Westminster Hall

Tuesday 18th January 2011 Westminster Hall

Tuesday 18 January 2011

[Jim Dobbin in the Chair]

Funding Formula

Tuesday 18th January 2011 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Miss Chloe Smith.)

09:30

[Andrew Selous (South West Bedfordshire) (Con)]

I am grateful to Mr Speaker for allocating me this important debate. It is a particular pleasure to serve under you, Mr Dobbin.

I have wanted to make this speech for a considerable time. As a member of a governing party with a bold and reforming agenda across large parts of Government, I hope that that spirit of boldness will also be applied to this issue and that it will be allied to a keen sense of fairness and justice so that we do the right thing by every part of the United Kingdom.

I speak as a committed Unionist and I want every part of the United Kingdom to be treated absolutely fairly as far as central Government funding is concerned. However, the formula that currently allocates funding between England, Wales, Scotland and Northern Ireland for large parts of public expenditure is broken. Even the man after whom it is named, Lord Barnett, wants to get rid of it and speaks against it. It really is time for us to look at it, as I shall try to show in my remarks.

The formula dates back to 1976. It was decided, across certain parts of Government spending, to allocate 85p in every pound to England, 10p in every pound to Scotland and 5p in every pound to Wales. That was done on the basis of population figures from the mid-1970s. Those figures have never been changed; all that has been changed over the years are the annual increments. We are therefore working on a population baseline from the mid-1970s that bears no relation to the significantly increased population in England or the increased population in Wales. At the same time, the population in Scotland has remained broadly static. In the excellent debate on the Barnett formula in the House of Lords, Lord Sewel, a Labour peer, referred to

“a series of fantasy populations”—[Official Report, House of Lords, 11 March 2010; Vol. 718, c. 381.]

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

I am grateful to the hon. Gentleman for bringing this important subject for debate, but his comments about the starting point for the Barnett formula give the impression that the 85%, 10% and 5% figures reflected the populations of the different parts of the UK at the time. Surely, that was not the case. Even at that stage, the formula reflected the different needs in the different parts of the UK by giving Scotland and Wales a slightly higher allocation per head. Population did not define the breakdown in different parts of the UK at the start.

[Andrew Selous]

The formula was fundamentally on a population basis. If the hon. Gentleman reads the excellent report by the House of Lords Committee on the Barnett formula, which came out in July 2009, he will see the significance of the population issue. I propose that we move to a needs-based formula, and that was the Committee’s unanimous, cross-party conclusion, which was supported by its Conservative, Liberal Democrat, Labour and Cross-Bench members. I think I can assure the hon. Gentleman that I absolutely want to reflect the higher need that is clearly evident in Wales and parts of Scotland so that we are totally fair. The evidence is that we are not doing that now. The situation has become unfair, and that is a danger to the Union.

Let us see what the man after whom the formula is named has said. Speaking of the formula’s creation in 1976, he said:

“I just wanted to get through every day without too much trouble.”

He also said:

“I do not consider it is successful. I do not think it is fair.”

He added:

“I thought it might last a year or two before a government would decide to change it. It never occurred to me for one moment that it would last this long”,

or more than 30 years. Those who pray in aid the Barnett formula should be well aware that its author thinks that it is time we moved on to something that is fairer and that is built on a needs basis.

[Hywel Williams (Arfon) (PC)]

Will the hon. Gentleman refer to the Holtham commission, which looked at the nature of the funding for Wales? It identified that Wales has been underfunded historically to the tune of about £300 million per annum.

[Andrew Selous]

I will most certainly refer to the Holtham commission. What the hon. Gentleman says is quite correct. He should have no fear about what I propose. The Holtham commission came to the same conclusion as the House of Commons Justice Committee report in July 2009 and the excellent House of Lords Committee report, on which there was a good debate on 11 March 2010. The commission really said the same thing as those reports: we need to move to a needs-based formula.

The money given to Wales and Scotland is distributed on a needs basis across the Principality and Scotland. It should not, therefore, be too difficult to put together a needs-based formula to allocate the money. That is difficult to argue against, and as I said, leading members of the Conservative, Labour and Liberal parties came to the unanimous conclusion in the House of Lords Committee report that we should move to such a formula.

I want to spend a little time explaining why the situation is unfair for England. We sometimes look at the Barnett formula as if it is just about Scotland, Wales and Northern Ireland. As a committed Unionist, however, I think we also have to remember the English. I do not, in any sense, say that apologetically; I just think we need to be fair to everyone, because poor people in England have similar rights and should also be treated fairly.

Council tax in Scotland has been frozen for a considerable number of years. Many of my constituents have worked hard all their lives to buy the home they love, but some are forced to sell their homes because they cannot afford the council tax, which goes up year after year. Is that fair?

I also think of business rates. I represent a town called Dunstable, which recently had 56 empty shops in its high street. Many shopkeepers told me time and time again that business rates were driving them out of business. Hon. Members might therefore be interested to know that business rates in Scotland were reduced by 80% for businesses with rateable values of up to £8,000 in 2008-09 and scrapped entirely in 2009 and 2010. Business rates were cut by half for businesses with a rateable value of up to £10,000 and by up to 25% for those with a rateable value of up to £15,000. Of course, I commend the Minister for recognising that unfairness as far as England is concerned and for bringing some relief, although it is not as much or as generous as elsewhere. I thank her and her Treasury colleagues very much for what they have done, but there are businesses that would still be operating in my constituency and paying tax revenue to the Treasury had we applied that relief earlier and more fairly across the United Kingdom.

Since 2002, personal care in Scotland has been given without reference to need, whereas it is time limited and not available in the same way in England. Prescription charges are much lower in Scotland and will be abolished completely by April. They do not exist in Wales. Why should people in the same circumstances in England have to pay prescription charges? On hospital car parking charges, it costs £2.50 per visit to park at my local hospital. If someone on a low income has a family member in hospital for a long period, those charges will be significant. Again, such charges are not paid in Scotland.

This year, the situation with tuition fees and education maintenance allowance really was the straw that broke the camel’s back for a lot of people in England. English Members have been receiving lots of letters about education maintenance allowance and the fact that it is to be replaced by a discretionary grant; but of course it is being kept in Wales, Scotland and Northern Ireland. There will continue to be no tuition fees for Scottish students and there will be no increase in the fees for Welsh students, while those of English students will double. Therefore, in a few years’ time, a Scots graduate, a Welsh graduate and an English graduate, working in the same company and the same office, perhaps having done similar courses, and earning the same salary under the same taxation system, will be paying back hugely different amounts of debt. How are we supposed to explain to our constituents that that is fair? My children are already giving me considerable grief on the subject, as they look to the university fees that they will no doubt pay in a few years. It is frankly not fair, and I defy any Scottish or, indeed, Welsh Member to say that the system is fair to the English.

[Owen Smith (Pontypridd) (Lab)]

I am pleased that the hon. Gentleman got this important debate, and pleased to be able to contribute a little. There is a one-word answer to the question that he has raised: devolution. In the spirit of fairness in which he has framed his remarks I entirely agree that we need to move to a needs-based formula, and the Holtham report and all the other empirical data we have about Barnett point in the same direction. We need to move in that direction. I am encouraged to hear a Parliamentary Private Secretary thinking in such ways. However, is it not invidious to cherry-pick ways in which citizens in Wales may be better off, when they are less well off in other respects? The hon. Gentleman mentioned the relative deprivation in Wales and Scotland. That is reflected in the empirical evidence, which shows that a needs-based, deprivation-based formula would afford more money to Wales than we currently enjoy.

[Andrew Selous]

I am glad that the hon. Gentleman is with me in wanting a needs-based formula. He is right that the evidence of the Holtham commission, and the evidence that the House of Lords took, suggests that Wales would benefit from such a formula and that if it is to be applied fairly there should be some reduction in what Scotland currently receives.

I agree with the hon. Gentleman that it is up to the Welsh Assembly Government and the Scottish Government to spend their money as they see fit. What is not fair and right is the allocation of money in a block grant on a bust formula from 1976, whose author no longer thinks that it is fair, when there is clearly in many cases such an imbalance between what the English and the Scottish can be offered. That is an entirely reasonable case.

[Mark Lazarowicz]

Will the hon. Gentleman give way?

[Andrew Selous]

I will, but I want to finish my list—I have not got to the end of it yet—of what we do not get in England. It is really worth listing, because even the Library did not have a comprehensive list. I was adding to it as I went along.

Certain cancer drugs were available earlier in Scotland than in England—we are just catching up. Concessionary bus travel is more generous in Scotland. People can go on long-distance journeys there and take a companion, if they are disabled, which they could not do in England. I think that hon. Members who are fair and who consider the issue dispassionately and want to do the right thing by every part of the United Kingdom will agree that we cannot allow the situation to continue if we are committed Unionists.

[Several hon. Members]

rose—

[Andrew Selous]

I cannot remember who wanted to intervene earlier; I give way to the hon. Member for Edinburgh North and Leith (Mark Lazarowicz).

[Mark Lazarowicz]

I am grateful to the hon. Gentleman for giving way again, but it is an important debate. I welcome the tone in which he presents his case, even if I disagree with some of the conclusions. Would it not be better if he were to mention not only the areas where residents of Scotland and Wales appear to get a better deal, but those where, because of a choice made under devolution, spending is less? There is now a debate in Scotland and Wales about university funding and the effects of different tuition fee levels on university fee income. In some areas of health and transport, provision is less than in England. It is not right, as my hon. Friend the Member for Pontypridd (Owen Smith) said, just to cherry-pick the areas where Scotland and Wales seem to be doing well, without referring to choices that have resulted in different consequences, which can be easily pointed out as examples of relatively lower levels of service than in England.

[Andrew Selous]

I will now move on to what I think we should do about the situation. I am proposing a needs-based way of allocating the block grant, reflecting current populations and needs, which are worse in England in some cases than in Scotland, and significantly worse in Wales than in some parts of England. That should be recognised because there is a fair, open and transparent way of proceeding, but at the moment much of what the Treasury does is not transparent. Crossrail, for example, was at one moment a UK project, designated by the Treasury. The next minute it was designated an English project so that there could be a Barnett consequential, and Scotland could get an extra £500 million. That may or may not have been right, but what was the process? Was it open to transparent scrutiny so that people in Wales and England could see that it was fair? In one year, the Treasury suddenly said that there was a £900 million underspend for 2007; that was allocated to the Scottish budget. That may have been correct, but at the moment everything is done deep in the bowels of the Treasury. I do not say that there has not been fair play, but there is a need for the process to be more open and transparent. The Treasury is judge and jury in its own court, in a process that is not open to scrutiny. I do not think that that is right.

[Hywel Williams]

I agree largely with what the hon. Gentleman has been saying. I want to point out the value of considering not only differences between Scotland, Wales and England but the interesting regional differences in England. It would be very useful for hon. Members from the north-east, for example, to look at those. Perhaps the hon. Gentleman will refer to them later.

[Andrew Selous]

The hon. Gentleman is right. There are significant differences. I am an east of England MP, and that region has the lowest spending of any region in England. Perhaps that is why I get increasingly angry communications from my constituents on the matter.

Having outlined the problem and some of the unfairness, I want to talk more about what we can do. I direct my hon. Friend the Minister to the excellent conclusions of the House of Lords report of 2009 on the Barnett formula. The report looked across the world to Australia—I declare an interest in that my mother was Australian, but that does not affect whether I think the Australians have a fair and good solution, from which we could learn. In Australia, the Commonwealth Grants Commission is an independent body charged with the responsibility of dividing the cake between the Australian states and territories. It is an advisory body to the federal Government and its impartiality is completely accepted by the states and territories of Australia. I understand, and agree with Government colleagues, that we are not looking to set up extra quangos. If my hon. Friend does not want an extra quango my proposal is that we should add the specific responsibilities in question to the remit of the Office for Budget Responsibility. However, if she says that that is too much for the OBR, it is not fair to tell me that we should not have an extra quango. I would be happy to go either way, with whichever option seemed most sensible and would cost the Government less. We could add the responsibilities to those of the OBR, but if we wanted a separate body we could have one. Given the figures involved—the sums of public spending—it would be a serious body.

What the Committee in the House of Lords proposed was only illustrative. If the Government have other or better ideas, or if colleagues from either side of the House want to contribute ideas about what the needs-based formula should include, let us start the debate now. Let us get ideas rolling into the Treasury, so that we can proceed with total fairness.

[Mr Mark Williams (Ceredigion) (LD)]

I too congratulate the hon. Gentleman on obtaining the debate. I welcome the direction of travel that he has outlined, but I want to ask about timing. He has alluded to the impatience in England, whereas I and colleagues from Wales and Scotland would allude to the shortfall, such as that in education; there is £500 less per child in Wales than in England. There is impatience about that. The coalition Government have said that in a Welsh context a Calman-style commission will be set up after the referendum. What are the hon. Gentleman’s views on that? Do they reflect that impatience, or is he more on the go-slow track?

[Andrew Selous]

I am naturally quite an impatient person, and I want to get things done when I see something that I think is not right. However, we are in difficult times financially, and it will be incredibly difficult to move from one formula to another in these challenging times.

A sensible time scale would be for the Government to start doing the work now, setting out how we are to allocate money fairly between England, Scotland, Wales and Northern Ireland on a needs basis. Once we agreed on it, there would need to be a transitional period. We cannot get away from that, because we have to do such things fairly and in a way that does not cause undue difficulties in any part of the United Kingdom.

I would be a happy person at the end of this debate if I had a sense that the Government would move toward setting up a system that allotted funding on a needs basis, and that they would agree to create some sort of body to do that, and consider a transitional period. The beauty of that is that by then we would have got through these difficult financial times, and more money would be available as we started to implement such a system. It would also make the transition easier for the parts of the United Kingdom that did not benefit.

[David Mowat (Warrington South) (Con)]

rose—

[Andrew Selous]

I shall give way for the last time; I have been generous in giving way, but I need to move on in order to let others speak.

[David Mowat]

I thank my hon. Friend for giving way. What he says about the time scale is important, particularly vis-à-vis Scotland. Next week the Scotland Bill is coming before the House. In my opinion, it will enshrine the current level of the Barnett settlement for ever, as it will link the Barnett amount that Scotland receives directly to the level of income tax paid in Scotland. As a consequence, future reforms will be difficult. I am not sure that time is on our side.

[Andrew Selous]

I hear what my hon. Friend says. He refers in part to the Calman commission and the fact that the block grant in Scotland will be reduced to 65% and that Scotland is to raise 35% of its income through tax-raising powers given under the Bill. What I am talking about will still apply, however, as 65% of Scotland’s public spending will be allocated. Everything mentioned in this debate is relevant, although we can argue about the time scale. I shall listen carefully to what the Minister has to say. I have outlined a possible way to proceed.

I touch again on the different needs that the House of Lords Committee found. They are four: we should move to an assessment method that takes account of the age and structure of the population, as a significant number of older people require extra spending; we need to consider low incomes; we should take account of ill health and disability; and we should consider economic weakness. All of us would probably have some sympathy with those four indicators. There would be value in setting up an independent commission, as it would allow people to make representations, and extra factors could be taken into account to deal with the particular situation in Wales or Scotland. Indeed, it has been done successfully in Scotland.

The House of Lords debated the Barnett formula report on 11 March 2010. Lord Moser, a former head Government statistician who was appointed by a previous Labour Government, said:

“We emphasised repeatedly that, especially in the hands of an independent body, backed by thorough and on-going research, this was an eminently practical task. It is just not true to say that it is difficult or too time-consuming or too complex—that is not so.”

He was talking about the task of setting up a new needs-based commission.

Baroness Hollis, a distinguished Labour peer, spoke of the differences in funding for personal care:

“What could be more unfair…than an elderly, frail person in East Anglia receiving perhaps only two-thirds, in public expenditure terms, of what an equally elderly, frail person in Scotland receives, even though the person in East Anglia is poorer, because we are hanging on to an unfair population basis of estimating subsidy?”

Lord Newby, a Liberal Democrat from Scotland, said:

“In terms of gaining public acceptance for a conclusion which will inevitably mean funds being taken away from Scotland, it is interesting to note that within the Lib Dems we had quite a spirited discussion with our colleagues in Scotland when we first proposed this, as you can imagine. In the end, the argument that fairness is the only long-term sustainable basis for allocating expenditure won the day, as I am sure it will in future as this case is made more widely.”

I note that Lord Davies of Oldham, then a Labour Treasury Minister, wound up the debate by saying of the report’s authors:

“They have created a framework within which the disadvantages of the Barnett formula are such that a reforming Government would need to look at them.”

That brings me back to my opening remarks. I am proud to be part of a reforming Government, and I hope that we will not be dilatory in this matter.

Baroness Noakes, then our shadow Treasury Minister, said in response to the debate:

“In principle, this is something which my party supports. We also support the transparency advocated by my noble friend Lord Trimble.”

She also spoke of

“an inevitable conclusion that change is necessary.”—[Official Report, House of Lords, 11 March 2010; Vol. 718, c. 371-404.]

I thank all Members who wish to contribute to the debate, and I shall listen with interest to what my hon. Friend the Minister has to say in response.

[Jim Dobbin (in the Chair)]

A number of hon. Members wish to speak. I remind the House that the wind-ups will start at 10.40 am, so I ask Members to keep their contributions brief.

09:56

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

It is a privilege to serve under your chairmanship, Mr Dobbin. Before the debate started, I forewarned you that I may have to leave early because of my Select Committee responsibilities, and I apologise for that.

I congratulate my hon. Friend the Member for South West Bedfordshire (Andrew Selous) on securing this debate. I recognise and support the spirit in which he has raised this sensitive matter, which affects all the nations and regions of the United Kingdom. He has underlined the point that we have a reforming Government and that bold steps need to be taken to come up with a formula that will serve all the nations and regions in a positive and constructive way that is dependent on need. The debate has been going on for some time in Wales. Even before the evidence was as stark as it is now, there was a view that relative deprivation in Wales meant that the Barnett formula was not serving Wales well.

A mathematical formula, such as the Barnett formula, offers significant advantages. The first advantage is that it offers a guarantee of funding, particularly to devolved Administrations, who need such a guarantee to plan, which prevents, for example, the Welsh Assembly Government, or the Wales Office on its behalf here in Westminster, becoming involved in horse trading year on year. Such a mathematical formula obviously offers that guarantee. The second advantage is that in times of limited or reduced spending, the Barnett formula offers protection to the devolved Administrations.

On the other hand, there are significant disadvantages with the formula being so far out of date, and I regret the time that it has taken to get to this point. The previous Government should accept their responsibility for leaving it so long. Despite Lord Barnett’s strong view that the formula needed reform, it was not accepted. He plainly said that the formula was unfair.

[Hywel Williams]

My memory of that slightly pre-dates the hon. Gentleman’s. I draw his attention to numerous debates over many years when Front-Bench spokesmen on both sides used the formulation, “The Barnett formula serves Wales well.” The hon. Gentleman should concede that both Conservative and Labour Governments were staunch defenders of the Barnett formula. My party, of course, took another view.

[Alun Cairns]

I shall square that point in a moment, but I do not want to let the previous Government off the hook for their delaying tactics in resolving the matter because of its sensitivity. Whereas Lord Barnett plainly said that it was not fair, the then Chief Secretary to the Treasury said that it was fair enough. That certainly was not good enough for Wales. I regret to say that despite 13 years in office, the previous Government did not have the opportunity to resolve the formula.

[Guto Bebb (Aberconwy) (Con)]

It is important to point out that back in 1999 and 2000, Wales, on average, received £125 for every £100 in England. In 2010-11, Wales receives around £112 for every £100 in England. Therefore, the Welsh treatment under the Conservative Government is significantly better than it was under the Labour party, when there was a significant decline in funding for Wales.

[Alun Cairns]

I will come on to the convergence in a moment. None the less, it is a point that is well made and that should be recognised by the Labour party. It is important not to confuse freedom of devolution, which enables nations to pursue their own policies, with funding. There is naturally a link, but because there is a policy, subsidy or generosity in one particular area, it should not then be used as proof or evidence of over-funding when we consider the whole context.

[Owen Smith]

I was rising to make precisely that point. Does the hon. Gentleman fear, as I do, that the hon. Member for South West Bedfordshire (Andrew Selous) will not be happy when we have a needs-based formula, because those examples that he cherry-picked earlier will still exist? The politics of envy, which underpins some of his concerns, will still play into this debate.

[Alun Cairns]

That point only demonstrates the hon. Gentleman’s misunderstanding of the spirit and tone of the debate presented by my hon. Friend the Member for South West Bedfordshire. My hon. Friend identified the differences, but recognised that that freedom needs to take place when we consider devolution. The obvious things in Wales are free prescriptions and—this one has focused attention of late—tuition fees. To those hon. Members who are critical of the Barnett formula because it is advantageous to Wales, I say that our NHS waiting lists are much longer and that the cancer drugs fund does not apply, so there are considerable drawbacks, and they need to be taken in the context of the whole funding settlement. It is far too easy to pick a policy that has been prioritised by the Welsh Assembly Government without accepting the areas that may not have been prioritised. Health is the obvious one. In England, for example, there is a guarantee of no cuts in NHS spending, whereas in Wales there will be real-term cuts and financial cuts to the health service. That point should be recognised in the debate.

