synthetic about my hon. Friend’s feelings on local government. They are genuine and heartfelt. There are people in all parties in this House who genuinely believe in local government and localism. My hon. Friend is one of them, and he has a record of many years of defending the rights and autonomies of local government. I hope that the hon. Member for Nuneaton will come to regret the accusation of synthetic rage as he gets to know my hon. Friend better over the years.

The claim of synthetic rage echoes what we heard from Conservative councillors in the council chamber in Coventry, who, when the redundancy notices were being dished out, accused Labour councillors of scaremongering. We are going to lose hundreds of jobs because of the grant settlement in Coventry, and that loss will come on top of the fact that we shall have 1,000 fewer policemen in the west midlands and 1,200 or thereabouts fewer back office staff serving the police. People think that they do not do anything, but the police are under-resourced in their back-up, not over-resourced, as anyone who ever has to deal with them will recognise. The job losses will also come on top of the losses that have been inflicted on the city by the closure of organisations such as the learning and skills councils and by the demolition of our bid for Building Schools for the Future. They will be a very heavy blow. The words of those who say that people are scaremongering about the consequences or indulging in synthetic rage will come back to bite them as the consequences of the decisions—not yet felt, but soon to be so—become apparent to the electorate in many areas.

The other thing that the hon. Member for Nuneaton said—I am sure the Minister is about to say it as well—is that all that is happening would have happened in any case: the cuts were inevitable. This is where I want to move on to my second theme, fairness. My hon. Friend the Member for Coventry North West (Mr Robinson) has just been touching on exactly that. It does not matter what kind of organisation we talk about—a business, a Department, the Government overall or the nation—when there are difficult times, it is surely important that those who address the difficulties should be seen to do it fairly and properly. If people feel, as the Prime Minister tries to tell them, that we are all in this together and we all have to take our share of the pain, that pain becomes a lot more acceptable. People pull together and try to get the organisation in question through its difficulties. However, as my hon. Friend has just graphically exposed, that is not what is happening with the local government settlement grant—and nor was it with the police formula funding. Coventry is losing £19 million in formula grant and £17 million in other grant. It has lost in its entirety the area grant funding, and we are going to lose an additional £8 million due to the damping mechanism being introduced as a result of the Government’s formula.

Damping, in principle, as has been said, is of course right. When shocks are delivered to the system it is right that they should be damped and spread, and that for a period those who are less affected should help those more affected. Who could argue with that? However, the people who are to gain from the damping mechanism appear to be in areas of the country that are a lot better off and better able to face the situation than communities such as the ones I and my hon. Friends represent. West Sussex, Wokingham, Richmond and Buckinghamshire all gain from the damping mechanism. While Coventry loses 7.2% of its formula grant, Dorset—I love Dorset and do not want to do anything to it; I hasten to say, with you in the Chair, Mrs Brooke, that it is a marvellous part of the country where I would spend more time, given the opportunity—gains 0.25%. Surrey, that underprivileged part of Britain, loses 0.31%. Coventry—not the most deprived part of the country, but certainly a lot poorer than those areas—loses 7.21%.

I fear that we are being invited to participate in a pretty cynical exercise. My hon. Friend the Member for Birmingham, Northfield (Richard Burden) touched on that matter. The Government’s rhetoric about localism is convincing many people and organisations that they genuinely believe in a devolution of power. There are people in the Conservative party who do believe in it, as do people in the Liberal and Labour parties. I hope I am one of them. I have always believed in more power for local government and local areas, as against central Government. Wherever it is sensible to take decisions at a local level, that is where they should be taken. However, I fear that local government is being set up and that we are announcing more powers and freedoms for local government, so that we can blame it for the massive cuts in its ability to serve the communities it is elected to represent, which the Government have brought in at the same time. That is a cynical manoeuvre. It will take people some time to see through it, but I am certain they will, as they see through claims of scaremongering from Tory councillors on Coventry city council, and of synthetic anger, from the hon. Member for Nuneaton.

15:28

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

It is a pleasure to serve under your chairmanship, Mrs Brooke. I, too, congratulate my hon. Friend the Member for Coventry South (Mr Cunningham) on securing this important debate on the impact of what the Government are doing to local government in the west midlands.

I start with an overview. The Government have made choices about the speed, extent and distribution of the cuts, but the cuts are too fast and too deep, and are targeted at deprived communities and vulnerable people. There is a consensus across the House on the need to reduce the deficit, but there are alternatives to these unfair and unreasonable cuts.

The coalition Government have made their choice. They have chosen to hit local government with bigger cuts than Government Departments, and they have chosen to front-load them so that the heaviest cuts fall in the first year rather than being spread more evenly over the next four years. They have also chosen to impose the cuts on the most deprived areas and on lower and middle-income communities, rather than distributing them more fairly. My right hon. and hon. Friends were therefore right to highlight the impact that the cuts will have on the great cities of Coventry and Birmingham.

Before proceeding to examine the impact of the cuts on local government in the west midlands, it is important to tackle the economic mythology that lies behind what is proposed. It is vital that that economic mythology, which has been propagated in defence of what the Government propose, is understood for what it is—mythology. We have heard, and will doubtless hear once again, that the cuts are unavoidable. We have heard, and will doubtless hear once again, that these deeply damaging cuts to local government are all Labour’s fault. However, that is part of the Tory-led coalition Government’s approach of rewriting history in order to justify their ideological vision.

Let us be clear: it was irresponsible bankers that caused the credit crunch and the deficits across the world that followed. We have seen recession on all continents and in all countries. My hon. Friend the Member for Coventry South was right to say that it was decisive action taken by the Labour Government that saw growth return and borrowing fall, and that saw jobs being protected. However, that action was opposed at every stage by the Conservative party.

Borrowing has risen in the UK and throughout the world as we tackle the global financial crisis. It must be brought down with a clear deficit reduction plan that has growth at its heart. It is a deceit for the Conservatives to claim that irresponsible spending is the reason why borrowing is high. Before the global financial crisis, Labour had paid down some of the debt. In 2007-08, as the crisis hit, the UK had the second lowest debt of the G7 countries at 36.5% of GDP. It was low because we had chosen to pay off the debt, reducing it from the 42.5% that we inherited from the previous Conservative Government. Borrowing rose because of the global financial crisis, and the deficit was unavoidable—but the Tory-led coalition’s austerity programme is not.

[Mr Jim Cunningham]

It is worth pointing out that when we were in government and dealing with the crisis, we had a triple A credit rating. We had 14 years to pay off any borrowing. I note that the Government have totally ignored that. I also note that although George W. Bush refused to bail out Lehman Brothers, in the last month of his presidency he allocated billions of dollars to help the banking system in America. The Tories conveniently forget about that; they are on planet Cameron.

[Jack Dromey]

My hon. Friend is right. The leadership given by the Labour Government was followed worldwide. Had it not been for that leadership, we would have seen not recession but a prolonged slump over a decade and more.

No major economy is cutting its deficit at the reckless pace being followed by the UK. The Tory-led coalition’s plans to tackle the deficit, which go too far and too fast, are not only avoidable; they are downright dangerous. However, nowhere are they going as far and as fast as in local government. We should consider the depth and speed of the cuts, and the fact that the Government are in denial about the impact of their choices.

The Secretary of State for Communities and Local Government was so keen to curry favour with the Prime Minister and to become a member of the Chancellor’s star chamber that he signed up to huge front-loaded cuts for local councils without putting up a proper fight. As a result, town halls throughout the country will lose an average of 27% of funding over the next four years, compared with an average of 11% for Whitehall. The Government have also chosen to front-load the cuts, so that the heaviest reductions will fall in the coming financial year. Councils have only until April to decide where to reduce spending. Coventry and many west midlands authorities face cuts to their formula grants of above 10%. With the added pressure of the loss of specific grants and the removal of ring-fencing, those councils must find spending reductions of more than £200 million in 2011-12.

It is a problem not only in the west midlands. The Association of North East Councils, a cross-party group, has said that the Government’s proposed local government cuts are “undeliverable” for some councils; and the president of the Society of District Council Treasurers has called the front-loading “disastrous”. The Secretary of State has not been willing to admit that the cuts are front-loaded; nevertheless, it is clearly another choice that was made by the Government.

Many authorities will be forced into taking damaging crisis measures. The hon. Member for Nuneaton (Mr Jones) is absolutely wrong: it is not true to say that local government was expecting the scale and speed of the cuts now being imposed upon it. Local government faces much deeper and faster cuts than expected, and they will come about in a few months’ time. Indeed, the Conservative chair of the Local Government Association said precisely that. That gives councils no time for innovation or to think of efficient solutions. Instead, there will be huge job losses and cuts to front-line services; and voluntary organisations funded by councils in the midlands will also face cuts.

Why is local government taking a 27% front-loaded cut, when Whitehall faces an average cut of 11%? Did the Government consult local authorities on the front-loading and other aspects of those cuts, and what steps did the Government take to satisfy themselves that the proposals were reasonable and workable? I suggest that the Government are in denial on all fronts.

The impact of the cuts is clear. The Local Government Association has calculated that 140,000 jobs will be lost in 2011-12. The Government deny that—or do they think that, as in the 1980s, unemployment is a price worth paying? The LGA said that councils will need about £2 billion for redundancy. The Government deny that, and have set aside £200 million to meet the cost of those job cuts. The Government have no idea of the cost of the redundancies, nor of the human cost of rising unemployment. The private sector, too, will be hit hard. For every job lost in local government in the west midlands, one job will go in the private sector.

The Government say that front-line services in the midlands can be protected. Before the general election, the Prime Minister said:

“But what I can tell you is any cabinet minister if I win the election, if we win the election, who comes to me and says, ‘Here are my plans’ and they involve frontline reductions, they’ll be sent straight back to their department to go away and think again.”

I would like to know the precise nature of discussions between the Secretary of State for Communities and Local Government and the Prime Minister. However, it is clear from what is happening in the west midlands that front-line services will be hit—and hit hard.

Birmingham city council, which is run by Conservatives and Liberal Democrats, has already announced measures to restrict social care funding to those assessed as “critical”, the highest level at which eligibility is set. Those people with substantial or moderate needs will instead be signposted to private and voluntary sector providers.

In Birmingham, children’s social care services are likely to see cuts of £10 million in 2011-12 and £16 million in 2014-15. Youth services will be slashed to save £3 million in the next financial year, and up to £4 million in the following year. Those cuts are just part of the £170 million that will be taken out of Birmingham city council’s budget. Much-needed services to the people of Birmingham will be lost.

The leader of Coventry city council has described the cuts as hideous, saying that the people of Coventry are paying the price for the bankers’ follies. My hon. Friend the Member for Coventry North West (Mr Robinson) was right to say that the cuts are not just restricted to local government. He pointed to the impact they will have on the west midlands police service. Up to 2,400 jobs are set to go, with more than 1,000 officers going over the next 12 months.

As my right hon. Friend the Member for Coventry North East (Mr Ainsworth) rightly said, the proposals are grotesquely unfair. There are many criticisms one can make of them, but the strongest must be that they have a disproportionate impact on deprived areas and on vulnerable people. In his statement to the House, the Secretary of State said that he sought to achieve

“a fair and sustainable settlement for local government…that is fair between different parts of the country.”—[Official Report, 13 December 2010; Vol. 520, c. 679.]

Yet data from the Department for Communities and Local Government demonstrate exactly the reverse. Even on the Government’s own measure of revenue spending power, the west midlands is being hit disproportionately hard compared with the leafy shires of Surrey and the Bracknells and Wokinghams of this world. Data from the House of Commons Library make that absolutely clear. They show that the most deprived authorities in shire districts will receive an 8.5% cut to their revenue spending power, while the least deprived face only a 4.9% cut. Wokingham borough council, the least deprived unitary authority in England, will have a cut to its revenue spending power of just 0.6%. The Government have chosen to hit hardest the regions that are already hard hit, and that includes the midlands.

My hon. Friend the Member for Birmingham, Northfield (Richard Burden) was right to say that the city of Birmingham, which is the 10th most deprived authority in Britain, faces cuts on a huge scale—£170 million next year. Yet, Solihull, right next door and ranked 199th in the deprivation index, will see a cut of less than half that, at 3.5%.

We all agree on the need to cut the deficit—of that there is no doubt—but there is an alternative to the speed, extent and distribution of these cuts to local government budgets over the next four years. The cuts are too deep and too quick. They will have a devastating impact on communities all around the country, with the most dramatic impact being felt in the west midlands. The Government have failed to listen to the concerns expressed by the communities and local authorities of the west midlands. The Opposition are determined to speak up for the communities and councils of the west midlands, and we call on the Government to rethink these cuts before lasting damage is done to the very fabric of our society and the most vulnerable within our communities.

15:44

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

It is a pleasure to see you in the Chair, Mrs Brooke. I congratulate the hon. Member for Coventry South (Mr Cunningham) on securing the debate; I know that he takes great interest in local government affairs.

Some serious and interesting points have been made today, but let us start with the reality, which is that the damage was done by the incompetence of the previous Government. It is a bit rich, therefore, for the hon. Member for Birmingham, Erdington (Jack Dromey) to end on the note that he did, but it is a pretty good starting point for me.

There will always be disagreements between hon. Members over the cause of the recession, but the truth is that this Government are picking up the tab for what went wrong under their predecessor’s watch. It does not advance some of the detailed technical arguments that I shall come to later, to go into denial about that or to try to say that the situation is entirely the result of something that blew in from north America thanks to the bankers. That is not the reality, and the public do not believe that. We need to deal with that legacy; that is a fact of life. I am sure that, in reflective moments, Labour Members recognise that as well, because those who served under the previous Government know that that Government intended to make very significant reductions because they had to, and because we cannot sustainably continue with a deficit of £156 billion, and interest payments of £120 million a day; that simply is not viable. That is money that will not be available for any kind of public service because it is going to pay the debt charges. That is why the coalition has had to tackle the problem swiftly and head on.

Reference was made to the country’s credit rating. I suspect that if the coalition Government had not come up with clear, credible proposals that the international markets knew would get a grip on the deficit, our rating would not have been as secure as all of us wish it to be. There is no pleasure in doing this; our economic inheritance necessitates this action. Denying that gets no one anywhere. It is fine for the Opposition to criticise; that is what happens. None the less, one hears very little apart from the words, “It needn’t be so far or so fast.” When one seeks anything more specific than that, very little is forthcoming. We are doing the job. I understand why the Opposition will be carping from the sidelines, but they are not putting forward a convincing argument.

Let me deal with the specific points that have been raised. First, there is the question about the nature of the settlement itself. When Opposition Members attack my right hon. Friend the Secretary of State, it is the highest compliment that they can pay him because it shows that he has got them rattled. Perhaps that is because he has more experience and understanding of local government than many people in this House put together. The reality is that we have sought, within the difficult financial constraints, to produce a settlement that does reflect a fair balance.

Let us look at what we have sought to do in some important material matters that were referred to. The question of dependency was raised by a number of hon. Members. The introduction of the differential bands for the floor damping was specifically intended to reflect differing levels of dependency. Some local authorities are significantly more dependent on central Government grants than others. It was this Government who, for the first time ever, introduced the refinement of differential bands to reflect that. I know some criticism was made of the whole question of damping. With respect to the hon. Member for Coventry South, it is not a new concept. As a local authority leader many years ago, I used to argue the toss about damping with Ministers. I know that it has changed over the years, but the concept is not new. We have inherited two things—a financial crisis and a commitment to pass down much more power, including financial power, to local authorities. We also have a local government formula that has been in place for many years but is rather creaking at the seams.

That is why, regarding the future, we decided that it was appropriate that although the comprehensive spending review period runs for four years, we would have a two-year settlement to deal with the immediate issues and after that we would institute a comprehensive resource review of local government. That review starts this month and I anticipate that hon. Members will be able to see the consultation document very shortly. The review will enable us to take an overall view of how we resource local government. That issue has been kicked around for a long time and we need to come to a view on it. So the review will enable us to address some of the points that have been raised in this debate.

[Richard Burden]

Will the Minister give way?

[Robert Neill]

I will just finish my point and then I will, of course, give way to the hon. Gentleman.

Against that background, the Government have recognised that there needs to be a change. We have to deal with that change, but we also have to deal with the immediate needs and the immediate financial pressures. That is what we have endeavoured to do.

[Richard Burden]

I am grateful to the Minister for giving way. I want to put two points to him. First, if he is saying that the formula as it stands is unfair, why is he imposing the greatest cuts in the early stages rather than phasing them in with the changes to the formula that he is talking about? Secondly, does he believe that it is fair that Wokingham will receive a cut in its spending power of £4.46 per person when Birmingham will receive an equivalent cut of more than £100? Is that fair—yes or no?

[Robert Neill]

The hon. Gentleman raises two points that I was about to come on to. First, I was setting the context. We all accept that a system that has worked but that has come to a point where it needs change must be readdressed, so I hope that Opposition Members will support the local government resource review and the alternative means by which, for example, we can enable local authorities to keep much more of the product of the business rate that they raise, in the same way that we want to give them much more flexibility. Indeed, we have already given them much more flexibility by significantly reducing the amount of grant that is ring-fenced, so that even within the tight settlement that we have at the moment they can move money around to reflect their priorities.

Secondly, however, the hon. Gentleman makes an error when he makes the comparisons that he did. That is because another part of what we have sought to achieve is to recognise not only that dependency upon a grant varies but that the formula grant is, of course, not the whole picture. That is why we use the concept of spending power, which the Local Government Association raised with us, because councils also have reserves and the ability—within some constraint—to raise council tax. Council tax doubled under the previous Government; there is a limit to how much more one can expect people to pay, so we do not want to encourage council tax rises.