My hon. Friend the Member for Aberconwy (Guto Bebb) has referred to the positive contribution of the Holtham commission. The two volumes of the Holtham commission can be brought down to a few figures. At the moment, Wales receives £113, which will drop to £112, for every £100 that is spent in England; Scotland receives £120; and Northern Ireland receives £124. Holtham concludes that Wales needs £115, which is marginally more than it is currently being awarded; Scotland needs £105, which is a significant reduction from its £120 now; and the figure for Northern Ireland is not far from what it already receives. That is the first needs-based assessment that has taken place. If that is not accepted in general terms, it is certainly an exceptionally useful starting point of where the needs lie.

The hon. Member for Arfon (Hywel Williams) has said that, historically, Wales has been underfunded by £300 million, but that fails to understand the convergence that has taken place over the past 13 years or more. That £300 million is the current level, and it would have been a much smaller level in the past.

A very good point has been made about Crossrail. Despite the view that the Labour party in Wales is taking at the moment, we can compare the spending on Crossrail with that on the Jubilee line. The spending on the Jubilee line was Barnettised, but the spending on Crossrail by the previous Government was not, which highlights another way in which Wales was treated unfairly by the previous Administration. It is far too easy to point the finger, when a real debate is taking place on satisfying the needs-based requirement.

My closing points—I am conscious of the time—relate to the way forward. All the nations and regions need to engage in the debate about this extremely sensitive area. Those who are allied with the Scottish National party are a block not only to any form of debate—that position is natural, because of the way in which Scotland would lose out—but to changes elsewhere in the United Kingdom. As the hon. Member for Arfon builds up a strong relationship with the Scottish nationalists, he must recognise that that is blocking reform in Wales, because every part of the UK needs to engage in this debate if we are to come up with a needs-based formula that satisfies all the nations and regions of the United Kingdom.

10:06

[Owen Smith (Pontypridd) (Lab)]

I am grateful to serve under your chairmanship, Mr Dobbin. I will make a few brief remarks, because I, too, am on the Select Committee to which the hon. Member for Vale of Glamorgan (Alun Cairns) has referred. I must leave early, for which I apologise.

I welcome today’s important debate. Although the issue has been debated many times in this House—there was a recent debate in the House of Lords, which produced an excellent report that is well worth reading—it is worth debating again. The issue was not resolved by the Labour Government. I accept that we were tardy in addressing the issue. Once we saw the firm evidence in the Holtham report on convergence—the so-called Barnett squeeze that resulted in a reduction in the relative benefits to Wales over the past 10 to 15 years—we responded to that at the last election. The previous Labour Government were keen to see fair funding for Wales, and we went into the last election fighting for that pledge. Had we won, we would have delivered fair funding. I hope that this current Government will be true to their word and look to deliver a different form of funding for Wales and the other devolved nations and regions of the UK, and I hope that it will be needs-based, as the hon. Member for South West Bedfordshire (Andrew Selous) has said.

My caveat—I did not mean to personalise the debate earlier in referring to the politics of envy—is that at some level, the hon. Gentleman’s underpinning concern is that parts of England do not benefit. In particular, he points to the fact that historically the east of England, which he represents, has featured towards the bottom of the league table of public expenditure over a long period. That is, in itself, reflective of the relative needs of the east of England. We have for the English regions, as Holtham and others have pointed out, a needs-based formula. Indeed, one of the conclusions of the excellent House of Lords report is that a quick interim measure would be for Wales and Scotland to go to a needs-based formula based on the English version.

As the hon. Gentleman has pointed out, aspects of policy in the devolved nations and regions can foment a sense of envy. When one looks at the responses in the Daily Mail and The Daily Telegraph on tuition fees, which range from outrage that the Welsh are doing something different through to incredulity that such a policy can be afforded in Wales, one sees that they reflect the lack of understanding that persists across the House about the way in which devolution works.

Current Government Members, such as the hon. Gentleman, have highlighted examples of how Wales and citizens in Wales appear to benefit financially from the devolution of powers and the policies that are pursued in Wales, whereas hon. Members from Wales have highlighted other areas, such as the health service, where—according to those hon. Members—people in Wales are not benefiting.

[Andrew Selous]

The evidence from Holtham and from the House of Lords Select Committee is that Wales would gain from a needs-based formula. So there is no part of what I have said that would cause problems as far as the Welsh are concerned. It appears that Scotland is more generously funded than a needs-based formula would suggest, but that is what we need to set up a commission to look into.

[Owen Smith]

I am grateful to the hon. Gentleman for that intervention and I fully appreciate that point; I heard him say very clearly that Wales would benefit. My point is simply that I fear that in much of the debate on this subject there is a concern that English regions do not benefit where other parts of the UK, particularly the devolved regions, do. Traditionally English Members from both Houses have expressed that view, which underpins and unfortunately colours debate on this subject.

[Mark Lazarowicz]

Is it not the case that moving to a needs-based formula would receive universal support, would be value-free and would not allow any political interference is an illusory hope, because even with a needs-based formula the question arises of how one assesses needs? For example, how much importance should be given to rural diversity and to the length of communications in Scotland? If a high priority were given to ferry links to the Shetland Isles and Western Isles, there would obviously be a high result there. When it comes to funding that depends on age, there are some parts of both Scotland and Wales where unfortunately, because of ill health, some people do not live to an older age, which would not be reflected in the formula. The idea that we can move to a value-free system with a needs-based formula is somewhat illusory. Will my hon. Friend comment on that?

[Owen Smith]

I agree with my hon. Friend—that is essentially what I was trying to say a moment ago. An arm’s-length independent organisation, which Holtham considered—whether it is the Office for Budget Responsibility or whether it is some other body—is an excellent idea that we should take account of.

[David Mowat]

The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) has said that it is not easy to conduct a needs-based analysis, but that does not mean that it should not be tried. He has raised the issue of sparsity in Scotland and the fact that many people live in the Western Isles, Orkney and such places, which makes a difference. There is a precedent for such an analysis, which was carried out by the Scottish NHS and which is referred to in the report by the House of Lords Select Committee on the Barnett formula. The cost was about 15% extra for that component of the population. However, the point is that that component of the population is very small and the overall impact is less than 1.5%. So it is right that that factor is taken into account, but it is not material to what we are discussing.

[Owen Smith]

The point that my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) has made—that it will be very difficult to introduce a needs-based formula—is valid. The aspects of a needs-based formula that ought to be taken into consideration and the weighting that ought to be placed on those aspects individually will not be incontestable. So it is easy to bracket them under “deprivation and sparsity”, or “deprivation” and some other criterion. Within that, there will be all sorts of eminently contestable notions related to the number of children in a country, the number of older people who are dependent, sparsity and all sorts of other aspects, which will be eminently contestable.

The simple point that I was trying to make is that even if we shift to a wholly independent—or ostensibly independent—and wholly needs-based formula, we will still see divergences and differences between the relative spending priorities and the relative quantum spent on individual aspects of public services across different parts of the country. That will still fuel a sense of resentment in certain quarters, when parts of the country are perceived as doing better than others. I therefore caution that we would not all be happy with a needs-based formula and I suggest that the hon. Member for South West Bedfordshire—

[Andrew Selous]

We would be happier.

[Owen Smith]

“Happier”—okay, well perhaps we would be “happier”. I, too, would be “happier” if we went to a needs-based formula; I will concede that much.

In conclusion, I simply add that at last we agree across this House that a fairer funding formula ought to be pursued and that Barnett has seen its day. I therefore commend the Government for considering how we might do something important about it in the future.

[Jim Dobbin (in the Chair)]

There are still three hon. Members who want to contribute, so I remind hon. Members of the time.

10:14

[Guto Bebb (Aberconwy) (Con)]

I will be very brief, Mr Dobbin. Thank you very much for calling me. It is a pleasure to serve under your chairmanship this morning. I also want to apologise in advance for the fact that I might have to leave before the conclusion of the debate, because of Select Committee responsibilities.

I congratulate my hon. Friend the Member for South West Bedfordshire (Andrew Selous) on securing this debate. In my view, the debate has been very positive and the spirit in which it has been conducted is something that we should be proud of, because it has not been a case of people complaining about the unfairness of the funding system in relation to England. Instead, the debate has highlighted real concerns about the fact that the current system is possibly unsustainable, because we are creating anomalies that are very difficult to justify in the long term.

I concur with my hon. Friend the Member for Vale of Glamorgan (Alun Cairns), inasmuch as the fact that some of the examples that have been given about the differences, for example, between Wales and England in terms of spending is in danger of confusing the issue of Barnett with the actual effect of devolution. As a Member from north Wales, where one can get to Cheshire in less than an hour along the A55 on a good day, I am very aware of the fact that, for instance, the decisions made by the Welsh Assembly during the past 12 years have resulted in spending on education being significantly less per head in Wales than in England. That is a real concern for people in north Wales, because we can actually see the differences between spending in Cheshire and the spending in north Wales. That is an effect not of Barnett but of the decisions that have been made and the priorities that have been set by the Welsh Assembly. As I said in my contribution to the debate on the issue of student funding, I personally feel that the decision made by the Welsh Assembly, within the Barnett block grant, in relation to funding student fees in future is actually an attack on the Welsh university system, which will be disastrous in the long term for Wales. Again, however, that is a decision that has been made within the funding formula. It is important when we have this debate on the funding formula to be aware of the fact that, on some clearly beneficial spending priorities established by the Welsh Assembly, there are counter-arguments, in terms of examples of spending decisions made in Wales that are actually quite damaging.

There are things that we need to be aware of about Barnett. In the Welsh context, there is concern that there has been a real change in the way in which Barnett works in Wales. I have already highlighted the fact, in an intervention, that in 1999-2000, Wales received on average about £125 for every £100 spent in England. That figure has reduced to about £112 for every £100 spent in England and obviously that reduction has been highlighted in Wales regularly. Therefore, I genuinely applaud the Welsh Assembly for commissioning the Holtham report, because the argument that Wales was underfunded and was being unfairly treated in some way was one that we had heard a lot about. I think that the Holtham report gave a very secure background to that debate and explained that Wales was, in comparative terms, being underfunded, if one takes into account the needs of Wales. That point has been acknowledged in this debate by my hon. Friend the Member for South West Bedfordshire, so it is a genuine issue.

Therefore, there is now a growing need to address the fact that the Barnett system is out of date and is creating a real problem. That situation has been made much worse by the implications of the Barnett squeeze; because of the way that the system works, as spending was increasing, the allocation to Wales on a pro rata basis was not increasing at the same rate.

That brings us to another important point. It has been highlighted by Holtham, and I do not think a single Member of this House would argue against this fact: most analyses of the Barnett formula seem to indicate that, if we try to move to some needs-based formula that is not dissimilar to the one used in England, the effect will be to increase the funding to Wales slightly—even if it is only a slight increase, it would be most welcome—but there would be a significant difference to the funding for Scotland.

That is an issue that we need to think about very carefully, because as my hon. Friend the Member for Vale of Glamorgan pointed out there is currently a block on consideration of the issue. Quite clearly, the Scottish Parliament is not looking to implement any changes, because the advantage is given to it by the current system.

Nevertheless, in my view there is a real issue here, which is the continuation of the happy relationship between the four component parts of the United Kingdom, because ultimately an ongoing sense of unfairness, which has been highlighted from an English point of view, is not compatible with the sustainability of the Union. There is a genuine need to consider coming up with a new formula that will replace Barnett and that will try to be fairer to all parts of the United Kingdom.

The hon. Member for Pontypridd (Owen Smith) made the point that no new system would necessarily result in everyone being happy, but that is not in itself an argument against sticking with a system that was implemented in 1976. Ultimately, it is important that the present Government take the issue in hand, to ensure that we have a system that is fairer to all parts of the United Kingdom.

Finally, I need to make a point about the Welsh context. The hon. Member for Arfon (Hywel Williams) is a Plaid Cymru Member, and his party has certainly been very vocal about the unfairness of Barnett. I think that it is fair to say that when the Holtham report was published there was genuine disappointment among some members of Plaid Cymru that the highlighted shortfall of £300 million was significantly lower than some of the figures that had been bandied around. Shortly after the publication of the report, I took part in a debate in Bangor university with the former president of Plaid Cymru and, in view of the evidence that had been collected, he could not argue that Wales was extremely hard done by under the current system.

[Hywel Williams]

Did I hear the hon. Gentleman say that the possible £300 million increase in funding for Wales was minor?

[Guto Bebb]

It is minor in the context of the unfairness that has been claimed by the hon. Gentleman’s party in the past. Currently, we spend about 112%, compared with the Holtham recommendation of 115%. In view of the fact that in 1999-2000 we were spending 125% compared to 100%, I think that my description is fair. The important point is that it is odd, to say the least, to hear a nationalist party, which now advocates independence, arguing very strongly for a needs-based formula that takes into account the need for transfers from England to subsidise the situation in Wales. I would fully subscribe to that. One of the hard lessons that I have learnt in life is that Wales is part of the United Kingdom, and as a result we accept that there can be transfers between the regions and nations of the United Kingdom to reflect their different needs. I find it odd that a party that advocates breaking that link can also stand up and argue for increased funding from the English taxpayer, to subsidise the situation in Wales.

[Hywel Williams]

I do not want to engage in what might be an internecine struggle, given the hon. Gentleman’s previous membership of my party and his strong advocacy of our policies, many years ago before he jumped ship—apparently on the matter of the currency. Does he accept that the Holtham report makes a three-step recommendation: first, a floor is established; secondly, there is then a needs-based formula; and thirdly, which is the point that the hon. Gentleman mentions, a differential taxation system for Wales is considered? The snapshot that he presents as our policy is certainly not our policy; it is one point on the journey.

[Guto Bebb]

The problem with the hon. Gentleman’s point is that it would require the agreement of the Scottish Parliament and we would have to look at the matter on a UK-wide basis. He is perfectly right to highlight my background regarding the single currency. The crucial issue was that one of the arguments against a single currency was that it was difficult to see how transfers from Germany to Greece, for example, to subsidise that currency could be justified. We now see that situation, and it has been highlighted in a book by my right hon. Friend the Member for Wokingham (Mr Redwood). My view is that we can still justify transfers within the United Kingdom to the different regions of England and to the nations, on the basis that we have a shared heritage and a shared belief that we are part of the United Kingdom. I was of the view that that shared heritage would not be there at European Union level, and we might see that issue tested to destruction this year. I do not want to see the situation that we have in the United Kingdom, with transfers within the Union, destroyed by a clear unfairness in the system. Wales will probably benefit from a needs-based system, but we certainly need to look at the issue during this Parliament because I think that otherwise there will be a growing disenchantment with the system on the part of the English taxpayer, and that would be bad for the needs of people in Wales.

[Jim Dobbin (in the Chair)]

Hon. Members might be interested to know that Lord Barnett was a predecessor of mine. I did not realise that my constituency had such an impact on Government funding.

10:24

[Hywel Williams (Arfon) (PC)]

I very much welcome this debate, and I congratulate the hon. Member for South West Bedfordshire (Andrew Selous) on securing it. The issue has been possibly an obsession of my party for many years, and so I am glad to see other people sharing that obsession—or disability.

I should like to focus briefly on the Barnett formula and on Wales, rather than on the English regions, because there are clear implications for the English regions, as I have already said. There are great differences between the funding for the regions within England, and the debate on that can be informed by looking at what has happened in Wales for many years. We have already heard that the Holtham report points out the requirement for Wales now to have a needs-based assessment. In fact, such assessments have been needed in Wales for many years, and they are already carried out in some English regions. The Barnett formula was developed in the ’70s and implemented in 1978—not in 1976, as has been said. It was based on historical spending and the size of the population—basically on the success of Ministers in extracting money from the Treasury pre-1978. It is a converging formula, and we have seen it in operation for many years. Between 1999 and 2007, public spending in England rose by 33%, and in Wales by 28%. That is the nature of convergence: public spending rose, but less quickly in Wales.

[Mark Lazarowicz]

The hon. Gentleman’s point needs to be underlined, because although many people suggest that the Barnett formula gives an unfair bias towards Scotland and Wales, it is in fact designed to level their expenditure down to the English average. It is not in any sense a formula that protects Scotland and Wales.

[Hywel Williams]

The hon. Gentleman makes a good point, but my point is that it is a converging formula, and that Wales is gradually losing out. Jumping forward to one of my later points, Holtham called for a floor to be established, and the right hon. Member for Neath (Mr Hain) referred to that before the election. We have consistently called for public sector funding in Wales to be based on needs, and our calls have been ignored and rejected. I do not know how many times I have heard the right hon. Member for Neath, and current Government Members, saying that the Barnett formula has served Wales well. Joel Barnett himself said, in a statement on 11 January 2009:

“I only meant the Barnett formula to last a year, not 30…One of the problems is that it was not based on need. It determined on the basis of population how much more or less funding Scotland should receive when cuts or increases in public spending were being made across the United Kingdom.”

I note, however, that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) used his appearance at the Wales Labour pre-election conference last year to call Barnett a needs-based formula. It is, of course, no such thing.

The report produced by Gerry Holtham has received the support of all the main political parties in Wales, and I am glad there is a measure of cross-party consensus this morning. The report calls for a floor to prevent further erosion of Welsh funding, for the reform of the formula to make it a needs-based one, and to at least stop, if not necessarily correct, the historical underspend on Welsh services. It then calls for differential taxation to be considered, to ensure that the Welsh Government take greater responsibility for their own spending. As I have noted many times in speeches in this place, the Welsh Government get a very large amount of money and are responsible for raising not a single penny piece of it, which is, I think, a fundamentally bad situation.

The underspend in Wales has been recently estimated at around £300 million—a significant sum—and there has been a knock-on effect on the private sector, as I am sure the hon. Member for Aberconwy (Guto Bebb) knows. The public sector in Wales is so large and is such a significant purchaser of goods and services, that if it were to have more money there would be a knock-on effect on the private sector. Because the formula reflects an historical position rather than an assessment of need, it has put Wales in a fundamentally weak position. We are funded on the basis of proportional Government spending in England and Wales, or in Great Britain, depending on the circumstances. Spending in Wales has been largely subject to changes in Government priorities on an England, England and Wales or GB basis, so we follow those priorities. We now have a Government in Cardiff who cut the cake as they see fit, but of course the size of that cake always depends on other matters. Hospital parking and prescription charges have been referred to, so I will not pursue those issues given the time.

How to define need has been discussed somewhat. I point hon. Members to the Holtham commission’s report, which suggests six steps based on such considerations as the number of old and young people, rurality and so on. The point was made that that might be complex, but that does not mean that we should not do it. I point hon. Members to an interesting example: the Welsh index of multiple deprivation, which has replaced the Townsend index of poverty. The Welsh index is complicated, but it is very effective. It can be done.

The Government have been clouding the issue by considering Wales’s funding as something that can be postponed until the recession is over. It must be examined now, for good reasons of governance in Wales and to eliminate the reasonable feelings that the hon. Member for South West Bedfordshire mentioned. Will the Minister tell us when the Government intend to start considering the Holtham inquiry’s recommendations for Wales and, more broadly, for the rest of the UK?

10:31

[Anne Marie Morris (Newton Abbot) (Con)]

This is a timely debate, and I am grateful to my hon. Friend the Member for South West Bedfordshire (Andrew Selous) for securing it. I will keep my comments brief to assist one more Member to speak.

Public funding effectively comes in two chunks. The largest is spending through central Departments; the smaller comes through the grant formula for local government. The emphasis today has been on the application of the Barnett formula to the local government grant, but the reality is that Barnett has had a creep effect and has become the default mechanism for making decisions even in mainstream Departments. Reforming Barnett is about reforming it as it is applied not just in local government but elsewhere.

The particular problem in my south-western constituency of Newton Abbot, in Devon, is that we are one of the largest regions in the country. Consequently, we have huge transport challenges, but the sparsity effect is not taken into account when funding formulae are determined for our local authorities. Some 20% of the south-west is rural, and it is a well-known and well-researched fact that our rural deprivation is high, which carries a heavy cost: 22% of people in the south-west live on the state pension, the highest number in the country as a whole. We all know the impact of the elderly on local government spending. In the south-west, 10% of people are over 75. I am pleased to say that they have a high life expectancy, but unfortunately that does not help the coffers.

We were fortunate this time around. Devon county council suffered a spending power cut of only 1.77%; in Teignbridge, my district authority, it was 5.89%. For that, I am grateful, but looking forward, the issue must be addressed. As I said, Departments have used Barnett when considering health funding and other devolved sums of money, and as a result, the south-west has fallen down the league tables. In 2009-10, the south-west was allocated only £42 billion across Departments, the third lowest regional spend in England. It has caused an awful lot of problems. We have 12.5% of the population, yet only 12% of the spend, even before aggravating factors are considered.