The hon. Gentleman forgets something when he looks at the amount of settlement that is received by local authorities; in fact, the amount of settlement is very instructive. He quotes figures about certain authorities because it suits the purpose of his argument. For example, he refers to Wokingham. Actually, let us make the comparison between Wokingham and Birmingham. Birmingham receives formula grant of £663 per head; Wokingham receives formula grant of £125 per head. So Wokingham gets something like a quarter of the support from central Government that Birmingham gets. That is a reflection of the fact that there may well be greater needs in Birmingham, but the suggestion that that element of need is ignored in the system is inaccurate, because we must look at not only the changes within the grant but where we are starting from. That is one of the points that has not been mentioned in this debate.

In the context that the hon. Gentleman refers to, it is also very significant that it was this Government, in refining the formula after consultation with local government, that actually increased the weighting given to what is called the relative needs element of the formula. That is the element that reflects greater pressures, elements of deprivation and other demands. So we as a Government—as a coalition—increased that weighting to 83%, which is more than it had previously been. That change was made to assist councils that are under pressure.

It was also this Government that set up for some authorities—generally including those in the west midlands —a transitional grant to cushion the loss of the working neighbourhood fund. The working neighbourhood fund was set up by the previous Government as a three-year fund and they were going to end it in May 2011 anyway. As far as we know, they were not planning any transition arrangement. To alleviate the difficulties for local authorities that are under pressure, this Government made available moneys even in difficult times to put in place transitional funding.

So, with respect, there is a little bit of protesting too much by Opposition Members that this Government have not recognised the difficulties that local authorities in the west midlands face. We have tried, within the constraints that we inherited, to do something about those difficulties.

The right hon. Member for Coventry North East (Mr Ainsworth) referred to the specific representations that have been made about the damping formula. Perhaps I can take those representations on board. We have received a number of representations about the formula. The consultation period has not yet closed; I think it closes next Monday. Therefore, I am sure that the right hon. Gentleman will understand why I cannot say today what our response to that consultation is. I am aware of the suggestions that have been made. We will give a proper response to the consultation, but it is obviously right and correct that I do not make any response to the number of local authorities that have written in until we have had all of the material from the consultation process in.

[Mr Robinson]

The Minister has confirmed that the discussions are taking place. Of course we understand why he cannot necessarily tell us today about those discussions. However, can he just assure us about what he has just said, namely that the consultation will be taken seriously and that we will, in due course, receive a reply to the specific points made by the city council in Coventry? I am sure that such a reply would be well received.

[Robert Neill]

Certainly I can do that and I hope that in the future, when we have the local government resource review, Coventry city council and other interested local authorities will put forward views about how we can take the new system forward.

The Government are making the best of the difficult hand that we have inherited. However, we have done so with a determination to pass down more flexibility to local authorities. The number of separate grants has been greatly reduced—from 90 to about 10—and considerably more money has been rolled into the formula grant, which is generally regarded as being more equitable in its distributional effects than the various specific grants that had existed previously. We have also increased the weighting given to a needs formula.

Of course I accept that regeneration is important for the west midlands in particular. It is worth remembering, however, that outside the limited area of formula grant the Government are in fact spending very considerable sums of money to support regeneration, and that money includes money that will benefit the west midlands. More than £20 billion is being provided to support regeneration, including regeneration of housing, which is important in the region. We are honouring existing Homes and Communities Agency contracts and existing regional development agency contracts, investing some £4.5 billion to deliver new affordable homes. In addition, there is £1.4 billion from the regional growth fund, which we are seeking to align with a similar sum in the European regional development fund. There is also investment in transport, including some £750 million for High Speed 2, which will have a particular impact on regeneration by speeding up journey times to Birmingham and the west Midlands.

So I think it is fair to say that the Government are putting in money to try to assist the councils in the west midlands and we are seeking to do so in a way that will encourage private sector investment. That is why the RDAs, which many of us believed had become unduly cumbersome although others may not agree, are being replaced by local enterprise partnerships that genuinely have private sector businesses working with local councils. It is also why we are committed to a new homes bonus, to encourage private sector investment in house building, and to the review of local government resource, which will actually make it worth while for councils such as Birmingham and Coventry that have a good history in relation to business, industry and commerce to grow their tax base once again.

So the Government are adopting a very positive approach. First, the settlement deals with difficult immediate issues. We have endeavoured to be fair and we believe that the settlement is fair and progressive, for the reasons that I have set out. Secondly, there is a plan that goes beyond the settlement, with the review of local government resource, which is consistent with both the current requirements and our commitment to localism. Of course, we will be entrenching that commitment when we introduce the Localism Bill for its Second Reading in the House next Monday.

[Annette Brooke (in the Chair)]

May I thank all the contributors to the debate and ask them to leave quietly? As the Minister is here already, I will begin the next debate.

Government IT Procurement

Wednesday 12th January 2011 Westminster Hall

15:59

[John Pugh (Southport) (LD)]

It is a pleasure to serve under your chairmanship, Mrs Brooke. Few things are as beguiling as an anoraky discussion about IT on a wet Wednesday afternoon; I am sure that we are all looking forward to it.

I want to add to an improving narrative about the Government and IT, which are not normally considered a good combination; in fact, some would argue that a successful Government IT project is some sort of oxymoron. None the less, the Government are committed to saving money by advancing IT applications. They must save money, and that is one sensible way, on the face of it, to do so. Developing better applications, better use and better value in IT is part of the efficiency agenda that the Government are destined to follow.

That might seem in some ways to be a triumph of hope over experience, but IT is recommended primarily because it offers hope. It offers the hope of speeding up processes or eliminating manual processes, and the opportunity to reduce costs, especially—and, perhaps, regrettably—manpower costs. Those are real benefits in the long term. Unfortunately, the procurer—in this case, the Government—must shell out quite a lot of money in the short term. They must pay up and hope that they get results, and we are all aware of the disasters that occur when they do not.

I encountered a number of those disasters during the previous Parliament through my work on the Select Committee on Public Accounts. Nearly every Department can list one. I do not want to embarrass particular Departments, but I will cite a few. The Lorenzo patient administration software, which I saw demonstrated over the road in Richmond house, has not been implemented anywhere so far, although it was developed at appreciable cost. The Libra project, which affected the Ministry of Justice and the courts, went from £146 million to £232 million. A Department for Transport project ended up unexpectedly spitting out messages in German. The Ministry of Defence, which excels everybody in this respect, developed an infrastructure system that went from £2.3 billion to about £7 billion. I could add other examples with which we are all familiar through our casework: the Child Support Agency, tax credits, the Rural Payments Agency and so on.

I am extremely grateful for some of those illustrations, which were provided to me by the hon. Member for South Norfolk (Mr Bacon), who is something of an expert in the field and who is currently producing a book on why Government IT projects fail. I am sure that it will be available in all good bookshops and via Amazon. From what I have seen of it, it will be a forensic and rattling good read.

However, even the hon. Member for South Norfolk, with his expertise, accepts that there are mitigating factors. Even in the private sector, IT projects are not guaranteed to work. Sainsbury’s had to write off a scheme developed at the cost of £260 million because its failure to operate properly was affecting the company’s share price. The London stock exchange had a heck of a problem over many years developing some of its IT systems, presumably to the detriment of many traders.

Against that, one could say that there are many instances in which the Government are successful, but they are never noticed because they are never of any interest to the press. “Another successful Government IT project accomplished” will never be a headline anywhere. However, I can think of things that we use daily that work satisfactorily that were developed by the Government or Government agencies. I use an Oyster card regularly, for instance. The congestion charge is extraordinarily efficient; sometimes, regrettably, too efficient as far as some of us are concerned. The passport office’s renewal service is good, and the Driver and Vehicle Licensing Agency system for renewing car tax is exemplary as a development of Government via the internet.

There are quiet signs—the Minister will wish to draw attention to them—that the Government have improved incrementally, and maybe substantially, even in the short time that they have been the Government. I believe that it is now common practice to deal with major suppliers, at any rate, as a Government, rather than allowing Departments to be picked off one by one by clever salesmen from software companies and the big IT firms. That is a laudable development, and one modelled on what happens in private enterprise. There are also various hurdles to get over. If some permanent secretary in some Department outside the Cabinet Office thinks that he has an IT project that will run, work and do the trick, he must now satisfy the Cabinet Office that that is actually the case. Such vetting and approval is surely a development that we want to encourage.

Getting things right is a hard art to acquire, and we as a Government and a country might not quite be there. The net effect is that some of the softer savings that we seek—those that are not publicly contentious and do not involve cutting services—will not be secured unless we drill down hard into that area and anatomise what goes wrong.

There are two schools of thought about what goes wrong. One school blames Government procurement: the specification fails, the tendering process is inadequate or civil servants are being suckered by streetwise corporates or conned by the consultants whom they often rope in to advise them. Essentially, they are being sold a pup and getting the wrong thing out of the box. The other school of thought—there is a lot to it—is that it is not the procurement and tendering that are going wrong so much as project management by Government. People talk about deficiencies in client-side expertise in managing, developing and evolving IT projects and about the Government’s relatively poor understanding of software development, saying that there are few experts in the civil service with a thorough grasp of it.