Children in Devon are particularly underfunded. We are 146th of 152 in the spending league tables. It has been calculated that in health care, we are £12 million short of the figure that would have been fair. We have the lowest spend per head in England on transport infrastructure, yet we are extremely rural and 14% of the population have no car. I urge the Minister to consider seriously the request for a needs-based formula, as it is clearly the way forward. I commend the proposal made by my hon. Friend the Member for South West Bedfordshire.

10:35

[David Mowat (Warrington South) (Con)]

This has been an important debate, focusing more on Wales than on Scotland. There is a disparity in Wales—the figure of £300 million has been mentioned—but it is dwarfed by the Holtham estimate of the disparity in Scotland, which is £4.5 billion. Many English Members of Parliament, particularly those from the north, are being forced to go back to their constituencies and defend an austere budgetary environment. It is tough to do so when £4 billion a year over and above the needs-based amount is being sent to Scotland.

I have two quick points to make; I will finish by 10.40. We use the term “needs-based” a lot. The real issue is not need; it is population movement. We could continue to use the Barnett formula of 1976 if we adjusted it for the population changes that have occurred since then. It would be a simple arithmetical adjustment. It is true that a needs-based analysis could be complex, but that change is not required. We need only to adjust the formula for relative population movement, and it would eradicate two thirds of the current imbalances.

[Hywel Williams]

The hon. Gentleman is coming to the point that I wished to make. It is a converging formula, so there are issues other than population change to be considered.

[David Mowat]

It is not wholly a converging formula; I do not agree. For example, if the baseline population is not adjusted in arithmetical terms, it means that if the population of Scotland fell to one, that person would get all the money. We do not change it for population, which is indefensible. As I said, I regret the fact that there are no Members from Scotland here, unless I am misinformed.

[Andrew Selous]

There are two.

[David Mowat]

What defence of the situation is made in Scotland? I have heard two defences. We have heard the sparsity defence; I have also heard the defence in terms of oil revenues. It is argued that somehow, the £4.5 billion Barnett imbalance roughly compensates Scotland for the additional oil revenue that it has had to give up to the Union or whatever. That is a poor argument.

[Mark Lazarowicz]

Will the hon. Gentleman give way?

[David Mowat]

I will finish my point. Other affluent areas of the United Kingdom are liable for relatively higher levels of income tax, and we do not necessarily expect those areas to have better services.

Finally—I would like the Minister to address this point in her closing remarks—I am concerned that the Scotland Bill, as it is currently configured, will institutionalise the Barnett formula for ever by creating a link between income tax levels in Scotland and current levels of Barnett settlement. In other words, that extra £4 billion will be linked for ever to income tax levels in Scotland. What that means in broad terms is that in order for the Scottish income tax base to make up the £4 billion that Scotland receives over and above a needs basis, additional Scottish income tax of between 12p and 15p in the pound would be required. That will never happen.

For the same reason, it will be difficult to review the formula significantly after the link to income tax has been created. If that is the case, we seem to be stuck with the imbalance, which means that every constituent of mine—my constituency of Warrington, in the north of England, is not overly affluent—receives some £5,000 less over the lifetime of a Parliament than his equivalent in Scotland, which would not be the case if the funding were needs-based. That is not to say that England and Scotland should be the same. Holtham did not say that. The figure that Holtham used and that currently exists is 120% of the English settlement in Scotland, but 107% would probably be a fairer figure. That is not the same, but it is a lot closer than it is now. I am concerned that if the Scotland Bill passes unamended, we will institutionalise the matter for ever, which, frankly, will be bad for the Union.

10:40

[Kerry McCarthy (Bristol East) (Lab)]

As ever, Mr Dobbin, it is a pleasure to serve under your chairmanship. It is also a pleasure to see so many hon. Members present. Some have left to attend a Select Committee, but this has been a good debate in which a lot of people have had an opportunity to participate.

The hon. Member for South West Bedfordshire (Andrew Selous) is passionate about the issue and has raised it on a number of occasions in Parliament. I accept that the issue is complex and that it is worthy of debate. However, although it is easy to criticise the operation of existing mechanisms, it is more difficult to come up with an ideal solution. The hon. Gentleman stated that the Barnett formula is broken, and he has argued passionately for a needs-based formula. He is waving a hefty document at me. If he would like to pass me a copy, I will sit down and digest it with great enthusiasm at some point.

The Barnett formula has been criticised over the years and, as the hon. Gentleman has said, its inventor, Lord Barnett himself, has suggested that we might need to move towards a needs-based formula. The hon. Gentleman has highlighted arguments criticising the formula, but it is easy to conflate and confuse two issues: what happens in terms of spending within a devolved nation as a consequence of devolution, and what is a direct consequence of the Barnett formula. He highlighted the differences in devolved areas in relation to council tax, prescription charges, tuition fees, education maintenance allowances, hospital car parking and so on. However, I should like to question his comments on the differences in relation to bus travel. He said that it was not possible in England for the carer of a disabled person to travel for free with them, but that is certainly not the case in my local area. Perhaps it is up to local authorities to decide, but in my area people get free bus travel if they can show that they are in the company of someone for whom they are caring.

The issues raised by the hon. Gentleman remind us of the argument about whether devolution is about deciding the size of the cake or about allocating who gets which piece of the cake. As my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) said, Scotland misses out in other areas as a consequence of policies on prescription charges and tuition fees that differ from those in England. Moreover, the hon. Member for Vale of Glamorgan (Alun Cairns), who is no longer present, pointed out that waiting lists are far longer in Wales as a consequence of decisions taken, using devolutionary powers, to spend money elsewhere. He said that, as a consequence, there will be real-term cuts in the health service—in the cancer drugs fund, for example—in Wales.

We have to accept that our establishment of the devolved Parliament and Assemblies means that the basic principle of devolution will lead to differentials in spending. It may create a sense of unfairness, but I do not think that that is particularly germane to the issue of the Barnett formula and its grant.

[Andrew Selous]

I understand what the hon. Lady is saying and I do not disagree with her that how the Scottish Government and the Welsh Assembly Government spend the money they are given is up to them. I have no quarrel with that. However, as my hon. Friend the Member for Warrington South (David Mowat) has said, if Scotland is getting £4.5 billion more than a needs-based assessment might imply, does she not understand that that can fund additional services that are not available to her constituents and mine?

[Kerry McCarthy]

As I have said, the Barnett formula is not perfect. We have established the Calman commission and the Holtham commission to look at the more detailed issues of how devolution works and how we fund matters.

[Mark Lazarowicz]

As we have already heard, the Barnett formula is essentially based upon historical levels of spending, which means that the relatively high levels in Scotland and Wales reflect the decades of argument between Government Departments making the case for higher spending in those areas. It has not appeared from nowhere. Does my hon. Friend agree that it is a question not only of having to assess needs, but of the impact of Government spending? For example, there is no doubt whatever that the presence of Government in London is a major boost to the London economy. That does not apply to the Barnett formula, but it means that London benefits from Government spending in a way that other parts of the UK—not just Scotland and Wales—do not.

[Kerry McCarthy]

I agree entirely. Statistics are thrown around about public spending, its impact and who gets the most. It is not just about Government block grants, but about things such as welfare spending and the impact of locally raised funding, such as council tax, which is a separate issue. I think that people sometimes forget that.

The hon. Member for South West Bedfordshire argued that either a separate body or the Office for Budget Responsibility should administer and oversee the introduction of a needs-based allocations system. I agree that, if we are to move towards something like that, now is not the time to introduce radical change overnight. This is a difficult time economically, and the Scotland Bill, which is making its way through Parliament, will have a major impact on the tax-raising powers of the Scottish Parliament. There are decisions to be made about whether it will take up those tax-raising powers and the impact that would have on its spending. The impact of the comprehensive spending review settlements on the devolved nations is also an issue.

I accept—I think that there is cross-party consensus on this—that we need to examine the case for moving towards a needs-based formula. Some of my colleagues have said that, but it has to be done carefully. I do not want to return to line-by-line negotiations with the devolved nations whenever there is a spending round. There has to be a formula of some sort. I think that my hon. Friend the Member for Pontypridd (Owen Smith) said that a needs-based formula would be eminently contestable. It would be difficult to establish which needs should be taken into account and which needs should not.

[Andrew Selous]

Does the hon. Lady think that we are so much more pathetic than Australia? Queensland and New South Wales are at each other’s throats to get more funding, yet they have a settled procedure which they all respect. Does she really not think that we can aspire to and achieve that in this country?

[Kerry McCarthy]

I am saying not that it is impossible to achieve, but that it is difficult. The Barnett formula was established in the 1970s and people have said that the implication was that it was intended to be in place for only a year. A Labour Government operated under the Barnett formula for 13 years, but a Conservative Government operated under the same formula for 18 years, so this applies to successive Governments. Although there were criticisms, they were unable to find the ideal solution to replace it. Devolution has bedded in and there has been a call from the devolved Assemblies for more powers, which is going to throw the issue into the spotlight again. It is time to revisit it.

[Hywel Williams]

Is the hon. Lady, as a Front-Bench spokesman for the Labour party, saying that the Barnett formula is serving Wales well now? If that is not what she is saying, what is her argument for not changing it as soon as possible?

[Kerry McCarthy]

The argument for not changing the formula as soon as possible is exactly as I have said. At a time when spending cuts are hitting Welsh people, as well as people throughout the rest of the UK, and when changes are afoot and the Welsh Assembly is arguing for it to be given similar powers to those of the Scottish Parliament, we have to look at all those things in the round. There is no immediate solution or magic bullet that will sort the matter out. I accept the case made by my hon. Friend the Member for Pontypridd, who feels that a needs-based formula would serve the UK better.

I am conscious of the time so, to sum up, I shall just say that we accept that the Barnett formula is not perfect and that the situation needs to be reviewed. However, we would be very worried if there were a rush towards jettisoning the Barnett formula overnight. We must deal with the matter in a measured, considered way and with an acknowledgment that devolution is at the heart of the matter. There are devolved powers and we cannot expect Scotland and Wales to conduct their spending and financial affairs in exactly the same way as the rest of the UK.

10:50

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to serve under your chairmanship, Mr Dobbin, particularly given your constituency’s links to the debate today, which became apparent during the discussion. I congratulate my hon. Friend the Member for South West Bedfordshire (Andrew Selous) on initiating an excellent debate. All hon. Members have made some articulate, well-argued points and I will do my best to try to respond to them during the next nine minutes. Given the fact that so many points have been made, if I do not cover all the issues, I will write to my hon. Friend afterwards to amplify them.

I shall start by being frank. As my hon. Friend is aware, the Government’s priority is to tackle the fiscal deficit. Although we do not have any current plans to review the Barnett formula, it is also fair to say that we accept it is not written in stone. Therefore, we look with interest at debates such as this one. The current statement of funding policy that we issued in October 2010 after the spending review was made in consultation with the devolved Administrations. Before I get on to some of my more detailed comments, I shall state a problem and then an observation about the issue. The problem is that, as the former Chief Secretary to the Treasury in the previous Government said, there is no money left. My observation on the debate is that I do not think anyone is arguing for a change in the Barnett formula on the assumption that their local community will come out of it with less money.

Those are the two challenges that we face. Hon. Members are absolutely right to make the case for the funding that their local communities need. The challenge is to ensure that we get the most out of the constrained pot that we have and to ensure in the future that the formula works effectively, whether that is at the Barnett level or at the England local government level, not just in terms of the absolute cash that goes in—there has been much discussion about cash per head and various Government policy areas—but critically in terms of what comes out. Despite today’s debate, we should never lose sight of the importance of discussing the quality of policy alongside the quantity of money that is going in. The cautionary tale is that the Barnett formula, which Lord Barnett said was only ever intended to be a short-term measure, has actually had a longevity that no one anticipated. It is worth while Ministers of today and tomorrow pondering the fact that, even if we think the decisions we take today are short-term, they might ultimately prove to be far more long term than we realise.

[Hywel Williams]

Is the Minister saying that underfunding in Wales will be addressed only when the economy grows and when we can afford to do so in a way that we currently cannot? Does she accept that that is irrelevant to the fact there is unfairness now?

[Justine Greening]

I shall make two points about the hon. Gentleman’s intervention. First, Wales is well funded. Secondly, let us consider how the Government have approached the spending review. It turns out that, because of how the formula works, the decisions we took to protect the NHS budget and the education budget in cash terms and in terms of schools has meant that the Welsh Assembly Government have probably received a more generous settlement out of Barnett than they would have if the previous Administration had stayed in office.

On the points raised today, clearly there have been a number of inquiries and reports on the Barnett formula and the devolution settlement. One such review is the Calman report on Scotland. As we have heard, the Scotland Bill is passing through Parliament and my hon. Friend the Member for Warrington South (David Mowat) is right to say that the legislation will devolve some of the financial management of income tax to the Scottish Government. However, I can assure him that it will not fix the Barnett formula in stone for the future. A further aspect to the Barnett formula is the Holtham commission, the findings of which illustrate the point I made at the start of my speech. The Holtham commission considered how a needs-based formula would work for Wales and said that such a formula would mean Wales got more, which would put more funding pressures on settlements for other areas. That shows that there are no easy answers to the debate.

[David Mowat]

On the point I raised about the Scotland Bill, it does not explicitly say that the Barnett formula can never be changed in future. The point I was making is that, once we link a baseline Barnett assessment to the level of Scottish income tax, it becomes extremely difficult to change. The £4 billion additional money that Scotland gets through Barnett is equivalent to 12p to 15p of income tax. In theory, the Scottish Government could reduce their income tax levels by 12p and go down to a needs-based analysis and it would be hard for us subsequently to change that.

[Justine Greening]

I understand my hon. Friend’s point. However, in many respects, the point of devolution is to allow more local decision making to take place across the different devolved Administrations.

Just to finish off the answer to the question asked by the hon. Member for Arfon (Hywel Williams), clearly there will be a referendum in Wales on whether primary legislative powers should be held by the Welsh Assembly Government. We will wait to see the outcome of that referendum before deciding how to take forward some of the points of the Holtham report.

On some of the specific issues raised by my hon. Friend the Member for South West Bedfordshire about transparency, the chapter and verse of the funding formula is in the current statement of funding policy. I admit that it is not the most riveting read in the world, but it does explain clearly how the various settlements are reached. The funding approach is agreed in consultation with the devolved Administrations of the rest of the United Kingdom.

On my hon. Friend’s suggestion about the needs-based formula, I can absolutely understand why people and hon. Members think that such an approach would be better. A needs-based formula allocates local government spending across English local authorities, but many hon. Members and different communities consider it to have flaws. That illustrates how there are no easy ways in which we can reform local government funding, whether in relation to local government across English local authorities or in relation to devolved Administrations. The common ground we have in the points made is that any changes should absolutely be approached with real caution over a period of time.

Of course, the Treasury has clear control over the process, as it deals with public spending issues. However, there are avenues through which disputes can be remitted to the Joint Ministerial Committee. Therefore, the Treasury is not always judge and jury. There is absolutely a process through which disputes can be resolved if the Treasury cannot do so. On the involvement of the Office for Budget Responsibility, that organisation is a forecasting rather than a policy-making body. My hon. Friend is right to point out that other countries, such as Australia, have a different approach, but they come with pros and cons. Yes, that authority may be independent, but there is no Minister such as me to stand in Parliament, listen to the issues and respond to them democratically and with some sense of accountability; Australia does not have that in the same way. There are still problems with how that authority operates and questions about whether it allocates funding fairly. Such an approach is not without its challenges.

In conclusion, although we do not plan to change the Barnett formula, we will continue to consider all aspects of public spending, how they operate and how effective they are. As I said, the points made today were highly relevant and interesting, and I have no doubt that the debate will continue over the coming years.

Royal Mail Privatisation

Tuesday 18th January 2011 Westminster Hall

11:00

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

It is a great pleasure to see you in the Chair again, Mr Dobbin. I am pleased to have secured this timely debate on the implications of the proposed privatisation of Royal Mail for our post office network. There will, of course, be many repercussions if the privatisation goes ahead, but the subject of this debate is, perhaps, the aspect about which the public are currently most concerned.

No other country in the world has separated its mail service from its post office network, and I hope that the Minister will accept that there is genuine concern that this privatisation will have a negative effect on an already vulnerable post office network. Many of the issues that I will raise today have already been raised with the Government during the proceedings of the Postal Services Bill in this House, and I suspect that they will be raised again in the Lords. I have given the Minister notice of what I will say today—I will ask him many questions that have been put to the Government but that have not, as yet, been answered adequately.

We heard many warm words from the Government during the progress of the Bill about their commitment to the post office network, and, indeed, an announcement of a short-term subsidy. However, my contention is that those warm words will not be sufficient to protect our post office network and that the legal framework that the Government are putting forward with a privatised Royal Mail, which will have a legal duty to its shareholders to maximise profits rather than any duty to the general public, provides no guaranteed protection in law for the post office network as we currently know it, and will put our post offices at risk.

We have read in the media that some fear that the privatisation will result in 4,400 post office closures. That figure comes from the fact that the current access criteria mean that we would have a post office network of 7,500 post offices, and we also know that approximately only 4,000 post offices are currently considered to be financially viable. There is, therefore, a great deal of concern that privatisation could lead to the closure of post offices. There is also concern about whether the standard rate for stamps will be able to survive in a uniform way throughout the country, and that there could be a serious deterioration of the service provided, particularly in rural communities, deprived urban areas and in any part of the country where the postal service is expensive. There is a concern that a privatised Royal Mail will cherry-pick the business and that the post office network will be left with what was left.

During the passage of the Bill, the Government were asked to guarantee the size of the network. The Minister will be well aware of those calls being made to him. We currently have 11,905 post offices. The access criteria laid down by the previous Government would, according to Post Office Ltd, mean that there would have to be a minimum of 7,500 post offices. The Government have said, in the course of proceedings, that they are committed to the post office network and would like to see a network of 11,500 post offices. In her evidence, Paula Vennells, the managing director of Post Office Ltd, said:

“What is absolutely important in this new approach is that there will be no closures whatsoever.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 5, Q6.]

That call has been made repeatedly to the Government in the past few months. I ask the Minister again today whether he agrees with that statement by Paula Vennells and that a central plank of the Government’s policy is that there should not be post office closures, and whether he will undertake to ensure that the size of the network will remain at 11,500 post offices, as opposed to outlets, which is something that I will come on to in more detail later.

When those questions have been put to Ministers, the response has been an explanation of how the post office network operates—that, as we all know, post offices are run by private individuals who may decide that they do not wish to continue in the business for a whole range of reasons and that such decisions may not be in any way connected with Government policy or, indeed, the framework in which those people are operating. We all appreciate that, but we are asking the Government to confirm that their policy will be to create a framework that enables existing post offices to continue. It would assist if we had a specific answer on why legal guarantees would not be helpful. Surely the Minister agrees that it would be helpful to the post office network if he came forward with a legal guarantee on post office numbers, given the huge concern. If he is not willing to do so, will he explain why it is such a priority to get a quick sale—probably to a foreign buyer—but not a priority to find a way to give legal guarantees to our post office network?

We also know that the Government are being pressed by a wide range of organisations to guarantee the inter-business agreement between Royal Mail and the post office network. The National Federation of SubPostmasters, the Communication Workers Union and Consumer Focus, as well as a whole range of other organisations, have made that call and, in particular, are asking that a 10-year contract be entered into by Royal Mail to ensure some kind of security for at least that time. Consumer Focus has said that it is concerned about how few safeguards the current legislation proposes. Andy Burrows, its postal services expert, has said:

“There are few safeguards to keep that contract in the long term. It’s entirely conceivable—though it seems an odd thing to suggest—but several years down the line you could have a post office network where you cannot undertake mail transactions. It would be for Royal Mail to determine which operator—whether it was Post Office Ltd or Tesco or whomever—to offer mail services and there would be no requirement for stamps or parcels. You could see a scenario where Royal Mail looked to cherry pick so Tesco, say, could meet its requirements in urban areas and the Post Office could pick up the slack in rural areas where there isn’t anyone else. And that has very serious implications in terms of the viability and integrity of the network because urban areas typically make money.”

That really goes to the nub of the concerns that many people have about the future of our post office network.

Will the Minister respond to the allegation, which has been made again and again, that many of those who run post offices will view the future of work in a privatised Royal Mail to be so uncertain that they will be more likely to leave the business? The Government must respond to that allegation. There is huge uncertainty about what will happen if Royal Mail is privatised, which is bound to lead to individuals making business decisions that will take them out of the trade.

Will the Minister say what steps the Government would take if a privatised Royal Mail decided to award the work to supermarkets rather than to post offices? I want to know whether the Government would allow that to happen. If Royal Mail were to decide not to award work to post offices but to another organisation or range of organisations, would they allow that to go ahead?