Over the years, there has certainly been appreciable evidence of inadequate cost control and checking, as well as evidence that during the course of a project, Ministers or civil servants often suggest some innovation that ends up costing far more than expected. A classic and highly publicised instance was when the Government asked Boeing to improve the avionics of helicopters. The net effect was a price tag that they could not bear at the time, so we ended up with grounded helicopters, largely because we did not understand what we were asking Boeing for and because the company was certainly not prepared to be thoroughly transparent about what costs might be incurred. Strangely, on that occasion, the MOD did not have the money.

I can think of other instances. EDS was almost taken to court by the Government for the failure of the tax credit system, but part of the problem was obviously the previous Government’s haste to get it up and running, even though EDS genuinely mentioned the problems that it could see. Despite the Government’s bluster about their intention to take EDS to court, they never actually did, ending in a settlement that was more favourable to EDS than some people might have expected given the debacle. That leads one to believe that EDS was not solely to blame for how the project evolved. There is also evidence that in the process of developing the system for the Rural Payments Agency, in particular, civil servants—perhaps the people one expects to monitor the process—took their eye off the ball.

We are therefore torn between two different diagnoses of the ill. It could be procurement; it could be project management. I suggest that they are two sides of the same coin. It might be genuinely insufficiently appreciated how different IT procurement is from other sorts of procurement with which Government are familiar, such as office furniture, tarmac and trains, although even trains have a software dimension nowadays. There is a failure to appreciate that what the Government are ultimately buying is not just things but new ways of doing things. I genuinely think that it is easy for Government to get the procurement of things almost right. I say “almost right”; we MPs are familiar with the printers procured for us by the House. I dare say the House got a good price for the printers, but replacement cartridges cost way over the odds. I must say that that does not seem to be an excellent form of procurement. Equally, there are countless incidents of Government simply not acknowledging that they will have to pay huge amounts in licence fees as part and parcel of what they are ordering, and that often leads to new deals with the companies when Government are alerted to the fact and they simply end up bearing the costs.

With regard to IT hardware procurement, the Public Accounts Committee and the National Audit Office recommended some time ago that it would be sensible for all Government Departments to refresh their hardware every three years and that to leave it longer would be detrimental to true value. In a sense, even that advice is dated. I still work daily with a Power Mac that I ordered in 2001, so its lifespan is already three times longer than the NAO recommends. Therefore, I am not convinced that there is not an art to ordering hardware successfully, but I think that the chances of Government getting that bit right are higher than their chances of getting the new work processes and software processes right.

There are certain implications of Government buying new ways of doing things, rather than simply buying things. To raise a negative point, and one that is not implied, the solution that is often advocated is that we need ever more detailed and expensive tendering processes and more consultant advice. We certainly do not want sloppy tendering or a lack of clarity on objectives, but the problem will not be resolved by having greater detail in the specifications. That is not the answer, unless the name of the game is simply to mind one’s back and prove that one has covered all the bases.

Prolonged over-specification does not seem to be the route out of the problem. Why is that? One thing that it does is put off small suppliers that cannot bear the cost or time constraints of a long tendering process and so cannot stay the pace. One consoling point about the demise of Building Schools for the Future is that its tendering process often excluded many capable and competent people and small and medium-sized enterprises. They might have had a real future role, but they were simply excluded by the nature of the tendering process because they could not match certain preordained criteria.

Another unhelpful consequence of over-specification is that it discourages innovative approaches. I spoke recently with representatives of a computer company that does a lot of business with Government, and they said that they are sometimes hampered not only by the fact that they have a well-defined tendering process, but by the OJEC—Official Journal of the European Community—regulations. They said that Government sometimes interpret those regulations as meaning that they are obliged to tell a company’s competitors if it suggests a new way that it can do what the Government want it to do that is different from what was set out in the original tender, and that is a distinct commercial disadvantage that companies would not welcome.

Over-specification also often leads to the development of complex and expensive bespoke solutions to problems that could otherwise be solved by adapting off-the-peg solutions. I do not want to mention it because it is a sad business, but the Independent Parliamentary Standards Authority had to develop a new expenses system for MPs even though there are probably many available commercially that would have been adequate. I will give another example in which we are perhaps guilty of reinventing the wheel in order to protect our own interests. If a Member wants to look up what they have said in a debate, they can go to Hansard’s search engine, which presumably was specially commissioned, where they will find a rather dismal process. If I try in a week’s time to find what I said about IT, I will probably receive a message telling me that there are no matching criteria, or something like that. Instead, I will go to a commercially-developed website, TheyWorkForYou, which will take me straight to the Hansard pages that the Hansard search engine would not bring me to.

There is much to be said for Government simply making themselves open to a sensible counter offer when there is something out there that meets their needs, rather than demanding bespoke alternatives at every point and turn, because that plays to the big players, and we see evidence of that in Connecting for Health. Highly detailed criteria and inflexibility in the tendering process also rules out the kind of procurement, which works well in the private sector, whereby companies are approached not by individual big companies, but by consortiums that have a variety of skills and can operate in a fluid market.

Another route that we do not want or need to go down in order to find new ways of doing things successfully, which is what software procurement is really about, is having a new army of software programmers and geeks employed by the civil service. Essentially, we need better project managers who can understand the end-user experience, iron out unnecessary complexity and comprehend the implications of changes that are demanded. We need project managers who understand not only the technical implications of project change, but its human aspects. The classic example of failure to do so is the tax credit system, which was developed by a firm that had no familiarity with the circumstances and life conditions of the people who would be applying for tax credits.

I think that there is a route through, but it is not a command and control model. I suggest—I am sure that the Minister is inclined to agree with me—that any successful negotiation of IT and software matters must be a type of conversation, with an acceptance that product delivery requires refinement, hand holding and long-term maintenance. Therefore, we need to get smarter and recognise that it is a specific type of process.

There is a remaining issue that I will try to address in the minutes I have left—I want to leave the Minister 10 minutes in which to respond to the debate. Even if we accept that there is a new way of doing things, that the Cabinet Office will wise up to it and that computer procurement is more like a conversation than an adversarial game, we must recognise that sometimes even conversations turn sour and we end up with ineffectual and underperforming suppliers that are overly costly. What then can Government do? The normal response would be to think that such suppliers should be shown the door, notwithstanding the complication that might ensue for maintenance and further development.

What—if anything—tends to happen depends to some extent on Government’s command over the whole process. If they are looking at a very proprietary solution, such as some quirky software over which a firm has sole and patented control, the options are dramatically reduced. Government can start the project again, which would be expensive and embarrassing, or they can continue to pay up and hope that the costs do not rack up too high, or they can just abandon a particular project and hope that everyone quietly forgets about it. There are incidents of that happening, such as Fujitsu’s withdrawal from Connecting for Health. I suggest that it is in Government’s interests, in most of their procurement, to insist on open standards, although not necessarily open-source software. As a powerful customer, that is exactly what they need to do.

I will make a brief comment on open source software, which is something of an enthusiasm of mine and had the Chancellor’s backing back in 2009. I think that there are real merits in overcoming the Government’s aversion to open source and recognising that it has advanced, that it is producing some very sophisticated SMEs and that it is not comprised entirely of bearded men in pullovers working in garages. There is a widespread belief that it represents a substantial challenge to some proprietary brands of software, and many of the big companies try to stifle open-source encroachment in the public sector.

In 2009, the Chancellor said that open standards, if not open source, could engineer a good deal of saving for the Government. He stated:

“We need to move in the direction of what are known as ‘open standards’—in effect, creating a common language for government IT. This technical change is crucial because it allows different types of software and systems to work side by side in government. At a stroke it means big projects can be split into smaller elements, which can be delivered by different suppliers and then bolted together.”

The article I am reading from is titled,

“When it comes to IT, big is not beautiful”.

It states at the top:

“Agile, modern technology can transform public services and relieve taxpayers of bloated budgets”.

I am sure that we would support that.

There is an overwhelming case for open standards, if not open source, as the Chancellor suggests. If we despair of a construction firm that is not building things properly, we can get in another firm that understands bricks. In mission-critical IT, projects need to be similarly resilient. If that does not mean open source, it certainly means open standards.

To conclude, the Government are moving in the right direction. They are trying to get the boring bit of government right, and that is important—we all subscribe to that—and the Cabinet Office has tried hard to embrace and spread good practice. I would like to hear from the Minister that that will be pushed further and faster, and with more success, because, if we are to believe the Chancellor, the savings would be substantial.

16:21

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

I welcome you to the Chair, Mrs Brooke. This is the first time I have served under your chairmanship, and it is a real pleasure. I do not know whether you count yourself as one of life’s anoraks. I do not, but I thoroughly enjoyed that speech by the hon. Member for Southport (John Pugh). I congratulate him on securing this debate and, if I may say so, on the elegant way in which he plugged the forthcoming book by my hon. Friend the Member for South Norfolk (Mr Bacon), with whom he served on the Public Accounts Committee.