My final request to the Minister—again, it has been put to the Government on many occasions—is that we use the opportunity of the Postal Services Bill to guarantee the access criteria in law, so that there is more certainty about the future. I have already referred to the view that the access criteria guarantee only 7,500 post offices, but even that is subject to uncertainty, given the legal framework.

I ask for all that because our post office network is already so vulnerable. More than 150 post offices closed on a long-term basis over the past year, and 900 are up for sale. Over the past 30 years, the number of post offices has almost halved, and the trend has been consistently downwards, irrespective of which political party or, as now, combination of parties is in power.

As someone who represents many deprived mainland communities, many small towns in areas of unemployment and rural island areas, it is clear is that the public are well aware of the vulnerability of the post office network. They are rightly suspicious of the Government’s assurances. That may be why people express a great deal of concern about the proposal to privatise Royal Mail whenever they are asked about it, whether it is through opinion polls or in other ways. The fear is that post offices will be at risk, particularly in deprived and remote rural communities. The Government may say that there will be no closure programme—indeed, they have said that—but that does not mean there will not be post office closures.

We know that the majority of work for post offices comes from either Royal Mail or the Government, but business from those providers is not secure. Royal Mail provides post offices with about one third of their work, and we are told that it is unthinkable that it would not use the network. However, it is clear that many competitors may be interested in the work, including supermarket chains, PayPoint—they are the two most obvious options—and a range of other providers. Surely it is a real possibility that a privatised Royal Mail would tender the work, either in whole or in part, to the cheapest provider in the future.

The reality is that because of how Royal Mail will be constructed legally, it will be under an obligation to ensure that it gets best value for its shareholders. There will be nothing to make it use post offices to the same extent. As a private company, its duty will be to its shareholders, which would put the work that many post offices currently rely on at risk. It is only common sense to think that more post offices would be in greater financial difficulty and that more of them would find it difficult to justify their existence.

We have heard a great deal about alternative sources of work for post offices. Indeed, the previous Labour Government were doing a considerable amount of work to develop a people’s bank, which was dropped by this Government. Will the Minister explain why the Government are not proceeding with some form of post bank or people’s bank? We would like an explanation as to why they do not accept that local post offices would be on a stronger footing if the post bank work had gone ahead. I also understand that the Department for Work and Pensions green giros contract is under threat. Will he explain why DWP work is not being channelled to the Post Office?

The reality, of course, is that the historic link between Royal Mail and the Post Office means that Royal Mail supports post offices in a range of different ways. The Royal Mail chief executive has said that, in effect, Royal Mail subsidises the post office network by £150 million a year through the central provision of services alone. Obviously, if the two organisations were to separate, that would be another way in which funding and support would be taken away from the network.

The previous Labour Government put substantial funding into the post office network, and this Government have announced a £1.34 billion subsidy, which I welcome, although I have been told that it will not increase the level of annual social subsidy to the post office network. However, my greater concern is that the funding is not guaranteed beyond 2014-15, and, even more, that the Government’s stated policy is that the subsidy will reduce over time. That must give us great concern. I do not know whether post offices will be able to survive in the future.

Does the Minister expect that the number of post offices or outlets will shrink over the coming period? Also, does he believe not only that the number of post offices or outlets will reduce but that the quality and extent of the service operated at post offices will shrink? The Government’s plans for changing the network over the next four years include replacing 2,000 post offices with “essentials” or “locals”, which will provide a more limited range of services, often from a venue such as a shop. I understand that the scheme is designed as a pilot, but many of us will already know from our constituency experience of examples of a Crown post office closing down and the service moving into, perhaps, a local newsagent. It is clear that our constituents feel that the quality and range of the service has decreased, even if it is simply because there is less space in the post office area. There is less ability to take in wheelchairs—the conditions are more cramped. That is a great concern to our constituents.

[Lorely Burt (Solihull) (LD)]

I congratulate the hon. Lady on securing this important debate. There is great potential for a more flexible approach to the format of post office that people want. I have one in my constituency that is in a convenience shop. A point has been opened in the shop itself, so people do not have to wait for post office opening hours. The number of open hours is phenomenally greater, so everyone who wants to cash in their lottery winnings goes to the shop. There are great opportunities, and not everyone needs all the services or wants them at specific restricted times.

[Katy Clark]

There may be some benefits in certain circumstances. The example that I was thinking of is a local one. The small town of Kilwinning in my constituency previously had a spacious Crown post office that was heavily used by the local community. When the service moved into a newsagent, the quality of service experienced by constituents became much worse. However, there may well be other situations that are success stories.

One of the concerns at present is that many of the proposals would actually mean a reduction in the number of hours that postal services will be available in some communities. That is the point that I have put to the Minister. There may be exceptions where the service improves, but my contention, and the evidence from the work that has been done, is that the trend is for the range and quality of services to diminish. The reason for that is the difficulty in making post office services pay, which is why we are having this debate. For public policy reasons, post offices are essential parts of our communities, and we should be finding a framework within which post office success would be most likely.

Related to that, a great deal of concern has been expressed about the network size being affected by the extension of outreach services, which are often provided by a van and often mean a substantial reduction in the hours a postal service is available in a specific community. Instead of having a post office, which would be available all week, a van might come once or twice a week, for a relatively small period. Those vans, or many of the facilities to which the hon. Member for Solihull (Lorely Burt) has referred, often do not provide the whole range of postal services that might have been available in a more traditional post office. I ask the Minister to respond to the considerable concern expressed about the quality of services provided by some outreach services.

The Select Committee on Scottish Affairs, for instance, made submissions to the Government after taking evidence in Scotland on such issues. An extension of such outreach facilities leading to a continuing deterioration of service is a concern. I have to declare an interest, because of the kind of constituency that I represent. I have many remote rural areas in my constituency, in particular the island of Arran, the kind of area for which outreach services are often proposed. As we know from the evidence given by members of the public and by hon. Members, often the view is that the level of service is far less good than that which was previously provided.

Huge concern has been expressed about the universal service obligation and whether a postal service could be maintained in all parts of the country, no matter how remote. What is perhaps more at risk is the continuation of the universal service as a six-day service everywhere and of a uniform affordable price throughout the UK. Can the Minister give an assurance on that continuation and whether there will be legal protection? The proposed legislation, similar to current legislation, allows Ofcom to waive the universal service obligation given exceptional geographic or other conditions. Will the Minister outline when that opt-out would be used? What guidance would be given about when Ofcom is allowed to say that the universal service obligation need not operate?

If the Postal Services Bill becomes an Act, we are creating a legislative framework in which it would be quite possible and highly likely that Royal Mail will move its work in the future. MPs of all political parties are concerned about their local post offices and wish them to survive. I urge the Minster to ensure that we organise our postal services in a way that enables them to have the business to make that a realistic possibility in the future. In particular, I ask that he uses the opportunity of the legislation to ensure that we have a legal framework whereby post offices can continue. There is huge concern that a privatised Royal Mail will operate in a manner that will undermine our post office network. Will the Minister please respond to the points made today and over the past few weeks?

11:23

[Anne Marie Morris (Newton Abbot) (Con)]

I thank the hon. Member for North Ayrshire and Arran (Katy Clark) for securing an excellent opportunity to talk about the future of the wonderful post offices that we all love and need and upon which our constituents—in particular, some of our small businesses—are dependent. However, I am surprised that the hon. Lady raised the issue of post offices when the Bill we are talking about and have been debating recently is about Royal Mail. The debate is meant to be about Royal Mail, rather than about post offices, but I was encouraged by the response that the Government gave, indirectly, with regard to post offices, effectively guaranteeing that we would be able to retain post offices, which we all value. I was absolutely delighted.

The other measure in the Bill, which the hon. Lady did not mention but which I find exciting, is the concept of mutualisation. It is a huge opportunity.

[Katy Clark]

There have been many opportunities over the past few weeks to make all sorts of points about Royal Mail privatisation. The debate today is about the implications of Royal Mail privatisation on the post office network. There are genuine concerns. Does the hon. Lady share any of those concerns?

[Anne Marie Morris]

I thank the hon. Lady for her comment but, to be honest, hearing her discussing the concerns about the future of the post offices was very reminiscent of the concerns felt by Opposition Members under the previous Administration. Our concern in opposition, when there were mass closures of post offices, was that the Government of the day had failed to recognise that such post offices were crucial to communities and were providing a social service as much as anything else.

I am delighted that both parties supporting the coalition Government are determined to ensure that post offices have a bright future. I do not share the hon. Lady’s concern about the future of post offices; they are far better off under the new coalition Government than they ever were under the previous Administration.

The hon. Lady made some points about universal delivery, but I am very heartened. It is important. The Government look on it as fundamental and will retain it.

Turning to post offices, we must remember that 99% of the population live within three miles of a post office. In the grand scheme, that is not a bad position to be in. The Government subsidy to non-commercial post offices is currently £150 million, but I am pleased that it will increase to £180 million in the next financial year.

[Nia Griffith (Llanelli) (Lab)]

Is the hon. Lady suggesting that a three-mile access criterion would be sufficient? In other words, as long as someone was within three miles of a post office, that would be acceptable. Is that the sort of network of post offices that she envisages?

[Anne Marie Morris]

I thank the hon. Lady for her comment. Clearly, we need to have as good access as we can for every individual. Therefore, we need to look at a good service and a good distribution of post offices. The sort of figures talked about, and where we are now with the number of post offices, will give a good service. What I would like to comment on, and will come to in my contribution, is what more those post offices could do.

[Karen Bradley (Staffordshire Moorlands) (Con)]

I am interested in what my hon. Friend says about the provision of post office services not only to individuals but also to businesses. Businesses in my constituency are concerned about how the post office network can help them in the current economic downturn. Does my hon. Friend have any thoughts on that?

[Anne Marie Morris]

My hon. Friend makes an excellent point. When we are looking at our small micro-businesses to lead the drive to put the economy back on its feet, post offices have a key role. In my constituency, in the village of Broadhempston, there is a delightful situation. Local volunteers run a small community shop—absolutely an example of the big society—in which they have effectively ensured that the post office can be retained. The challenge—the point made by my hon. Friend—is to ensure that we can grow that service. The shop currently opens in the morning between 9 and 12, but if it opened in the afternoon, it would really be able to offer services to local businesses. I have been looking at that and championing it. Looking at such post offices being able to support small businesses must be the way forward; my hon. Friend’s point is extremely well made.

Post offices are at the heart of the community. With regard to concerns expressed in all parts of the Chamber, post offices need to be able to provide more, not less, to individuals and to small businesses. Indeed, the Federation of Small Businesses has said that it would be an excellent idea to have a dedicated business counter or business advertising. Could not such post offices provide meeting rooms or wi-fi hot spots? As discussed, we could be moving towards providing banking facilities.

The opportunity for post offices is enormous, and I am delighted that they have that opportunity. The big society and the overall push to help small businesses should make that opportunity a reality. Nineteen per cent. of small businesses visit post offices on a daily basis, and 47% visit twice a week. That is excellent news. As I said earlier, mutualisation could be the way to make things possible. I have found a real will to work together in the community, whether that is the business community or the community within a geographical area. Mutualisation is a real opportunity and it may be the solution to the position in Broadhempston.

[Sheila Gilmore (Edinburgh East) (Lab)]

I am a supporter of mutualisation. Many people, however, are concerned that from mutualisation comes demutualisation. Would the hon. Lady be in favour of building a way of preventing demutualisation into any plans for mutualisation, as far as that is possible? People are wary of mutualisation given some of the experiences of the past 20 years concerning building societies and other mutual organisations.

[Anne Marie Morris]

I understand the hon. Lady’s point, but the devil is not in the legislation but in the detail and particular circumstances. I am not a great believer in regulating and legislating; I believe in the free market. It is right to empower communities and businesses, but not to tell them how to do what they do.

In conclusion, I would be delighted to see the Government look carefully at what post offices can do, and then empower them so that it happens, perhaps by looking at how we can improve the number of Government services in post offices. At the moment, people cannot always sort out vehicle taxation at post offices or pay their utility bills—they might not know that they can pay in a post office because it does not say so on the back of the bill. There are things that the Government could do to ensure that where it is financially sensible, more services are provided through the local post office network. There is much that could be done by the business community, and I commend to the Minister the suggestions made by the Federation of Small Businesses.

11:32

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

It is a pleasure to serve under your chairmanship, Mr Dobbin. I too congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing this important debate. We both have rural constituencies that contain islands, and post offices are important in such rural communities.

Post offices are important in the communities they serve. No other retail outlet has such a range of shops that cover the rural parts of the country to the same extent as the post office network. Post offices provide an important social function and assist vulnerable people with help and advice. I am pleased that the Government have recognised that by making a big investment in the post office network, and I am delighted by the guarantee of a no closure programme, which is a complete reverse from the position of the previous Government. During the previous Parliament, debates such as this happened practically every fortnight as hon. Members tried to stop post offices being closed. This debate takes place in a completely different atmosphere as we have a Government who recognise the importance of post offices and back that up with investment.

For post offices to stay open, not having a closure programme is not enough. It is essential that as small businesses, post offices remain profitable for the sub-postmaster or sub-postmistress. Changing lifestyles mean that what was once one of the core businesses of post offices—people taking their pension book to collect their pension—is no longer so important. When people retire, they are more likely to have their pension paid directly into their bank account, as that is what currently happens to the vast majority of people of working age. Therefore, it is inevitable that business will decline. One postmaster put it to me succinctly when he said, “Many of my customers are dying off.” When people retire they do not collect their pension at the post office to the same extent, and that service must be replaced by other Government work.

It is essential that Departments, the devolved Administrations, local government and public bodies give work to post offices. Otherwise, in the long term we will see a gradual decline. There is no immediate threat to post offices, but unless the Government provide commitments to more work, in 10 or 20 years’ time we will see the gradual decline of post offices.

I am pleased to note the Government’s stated policy of giving more work to post offices, but it is vitally important that every Department follows that policy with action. Often, giving a contract to the Post Office will cost more than giving it to another provider, but that is because of the social benefits of post offices. Post office staff will take time to explain things to vulnerable people and give them help and advice that they would not often get in a supermarket or filling station. One can imagine the impatient queue at a filling station if people wanted to pay for their petrol but the assistant was taking time to give advice to an elderly person. Such advice is provided in a post office, but I cannot see it happening to the same extent in a filling station or supermarket. I hope that Departments will not be tempted to save money from their budgets by taking contracts from the Post Office.

[Graham Evans (Weaver Vale) (Con)]

I agree with what the hon. Gentleman says but when it comes to the crunch, sometimes a local post office will close, no matter how unfortunate that is. One of the biggest areas of growth is in supermarkets, whether metro stores or small stores. If a new supermarket contains a post office, would that not keep some of the services, even if they are in a supermarket?

[Mr Reid]

I agree with my hon. Friend; there is no problem with a post office being located in a supermarket and I was not saying that was a bad idea. My point is that a different type of outlet—PayPoint, for example—could be in a filling station but not in a dedicated post office that is part of a supermarket or filling station. In such situations, a person will not receive the same help and advice as they would in a post office located in a supermarket. I have no problem with a post office being located in another outlet—in my constituency, almost every post office is within a shop, filling station or supermarket. However, I would be concerned if the contract for benefit cheques was given to PayPoint, for example, because if an elderly person is in the same queue as people who are waiting to pay for their petrol, they might not receive the same quality of advice and help. A post office in another outlet is great, but if the facilities are simply part of that other outlet they will not offer the same social benefits to the customer.

The benefit cheque contract of the Department for Work and Pensions is for paying pensions and benefits to vulnerable people who are considered unable to use the Post Office card account. That contract was put out for renewal by the previous Government and I understand that the Post Office and PayPoint have bid for it. I hope that once the DWP has weighed up all the factors involved, including social factors and access criteria, it will keep the contract with the Post Office. PayPoint has a large number of outlets, including in my constituency, but nearly all those outlets are in towns and it does not have the same coverage throughout rural areas and islands as the Post Office.

If the contract were taken away from the Post Office and given to PayPoint, it would mean that on several of the islands in my constituency, there would be nowhere for people to cash the cheques. Also, in the rural areas of north Argyll, there would be nowhere for people to cash their cheques, because although there are plenty of PayPoint outlets in Oban, once people go outside Oban, they have to go all the way to Ballachulish or Inveraray to find another PayPoint outlet. It is therefore very important both for social reasons and for access reasons that the contract remains with the Post Office. I hope that the Minister will go away from today’s debate and knock on the door of the Secretary of State for Work and Pensions to tell him just that.

[David Mowat (Warrington South) (Con)]

Does my hon. Friend agree that it is extraordinary that the Government on the one hand are giving much-needed subsidies to the network—£1.3 billion over four years; £50,000 per location per year—yet on the other hand are taking away some of the contracts? No other shareholder or business would act in that way. It just is not joined up.

[Mr Reid]

I hope that the Government will not react in the way that my hon. Friend fears. I share his concerns, however. What worries me—I hope that these fears are ungrounded—is that there may be silo thinking within the Government. Clearly, in these very difficult financial times, with Departments having to make huge savings, it must be very tempting for Ministers to go for the cheapest contract, but I hope that they will resist that temptation, that there will be joined-up thinking in the Government and that the Post Office will be given work because of the good service that it provides. I hope that that will be the case for social reasons and because of the access provided by having a network that is unmatched throughout rural Britain and on many of the islands in my constituency.

Let us consider other Government work. When I tour my constituency, as I do every summer, one bone of contention that keeps cropping up in the rural parts of it is vehicle excise duty. Vehicle excise duty can be renewed only in certain post offices. I understand that that is because the Department for Transport decided the number of outlets that it wanted. However, it means that people living in rural areas must go into the town if they want to renew their car tax at a post office. Clearly, the temptation, then, is to use the internet, and if people do that, the work is lost to the Post Office completely.

My understanding is that the computer system is the same in all post offices, so there seems to be no reason why vehicle excise duty cannot be paid in any post office. Again, I hope that the Minister takes that point away from the debate and has a word with his ministerial colleagues in the Department for Transport, so that when that contract comes up for renewal, the restriction on the number of outlets can be removed.

I also want to refer to the BBC. As we all know, during the last Parliament, the contract for renewing TV licences was taken away from the Post Office and given to PayPoint. When Ministers are questioned on that, we just get indignant responses that the BBC is not part of the Government. However, it is a public body, and I hope that the Government are explaining to all public bodies the benefits of the Post Office and the Government policy of supporting the Post Office, and are encouraging the BBC and other public bodies to use the Post Office.

I was delighted with the commitment given during last week’s Report stage of the Postal Services Bill by the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is responsible for postal services, that Post Office Ltd and Royal Mail would sign an inter-business agreement for the longest legally permissible period before they become separate companies. That is important to give post offices time to adapt to being part of a separate company from Royal Mail.

I do not share the concerns of the hon. Member for North Ayrshire and Arran about Royal Mail in the long run taking business away from post offices. I do not believe that supermarkets or other shops could replicate what the post office does. Post office staff undergo a tremendous amount of training. There is also the computer system. One of the hon. Lady’s fears was that in urban areas, supermarkets would take over the contract, but in rural areas the post office would be responsible. That would mean two separate computer systems and training other staff. I simply do not see that happening. As I said in response to a point made by my hon. Friend the Member for Weaver Vale (Graham Evans), I see no problem with post offices being located in supermarkets, but I simply cannot see the benefits to a privatised Royal Mail of having a different arrangement in towns compared with rural areas. Many post offices are located in supermarkets. In the towns in my constituency, that is the norm and I see no problem with it, but I simply cannot see a situation in which there would be separate arrangements in towns and villages.

[Nia Griffith]

The hon. Gentleman has mentioned training, the quality of post office staff and the different reception that people may have in supermarkets and garages. Does he not think that it is precisely that type of thing that makes it possible for supermarkets and high street chains to undercut the price that the Post Office will probably be tendering at, and that therefore there is a real danger that the Royal Mail could switch to a cheaper option, which might be a much poorer-quality service? It may even be a loss leader for some of the big chains.

[Mr Reid]

I simply do not see that happening, because those organisations would have to develop a computer system and train staff. At the moment, in the towns in my constituency, the post offices tend to be located within supermarkets. I do not see any benefit to Royal Mail or a supermarket from developing its own system rather than encouraging a post office to be located in the supermarket.

[Neil Carmichael (Stroud) (Con)]

I thank my hon. Friend for allowing me to speak. I find that exactly the opposite happens in connection with supermarkets. When I was fighting to save a post office near my own home in my constituency, the real problem was that Tesco did not want a post office on its premises because it took up too much space. We had to move the post office and have a community arrangement a few doors down. The essential problem is that supermarkets will not necessarily want a post office on their premises. I therefore agree entirely with my hon. Friend that the post office network is safe and the relationship that it has with Royal Mail will continue.

[Mr Reid]

I am grateful to my hon. Friend for his intervention. I agree: I think that the post office network is safe. The attitude of the supermarkets in his constituency and mine just shows the diversity that we have in Britain. He mentioned space. One thing that my constituency does not lack is space; there is plenty of it, but I can understand that in a crowded urban area, the situation might be very different.