It is one of the oddities of this place that the Minister for Civil Society should find himself responding to a debate on cost reduction in information and communications technology procurement, but that is my fate as the junior Minister in the Cabinet Office. I should start with an apology to the hon. Member for Southport: this is not my area of day-to-day responsibility, so I am a fish out of water here, but I shall flap to the best of my abilities for the next eight minutes or so. I take this opportunity to reassure him that the Cabinet Office takes seriously the opportunity he has identified to find substantial savings and efficiencies, and better ways for the Government to commission, procure and manage ICT. I shall focus more on procurement, because that is where the Cabinet Office is in a leadership role and where it is particularly focused at present.

The hon. Gentleman was clear about the context in which this debate takes place, including the overriding priority to control the deficit. He will know from his experience on the Public Accounts Committee that there clearly is considerable scope to make savings on ICT, and we are focusing on that. Specifically, there has been a review of major programmes, the introduction of the ICT moratorium and a new, rigorous approval process for procuring consultants and contractors. We expect that up to £1 billion might be saved through the moratoriums in this financial year, if current buying behaviour continues.

In addition to those short-term measures, the Government are committed to delivering sustainable reductions in ICT expenditure—both the cost of goods and services, and the cost of procurement—through the following key initiatives, which are being incorporated. The first one involves managing the Government’s strategic suppliers on a consolidated basis from the centre as the Crown, not from individual Departments—an opportunity that the hon. Gentleman identified. We expect that work to deliver up to £800 million of savings through renegotiating and de-scoping existing contracts with the Government’s top suppliers.

The second initiative involves centralising the procurement of commonly used goods and services, including ICT commodities, to standardise specifications and aggregate the Government’s expenditure more effectively than in the past. That will deliver significant sustainable cost reductions from the existing baseline of £13 billion over the next four years and, in doing so, build on the recommendations made in the Green review.

The third initiative involves streamlining the current process used to source from and contract with suppliers through the application of industry best practice—in this case, “lean” techniques, which have identified the potential to reduce procurement and sourcing project times from an astonishing 85 weeks to 27 weeks, depending on the size, complexity and risk of the procurement, while ensuring compliance with European Union directives.

The fourth initiative involves introducing new spending controls, including a moratorium on any new ICT spend with a value of £1 million or more, and a review of all major projects, a number of which are IT-based. So far, we have reviewed more than 300 Government ICT projects worth nearly £3 billion, and have recommended that more than £1 billion of expenditure be stopped or curtailed. We estimate that the review of major projects has saved £400 million this year. Those are all serious numbers.

We are also developing a strategy that increases the agility of public sector ICT in supporting policy delivery, that achieves greater value for money, that enables effective and efficient digital services and that empowers the big society through greater collaboration and transparency, which is a theme the hon. Gentleman discussed.

Let me elaborate further on each of the initiatives. First, on managing the Government’s strategic suppliers as the Crown rather than as individual Departments, one of the first actions that we took as a new Government was to announce saving targets of £6.2 billion for this financial year. A key part of that involves working with our leading suppliers, including ICT suppliers, to reform our commercial relationships and try to eliminate waste while protecting the fundamental services that we need to provide.

We are driving down the cost of Government IT contracts by negotiating directly with suppliers to achieve cost reductions and efficiency savings in our contracts. As I said, those renegotiation activities are expected to yield £800 million of in-year savings and substantial future savings. In addition, we are commencing reviews of large contracts with more than £100 million remaining contract value to identify further potential savings opportunities.

Secondly, on centralisation of the procurement of commonly used goods and services, we know that the Government buy the same commodity many times but at different price points. We are working to eradicate duplication, apply common specifications, and leverage the Government’s considerable collective buying power more effectively. We are creating a new centralised procurement operating model, and that capability will be mandated across all Government Departments. That transformation of how the Government procure common goods and services through centralised category management is targeted to deliver significant sustainable cost reductions in the region of 25% from the existing baseline of £13 billion.

For each category, there will be a single supply strategy that will deliver a centralised sourcing solution, so that central Government can significantly reduce their spend through aggregation, standardisation and rationalisation. Centralised category management teams will negotiate best-value contracts for central Government Departments based on volume-bound agreements.

[John Pugh]

The Minister mentioned a moratorium. Clearly, a moratorium by itself stops the spend and in doing so saves money, but advocates and supporters of a project who want it to go forward will say that, if it goes forward, it will save far more money than will be saved by virtue of the moratorium. How does the Cabinet Office in its approval mechanism make a judgment about a specific project? Does it take a broad view on how credible a project is or how secure the savings are, or is it simply the case that a certain number of projects need to be stopped in order to meet a certain figure?

[Mr Hurd]

It is more the case that the moratorium provides an opportunity to go through the discipline of looking closely at what is actually going on.

In my last minute, I would like to expand a little on the third pillar of our approach, which involves improving procurement processes. We know that bid costs range from £20,000 to £200,000 for every month. We are determined to reduce that, and the 6,000 pages of guidance on procurement within Government. The “lean” study has set out the task ahead of us: to refine and introduce a lean, new procurement process.

The point of all that is to try to reassure the hon. Gentleman that the Government take extremely seriously the need and the opportunity to be more efficient in how they procure IT and manage it on an ongoing basis.

Planning Control

Wednesday 12th January 2011 Westminster Hall

16:30

[Andrea Leadsom (South Northamptonshire) (Con)]

It is an honour to serve under your chairmanship, Mrs Brooke.

I am very pleased that I have secured this debate on the subject of planning, which is so important to my constituency and to those of many other hon. Members. I congratulate the Government on introducing the Localism Bill at this early opportunity, and I am delighted that the Bill will have its Second Reading on Monday. It will at last abolish the regional spatial strategies and the top-down housing targets implemented by the previous Government. The regional spatial strategy for the east midlands required nearly 40,000 houses to be built in Northampton borough and South Northants district. The figure was not derived from local housing need, but from the previous Government’s determination to control house building from the centre, a policy that has been shown to be an abject failure. Under the Bill, planning for the needs of local communities will be returned to democratically elected councils that know, appreciate and understand the local area and the concerns of its residents.

I would like to bring to the Minister’s attention four issues that are extremely important to my constituents. The first is the St Crispin and Upton development in Northampton, and in particular the building of the final 80 houses in a development of 3,600 houses that has taken 10 years. The second is the West Northamptonshire Development Corporation’s role in planning. Thirdly, I want to raise a concern about the planning vacuum that we are in until the Localism Bill reaches the statute book, and fourthly, I want to raise the subject of wind farms and their inclusion in the Bill.

The St Crispin development is an excellent example of a development that was approved by an unelected body in the face of overwhelming objection from the local community. Despite the objections of more than 130 residents and many Northampton borough and South Northants councillors, the West Northamptonshire Development Corporation has approved the final stage of the redevelopment of the St Crispin hospital site, which will see a further 80 houses being built there. The major concern of residents is utterly genuine, yet it has been completely disregarded by the WNDC. Approval for the 80 houses should have been subject to the building of a new access road. The estate’s existing roads are unsuitable for even the current level of traffic, with the main road through the area gridlocked twice a day at school drop-off and pick-up times. The congestion is a threat to the safety of schoolchildren needing to cross the road.

[Justin Tomlinson (North Swindon) (Con)]

I congratulate my hon. Friend on securing this excellent debate. I am sure that all of us here have similar issues. In my constituency there is the proposed Tadpole Farm development, and traffic concerns are a major issue. Too often developers ride roughshod over the concerns of residents. I therefore fully support this debate, and very much hope that local communities will be empowered to get appropriate development.

[Andrea Leadsom]

My hon. Friend’s point highlights yet again how local concerns were disregarded by the previous Government.

In the area, access to a residential nursing home and ambulance access to the local hospital are jeopardised by existing traffic problems, even without this yet further development. A relief road that was part of the original package for the estate has not been completed, and there does not appear to be any plan to do so, with continued protests from residents and councillors being ignored. I urge the Minister to consider calling in the application under the Secretary of State’s powers, and to see for himself the shocking disregard for the community on the part of an unelected quango.

I turn now to the West Northamptonshire Development Corporation. It was set up by the previous Government to deliver the housing targets imposed by the regional spatial strategy, because the councils were not trusted to deliver them quickly enough. A minority of WNDC board members were elected councillors, but from across three planning authorities, so little democratic accountability has been the body’s key feature. In the last financial year it spent £17.8 million and received a grant of £15.9 million from the Department for Communities and Local Government. I am sure that residents of South Northants do not feel that they have received value for money. I am delighted, therefore, that the WNDC will be disbanded in due course, but I urge the Minister to consider again whether he can do more to ensure that all planning powers are passed back to councils during 2011.

Although the Localism Bill is progressing though Parliament as quickly as possible, at present it is a set of intentions rather than a law, and this interim period before it finally appears on the statute book has created something of a planning vacuum in South Northamptonshire, which in turn is creating difficulty and worry for councillors and local residents alike. I have received a number of letters and e-mails from concerned members of our local planning committees, and I am very grateful for the prompt attention that the Minister has given them. The planning committee’s members say that until the Bill becomes law, they are afraid to turn down applications for new housing developments on the grounds of the huge costs incurred by the taxpayer if their decisions are overturned on appeal. I should be grateful if the Minister would clarify for my constituents and councillors the precise process and timeline for moving from the old top-down housing targets to the new bottom-up community-driven plans. Between today and the date on which the Bill becomes law, how should planning committees deal with applications when there is mass local objection?

The final point on which I seek guidance is wind farm policy. Currently, this is a huge threat to the happiness of many local communities, in my constituency and across the country.

[Karen Lumley (Redditch) (Con)]

I congratulate my hon. Friend on securing this very important debate. I want to pick up on her point about wind farms, and to ask the Minister for some clarity on his Department’s thinking on this issue. I understand that there is some tension between the need for renewable energy in the form of wind power and the placement of wind turbines, in rural communities where there seems to be ample space. I am finding that my constituents, especially those within shouting distance of the planned wind farms, such as the one in the Lenches, are fighting a huge battle against both the planning process and the large companies proposing the plans. I am keen to know what the Minister’s Department will do to remedy the conflict between renewable energy and local community choice.

[Andrea Leadsom]

My hon. Friend’s contribution mirrors my own questions for the Minister.

Wind farms are, of course, an essential part of our strategy to achieve energy security. I entirely accept that, as do many of my colleagues here today.

[Jason McCartney (Colne Valley) (Con)]

I congratulate my hon. Friend on securing this excellent debate, which is very timely, ahead of the Second Reading of the Localism Bill next week. I also thank the Minister for coming along.

My hon. Friend has already hit on the housing targets. Kirklees council in my patch is looking to impose 28,000 homes on an area that just does not have the infrastructure, so the debate is very timely indeed.

We are now talking about wind farms—we spoke about them earlier today. There really is a vacuum in planning strategy for wind farms. People in my community, in Birds Edge, Holmfirth and Scapegoat Hill, are opposing wind farms that are totally unsuitable, and unscrupulous people who do not fit into the local community are coming in just to make money. I am really looking forward to the inclusion of this matter in the Localism Bill.

[Andrea Leadsom]

The Minister will see that many colleagues are very concerned about the issue, and I am sure that he intends to address it.

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

I, too, congratulate my hon. Friend on securing the debate, particularly on the comments that she has made about housing, with which I agree. I have a huge problem in my constituency, where Labour’s local development framework is proposing a massive expansion of the town of Brigg.

On wind farms, what we really need is clarity as to what the Localism Bill means for appeals. I have an application for a wind farm development in Flixborough Grange that has now been submitted for the third time, and I want to be able to go back to my constituents and tell them that once we get rid of Labour’s planning system there will not be constant appeals to central Government, and we will have proper local decision makers. We really need clarity as to where the buck will stop on decisions about wind farms.

[Andrea Leadsom]

I absolutely agree with my hon. Friend, and I continue to stress how much we all agree that renewables form part of the future for our energy security policy. I am well aware of the potential energy shortages in the latter part of this decade, a potential that was brought about by the previous Government’s failure to prepare for the closure of elderly power stations and nuclear plants. A mix of energy resources, including renewables, is essential. However, it is unclear to me how big a part wind power can play in providing for our 21st-century energy needs.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

I want to raise a separate planning issue. In Wales, applications have been made for one or two sites that are owned by the local authority. Can attention be paid in the Localism Bill to applications when the authority is not only the applicant, but the judge and jury?

[Andrea Leadsom]

My hon. Friend makes a very good point. Returning to my question to the Minister, I am unclear about how big a part wind power can play in providing for our 21st-century energy needs. Denmark, which is Europe’s leading contributor to onshore wind farm development, and France have both changed their policies on wind farms, with Denmark stopping all further onshore wind developments. Recent press has highlighted how during cold weather, the efficiency of wind turbines can drop to negligible levels. During the latest cold snap, wind turbines that normally produce up to 5% of Britain's energy achieved only a miserable 0.2% at a time of greatest need.

Three picturesque villages in my constituency—Helmdon, Sulgrave and Greatworth—are dealing with the prospect of a wind farm in the middle of the three villages. The residents are open-minded, and many have said that they would accept the proposal if they could be convinced that it offers the right solution. However, Northamptonshire is one of the least windy counties in the country, and local calculations suggest that the output of the proposed turbines may be as little as 19% of capacity. It is worrying that the generosity of taxpayer-funded renewables obligation certificates means that even with so little energy production, the project is still worth while for the developers.

I have read the Localism Bill in detail, and it seems that the new neighbourhood plans will include within its scope any generating plants of up to 50 MW capacity.

[Craig Whittaker (Calder Valley) (Con)]

I congratulate my hon. Friend on securing this debate, Will the Minister respond to an ambiguity about the 50 MW output and neighbourhood plans? In Calder Valley, a plan is going through in Crook Hill, which is half in the Calder valley and half in Rochdale. If the two were combined, that would take the output well over the 50 MW limit for neighbourhood plans to have an input. Will the Minister clarify the position in that case, because many constituencies, such as Calder Valley, which have moorland around them, butt up to many other local authorities and local communities?

[Andrea Leadsom]

That is a good question, and it would be helpful to have a response from the Minister. Having read the Localism Bill in some detail, it seems that the new neighbourhood plans will include any generating plants of up to 50 MW capacity within their scope. I understand that that means that a community will be able to decide whether to include a wind farm of up to that size within its neighbourhood plan. I would be grateful for confirmation from my hon. Friend that that understanding is correct. I also understand that applications for generating plants of greater than 50 MW will be subject to determination by the Secretary of State as being nationally important. I would also appreciate confirmation that that is correct.

Finally, what will be the appeal process for wind farms under the new legislation?

The Bill is not clear—not to me anyway. Specifically, I and my constituents would like to know whether wind farms that are turned down locally could in future be approved on appeal just as easily as has been shown to be the case recently. What reassurance can the Minister give me that the views of local communities really will count in future?

In conclusion, I welcome the Localism Bill, and I am grateful to my hon. Friend the Minister for the support that he has given to my constituents, both in visiting us and in responding to questions. Northamptonshire was under siege by the previous Government¸ but I have great hopes of a bright future for my home county, where local communities will have a far greater say on planning developments and the focus will be on providing for local needs, not national diktat.

16:44

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

It is a pleasure, Mrs Brooke, to come back for round 2 under your chairmanship this afternoon. I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing this debate on an important matter. She has attracted a not inconsiderable following for it, which is no surprise to those of us who know her, and she addressed the issue with her characteristic energy. These matters are significant and important, and I shall do my best in the time available to deal with the points that she and other hon. Friends raised.

I shall deal first with the St Crispins development to which my hon. Friend referred. I am sure she understands that generally, and consistent with the policy of the Localism Bill, it is not the Secretary of State’s policy to interfere with the jurisdiction of local planning authorities, unless necessary. There is a long-established practice that Ministers do not comment on the merits or otherwise of individual planning applications, lest it constrain the Secretary of State in his functions should the case come before him at some time, in which case he must act quasi-judicially.

I understand, as my hon. Friend said, that the full application for 80 dwellings known as the St Crispins development was submitted after the change in departure regulations and the issue of circular 02/09. On its own, that scale of development would not normally be referred to the Secretary of State as a departure from the development plan. However, I understand that the west Northamptonshire development corporation took the view that it would be wise to refer to the Secretary of State its decision in principle to approve the application. Apparently that was because the application clearly forms part of a much larger scheme in the Upton Lodge master plan. I am sure my hon. Friend is familiar with that. The position now is that, because of that decision by the WNDC, Ministers will have to decide in due course whether that matter will be recovered and determined by the Secretary of State following a public inquiry conducted, of course, by an independent planning inspector.

Having set out why I cannot comment more, I hope I can talk generally about the criteria for dealing with such applications. The purpose of the Localism Bill is to reinforce that. Parliament has entrusted local planning authorities with responsibility for day-to-day planning control in their local areas, and the Government’s policy on call-in will be very selective. It is right that in almost all cases, the decision on whether an application should proceed is taken by the local planning authority. Its residents and citizens vote for it. In general, planning applications are called in only if they involve planning issues of more than local importance.

I accept that there are complications in my hon. Friend’s part of the world because the west Northamptonshire development corporation is the decision-making authority in this case, but that authority, as with any other planning authority, must have regard to both the approved development plan and any material considerations. The same principle would apply to an inspector or the Secretary of State.