The reason why I came along to the debate this morning was to say that what is very important to the long-term future of our post offices is more Government work and the Government acting in a joined-up fashion, with all Departments being encouraged to give work to the Post Office. I hope that the Minister, in his reply to the debate, will assure us that that is what the Government are doing, that there is joined-up thinking in the Government and that work is in progress to ensure that more Government work is given to post offices, because post offices are in an ideal position to be a front office for Government throughout the country.

11:48

[Lorely Burt (Solihull) (LD)]

The hon. Member for North Ayrshire and Arran (Katy Clark) has rightly initiated this debate today. It is important that we ensure that the Post Office is protected and that legislation such as the Postal Services Bill does not have an undue effect. She asked many pertinent questions of the Minister and, like her, I look forward to hearing the answers.

Having worked for some years on issues within the remit of the Department for Business, Innovation and Skills, under its various names, I have attended numerous statutory instrument Committees whereby the Government of whom the hon. Lady was a supporter put in subsidies year after year to support the Post Office. That was absolutely right. However, what happened under the previous Government was that they managed a decline. The very important social value of the Post Office has been recognised. Nevertheless, it has not necessarily been given the legs to be able to compete in a changing business situation in this country.

The new coalition Government are taking a different approach to the Post Office. We have no less desire than the Labour party to ensure the Post Office’s future, but we are trying to adopt a different approach to enable the Post Office to stand on its own two feet. Several hon. Members have mentioned the £1.34 billion that the Government have committed to protect the network of 11,500 post offices, which we have said will remain. That is considerably better than managing the Post Office’s decline. We do not want any more post office closures. We want the Post Office to remain in public ownership, unless it goes for mutualisation itself.

The hon. Lady mentioned the inter-business agreement at a little length. The chairman of Royal Mail has said that such an agreement will be drawn up for the maximum legal period before any sale. My hon. Friend the Member for Colchester (Bob Russell) raised the issue in a new clause for the Postal Services Bill. It was argued at some length that a long period would benefit the Post Office, and I totally agree. Where I perhaps disagree, however, is on the practicalities. We are talking about an agreement between two commercial companies, which need the flexibility to negotiate an inter-business agreement that benefits both; if it does not, it will not necessarily hold together. There was also some discussion of how such an arrangement could be implemented, and the conclusion was that it would not necessarily work well under existing EU law.

The hon. Lady mentioned the post bank, and I, too, was disappointed that we did not go down that path. However, we have secured the ability for people belonging to virtually every bank in the United Kingdom to conduct transactions. That is a very good second best, which will at least make sure that the banks start to play ball and respond to the need to be more flexible in conducting their financial transactions.

What about the Post Office’s future? My hon. Friend the Member for Argyll and Bute (Mr Reid) mentioned some of the losses that we have seen, as well as some of the potential losses. A little while back, the Post Office card account went out to competitive tender. Lord Mandelson, who had just been appointed Business Secretary, stopped that straight away. I thought, “Brilliant.” We really cannot afford to lose the Post Office card account in that way. Like my hon. Friend, I hope that it will continue.

[Sheila Gilmore]

The hon. Lady mentions the Post Office card account, and those who are active in promoting financial inclusion have suggested that introducing more functions into the Post Office card account might be one way of assisting people who do not have access to mainstream banking. Another issue, which is much discussed, and about which I have heard a lot of discussion since I arrived in the House in May, is the possibility of linking credit unions with post offices. I have to say that there has been more discussion than actual tying things down, and I understand that there are cost issues, but does the hon. Lady agree that those two additional functions would be useful for post offices and contribute to the financial inclusion agenda?

[Lorely Burt]

I certainly agree that it is important that we extend the range of services available to people who do not have a traditional bank account, and the Government are actively considering how that can best be done. I certainly applaud the work of credit unions, although I am not entirely sure whether they have sufficient coverage and continuity to form a national service at this stage. However, the Government are actively considering these matters, and we are doing all we can to reach a practical solution on increasing financial inclusion for those who are unbanked.

The hon. Member for Newton Abbot (Anne Marie Morris) described all sorts of different ways of introducing flexibility, and the Government are fizzing with ideas about how we can be more flexible. We can adapt to the changing commercial landscape and to the internet. My hon. Friend the Member for Argyll and Bute mentioned vehicle excise duty licences, and I am sorry to say that I am guilty of using the internet to renew mine, because it takes five minutes. The point, however, is that there are many other functions that post offices can carry out; they do not have to exist in their traditional format to deliver a postal service to their customers.

I am very hopeful that some of the pilots that are being undertaken will prove successful. It is good that schemes are being piloted, because we can iron out some of the problems that might otherwise ensue. We will take the best ways of responding to the changing landscape. We do not want to continue giving subsidies to the Post Office; we want it to be vibrant, commercial and profitable and to stand on its own two feet.

11:57

[David Mowat (Warrington South) (Con)]

I want to add just a couple of quick points to what has been said.

To put these issues in context, there were 20,000 post offices a decade ago; now, there are fewer than 12,000. The Government have committed to keeping 11,500 of those open for the next four years. I do not share the confidence of my hon. Friend the Member for Argyll and Bute (Mr Reid) that the network will be stable for the next decade. Unless action is taken, it will be stable for only the next four years—that is, for the period of the subsidy that is currently going through. Although I welcome the £1.3 billion subsidy in terms of keeping the network open, 7,000 of the 11,500 post offices that remain are loss making. Unless that is fixed, the prognosis cannot be positive. We have 7,000 loss-making post offices, and that is with the inter-business agreement in place. It is worth telling Opposition Members that. The issue is not the IBA, but sustainability over the medium term.

Will the Minister answer two questions? I want to know more about the modernisation programme that will be put in place over the next four years, which involves something like £350 million. I also reiterate the point that Members on both sides have made about joined-up thinking in the Government. It is not sustainable that we are, on the one hand, investing millions of pounds in trying to make the network better, albeit in ways I am not sure I fully understand, while Departments are, on the other hand, tendering business in a way that no commercial organisation would. I have heard EU legislation being used as an excuse, but I do not accept that and think that the argument should be tested. I do not intend to reiterate the types of Government business that are being removed or that could be removed, but it is anomalous that so much work is potentially threatened, while on the other hand we are spending £50,000 per location, per year, to keep post offices open.

[Mr Philip Hollobone in the Chair]

I shall be particularly interested to hear from the Minister, in relation to the modernisation programme, about who is accountable for its success and what the measures of its success will be. In particular, what is his estimate of the number of post offices that will be in profit after the four-year period has elapsed? At the moment, the number is 4,000. We are to spend £300 million on modernisation. What number would he, at this stage when the money is being committed, expect to be viable after the modernisation programme? The corollary to the answer to that question is what level of subsidy the Government and the Minister expect to be payable after four years to maintain, for the purpose of argument, 11,500 post offices.

12:00

[Nia Griffith (Llanelli) (Lab)]

I congratulate my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) on securing this debate on a very important topic. Her worries and concerns are shared by many hon. Members on both sides of the House, as we saw from the number who attended and participated on Report in the debate on the amendment to guarantee a 10-year inter-business agreement.

Post offices are at the heart of our communities and are well loved by the people they serve. Hon. Members will remember the postcard campaign lobbying MPs to keep the Post Office card account; many were contacted by more constituents on that issue than on any other, before or since. They received cards from constituents who used Post Office card accounts, and from people who did not have one but who realised the value of the facility to other members of the community and the account’s value to the post office network, because of the work it brought in, directly and indirectly, through increased footfall in post offices and increased business for the corner or village shop where the post office was situated.

Consumers and sub-postmasters alike recognise that any drop in post office business or footfall could have an impact on the economic viability of the post office or village shop. Yet the Government are complacent about the potential loss to the post office network of some 37% of its current business. The loss of all or even some of that business will inevitably mean a dramatic reshaping of the post office network on an unprecedented scale. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey) has not explained that complacency. He has hidden behind some potential barriers, which he seems unwilling to try to shift and which may be more a figment of his imagination than a reality. I hope that the Minister will today be able to give us a better explanation for that complacency.

The Under-Secretary did not tell us, either in Committee or on Report, about any detailed work or discussions that have taken place to secure future Royal Mail business for the post office network. There are many ways in which that might be achieved, but I shall concentrate my remarks on three of them, namely the inclusion of a specific number of access points in the Bill, the inclusion of an inter-business agreement in the Bill and other ways of securing an inter-business agreement. In Committee, the Under-Secretary steadfastly refused to consider any mechanism to protect the post office network or the number of outlets where consumers can access post office services. One of the issues that we debated at length in Committee was including in the Postal Services Bill measures to guarantee the number and geographical spread of access points to postal services, which would guarantee the public a number of outlets across the country to post parcels or register letters. Without that guarantee of a specific number of outlets to serve consumers, there will be nothing to stop a privatised Royal Mail from drastically cutting the number of outlets, and limiting them to the larger centres only, whether through high street chains or part of the post office network.

[Mr Reid]

Under the Bill, Ofcom has a duty to ensure that there are enough access points to meet users’ reasonable needs. Surely that is the guarantee. The Post Office will either remain in Government hands or it will be mutualised, so the Government have a role there. The regulator has a role in ensuring enough access points—that is post offices.

[Nia Griffith]

If the hon. Gentleman looks carefully, he will see that there is much flexibility in the Bill about what can be changed by the regulator and where things can be moved to, so the guarantee is not robust.

Returning to putting more robust access criteria in the Bill, if that does not happen consumers will have to travel much further to access Royal Mail postal services, and inevitably those who have least access to transport will miss out—those who do not have cars and those who are served by an infrequent bus service or by no bus service at all. A reduction in the number of access points would also have a negative impact on small businesses in rural areas that make frequent use of the parcel service and whose costs, both in fuel and time, would increase significantly if they had to travel many extra miles to use postal services. There is nothing to stop the Government including in the Bill that vital guarantee for consumers. Only a simple guarantee of a number of access points similar to the current number of post offices would ensure that consumers would continue to have access to the same sort of availability of counter services as they enjoy at present.

[Mr Reid]

Legislating for a specific number of post offices does not help, because they could all be moved into cities. The problem is writing the requirement for a spread of post offices into legislation. The previous Government’s access criteria could, as we know, be satisfied by closing 4,000 post offices, so the difficulty is writing the spread into legislation. No one—neither the official Opposition nor Back Benchers—tabled such an amendment on Report, because devising the formula is impossible.

[Nia Griffith]

The hon. Gentleman rightly mentions geographical spread, which is important. Provision should be made for it. Perhaps we should look to the Australian model. There it is guaranteed that 90% of the urban population will have a post office within 2.5 km; and almost unbelievably in such a large continent it is guaranteed that 85% of the rural population will have a post office within 7.5 km. If they can manage that in Australia, we could introduce a guarantee that is much more robust than what we now have. The irony is that, if Deutsche Post were to purchase Royal Mail, consumers here could have a reduced service, while they contributed to the profits of a company which must provide a specified number of outlets in its own country. In other words, we could have a poorer service here, while propping up a better service in Germany—a scenario we might associate more with 19th-century colonialism than modern Britain.

The Under-Secretary did not give convincing answers on Report about what exactly the legal obstacles are to the inclusion in the Bill of a guarantee of an inter-business agreement. He did not tell us about any legal precedents on which he was drawing, or what research his team has done on any relevant challenges in EU law.

The Under-Secretary has also failed to tell us about options outside the Bill itself. Currently both Royal Mail and the post office network are in public ownership. Both the chief executive and the chairman of Royal Mail speak favourably of the post office network. They recognise the respect it commands, the trust it enjoys in our communities and its value as a business partner. What, therefore, is preventing the signing of a new inter-business agreement now, while Royal Mail is still in public ownership? I am not now talking about a new clause in the Bill, but a new business agreement: an agreement that goes beyond the end of the current inter-business agreement, which could run out within a couple of years of privatisation, depending on the time scale, and that lasts for an additional 10 years. Has the Minister explored that possibility with Royal Mail? What would be the legal difference between an inter-business agreement with just a couple of years to run and one that was to last five or 10 years? Has he sought to capitalise on the warm words of Moya Greene and Donald Brydon about the post office network? Has he had any talks about an extended IBA between Royal Mail and the post office network?

I am sure that the Minister does not need to be reminded that Royal Mail is currently in public ownership. He must realise how serious the loss of business would be to the post office network. Even though any decision by Royal Mail to abandon the Post Office will be taken after privatisation, and therefore will technically not be a Government decision, he knows that the people of this country will not be slow to make the connection between the privatisation of Royal Mail and the demise of their local post offices.

The pity is that the Minister does not seem to want to take specific action. He seems to think that he can rely on warm words to guarantee Royal Mail business for the Post Office, but people are wary of warm words. There have been warm words about no rise in VAT and warm words about no increase in tuition fees—people are becoming very cynical about warm words. No shrewd business person would trust future business security to warm words. Surely, in his enthusiasm to privatise Royal Mail, the Minister has not overlooked the fact that it is currently in public ownership, and that he therefore has every opportunity to influence the way forward and to negotiate a longer IBA, here and now, before proceeding to privatisation.

Indeed, the Under-Secretary told us on Report that the Government

“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.”—[Official Report, 12 January 2011; Vol. 521, c. 357.]

I ask the Minister to enlighten us about what talks he or the Under-Secretary have had with Royal Mail about drawing up a longer IBA with the Post Office before privatisation. What was meant by the “longest legally permissible contract”? Is there a legal limit on such a contract? If so, what is it? As I said in last week’s debate, purchasers take over existing contracts and responsibilities in all sorts of takeovers, and such arrangements can be long-lasting.

The hon. Member for Warrington South (David Mowat) rightly questions what joined-up thinking has taken place on the subsidy. In our debate on the subsidy on 20 December, I said that the taxpayer is paying a large subsidy to the post office network, of which only 48% is necessary to continue the subsidy that Labour introduced to maintain the operation of the current post office network. We have been told that the remainder includes money to convert post offices to the post office local model, which involves paying the sub-postmaster by transaction, but that has been criticised by the Rural Shops Alliance, which questions why anyone would want to work longer hours for less income. It predicts difficulty in attracting new entrants to the post office local model; indeed, a similar pilot in Linlithgow ended with the shopkeeper saying that it simply was not worth his while to provide post office services.

Taxpayers will rightly ask what is the point of so much taxpayers’ money going into the post office network, particularly when they are seeing savage cuts in other services, and given that the Government are doing absolutely nothing to help secure the 37% of post office income that comes from the IBA with Royal Mail.

[David Mowat]

The Opposition continually talk about the IBA as if it were some kind of nirvana. Even with it in place, 7,500 post offices in the network are making a loss. At least the Minister has proposals on fixing that and on modernisation. Do the Opposition have any proposals other than the status quo?

[Nia Griffith]

Frankly, despite the Government’s fine words, the Post Office has no new Government contracts and no new streams of business, and it faces the possibility of losing all its Royal Mail business. Taxpayers will ask why they have to pay for that.

Taxpayers understand the idea of investment that brings returns and the value of business start-up funds, which can help to launch new businesses that subsequently stand on their own two feet, and they accept the need for some subsidy to make the network a truly nationwide service. However, if the post office network does not provide nationwide access to postal services or develop new business streams to improve its viability, the taxpayer may well ask what is the point of allocating £1.34 billion to the post office network. The taxpayer has every right to ask what steps the Minister is taking to ensure that the Post Office continues to do for Royal Mail business that provides 37% of its income.

In its recent report, the Scottish Affairs Committee stated that:

“we recommend the Government take a more proactive approach to facilitating a long and robust IBA, through removing any obstacles: practical, legal or otherwise that may exist. Ideally, a ten year agreement should be reached prior to any sale of Royal Mail. We understand that this may affect the marketability of Royal Mail, but it is essential to the sustainability of Postal Services in Scotland. It is in everyone’s interest”.

Members on both sides have stressed time and again the valuable social role of the post office, and the Government’s recent subsidy allocation suggests that it is a role worth paying for.

Will the Minister say whether concern about the marketability of Royal Mail is the reason for the Government’s reluctance to pursue a robust IBA? If so, does he consider potential diminished marketability to be a price worth paying when it comes to guaranteeing the future of 37% of the post office network’s business? What analysis have the Government made of the cost of a presumed lower price for Royal Mail with a robust IBA with the Post Office, and the cost of continued subsidy of the post office network? Once Royal Mail is privatised and possibly sold to a foreign owner without a long-term IBA in place, it will be too late to insist on one.

The Government will not be able to insist on Royal Mail using the Post Office. They will not be able to do what Lord Mandelson did. They have the chance here and now. I want to know whether they are going to take it.

12:16

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

It is always a delight to serve under your chairmanship, Mr Hollobone. It is a delight, also, to welcome a debate on the implications for the post office network of the privatisation of Royal Mail, and I congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing it. She introduced the subject with typical courtesy and clarity. I know that her concerns are widely felt, and I want to be as responsive and sensitive to those concerns as I can. I shall try to deal with as many of the points raised in debate as possible; I hope that hon. Members will not mind if I am not as generous as usual in taking interventions, as we have a lot of ground to cover.

The matter has been extensively debated over recent weeks, including during the Committee stage of the Postal Services Bill, the oral evidence session of the Scottish Affairs Committee, the Third Reading of the Bill last Wednesday and at Business, Innovation and Skills Question Time. Indeed, the matter has been aired in a number of forums. I fully appreciate that people are concerned about the future of the post office network. In essence, this debate focuses on that subject, and I shall try to restrict my remarks to that, for understandable reasons.

I start by putting the matter in context. I do not mean the economic context—the fact that the Government inherited the largest peacetime deficit in our history, and that the state is borrowing one pound in every four that it spends and is paying only the interest on the nation’s debt, which costs £43 billion each year, or about £120 million a day. That is not entirely relevant, Mr Hollobone, and you would not want me to dwell on it, but it needs to be said. I mean the context that surrounds Royal Mail—the need to invest in Royal Mail, to update it and to make it a business that can compete in an increasingly complex international scene.

As the hon. Member for Solihull (Lorely Burt) said, social change and the way in which people access, exchange and use information are having an impact on post offices and Royal Mail, as has the increasingly competitive nature of the marketplace. In order to get that investment, the Government needed to think afresh about the ownership of Royal Mail. That is widely acknowledged. I put on record the fact that that the previous Government were indeed considering the matter, and introduced a Bill in the Lords. Had they been re-elected, I have no doubt that we would be having a debate in Government time about the future of Royal Mail, but on a different set of assumptions about its ownership.

The context is one of a need for change, and a need for fresh ideas about how to guarantee a strong future for Royal Mail. In that spirit, I do not want to dwell too much on the previous Government’s record, but it would be remiss of me not to say that between 1997 and 2010, about 7,000 post offices closed, 5,000 of which were in two Government-funded closure programmes in 2003-05 and 2007-09. Government Members should not be expected to take too many lessons from the Opposition.

I do not want to be excessively partisan or to get into an argument about this, but the Government value post offices. We understand their social and cultural value as well as their utility. As constituency Members, we have fought for them to be retained up and down the land, so we have nothing to be embarrassed about in those terms. It is in that spirit that this Government approach the subject of post offices and make it clear there will be no further post office closure programme. That is enough of my partisan points; I just felt that it was important to put them on the record.

Let me make 10 points to kick things off, then I will try to deal with the points that have been raised in the debate. First, the Government have made it absolutely clear that the Post Office is not for sale. Secondly, we recognise that the Post Office is a unique national asset, so there will be no repeat of the closure programmes of the past. Thirdly, we have committed £1.34 billion to the Post Office for it to modernise its network and safeguard its future, thus making it a stronger partner for Royal Mail. Fourthly, the Bill before Parliament proposes to separate Post Office Ltd from the Royal Mail Group, thus allowing the Post Office to focus more attention on developing its business. It also allows for the possible future mutualisation of Post Office Ltd.

Fifthly, under a mutual structure, the ownership and running of the post office network could be handed over to employees, sub-postmasters and communities. Sixthly, the Government are committed to secure a sustainable future for the Post Office and we want it to become a genuine front office for Government at both a national and local level. Seventhly, we will support the expansion of accessible and affordable personal financial services that are available through the post office. Eighthly, we will support the greater involvement of local authorities in planning and delivering local post office provision.

Ninthly, the Government fully share hon. Members’ laudable interest in ensuring a strong commercial relationship between Royal Mail and Post Office Ltd, but we do not share the view that legislating for a contract of between five and 20 years is the way to achieve our shared objective. To pick up on the point made by the hon. Member for Llanelli (Nia Griffith), it is not just that that would make Royal Mail less saleable—although it might—but that it would be legally challenged under competition law and possibly internationally, too. I agree that it is important that the arrangements between Royal Mail and the Post Office are as secure as they can be, and I will return to that point and the particular question that she raised in a moment.

Lastly, as the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), made clear last week, stamps will continue to be issued in the same way.

[Anne Marie Morris]

I am delighted to hear the Minister’s comments about stamps, but I am concerned about those wonderful red pillar boxes and the monogram. Will the Minister confirm that they will also be protected?