I understand why there may be a tendency for confusion between the role and purpose of the development corporation and another body—the west Northants joint planning unit. The WNDC was set up in 2004, and was given development control powers for certain types of development. A quinquennial review of all three urban development corporations, including the WNDC, concluded in January 2010. Following that review, the previous Administration decided to hand planning powers back to local authorities in a staged way, beginning in April 2011 with raising the threshold of applications dealt with by the WNDC to 200 houses and the return of mineral and waste applications to the county council. Similarly, the threshold for commercial applications will also be set up then.

As the corporation was set up by a formal order, legislation will be required to make the changes. Subject to assurances that the local authorities have adequate capacity to operate their planning systems, we see no reason why the full transfer of powers should not be completed by April 2012, when we will be back to the normal situation of the local authority being the decision-making body. The joint planning unit was set up by statutory instrument, following agreement by the county council, Northampton borough council, Daventry district council, and South Northamptonshire district council to prepare a local development framework for their area, west Northamptonshire. That arrangement could be revoked by a constituent authority that requested the Secretary of State to use powers under section 31 of the Planning and Compulsory Purchase Act 2004.

My hon. Friend mentioned the wishes of her district council in South Northamptonshire to leave the joint planning unit, and my officials have sought views from the other local planning authorities involved. Once all their views are known, it will be necessary to assess the effects of dissolving the joint committee, or modifying it so that South Northamptonshire can sit outside the committee but still contribute to the joint planning of growth, particularly on the edge of Northampton. Although we seek to get rid of artificial structures, the Localism Bill will place an obligation on local authorities to collaborate on and co-ordinate spatial planning issues.

That is where are at the moment. The WNDC will be gone and its powers returned by April 2012. Because it was created through a different route, the position of the joint planning unit is slightly different and any change would require the views of the other authorities. We are seeking that, and I will obviously speak again to my hon. Friend once we have a clear view as to how other people will react and what is the best way forward.

[Neil Carmichael (Stroud) (Con)]

I thank my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) for securing this important debate. I am concerned about enforcement and appeals, and I am thinking about the transition from the existing planning regime to the new regime once the Localism Bill becomes an Act. Will the Minister comment on a situation where an appeal is made about a recent decision, and how that might be treated under the new planning regime?

[Robert Neill]

There is a legitimate role for an appeals process in a planning system. Planning decisions are matters of important public consideration, and in many circumstances affect proprietary rights. Our advice is that it is necessary to have an appeals process, and to ensure that the system is compliant with human rights legislation. We must have a planning system, and our desire is to avoid the system we have at the moment, whereby planning by appeal takes place almost automatically because local authorities are almost forced to refuse applications because they are grounded on the basis of the regional spatial strategies, which do not have regard to local needs. I want to get away from that. The scheme in the Localism Bill—it is too detailed for me to go through at this stage—involves front-loading the process to encourage much greater community involvement in the development of neighbourhood plans; and developments over a certain minimum threshold will require pre-application discussions. The best developers do that anyway, and that will provide a greater opportunity for issues to be thrashed out before the decision-making process, rather than being decided on appeal.

The Bill proposes to abolish the pre-determination rule. That rule is a considerable vice because it prevents local councillors from speaking out on behalf of their constituents for fear that they will be prevented from being involved in a decision. There will have to be an appeals process, but I hope that if we can reduce the volume of cases that go through it, and look at how to simplify it and make it more intelligible, that will deal with many of the issues raised by my hon. Friend the Member for South Northamptonshire.

[Andrew Percy]

I want to be clear about the issue of appeals. The local authorities of East Riding of Yorkshire and North Lincolnshire have hit their 2020 targets for renewable energy generation. I know that those targets have been removed, but we feel strongly that we already have our fair share of wind farms. What will be the situation with appeals? It is likely that our local authorities will want to continue to reject wind farms. We cannot front-load the system because we feel that we have already played our part. What will be the appeals process in such situations?

[Robert Neill]

With respect to my hon. Friend, it is not realistic to spell out that degree of detail at this stage, but it will become apparent. Under both the current system and the new system proposed in the Bill, in which we want to place more weight on the view of the local authority, we are looking at the basis on which an appeal could override the view expressed in the local plan, and to what extent that would be the appropriate course. The local planning authority, be it the statutory planning authority or the neighbourhood plan that would become part of the local plan, has to be cognisant of and consistent with national planning policy. It is the coalition’s policy to support the development of wind farms where appropriate, but I accept that there is a concern to ensure that the community’s views are properly articulated. That is why we will address those points about how to get the balance right, not just in the Bill but in parallel with the important reforms and the creation of a national planning priorities framework. That is an important point and I ask my hon. Friend to be patient. We will consult on the national planning framework, and I suspect that he and his constituents will want to have an input into the best means to deal with that issue.

[Andrea Leadsom]

Are the Government considering allowing appeals against approvals that have already been given? That would be the opposite of an appeal made by the developer, and could be an appeal by local residents who are unhappy with the decision already taken.

[Robert Neill]

A number of alternatives were posited on that matter, but there are complications to any significant reform of the appeals system. Our instinct is, first, to put the Localism Bill into practice, secondly, to get the national planning framework up and running, and then to look at the appropriate means of proceeding thereafter. Of course it would be appropriate for a neighbourhood plan to express a view about things such as wind farm development, subject to the 50 MW threshold that would turn a scheme into a nationally significant infrastructure project.

[Guto Bebb (Aberconwy) (Con)]

I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing the debate. I represent the constituency of Aberconwy. It has one of the largest wind farms currently proposed, Gwynt y Môr, which is a £2.2 billion development. It was opposed by local residents and the local authority, but it was approved by the current leader of the Opposition, the right hon. Member for Doncaster North (Edward Miliband), when he was Environment Minister. It is a strategic development, and I understand that under the Localism Bill it is likely that such a decision would be made at the centre rather than at local level.

Although the developers promised a significant community compensation package, because the plan was opposed by local residents and the local authority, when approval was given by central Government the compensation package was vastly reduced. Would that issue be addressed in the Localism Bill?

[Robert Neill]

It should be. We want to spell out with rather more precision exactly how local communities can benefit from the approval of wind farm development, where appropriate. There has been a lack of clarity about that until now. We also want to look more generally at how one can capture the benefit of what is called “planning gain” for communities within that context. There will be a hold for neighbourhoods in that regard, and they will be able to benefit in a more systematic and transparent way than they do at the moment. It will be possible for things such as wind farms to be dealt with in a neighbourhood plan. However, any such plan must be consistent with the overarching national policy that we intend to set out in the national planning priorities framework.

I hope that that has dealt with a number of the issues raised, although I have not been able to deal with every point made in the time available. My hon. Friend the Member for Brigg and Goole (Andrew Percy) raised a point about a multiplicity of applications, and I will have to return to him on that. To some degree, we must delve into the realms of case law when we get to that topic, and I do not want to commit myself to that on the hoof. However, from what I have heard, I suspect that there are likely to be a number of participants in the proceedings of the Localism Bill as it makes its way through the House, and I welcome the interest shown by all my hon. Friends in that important matter.

I end by congratulating—and I think thanking—my hon. Friend the Member for South Northamptonshire. She has given me a busy time at the end of a Wednesday afternoon in dealing with the debate, and I will get back to her on any specific points that I have not been able to address.

Question put and agreed to.

16:59

Sitting adjourned.

Written Ministerial Statements

Wednesday 12th January 2011 Written Statements

Wednesday 12 January 2011

BP Deepwater Horizon Oil Spill and Offshore Drilling

Wednesday 12th January 2011 Written Statements

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

The US National Commission on the BP Deepwater Horizon oil spill and offshore drilling delivered its final report yesterday. This is a substantial document, both in its scope and in the careful detail of its analysis and recommendations. It will of course be reviewed carefully by my Department and all other relevant bodies within Government, to identify the implications from this tragic incident in the gulf of Mexico for the regulation of deep-water drilling in the UK. We will be working closely with the industry, our colleagues in HSE and the MCA to ensure that any lessons to be learned from this report are understood and effectively communicated throughout companies working in the UKCS. This will take time. Nevertheless, there are some key points which emerge even at this early stage.

While noting that the precise contribution of specific actions to the disaster remains to some degree uncertain, the report confirms earlier information on the root causes of the accident. The report makes comprehensive recommendations for the US offshore regulatory regime, including:

A new approach to risk assessment and management, with regular third-party audits of management systems;

A new independent agency responsible for safety and environmental regulation of offshore drilling;

Stronger environmental regulation and enforcement;

A reorientation of oil spill response and containment planning; and

A revision of liability rules.

The regulatory system in the gulf of Mexico at the time of the incident was of course very different from that which we maintain in the UK and is employed in the North sea in general. And indeed the report recommends the adoption in the US of a risk-based performance approach similar to the safety case approach in the North sea. It also recommends the development of plans and procedures for responding to a “Spill of National Significance” which is an approach already reflected in our national contingency plan. As regards environmental assessment, we have a comprehensive suite including strategic environmental assessment, project-specific environmental impact assessments and habitats directive assessments. But notwithstanding these strengths of our existing system, we are committed to learning what we can from the commission’s findings and recommendations, and, where appropriate, applying that learning on the UKCS.