[Mr Hayes]

I was about to say that stamps will continue to bear the sovereign’s head, which is right and proper. I hear what my hon. Friend says, and I share her view; it is important that we retain the iconic pillar box with the Royal monogram on. That is something that the Government will consider. I can say no more at this stage, but I know that my hon. Friend will want to take up that point and see what can be done.

In evidence to the Postal Services Bill Committee over recent weeks, there has been strong backing for the separation of Royal Mail and Post Office Ltd. I noted that no one made a case against that today. As I said, it was, I think, accepted by most Members in this House. They are different businesses that will benefit from focusing on different challenges. In his evidence to the Committee, Richard Hooper of Consumer Focus and Postcomm supported the separation of the ownership of the businesses.

In her evidence to the Committee, Moya Greene, chief executive of Royal Mail, said that it would be unthinkable not always to have a strong relationship between the Post Office and Royal Mail. To underline that point, Donald Brydon, Royal Mail’s chairman, pledged in his evidence that before any privatisation of Royal Mail could take place, a continued long-term commercial contract will be in place between the two businesses for the longest duration that is legally permissible—a point that was picked up by the hon. Member for Argyll and Bute (Mr Reid). Such a pledge provides a reassurance about the marriage between the two, which is essential to maintaining the post office network that we all feel so strongly about. This is done not for sentimental reasons, but because it makes good commercial sense. The post office network has an unparalleled reach and a very strong brand. As my hon. Friend the Member for Newton Abbot (Anne Marie Morris) said, we can be optimistic about the relationship. A stronger Royal Mail is more likely to secure the future of many more post offices. If we do not take the necessary radical steps to support and invest in Royal Mail, post offices will be at risk. That is something that we can look to with confidence, based on the belief that post offices not only provide important services, but are at the hub of local communities. The post office in my own village of Moulton, which is run by Gary and Jane, does an excellent job not just providing postal services but as a centre for all kinds of activities in the village. It is a shop, too, and provides a valuable local service.

As a representative of a rural constituency, I understand some of the concerns expressed by other rural colleagues. We heard from the hon. Member for North Ayrshire and Arran that there are concerns about the spread of the network—the universality. Let me make it clear that in terms of universality, the Bill will create a fundamental duty at the heart of the legislation for a six-day per week collection and delivery of letters at uniform and affordable prices. To do that, we need a service that is spread across the whole nation and not a partial service; we are committed to that and I personally feel very strongly about it.

It is important to say that the future success of the post office network will depend on its providing a fuller and wider range of services. I hear what my hon. Friend the Member for Warrington South (David Mowat) says about cost and subsidy. We can deal with that by allowing post offices to do more, thus ensuring that they can be profitable businesses. We are looking at a range of additional services—both local government and national Government services—that post offices can provide. Post offices can act as a front line for those clients or users that need to do things in their community in a way that is accessible and convenient. We are piloting a range of services that post offices can provide and, as a result of this debate, we will look at other things that Government can do to make the post office network more viable, commercial and profitable. I know that my hon. Friend is anxious about that and I understand why.

However, there will always be small rural post offices, perhaps in more remote communities, that will find it very hard to operate without subsidy. I do not have a problem with that. Post offices are so culturally and socially important that we need to take that on board. Certainly, all those that can be profitable should be profitable.

[David Mowat]

After the modernisation programme, how many post offices does the Minister think will be self-sufficient?

[Mr Hayes]

As part of the recent £1.34 billion funding package, there is a legally binding commitment to a minimum number of post offices—the Post Office is required to provide a network of at least 11,500 branches. As I have said, there will be no closure programme under this Government. I am confident that many more post offices can be made profitable, but I will not speculate on which post offices will take up which services in which locations; my hon. Friend can hardly expect me to do that.

I have just time to say a word about demutualisation, which was raised by the hon. Member for Edinburgh East (Sheila Gilmore). Demutualisation is not something that we see happening; indeed it will be specifically prohibited.

A better future for Royal Mail means a brighter future for post offices. This Government seek that brighter future and will deliver it; nothing less will do.

[Mr Philip Hollobone (in the Chair)]

Order. I thank all the Members who took part in that most interesting debate and ask all those who are leaving to do so quickly and quietly.

Trailers (EU Proposals)

Tuesday 18th January 2011 Westminster Hall

12:30

[Pauline Latham (Mid Derbyshire) (Con)]

Thank you, Mr Hollobone. It is an honour to speak under your chairmanship.

Although talking about the height of trailers does not sound too exciting, the new proposal from the European Commission to limit the height of trailers to 4 metres will have a detrimental effect on the British haulage sector, on our environment and on every person who uses our already crowded roads. One of my constituents, Robin Allen, contacted me towards the end of last year to ask me to raise the issue in this House, hopefully to stir up some support for our country’s hauliers.

Like many people, at first I did not realise the potential impact of the proposed legislation. Of the EU member states, 20 out of 25 have a 4-metre height restriction on trailers for safety reasons. The proposal from the European Commission aims to bring the UK and four other member states into line with the majority. It is my personal view that this proposal demonstrates the unnecessary work of the European Commission, which makes regulations for regulation’s sake.

The UK’s road infrastructure can accommodate trailers that are up to 4.9 metres high and there is currently no limit in Britain on the height that a trailer can be; the only restriction is whether a trailer can pass under bridges here. People might think that a reduction of 90 cm will not make much difference, but, as the excellent report by Professor Alan McKinnon, “Britain without Double-deck Lorries”, demonstrates, this proposal will have a massive impact on Britain’s haulage industry.

Professor McKinnon suggests that, if the height of lorries is restricted, haulage companies will have to increase their fleet size just to accommodate the same load capacity, and it will cost an extra £387 million to distribute the same amount of goods. Double-deck lorries, or lorries over 4 metres in height, cost roughly 10% more money to operate than other lorries, due to their size. Nevertheless, it would cost a haulage company more money to have fewer double-deck lorries and to increase the size of its fleet. Any extra cost would inevitably have a huge impact on the ability of smaller firms to remain competitive, thus resulting in cuts in employment in the sector. As there are several haulage firms in my constituency, I am particularly concerned for their viability, given all the other challenges that they face, such as rising fuel prices and the rise in VAT.

Professor McKinnon’s research suggests that the proposed legislation would result in a 5.5% increase in the number of lorries on Britain’s roads. That would mean more wear and tear on our roads—the previous Government’s economic record already makes it difficult to keep on top of that issue. The increase in the number of lorries using our roads and the resulting damage to our roads would lead to more traffic and more traffic jams. In turn, that would mean higher transport costs and higher costs for goods in the shops, along with increased stress and inconvenience for drivers.

Finally, there is the issue of the impact on our environment; it is probably not the main concern of Britain’s haulage firms, but in my view it is equally important. If in 2008 we had replaced all double-deck vehicles with single-deck ones, the total amount of fuel consumed since 2008 would have increased from 190 million litres of fuel to 342 million litres, which is an 80% increase in fuel consumption. With carbon dioxide directly linked to fuel consumption, it has been predicted that that increase in fuel consumption would increase CO₂ emissions from 0.5 million tonnes to 0.9 million tonnes a year, which relates to a 5.3% increase in the amount of CO₂ emitted by articulated lorries on British roads.

Although the concerns that I have expressed are paramount, I am also concerned by the way in which the European Commission has conducted itself on this issue. The proposal on page 49 of version two of the working paper of the “Fl JPD PE Masses and Dimensions” document is registered for “restricted circulation”, and it is not at all easy to track down. In fact, it took a lot of lateral thinking and persuasion by my staff to finally see a copy. It concerns me that, given the impact this proposal will have on British haulage, this document is being hidden away, despite its being well known within the haulage industry.

Perhaps my lack of trust in the openness of Europe is getting the better of me, but I believe that the European Commission would be better able to defend itself if it were completely open with the industry that it is attempting to regulate. An e-mail from the European Commission received by my office states that the document is not ready to be seen outside the working group on the policy. As I have said, the proposal is already well known within the haulage industry, so I ask the European Union to open the discussion to everyone who will be affected by the proposal, to ensure that anything that is developed is in the interests of British companies.

The European Commission’s proposal has caused concern among those in the haulage industry, from my constituent, Robin Allen, to the chief executive officer of the Society of Motor Manufacturers and Traders, Mr Paul Everitt, who has stated:

“The Society of Motor Manufacturers and Traders’ view on trailer heights is that limiting them to 4 metres would be detrimental to the vehicle industry, UK infrastructure, environment and economy.”

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

I come to this debate as the chairman of the all-party group on freight transport, and we discussed this issue at our last meeting. At that meeting, there were organisations around the table from across the spectrum, not only from the haulage industry but from the haulage rescue industry, which would undoubtedly see its work load rise under this proposal.

The hon. Lady has made some excellent points. Does she agree that Britain should be at the forefront of fighting against this proposal, saying, “No, 4.2 metres, 4 metres or whatever the European suggestion is for is just ridiculous. It doesn’t work for British hauliers and should be opposed at every stage.”?

[Pauline Latham]

I agree that we should be at the forefront of the fight against this proposal, because it would impact so greatly on our haulage industry, which, as I have said, faces so many challenges at the moment. It would also impact on the people of this country, who would pay more for their goods. We are already in a difficult, cash-strapped situation, so we do not want to increase the difficulties not only for the haulage industry but for every single one of us. I completely agree with the hon. Gentleman’s point and hope that the Minister will take it on board.

Time is short, so I will use what time I have left to ask three things of the Minister—for the sake of the British economy, we need to get this proposal right. Before doing so, however, I thank him for his letter of 22 December 2010. First, I hope that the Minister will use his time today to outline his Department’s position in relation to the European Commission’s proposal. I understand from his letter to me and his comments to the trade press that he and the Department share many of the views of the haulage industry, but perhaps he will put that position on record. Secondly, will he ask the European Commission to make the proposal document available, so that those within the industry who will be affected can give their views? Thirdly and finally, I ask him to write to Government MEPs to ask them to raise the concerns of the British haulage industry in Europe.

[Mr Philip Hollobone (in the Chair)]

I have certainly learned a lot from what the hon. Lady has just said, and I am very much looking forward to hearing the response from the Minister.

12:37

[The Parliamentary Under-Secretary of State for Transport (Mike Penning)]

It is a privilege to serve under your chairmanship, Mr Hollobone. We entered the House together; clearly I have gone one way and you have gone another.

This is a really important debate. I congratulate my hon. Friend the Member for Mid Derbyshire (Pauline Latham) on securing it, so that I can do exactly what she has asked me to do and set out the Government’s position. Also, I say to the hon. Member for Stoke-on-Trent South (Robert Flello) that I would love to speak to the all-party group on freight transport and set out the Government’s position there, too; I know the all-party group well, just as the haulage industry in general knows me very well.

In the short time that I have been a Minister, I have been trying to set out as quickly as possible the new Government’s position on this issue, particularly to hauliers, given the problems that they face. I would love to think that, when the Prime Minister appointed me to my post, he knew that I hold a heavy goods vehicle licence and have done so since I was 17—I was in the military at the time, so I could hold a HGV licence at that age, unlike in civvy street, where someone has to be 21. Sadly, I have never driven an articulated vehicle, although the Stobart Group has encouraged me to do so on its private land; indeed, I will do so in the very near future.

I want to set out right from the start that the Government have absolutely no intention of introducing the 4-metre regulation here; we are fighting it tooth and nail. Yesterday, my officials within this group in Europe attended a meeting, and said exactly that. This is majority vote territory, so we have to ensure that we are not alone, and I am pleased that the information coming back is that other countries with substantial vote clout are indicating that they are not happy either.

It is important that I set out why I am turning around and saying no to my European friends. It is not just that I am a little Eurosceptic, but that the measure would have a fundamental effect on the British haulage industry. Other countries in Europe already have a 4-metre limit—Austria, for example. No vehicle entering that country can have a height of more than 4 metres, which is absolutely fine. The people of Austria have every right to decide that, but they do not have any right to tell us, in this country, what the height of our vehicles should be.

There are a number of key points. We have a system that works perfectly well—it’s not broken, so don’t fix it. We should not put our hauliers in a disproportionately difficult fiscal position. Environmentally, what are we doing talking about limiting the height and thereby increasing the number of vehicles on our roads? I have absolutely no intention of increasing the weight limit on vehicles, so this measure would immediately cause a problem. My hon. Friend is absolutely right that it would place a disproportionate burden on our industry.

I am carefully considering proposals to extend the length of vehicles by adding more crates to the back of certain vehicles. The issue has split the industry almost 50:50, and I can see the benefits but also the problems for some of the smaller hauliers, whose trailer stock would have to be changed. The industry should not fear that proposal though, because it is common sense to move more products around our congested roads in just one vehicle, which will take more vehicles off the roads altogether.

I have not only set out the position to the industry here in Parliament, but written articles, provided interviews and strongly set out my views, because I want this market-driven industry, which has very tight profit margins, to know not only what is happening on this issue, but how the Government will protect it in the future. Hauliers come over to this country from other European countries with belly tanks on, drive around our roads, pay no taxation and buy no fuel. It is difficult for our industry to compete with that, so we are looking at lorry road-user charges to create a more level playing field. We are committed to bringing in such a charge for trucks, because it will create a better balance.

I am also trying to limit the amount of regulation, so that the industry does not feel that the Government are on its back all the time. If there are bad hauliers out there with vehicles that are not fit for purpose, it is quite right that our police should bring regulation down on them like a ton of bricks. The vast majority of those in the industry, however, play by the rules and do the very best they can, but at the same time they feel that more regulation and more of a burden is placed on them.

As well as being the roads Minister, responsible for the UK freight industry and haulage, I am the deregulation Minister, and I am looking carefully at the regulations that are out there, some of which we have inherited and some of which have come from Europe. We are talking about just one of the measures that Europe has decided to look at, but about four fifths of all regulations that come through the Department for Transport are either EU or internationally led. It is difficult, therefore, to start to deregulate when these things have already been decided. The key is to get in early, to put our foot down absolutely rigorously right at the start and say, “This is the position we’re in.” To be fair to the Commission, I think that it realises that the measure is not popular and will certainly not get unanimity, and it is starting to learn that not only this country but others will start to kick and push back.

The earlier we push back on regulations from Europe, the better. As I have said, there were meetings yesterday, and there will be more as we go forward, and there is no doubt that the Commission knows this Government’s views—it certainly knows mine. My officials have been told in no uncertain terms to ensure that those views are put forward as strongly as possible. The European Parliament also knows my views, and I certainly will be working with it, and hon. Members, and I can spread the good word about where we are through the all-party groups. I hope to write an article on this matter in the next few weeks, to elaborate exactly where we are, not only on this matter but on the enormously important issue of trailer length.

To move forward on this subject, in which I am sure you are very interested, Mr Hollobone, it is important that not only do I do my bit and my hon. Friend does hers but, as constituency MPs, we all do our bit. It is important that I get as much written support as possible, to show that we have, in our armoury, cross-party support in the House. The matter is not new—it has been around since 2005—and I am sure that the shadow teams, even though they quite rightly cannot contribute to the debate today, understand the problems that have been coming through. It is important that the hauliers in my constituency, my hon. Friend’s constituency and the constituency of the hon. Member for Stoke-on-Trent South know that we will do everything we can to support them in this and other areas related to the regulatory burden.

[Robert Flello]

I welcome what the Minister has said today, and I congratulate the hon. Member for Mid Derbyshire (Pauline Latham) on securing the debate.

Taking up the comment that the Minister made at the beginning, I invite him to address the next meeting of the all-party group on freight transport, to set at rest the minds of all the different organisations represented there, and perhaps to discuss issues of great concern and relevance to various organisations out there in the haulage industry, such as the motor insurance database.

[Mike Penning]

I am more than grateful to accept that offer. I am sure that my officials have heard what has been said and will contact the hon. Gentleman in the near future, so that I can discuss these and the many other issues of concern to the haulage industry. On his point about insurance—something that he is perhaps looking into—there should be no fears around that. The idea is to remove the at least 1.5 million people who drive on the highways and byways of this country when uninsured, and I am sure that the haulage industry wholeheartedly supports me on the importance of addressing that.

The haulage industry needs to supply us with evidence, because it is all well and good my standing up here and our having a debate, but we are not experts in this field. The people in the industry are the experts on these problems, which affect their jobs, and their capacity to do them, every single day. As well as us and the Government saying, “Right, we’re going to push back on this,” the evidence has to come from the industry itself, so that when other countries in the European Union say that they are pro this—some are—we can have an evidence-based argument, which is absolutely crucial.

The evidence needs to be not only on the costs and the increased distance travelled—there are different figures around, but there would be an increase of about 4.5% in road use, particularly by articulated lorries—but on the effects on CO₂ emissions. One thing that we all want to do is to protect the planet for our young people and for the future, but at the same time we need growth. The last thing in the world that I want, therefore, if I am sweating the assets on the highways, and particularly the motorways, of this country—something we try to do as much as possible—is to see an increase in the number of lorries without an increase in growth. There would be an increase in cost, but not in profitability. We estimate that this would equate to about 151,000 new cars on the road, which, for those who do not know the industry, would cost road haulage about £305 million a year. Figures such as those—our Department produced them in consultation with the industry—are desperately needed. We need to quantify matters and ensure that we have a proper evidence base.

Impact assessments must be done not only for fiscal problems and emissions but for congestion. One thing that I have learned since I took over this portfolio eight months ago is that congestion involves not only pollution but money for the haulage industry. That is why we have announced, as I am sure my hon. Friend knows, that we will remove barrier tolls from the Dartford river crossing by the end of 2012 to allow free flow, so that hauliers do not sit in traffic for 10, 11 or 12 miles. Often, no accident has occurred; it is just that someone is trying to find their money or credit card to pay, while the barriers bob up and down and traffic moves forward. That will open up opportunities enormously for the industry in that part of the world.

I have said to the Select Committee on Welsh Affairs that we will consider whether we can negotiate with the contract holder of the Severn bridge crossing to do the same. I was also on the M6 toll road the other day to discuss whether barriers could be removed there and replaced by number plate recognition. Sadly, legislation would need to be introduced—I hope to introduce it with reference to the Dartford river crossing—to allow us to pursue and find people who refuse to pay the tolls that everybody else pays.

The next step is that the Department for Transport will again meet the relevant heads of responsibilities in the European Commission—as I have said, we met yesterday— and make it perfectly clear that we are more than happy with the status quo and do not want to reduce the limit to 4 metres. We have told the other member states supporting us that we are happy with the status quo. They feel that issues might arise involving cross-border enforcement. That operates perfectly well today; as I said earlier, Austria already has a 4-metre limit and enforces it. That is fine for Austria. We do not need to enforce anything, because there is no limit and we are perfectly happy. We have weight restrictions.

I have alluded to allowing free-flow tolling at the Dartford river crossing. Interestingly, the left-hand bore going north is the smaller of the two tunnels, and when we move to free-flow tolling, there will be issues involving how to move oversize vehicles into the right-hand bore. Free-flow tolling going south will cost money, but it is much simpler coming off the bridge.

[Mr Christopher Chope in the Chair]

Because of the size of the regional tunnel—some of us remember when it was the only tunnel available for crossing at that part of the dock—it is absolutely imperative that we consider traffic going north, as there are safety implications. However, we have managed to do it. There are plenty of bridges, tunnels and crossings in this country with height restrictions, and we have pushed hard to ensure that we protect them.

As I said earlier, Mr Hollobone—[Interruption.] It is a pleasure to serve under your chairmanship, Mr Chope. I mentioned earlier that if we made the change, there would undoubtedly be pressure on me as a Minister to increase the weight limits in line with other parts of Europe. It is a natural argument to make. If I argue that we do not want more vehicles as a result of the height limitation, the pressure will say, “We have dropped to 4 metres. If you want fewer vehicles, it would be better—wouldn’t it, Minister?—to increase weight limits so we can move the same amount of freight around the country on the same number of vehicles.” I am not minded to do so. As it is, our roads are struggling to cope with the size of some lorries. Some lorries, often unintentionally, end up on wrong and completely unsuitable roads—we have all seen it; I have seen it especially in the rural part of my constituency—often sent by some satellite navigation device.

There are some interesting ideas about how trailers can adapt for the 21st century without the need to drop the height. For instance, one interesting idea submitted to me is that the payload might be dropped between the two axles in order to get more volume into the trailer on lighter loads. I am considering the extension of trailers, and, as I have said, I will make an announcement pretty soon.

It all falls into place. Margins are tight for hauliers. They are worried, for instance, about the cost of fuel, wages and insurance. This is the last thing that any Government want. I am surprised that Europe is considering such a measure. I do not actually think that that was what was originally intended; I think that it was drifted into. The matter falls into the area of subsidiarity. Europe should not be touching it; it is a sovereign area. However, it is a matter for qualified majority voting, so as much as I would like to stand alone and say that England can defend our shores, unless we carry the support of a significant number of other European Union countries, we will struggle. However, all the evidence that we are receiving at the moment says that we have support, including, interestingly, from France, our closest neighbour, which is also not interested in imposing the 4-metre limit. It looks as though common sense will come forward.

I think that I have exhausted this interesting and important subject and set out the Government’s position strongly. I hope that hon. Members here today are listening, as are the industry and the European Commission, and that we can move forward and protect our freight industry and hauliers. I am passionate about the issue.

To declare an interest, I drove HGVs young in life—I was a fireman and, like all firemen, had a part-time job, so I drove HGVs during my time off. We must protect hauliers and ensure that we have a robust British industry of which we can be proud. As the Minister, I am determined to defend it.

Arbroath and Forfar Driving Test Centres

Tuesday 18th January 2011 Westminster Hall

12:56

[Mr Mike Weir (Angus) (SNP)]

I am pleased to appear under your chairmanship, Mr Chope. I am also pleased to see the Minister here. I was a bit worried this morning when I saw the written statement that the Secretary of State for Transport issued on the closure of an office in Cardiff. It starts:

“The Driving Standards Agency (DSA) is responsible for setting standards and conducting theory and practical driving tests for motorists in England and Wales.”

I wondered whether the Government had devolved responsibility without telling us, but I am assured that that is not the case and that the Minister is still responsible for the Scottish centres.

A problem has arisen in my constituency. Last week, the Driving Standards Agency announced the closure of the driving test centres at Arbroath and Forfar. The decision has caused a huge amount of anger among those who are undergoing driving instruction, driving instructors and the general public. That anger stems not only from the effects of the closure on our local communities, but from how the closure was announced.

Actually, saying that it was announced is incorrect. What happened is that the Driving Standards Agency wrote to local driving instructors on 30 December, although many letters were not received until after the new year holiday. At the same time, the DSA sent me a letter with a copy of the first letter attached. The letter informed driving instructors about a wonderful new multi-purpose testing centre to be opened in Dundee in February. Halfway through, the letter casually stated:

“In line with the opening of this new centre and in keeping with the Agency’s Code of Practice I wish to notify you of the closure of the practical driving test centres in Arbroath and Forfar. Arbroath and Forfar test centres will cease to operate with effect from 18 March 2011.”

That was the first that any of us had heard of it. No prior notice was given, no consultation was held and, in effect, no public announcement was made; only a letter was sent to driving instructors.

The letter went on to say that those who had booked tests at Arbroath and Forfar centres would

“be contacted by the Agency to notify them of this change in location.”

It is not a change in location; it is the removal of a local facility without any notice or consultation. In effect, those seeking tests will have to sit them in Dundee.

Worse still, the DSA imperiously noted that it did not need to consult on the matter and that the closure would go ahead. That is a ridiculous, high-handed and objectionable way for any Government agency to behave. Surely those affected by such a decision should, at the very least, be consulted before an important local service is removed. The present Government say that they are committed to localism—in fact, the Localism Bill received its Second Reading yesterday—but the way in which they have proceeded is the antithesis of such a policy. Will the Minister get in touch with the DSA immediately and tell it that such a high-handed attitude is totally unacceptable and that it must consult before removing services from local communities?

In Angus, local petitions and a Facebook campaign are already showing the level of opposition to that move. The removal of the driving test centres would have serious implications for Angus. It would mean that only Montrose, which is a part-time testing station, would be left between Dundee and Aberdeen on the east cost of Scotland. All the driving centres in the area already have substantial waiting times, and I will address that point in a moment.

The Driving Standards Agency’s own charter for excellence gives a standard of six weeks’ waiting time for a driving test, but I am told by local instructors that, at present, the average waiting time in Arbroath, Forfar, Montrose and Dundee test centres is 10 to 12 weeks, while 14 is not unknown. I know that that is the case because my own daughter is learning to drive and, apart from the cost, she will have to wait for a driving test.

At the end of December, tests were being allocated for the end of March, which effectively means a three-month wait for a test. Closure of the Arbroath and Forfar stations will surely exacerbate that problem and lead to even longer waiting times. How does that comply with the agency’s own charter? I understand that the Government’s charter mark was removed from the agency in 2003 due to its inability to meet its obligations. It seems that, given the waiting times and the charter’s terms, it is moving towards the same situation.

The removal of the stations in Arbroath and Forfar would mean that those who have already booked tests for dates after the closure would have to re-book for a test in Dundee and would fall, presumably, to the end of the queue, putting their tests off for at least several weeks. They would also either face further lessons to learn the techniques of driving under very different city conditions on their test route, or take the test at a huge disadvantage; it might be different from what they expected.

The situation is even worse for future learner drivers in the Angus area. At present, a driving lesson in Angus costs in the region of £20 for an hour, which I can confirm because, as I have said, my daughter is learning to drive. The costs are already under pressure due to the escalating price of fuel, which now stands at £1.26 a litre in Brechin, where I live, and to increases in VAT, and they will undoubtedly rise further. Within the hour of a driving lesson, the learner can learn driving techniques that are normal in the area in which they would expect to take their test: Arbroath, Forfar or Montrose. If, however, they now face having to go to Dundee to take the test, they will, understandably, wish to learn to drive in the type of conditions in which they would be taking their tests, which means that they would have to learn to drive mostly in the city of Dundee. Therefore, if they took lessons from a local driving instructor, the driving time from Forfar or Arbroath to Dundee and back would take up the vast bulk of their one hour lesson, giving them very little time to learn within the city area.

The implications for those people are quite clear: they would have to take substantially more lessons, or to book two-hour lessons, which would substantially increase the cost of learning to drive. Few of the young people in my constituency who are learning to drive could afford to pay the £40 to £50 per week that would be required. Moreover, on the test days themselves, as well as paying the fee of £62 for the test, they would incur the costs of three hours’ hire of the instructor’s car and time. It is a substantial cost just to sit the test.

The implications for local driving instructors would be equally devastating. They are mostly small businesses; indeed, they are often one-person operations. They have to meet increasing costs, as I have mentioned, due to rising fuel prices and VAT, which already impact upon the costs of lessons. Clearly, they would wish to teach their pupils on the types of routes over which they would have to sit their tests, but is it really conceivable that their pupils would be prepared to pay almost double the price currently charged? Many pupils may take the bus to Dundee and receive their lessons from a Dundee instructor rather than a local one, thus devastating their businesses. What is the sense in closing local facilities and imperilling local small businesses? I thought that the Government’s policy was to encourage the creation of private sector jobs, but the ridiculous closure decision will have exactly the opposite effect. How on earth can this be justified? It seems to fly in the face of the much-vaunted localism agenda.

[David Mowat (Warrington South) (Con)]

The hon. Gentleman makes an extremely valuable point in relation to the impact on driving instructors whose centres are closed in that way, particularly in Forfar and Arbroath. When the driving test centre in Warrington was closed, there was a displacement of activity to driving instructors in St Helen’s, which had a test centre, and that has resulted in a number of Warrington-based driving instructors going out of business. A secondary impact is that the pass rates for Warrington-based students have declined, presumably because they were less likely to be able to practise in those areas in which they would ultimately take the test.

[Mr Weir]

I thank the hon. Gentleman, who has reiterated my point. There will also be real impacts upon the local community of Angus. Not only will the decision mean, as I have said, that there will be only one test centre between Dundee and Aberdeen—and that a part-time one—but, inevitably, there will be increased waiting times for tests for many constituents. The Minister will also be aware, however, that the type of driving that is suitable for cities—I think that this is the point that the hon. Member for Warrington South (David Mowat) was making—is different from the type of driving that is, or should, be practised on rural roads in areas such as Angus.

I noticed the Minister shaking his head at some of my earlier points on this issue. Although it is undoubtedly true that drivers should be able to deal with any road conditions and situations that they encounter, I am sure that he would agree that it is vital that those who learn to drive do so on the roads that they are most likely to use, especially in the early months of driving. I am seriously concerned that those who learn to drive on the congested city roads may find it a very different experience on country roads. I believe that to be a serious safety issue.

As I said, the Minister shook his head at some of my earlier remarks, but just before Christmas he accepted that argument, to some extent, in relation to motorcycle tests when he announced that they would take place mostly on local roads, not in specialist centres, in order to deal with the ridiculous situation where motorcyclists in rural areas often had to travel large distances to a test centre. However, the letter that I received from the DSA states that the test facilities in Perth for motorcyclists are also being withdrawn and that they will have to travel to Dundee for the tests. It appears that motorcyclists from highland Perthshire, for example, will have to go to either Dundee or Inverness, which is a long journey either way, for a test. Surely that action goes against the Minister’s own announced policy a month ago.

The DSA’s actions are even more inexplicable when we look at the pass rates from the various test centres. The hon. Member for Warrington South referred to that point in relation to his own area. In 2010, Arbroath had a pass rate of 61.1% and Forfar 57.2%, while Dundee had a pass rate of only 47.3%. They all administer the same test, so it seems that the driving instructors and examiners in those areas are doing something right, yet they are being rewarded by the daft decision to close the centres.

In its own publicity, the DSA says that it aims to make appointments available within nine weeks, although it gives itself an out by limiting that to 90% of test centres. I submit that that will, in any event, be almost impossible if this centralising proposal goes ahead. The promise under the DSA’s “Customer Service Excellence” section to

“make a tangible difference to public service users by encouraging provider organisations to focus on customers’ individual needs and preferences”

will raise a hollow laugh around Angus as our facilities are stripped away. What customers want is a local facility that meets local needs.

It is also interesting to note that the agency promotes an eco-safe driving scheme. It states that

“the objectives of this scheme also support the Department for Transport’s targets to improve road safety and the environmental performance of transport.”

How will it be more eco-efficient to have learners and instructors travelling from all over Angus to take lessons and tests in Dundee? Surely the effect will be an increase in carbon emissions.

Since I secured the debate, I have received representations from many areas of the United Kingdom where similar situations have developed. I understand that some 22 test centres have closed over the past two years and accept that the problem predates the Government. However, the Minister is in post when the Government are trying to close the test centre in my constituency and many others throughout the UK. The Driving Standards Agency seems to have a deliberate policy of closing smaller test centres in favour of large multi-purpose test centres. For all the reasons I have noted, that is a misguided and dangerous proposal for learners, instructors and local communities.

I urge the Minister to undertake an urgent review of the policy and immediately to tell the Driving Standards Agency to halt the proposed closures at Arbroath and Forfar. At the very least, they should ensure that there is a public consultation before any decisions are made. That is the least the general public should expect when an important local facility is under threat. Such a facility would not be removed by central diktat in any other area without a public announcement or consultation with not only the community, but those directly affected by the proposal. This is a totally inappropriate way for any Government agency to proceed.

13:11

[The Parliamentary Under-Secretary of State for Transport (Mike Penning)]

I reiterate the earlier comments I made when you took the Chair, Mr Chope: it is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Angus (Mr Weir). He is doing exactly what I would do if I were a Back Bencher—standing up for his community.

Let us agree on some things from the start. If the waiting list is 10 to 12 weeks—I take the hon. Gentleman’s word that that is the case—the centres will not close until they are within the guidelines, which is six weeks. Pre-bookings are an issue. People can pre-book in bulk, which causes a problem. The hon. Gentleman said that there were bookings into March. There will be pre-bookings in cases when instructors can predict that their pupils are likely to be able to take the test at that time. That is why there are pre-bookings. It happens around the country—it happened when my daughter was doing her test just 18 months ago.

There is an issue relating to consultation. However, I must say that I have inherited the Driving Standards Agency code of practice that his Government put into place.

[Mr Weir]

Will the Minister give way?

[Mike Penning]

No. I sat and listened, so the hon. Gentleman can listen to me for a few minutes longer and then he can intervene. Let me make my point first. I inherited the current situation. As a result of the distance travelled, the code of practice brought in by the previous Government states that there does not have to be a consultation. I am looking at that issue because I do not think it is acceptable. I am eight months into the job and I have a very large portfolio. I accept that there are issues, but I inherited this situation and I will look at it and see if we can change it. I am happy to do so as long as the hon. Gentleman accepts that his Government were the problem and were closing driving test centres long before I was appointed to my post.

[Mr Weir]

I do not accept that. I was not a supporter of the previous Government just as I am not a supporter of this Government. I represent the Scottish National party. I accept the Minister’s point that he did not introduce the code of practice, but the code of practice exists and he is the Minister. He says he is looking at it, but will he suspend closures until he considers the matter in more detail?

[Mike Penning]

I humbly apologise to the hon. Gentleman. It was wrong and improper of me to assume that he was a member of the previous Government. It is probably because there has been a coalition in Scotland over the years since I have been in politics. I completely and humbly apologise; it was an insult.

[Mr Weir]

It was a great insult.

[Mike Penning]

I have been insulted many times over the years. I am sure we can solve the problem over a pint of beer.

I am not going to do as the hon. Gentleman suggests because I want the Driving Standards Agency to make progress. I shall touch on several points, including those made by my hon. Friend the Member for Warrington South (David Mowat), regarding how we should be dealing with the matter. The issue has nothing to do with bricks and mortar and buildings; it is about the quality of service, the test and the people who are taking the test. I shall work backwards through the issues.

Long before I took over this portfolio, one of the biggest things that worried me as a father and that worries me now as a Minister is that people are being taught to pass a test, rather than how to drive and be safe on the road for themselves and other road users. My daughter is going through the process at the moment—as is the daughter of the hon. Member for Angus—which is difficult and strenuous. I intend to make it more difficult, not because I am picking on young people, or on anyone who is taking their test, but because if we consider the statistics on 17 to 25-year-old people who pass their test—predominantly boys—they are a huge risk to themselves, other road users and their passengers.

A frightening statistic shows that the riskiest thing a lady aged 17 to 25 can do is to sit in the passenger seat of a car with a 17 to 25-year-old boy of any description, whether he is related to the lady or not. That is a frightening thing. The system is not working, so we must look at what the test involves. For someone to say, “That test centre has a better pass rate than that one so it should stay open,” is really looking at things from the wrong end of the telescope. We have recently changed the driving test to give young drivers in particular—and other drivers—the skills that they need when they leave the test centre and they are sitting in a car on their own with no one telling them which way to go, and they have not driven the route 100 times with their instructor.

[Mr Weir]

I do not disagree to a large extent with what the Minister is saying. I agree that there is sometimes a serious problem with young drivers. I accept that a 10-minute independent drive is now part of the test, but does he not accept that if someone learns to drive in a congested city area and they are faced with the country roads of somewhere such as Angus or perhaps his own constituency, they experience very different driving conditions that are perhaps not the appropriate driving conditions? It would be better if they understood the conditions in which they will be driving, at least in the early months of their driving.

[Mike Penning]

When someone passes their test, there is no restriction at all on where they can drive in the country. Someone can pass their test in Angus, drive to the nearest dual carriageway on their own and go down the motorway. I am also seriously considering how we can give the relevant skills to young drivers who have never driven on a motorway in their life, whether or not someone is sat next to them. At the moment, they can pass their test and go straight on the motorway. We must work on dealing with that.

I am surprised that the hon. Gentleman has not looked at the changes that have recently been made to the driving test. We have dealt with the problem of someone going to an area because they know it. We are not publishing the routes that people take for their test, and instructors will not know what the examiners are going to do. However, I agree that people have to understand how to drive on rural roads, which we have in parts of my constituency as well as in that of the hon. Gentleman, and in urban areas. We must have a situation in which we increase the skill base. I have listened to the instructors in certain areas and they have said, “This will have a detrimental effect because we will have to teach them to go there.” That is based on old knowledge and on the fact that we used to publish the routes that examiners would take. We are no longer going to do that. They will not know the routes. People will not only have to be able to drive for 10 minutes without being guided, which is what happens when people have passed their test, but they will not know the routes. The instructors do not know the routes; things will not happen that way.

This a short debate, so let us touch on the important points raised by the hon. Gentleman because I find some of them very worrying, especially his analogy. The reason I changed the motorcycle test is because someone could drive for up to two hours to a test centre and be taken off-road to a piece of tarmac that the Government own to do an off-road test. They could fail the test, yet be allowed to drive two hours back, or whatever the distance is. The test was not fit for purpose, which is why I have reviewed it. The whole test will be on the road, not off-road, and will be done in one go, unlike the present on-road and off-road arrangement. That will give motorcyclists the skills that will enable them to make progress, about which I have been talking in relation to car drivers. The analogy is not there.

As I have said, what is important—I will consider this matter—is that if the waiting list is as great as the hon. Gentleman says and it is blocked, these centres will not close until the capacity can be taken up in Dundee. I give that commitment today. We have to be in that situation. However, I will consider the matter of block bookings by driving instructors who pre-book extensively and block up areas, so that there are no bookings available for other people.

In the short period of time we have for the debate, let us look, if we can, at what the test should be for and see if we can go forward fixated not with buildings, but with service to the community and the people who want to take their test.

[David Mowat]

I was hoping that the debate would touch on what I regard as the major issue, which is the multi-test centres and other super-test centres. They became the policy of the previous Government because they over-interpreted an EU requirement regarding the motorcycle test. I believe that the Transport Committee, inter alia, pointed out that that was wrong, did not need to happen and was an error, yet the concept of a super-test centre is being pursued. It sounds as though that happened in Dundee and St Helens. One result of that, which the Minister might want to comment on, is that motorcyclists have to travel even further for their test, and further back if they fail it.

[Mike Penning]

My hon. Friend is absolutely right. The Select Committee, under the previous Administration, had real concerns about how the motorcycle test was fundamentally changed. It felt that the Government had misinterpreted guidance on kilometres—in English, motorcyclists had to do just under 31 miles an hour. I agree, fundamentally, with the Select Committee, which is why we have broken away from that. We have a pilot at the moment and we have worked with the industry—the testers, the unions and everybody out there—to get a test that I hope is closer to fit for purpose.

There is a fundamental difference, I am afraid, regarding the motorcycle test centres. A plethora of them appeared all over the country. The big problem was finding suitable off-road facilities for part one of the test. I looked at that, and the review looked at it. It was farcical that we spent millions and millions of pounds building pieces of tarmac that, in the near future, we will have to sell off because we do not need them any more.

The key issue and the most important thing, to return to what I was saying, is not the building, the instructors, Members of Parliament or Ministers, but the people who take their test. The test has to be fit for purpose. I am not at all worried about a drop in pass rates, because that would tell me something. For example, quite a few people think that their instructor is a qualified driving instructor—very often, they are not. That is something we need to look at to ensure that the public know exactly who is qualified and who is not. We need to ensure that the test is fit for purpose, and we are doing a lot of work on that.

The next stage is to ask why people who want to take their test have to go to the instructor. Why can the instructor not come to them? The two test centres mentioned earlier, in Forfar and Arbroath, are open two days a week. Why is there not a facility, whatever the demand is, for a tester to go people’s community two days a week? Why are we fixated with a Soviet system that means that people have to come to Government so that we can give them a piece of paper that says they can drive? That, to me, is the way forward. Other countries around the world have looked at that and do not have test centres that are physically big. There are test centres where instructors are based, and they then go out into the community. That would alleviate many of the concerns that the hon. Member for Angus has raised today—how far people have to go, the cost to the community, the risk to instructors and so on. Some of that fear is unfounded and I have touched on why, especially given the developments in the test, but I am more than willing to look at whether it is right, in the 21st century, that if someone wants a piece of paper or card that says that the Government say they can drive a car, motorcycle or a lorry, they have to go into a Government building in Dundee, or wherever it happens to be—in my case, in St Albans.

It is fit and proper to look closely at how the DSA works. I accept some of the criticisms. I have already said that I will look carefully at how the consultation process works. I would like to have been told. I apologise to the hon. Member for Angus for not sending him a letter, because I write to everybody when there are closures and I do not know how that one slipped through the net. I also apologise on behalf of the DSA and the Department, because I am absolutely paranoid about writing to MPs when something happens in their constituency. I think that it is very important that MPs are informed. I will look at the guidance on how the code of practice works. It is not difficult to consult on these things; it is difficult to know how far to go, but it is important that we do so. We must not, I stress, be fixated with buildings. Buildings deliver a service that could be delivered in other ways.

[Mr Weir]

It is not a fixation about buildings; it is a fixation about the service being available in the community. If the Minister can tell me I am wrong I would be delighted to have further details, but what appears to be happening is that the service has been removed from the local community. People will still have to go to a building. That building will not be in Arbroath and Forfar, however, it will be in Dundee, and that will be severely detrimental to the community.

[Mike Penning]

The hon. Gentleman is right. Under the proposals, that is what will happen. There is not full-time demand in his constituency, so we have a building sitting empty for three days of the week. That is a fact, and I cannot afford to do that in the present situation. Going forward—I stress going forward—the proposals will be developed. It will take time; they will have to be piloted and pushed forward in consultation with the whole of the industry, whether testers or instructors, and relevant MPs, to ensure that there is proper debate.