And we have already acted, in the light of the emerging information from the many investigations into the disaster, to strengthen where we can what is already one of the most robust environmental and safety regimes in the world.

As announced by the Secretary of State in May, we conducted an immediate review of our regime and decided to increase the number of offshore environmental inspectors. He also announced yesterday our plans to further increase the number of offshore environmental inspections from 60 to 150 annually.

We also required the companies to update their oil pollution emergency plans, to address the possibility of an uncontrolled blow-out.

And consents for new drilling operations in deep water, already subject to case-by-case review, have been required to demonstrate stringently the arrangements for co-ordination between the various companies engaged, and are subject to individual inspection before drilling commences.

At the same time, the industry has been working through the new OSPRAG grouping, with Government participation, to develop new technical solutions which could be deployed to bring any uncontrolled blow-out under control as rapidly as possible.

Also the OPOL liability pool, which is unique to North sea operations, has increased its cover from $125 million to $250 million. OSPRAG is further reviewing the implications of Macondo for the scale of liability cover which would now be appropriate for UKCS conditions.

The report highlights the importance of ensuring adequate liability arrangements are in place to better protect victims and provide appropriate incentives to industry. Some of the recommendations in this area address particular circumstances in the US, including a limit on the liability of drilling operators. There is no such limit in the UK—the liability of companies for the consequences of their actions is subject to no statutory restriction. And the existence of the OPOL liability pool provides a globally unique, and very substantial, assurance that victims would be adequately protected. However, this is an area on which the Select Committee has also made recommendations and in which the European Commission has proposed further work. We will continue to work with industry and with European partners to see how further improvements could be made.

I should add that we welcome the stress placed by the presidential commission on international collaboration and co-operation in developing the most effective approaches to meeting the challenges of ensuring safe and environmentally responsible conduct of offshore drilling operations. As the commission recognises, the industry is truly a global one, and we wish to draw on all the expertise, in industry and in regulators around the world, and in particular with the US Administration, to make these operations as safe as we can.

As the Secretary of State made clear in May, we intend to review the UK’s oil and gas offshore regulatory regime against the findings of the US investigations. This review will begin within a month, once the report of the National Commission has been thoroughly analysed. It will be carried through by DECC, the Health and Safety Executive and the Maritime and Coastguard Agency, and will be based on the full life cycle of an offshore development thus ensuring that all activities are covered. The review will report later this year, once the US Maritime Board investigation report—currently expected in March 2011—has been published and the details analysed.

Strategy for Cancer

Wednesday 12th January 2011 Written Statements

[The Secretary of State for Health (Mr Andrew Lansley)]

Today, I formally launch “Improving Outcomes: A Strategy for Cancer”, which outlines the coalition Government’s plans to deliver health outcomes for cancer patients that are among the best in the world in a reformed national health service. Although significant improvements have been made in recent decades—and we welcome the work of all those involved in driving these improvements—outcomes for patients in England continue to lag behind those in countries of comparable wealth.

The strategy translates the three underpinning principles of the coalition Government’s reforms of the health and care services into the steps we need to take to drive improvements in cancer outcomes. In order to put patients, service users and members of the public at the heart of decisions about their care, this strategy sets out the actions we will take to tackle the preventable causes of cancer, to improve the experience of cancer patients and support the increasing number of cancer survivors; describes the ways in which choice for patients in their cancer care will be extended and implemented; and identifies the gaps in information on health outcomes that are crucial to ensuring patients are empowered.



In order to ensure that health and care services are orientated towards delivering the improvements in outcomes for people with cancer we wish to see, the strategy sets out the work which the public health service will be charged with undertaking to deliver the necessary improvements in prevention, raising awareness of cancer symptoms and achieving earlier diagnosis; outlines the resources the NHS commissioning board will be able to draw on to drive improvements in the quality of NHS cancer commissioning; and identifies ways in which best practice approaches to cancer commissioning can be disseminated for use by pathfinder consortia through the transition and beyond.

In order to empower local organisations and front-line professionals to encourage the delivery of improved cancer care, the strategy provides possible future models for the delivery of advice and support on cancer commissioning at the national level; reports on the review of cancer waiting time standards, recommending that current cancer waiting time standards are retained; and announces plans to harness the innovation and responsiveness of the charitable sector further in cancer care, to build on the important work done to date to promote healthier lifestyles, encourage earlier diagnosis and provide information and support for those living with cancer.

The strategy sets out how—in cancer care—we will bring the approach we have set out for health and care services to bear in order to improve outcomes for all cancer patients and achieve our aim of improving cancer survival rates, at the same time as working more efficiently so that cancer services make a significant contribution to meeting the quality and productivity challenge the NHS has been set in this spending review.

Through the approaches this strategy sets out, we aim to save an additional 5,000 lives every year by 2014-15, aiming to narrow the inequalities gap at the same time. The strategy is backed with more than £750 million investment over this spending review, which includes over £450 million to support earlier diagnosis of cancer.

“Improving Outcomes: A Strategy for Cancer” has been placed in the Library. Copies are available to hon. Members from the Vote Office and to noble Lords from the Printed Paper Office.

Equality Act 2010

Wednesday 12th January 2011 Written Statements

[The Minister for Equalities (Lynne Featherstone)]

The Government have committed to commencing the provisions in the Equality Act 2010 in stages, in order to allow businesses and the public and voluntary sectors sufficient time to review their policies and plan effectively for implementation. Most of the provisions in the Act came into effect on 1 October 2010. This statement is about provisions which will come into effect on 6 April 2011. These provisions are sections 149-157 (on the public sector Equality Duty); and section 159 (positive action in recruitment and promotion) of the Act.

Today I am publishing:

Draft regulations setting out what the specific duties supporting the public sector Equality Duty will require public bodies to do, and to which of the public bodies listed in schedule 19 to the Equality Act they will apply. This follows the Government’s consultation last year. The Government will be finalising the draft regulations and laying them before Parliament for debate in the next few weeks, to come into effect on 6 April 2011.

A draft order amending schedule 19 to the Equality Act, which sets out the list of public bodies to which the general Equality Duty will apply. The Government will be finalising this draft order and laying it before Parliament for debate in the next few weeks, to come into effect on 6 April 2011.

A document summarising the responses to the consultation on specific duties “Equality Act 2010: The public sector Equality Duty. Promoting equality through transparency” and setting out how the Government have taken account of them and made adjustments to the draft regulations so that they better deliver the policy intent as set out in the consultation document.

Short practical guidance produced by the Government Equalities Office on the public sector Equality Duty and on positive action in recruitment and promotion. The guides are available at: www.equalities.gov.uk. The Government guidance will be complemented by a detailed essential guide and thematic guides on the public sector Equality Duty from the Equality and Human Rights Commission, which will also be developing a statutory code of practice on the Equality Duty later this year.

Copies of these documents will be placed in the House Library.

The new single public sector Equality Duty will put into practice the approach to equality I set out in the Government’s Equality Strategy, published on 2 December 2010. It is a powerful means of embedding equality considerations into all the policies and practices of the public sector. The Equality Duty brings to an end the era of Government-inspired bureaucratic targets and shifts power to local people. The community, not Whitehall, will be in the front line for holding public bodies to account. It will remain the responsibility of the Equality and Human Rights Commission to enforce the duty.

Positive action in recruitment and promotion is a useful means of providing flexibility for public as well as private sector employers to achieve a more diverse work force.

Licensing Hours (Royal Wedding)

Wednesday 12th January 2011 Written Statements

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

Today we are publishing a consultation on an order to relax licensing hours to celebrate the wedding of Prince William and Catherine Middleton on 29 April 2011. The order would allow all licensed premises in England and Wales to open until 1 am on Friday 29 April and Saturday 30 April to sell alcohol for consumption on the premises and to put on entertainment such as live music.

Section 172 of the Licensing Act 2003 allows the relevant Secretary of State to make an order relaxing opening hours for licensed premises to mark occasions of “exceptional international, national or local significance”. A “licensing hours order” overrides existing opening hours in licensed premises, that is, any premises with a premises licence or club premises certificate and can be used for a period of up to four days. An order may be applied to all licensed premises in England and Wales or restricted to one or more specified areas. It is also possible to impose different opening hours on different days during the relaxation period and to allow different licensing hours for different licensable activities.

The Government consider that, as the royal wedding is an occasion for national celebration, licensing hours should be relaxed in all licensed premises in England and Wales. However, we are mindful that late-night drinking can lead to crime and disorder and public nuisance. On this basis, we are proposing a modest relaxation of licensing hours until 1 am and intend to restrict the order to the sale of alcohol in pubs, clubs and anywhere else where alcohol is consumed on the premises and to regulated entertainment such as live and recorded music, dancing, plays and films. We are also limiting the order to Friday 29 April—the day of the wedding—and Saturday 30 April as these are the days when people are most likely to want to celebrate.

The consultation will be published today on the Home Office website and copies will also be placed in the Vote Office and House Library.