It must be right that we offer services to the community. That is what this is about. It is not about the buildings, as the hon. Gentleman said, it is about service to the community. At the moment, in his constituency, the service is being taken up on two days a week. That is what I am told. If I am wrong, people should write to me and tell me. The demand may be there, but the centres are not operating for more than two days a week. That is where we are.

Given the cost and the really difficult fiscal situation that we are in, which is the same in Scotland as it is in Wales, Northern Ireland and England, we have to ensure that all assets are being sweated as much as they can be. I will look carefully at the consultation. I will look carefully at the amount of waiting times, but I think I will find a lot of block bookings from the instructors the hon. Gentleman mentioned earlier. If it is a problem of block bookings, we will have to address it. However, if the waiting time is more than six weeks—more than the code of conduct says—they will not close until it is inside six weeks. That is a commitment I give today. What we all want, for all our constituents, is for the test to be fit for purpose, and for people to be able to enjoy the road, no matter what vehicle they pass their test on, so that they are safe for themselves and others. At the moment, I stress that we have a lot of work to do on the test to make it fit for purpose in the 21st century.

Young Carers

Tuesday 18th January 2011 Westminster Hall

13:28

[Julian Sturdy (York Outer) (Con)]

It is a pleasure to serve under your chairmanship for the first time, Mr Chope. I am delighted to have been granted the opportunity to secure a debate on the sensitive and somewhat emotional subject of young carers.

Across our country, it is estimated that 700,000 young people support their mother, father, brother, sister or grandparent as a primary carer. Each and every one of those brave young people has a unique story to tell, and all of them face a range of difficulties as a result of the compassion and love that they show toward their cared-for relatives. As I am sure all new MPs will agree, attempting to visit as many community groups and local organisations as possible was, and remains, a key priority following last May’s general election. I was fortunate enough to be invited to visit York Young Carers last October. I shall always remember meeting some of York’s most valuable young people. Listening to some of the young carers’ stories made me immensely proud to be one of the MPs of our great city of York. I cannot praise highly enough our young cares’ courage, compassion and utter dedication to their role.

The visit also opened my eyes to the vast responsibilities that young carers find placed on their shoulders at such a young age. Their wide-ranging roles include providing physical and mental support, organising hospital visits, paying bills, cooking meals, cleaning, organising medication and liaising with social workers. Given that the average age of young carers is just 12 years, it is remarkable that so many have the capacity to care while also studying at school and developing emotionally themselves.

In addition, my meeting gave me a fascinating insight into the tremendous work carried out by the York Young Carers charity, and I know that many other charities across the country do similar things. I take this opportunity to highlight the dedication of the organisation’s staff and volunteers. From offering young carers one-to-one support to providing an environment where they can come together to socialise, support one another and share their experience, the charity is an invaluable source of support and stability for the young people.

One of the most important support mechanisms that the charity provides is organising away-day trips. Young carers spend so much of their time acting with the responsibility and maturity of adults that it is important to remember that they are, in fact, just children themselves. By providing trips and away days, charities such as York Young Carers provide welcome relief from the everyday challenges of caring. For a brief period, young carers are allowed to enjoy being children again.

I would also like to draw attention to the “Young Carers Revolution” media campaign set up by York Young Carers to highlight the difficulties facing young carers across the country. A promotional DVD is available on YouTube, and I encourage all interested Members to watch it to see for themselves what young carers go through, and to hear about it through their own words.

[Gavin Williamson (South Staffordshire) (Con)]

I thank my hon. Friend for securing this incredibly important debate. Does he agree that the work of York Young Carers is important because of the great stigma that is often attached to young children who care for relatives? Authorities, whether school or social services, are often not aware of the work that they do to try to support their family. That is why what York Young Carers does is so valuable.

[Julian Sturdy]

I agree entirely with those comments. The essence of the debate is to try to raise awareness. I shall go into more detail later about the educational side and potential bullying, but my hon. Friend is right that awareness is crucial. It is sad that the work of so many young carers, not only in York but across the country, goes unrecognised. We must remember that, and the essential contribution that they make not only to their own family but to society as a whole.

The national focus of the “Young Carers Revolution” campaign requires us to look at the state of play for young carers up and down the country more generally. In particular, I am extremely worried by research by the Princess Royal Trust for Carers which concludes that one in three young carers face educational difficulties, while two in three experience bullying at school.

There can be no doubt that young carers live under huge pressure. As I have said, their roles and responsibilities are great and many. We must all expect that such unenviable circumstances will, in most instances, have an adverse effect on the time and ability of young carers to contribute fully to their educational studies. With a young carer’s first priority being the relative for whom they care, it is only right that schools and education providers understand and are sympathetic to their role. One of the greatest frustrations outlined to me by York Young Carers was that too few people, including some teachers, fully appreciate the pressures, both time-wise and emotionally, under which young carers operate. Sadly, 60% of young carers say that they would not be able to talk to a teacher about their caring role, which I find disappointing.

Given that the research by the Princess Royal Trust for Carers shows that some young carers spend up to 50 hours a week carrying out their caring role in their family home, the subject needs greater exposure. It is essential that schools not only show great understanding towards students who are carers, but take on the role of educating others about the pressures faced by their peers. I know that Members on both sides of the House fully support the “Stand Against Bullying” campaign, and I hope that the Minister will be able to commit Government support to those who are working hard to challenge negative attitudes in our classrooms. It is simply unacceptable that two out of three young carers are subject to bullying, and I would welcome his thoughts on how central Government, in conjunction with local authorities and schools, can work in a co-ordinated manner to tackle that form of harassment.

On the academic side, I urge all schools and colleges to provide additional learning support to known young carers who may struggle with their grades as a result of their responsibilities. I am concerned that a childhood of care can sometimes lead to limited options for the individual concerned as they move into adulthood. It would be a tragedy if that were to prove to be the case, so I would like universities and employers to take a more informed view when being approached by those who have spent a sizeable part of their learning years operating as carers. Ensuring accessibility to education, higher study and employment for young carers is vital.

As well as educational difficulties, young carers face struggles relating to additional social support and financial assistance. Less than a month ago—it might seem longer to some Members—the country was celebrating Christmas, a wonderful festive season. As a father of two young children, I know how important it is to families and children, yet it is at that time of year that the plight of young carers can be captured most vividly.

Sadly, more than one quarter of young carers had to wrap their own Christmas presents, and one in five found Christmas day tougher or sadder than the rest of the year because support services are reduced and family finances are under greater pressure. For most of Britain’s children, Christmas day is an opportunity to relax, enjoy presents, watch TV and share family time, but more than one third of young carers spend more than six hours carrying out their caring role on Christmas day itself. The chief executive of the Princess Royal Trust for Carers stated:

“Many of the young carers we surveyed wished for their family member to get better rather than get the latest toy. Sadly for them Christmas is just like any other day.”

My purpose in highlighting young carers’ difficulties during the festive period is not simply to praise their magnificent contribution, though that would be a worthy enough reason in itself, but to pick up on the amount of support that is available to them. Without question, a number of fantastic social services staff work with young carers across the country, but what worries me is that, on average, it takes four years for young carers to receive any support at all.

Such delays are often a result of fear or embarrassment. Sadly, a culture of fear seems to be prevalent among young carers, and I can absolutely understand why. Asking for help is never easy, particularly if someone fears that their family home may be broken up or disrupted as a result. It is the job of the authorities and the voluntary sector to break the cycle of fear, and I welcome the new national carers strategy commitment to early identification of carers. Such identification and the subsequent focus of support towards young carers are essential.

The recent report commissioned by the Mental Health Foundation in association with the Princess Royal Trust for Carers, “MyCare: The challenges facing young carers of parents with a severe mental illness”, found that young carers are at greater risk of isolation than any other youth group. Also, many young carers lack the information to understand a relative’s mental health problems, and they disproportionately face their own physical and mental health risks.

I share the sentiments of the senior researcher at the Mental Health Foundation, Dr Robotham, who led the “MyCare” report:

“While there are examples of good practice such as young carers’ support groups, much more needs to be done to meet young carers’ needs more effectively.”

That is an accurate assessment. The work of the York Young Carers charity will, for example, be further enhanced if some of the following report suggestions are implemented locally and nationally.

First, I support the report’s suggestion for young carers to be included in discussions of their relative’s treatment. Indeed, young carers in York raised that very issue with me when I met them last year. Our young carers often know the most about the cared-for’s condition and yet, frequently, they are overlooked by health professionals and GPs. I would be most grateful for the Minister’s specific views on that, because it is an important aspect of how young carers are dealt with by the medical profession.

Secondly, as I have touched upon, it is essential that every school has a policy on provision of support for pupils who are young carers. Such a measure would ensure that all teachers and education professionals were aware of the sensitive issues involved.

Thirdly, our health, mental and social services should be encouraged to work together, to be more effective in their offer of support not only to the cared-for but to the carer. I would be grateful if the Minister confirmed whether he has had any discussions with appropriate agencies to promote any such increased co-operation.

Lastly, the issue of funding is of great concern to many carers and related charities. As a firm supporter of the localism agenda and the Localism Bill—sadly, I did not get to speak yesterday, although I was one of the 52 who put in a request to speak—I strongly believe in providing local authorities with greater flexibility about how best to spend their budgets. However, I urge local authorities, including City of York council, to prioritise the needs of young carers highly.

Following the publication of the “MyCare” report, the chief executive of the Princess Royal Trust for Carers stated:

“The aim of this project is to help children’s services, education and mental health services to work together to better identify and support young carers, making the little changes to services that can make a huge difference to their lives.”

That is a key point in the whole process.

Some of the individual concerns that I have discussed today might seem small or insignificant when viewed alongside the wider social services agenda. However, for our young carers, more recognition from health services, greater support from teachers, firmer guarantees about future support provision and simple understanding from wider society would make their pressurised lives a bit easier.

Having spoken with local experts, agencies and, more importantly, young carers themselves, I believe that the issue could and should attract cross-party consensus and action. Our young carers carry out remarkable work, often in unimaginable circumstances and under tremendous pressure. We must do all we can to promote their cause and to ease their burdens.

Britain’s young carers have spent their lives loving, supporting and caring for a member of their family. It is now time that we begin to champion them, and to ensure that each and every young carer has a strong voice and clear access to as much support as possible.

13:43

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

It is a delight to serve under your chairmanship again, Mr Chope.

I congratulate my hon. Friend the Member for York Outer (Julian Sturdy) on securing the debate and on his exceedingly articulate and measured way of making a strong case. I echo most of the sentiments in his excellent speech, which I hope is heard more widely beyond today’s not overly crowded Chamber.

I am pleased, in particular, to be here to respond as a Minister. As shadow Minister for Children, I took a particular interest in the subject, and I have met many groups of young carers and the organisations involved with them. I pay tribute to those various organisations, some of which my hon. Friend has mentioned, for their excellent and often unrecognised work in a really important area, which affects many more children than some estimates suggest.

Supporting vulnerable children, including young carers, is, of course, a priority for the Government, which is why I am pleased to have the opportunity to articulate our approach to that subset of young people. Helping to care for a family member is something that many young people are happy and proud to do—it helps them to develop a sense of responsibility and skills that are important in later life. Such young people play an absolutely vital role in their families and in society as a whole, for whom they save an awful lot of money. They deserve our recognition and support. However, inappropriate or excessive levels of caring by young people—even if at their own behest—can put their education, training, social development or health at risk, preventing them from enjoying their childhood in the same way as other children. Too many young carers are trapped in harmful caring roles without much hope of fulfilling their potential. That can be for a number of reasons: they do not recognise themselves as young carers or, if they do, they do not seek help; services are not identifying them as carers; or they fear involving children’s services and outside agencies.

That is not, of course, the full picture. Thousands of carers, through admirable resilience and sheer determination, achieve so much despite the odds stacked against them. I have met many young carers, including at the annual young carers festival down in Southampton, which is organised by the Children’s Society—in particular, by Jenny Frank, who has devoted so much of her career to helping young carers—and by the YMCA Fairthorne Group. I have attended for most of the 12 years that that incredible festival has been running. I encourage my hon. Friend the Member for York Outer to attend, if he can—it is usually on a weekend in July. I never cease to be impressed by the commitment of the people whom I meet there and their determination to do the best not only for the person they care for but often for other members of their families, such as their brothers and sisters. Some of those young people have done all that and still succeeded at school and gone on to university or successful employment, but not all of them cope so well.

I pay tribute to my hon. Friend for making the issue a priority and for finding time to meet the York Young Carers—I shall certainly look at the group’s excellent film on YouTube. As he has said, a new Member is at the call of many organisations wanting to familiarise themselves with new MPs. However, young carers, such as those in my hon. Friend’s constituency, have made it clear to me that they want their schools, GPs and the mental health and other health services with which their family members come into contact to be more supportive and more carer aware. My hon. Friend made a good point, which young carers often make to me, about how the doctor, social worker or professional from another agency, who is seeing the parent or whoever is being cared for, often talks over the head of the young person.

If that young person has the day-to-day responsibility, that young person has some very grown-up responsibility placed on them, they know an awful lot about their loved one’s situation, and they need to be talked to and involved in the process. That is a common plea, and my hon. Friend is right to highlight the issue. Professionals, therefore, need to be more carer aware. Young carers want professionals to recognise that the young carer, despite being a minor, will often be the responsible person in the house and might understand better than anyone what kind of support is needed and when.

It is shocking that so many young people lose the opportunity to live a normal childhood because of their caring role. Such young people are often hidden from everyone but their families. I agree with my hon. Friend that all of us, including those services I mentioned earlier, need to be mindful of the impact that caring can have on a young person’s education, training or employment opportunities. Indeed, that is why providing carers with vital information about the illness or disability that they and their family are coping with and involving them in the decisions about how best to provide care and manage their health is one of the key principles in the carers strategy, “Recognised, valued and supported: next steps for the Carers Strategy”, to which my hon. Friend has referred.

I pay tribute to the Minister of State, Department of Health, my hon. Friend the Member for Sutton and Cheam (Paul Burstow), for the speed with which he and his Department, with support from the Department for Education and others in the Government, published the new strategy. I am pleased to say that carers’ views, including those of young carers, are very much at the heart of it. If we listened to the views of young carers, it would go a long way to helping them.

I shall take this opportunity to praise the young carers in York for producing their “Young Carers Revolution” media campaign, and for the sterling work that they have done to raise awareness and reach out to young carers. They come to the annual festival and have interesting things to say.

The new carers strategy recognises that there are hidden young carers. It sends out a strong signal that effective support for young carers requires adult and children’s services, including health services, schools and the voluntary sector, to work together and prevent young carers from taking on harmful or excessive caring roles. The early intervention grant, worth £2.2 billion a year over the period of the spending review, provides local authorities and their partners with the freedom and flexibility to decide how best to prioritise their resources in accordance with local demand.

The Government strongly believe that such support should be targeted at those children and families who are most in need, and I encourage local authorities to identify appropriate services for young carers and prioritise them. Local authorities can do that by adopting the “Working together to support young carers” programme, which is a memorandum of understanding published jointly by the Association of Directors of Adult Social Services and the Association of Directors of Children’s Services. The memorandum is unambiguous in stating that no care package should rely on a young person taking on an inappropriate caring role. I urge local authorities—including that of my hon. Friend—as does the Government’s carers strategy, to consider adopting that memorandum.

All too often, as an Ofsted report highlighted in 2009, services do not work together effectively and young carers fall through the gaps. Training can be an effective way of raising awareness of young carers among professionals who might not otherwise recognise that a young carer is involved. I am grateful for the work done by the Children’s Society, the National Treatment Agency for Substance Misuse, the Social Care Institute for Excellence, and others, to train a range of professionals to be more carer aware.

There is already much good practice in this area, and I join my hon. Friend in saluting the dedication of staff—including thousands of volunteers—who through hundreds of young carer projects, mostly in the voluntary sector, provide young carers with the respite and one-to-one support that they need, giving them the opportunity to take part in activities or go on breaks with friends with whom they can share their experiences. Often, young people who find themselves as carers need to get together with other young people in a similar situation who can appreciate, understand and sympathise with the challenges they face at home. It is about having the opportunity to take an evening off to go and see a film with other people, or to go bowling, or whatever. There are lots of interesting projects, largely set up through the Children’s Society by Jenny Frank and others, and we have entertained many such projects in this House over the years. They could be something simple that make young carers feel that they are not alone and that other people understand and look out for them.

The voluntary sector plays a vital role in supporting those young people, and I am pleased that through the innovation fund, the National Young Carers Coalition is extending the support that it provides to the whole family. The carers centre in York is another example of a voluntary sector project that provides invaluable support.

It is not for Government to micro-manage and prescribe what is best for local authorities—local authorities should know what is most appropriate for their residents and communities. Practice and approach, however, varies across the country and I am committed to encouraging the sharing of best practice—something that we are often not terribly good at—so that all areas in the country can share knowledge about what works from areas that are doing well. I am pleased that the Princess Royal Trust for Carers, which my hon. Friend has mentioned, will, on behalf of the National Young Carers Coalition, showcase the learning from the innovation fund.

My Department has already made available the interim findings from the young carer pathfinders scheme. It shows that where intensive support was co-ordinated by a key worker and focused around the family, between entry and exit from the project, there was a 35% reduction in the number of young carers in those families, and a 41% reduction in the number of young people for whom caring was having a negative impact.

An improving picture is emerging as more young people are referred to receive the support they need as a result of their parents’ mental health or substance misuse problems, and more schools are becoming aware of the support that they need to provide. However, there is much still to do, and a number of families will be facing a range of other complex problems. For example, research highlights that family violence can be an issue at home. That is why I am pleased that on 10 December last year, the Prime Minister announced a new national campaign for families with multiple problems. That campaign sets out to support the most vulnerable 120,000 families, a number of whom will have a young person or persons in a caring role. It represents a new and determined effort to improve the lives of those families and those who live around them. It will trial innovative new approaches to providing tailored support to the whole family where there are complex problems, and it will provide personalised and holistic support to help a family deal with its problems. I look forward to seeing the benefits of that new approach.

From a young carer’s perspective, schools are arguably the local service with which they have the most contact and which play the greatest role in helping them. Young carers have told us that they want their schools to be more supportive and understanding about their caring role and education, and I support that. Young carers want teaching staff to recognise that they may need flexible learning arrangements and additional support. That is a major issue, and it comes up when I go to conferences and meet people. Young carers need an understanding teacher who knows the demands on them and can put in a word if, for some good reason, homework is in late or it is necessary to be in telephone contact with a doctor or another professional because a relative has taken a turn for the worse, or whatever. Good practice is for each school to designate somebody in that role, but that does not always happen.

Although many schools have systems in place to support young carers and have a lead person to support them, that does not happen enough. Some schools may like to consider whether a governor should have an oversight role, just as we recommend for children in the care system who have particular requirements. To increase the support available to young carers in schools, the Department for Education is working closely with the Department of Health to provide the National Young Carers Coalition with an e-learning module for teachers and staff as part of the healthy schools approach to help better identify and support young carers.

Another issue that affects young carers—I am aware of the research by the Princess Royal Trust for Carers that my hon. Friend has mentioned—is bullying. Unacceptably, and incredibly, nearly two thirds of young carers are bullied at school. Perhaps they are often late, do not have time to take part in social activities or do not dress in the same way as others. All those things can mark them out as different from their peers. The Government, the Secretary of State for Education and I, take that issue very seriously. It is unacceptable for any child to be victimised, and even more so when they have the responsibilities of a young carer on their shoulders.

We can be proud of the vast majority of young people, but when bullies are identified we cannot just suspend them for a couple of days and allow them to saunter back into school to torment their victims again. We will put head teachers and teachers back in control and give them a range of tough new powers to deal with bullies. Head teachers will be able to take a zero-tolerance approach and will have the final say. We trust that head teachers will use those powers but I hope they do not have to. By educating young people to appreciate, respect and empathise with the pressures on people who, through no fault of their own, find themselves in an adult caring role, I hope that we can eradicate that completely unacceptable form of bullying.

When bullying occurs, schools need to respond promptly and firmly. They need to apply disciplinary sanctions and work with bullies so that they are held to account for their actions and accept responsibility for the harm they have caused. Schools must also support those who are being bullied and, above all, they must educate bullying out of the school and classroom. All of us in society have a responsibility in that area. I hope that this debate and the other initiatives for young carers, such as the fantastic weekend at Fairthorne manor and the meetings in which we speak to young carers to understand their problems from the sharp end and look at how better we can accommodate them, will raise the profile of this issue, so that more people recognise the particular challenges faced by those young people.

The Department for Education will continue to work closely with the voluntary sector and local authorities to break down barriers to supporting young carers and their families effectively, which is the least we can do. We have a duty as a society to help those people, and frankly it is a false economy both socially and financially not to do that as actively as possible. I congratulate my hon. Friend on raising this subject and putting his case so strongly. I hope that he is a convert, an advocate and an ambassador for the issue of young carers, and that he will ensure that as many people in his constituency—and beyond—are aware of the challenges faced and do their bit to make the role of young carers as easy as possible.

Question put and agreed to.

13:59

Sitting adjourned.